Jul 18, 2013 · 3 minutes

When was the last time you paid for an app?

An increasing number of applications are being given away for free and subsidized by advertisements, in-app purchases, or patient investors willing to wait as companies favor user metrics over revenues. Flurry reports today that 90 percent of applications in the App Store are free -- that's a 6 percent increase over last year's tally and a full 10 percent higher than the lowest year on record, 2011. Software that takes months or years to develop is now being given away, almost by default.

Flurry's Mary Ellen Gordon writes in the report that many application developers will not be able to monetize through higher (or simply existent) upfront costs, and must rely instead on in-app purchases or advertisements. Says Gordon:

Given that, we believe it’s time to shift the conversation away from whether there should be ads in apps at all, and instead determine how to make ads in apps as interesting and relevant as possible for consumers, and as efficient and effective as possible for advertisers and developers.
Put another way: Ads are here to stay, so why not make them suck less?

Software presents a unique opportunity for marketers to create advertisements that do more than irritate, compel, or entertain viewers. These applications are used on devices that are almost always online and are equipped with plenty of tools that allow users to purchase goods with just a few taps (provided they've already given such services their payment information, anyway). They're gathering data that marketers would've killed for just a few years ago. And they're reliant on free services that have to be subsidized in some way.

Combine that with the increased time people are spending with their smartphones (users spent around two hours interacting with apps each day, according to another Flurry report from last December), and within applications instead of Web browsers, and there's plenty of data in them apps. (That sentence best read as an old time-y Gold Rush prospector.)

Kiip, a mobile ads network -slash- rewards platform, is trying to use all of that information to create smarter advertisements. The service doesn't simply run display ads within applications. Instead, it serves as a bridge between application developers and marketers willing to offer rewards for certain actions. A marketer might choose to reward users who complete every task in their to-do list, for example, or if they reach a certain milestone in a game. Kiip CEO Brian Wong says that the service is built into 1,000 applications that witness some 520 million reward-worthy events -- Kiip calls them "moments" -- each month.

It isn't hard to imagine other uses for all of the data these applications gather. Foursquare has introduced a still-early ads platform that allows brands to prompt users to take certain actions or purchase a particular product after they check-in somewhere -- what if that same principle were applied to other location-based apps and services? Or maybe Flixster could notice that I like to check out showtimes every Friday night, learn what kind of movies I seem to like, and offer suggestions for this Friday.

There are ways to make such advertisements valuable to marketers, app developers, and users. There simply needs to be a balance between "I noticed you like this, maybe you'll also like this sponsored item?" and "Now that you've checked-in to a few places I'm just gonna recommend that you buy everything, everywhere, okay?"

Apps aren't going to start charging for access overnight, as Flurry notes. And, as Kiip's Brian Wong told me last July, annoying users with large display ads that do little more than get in the way of the app itself isn't a great way to monetize. Again: Ads aren't going anywhere, so we might as well make 'em better.

[Illustration by Hallie Bateman]