Jordan Bevan
The digital economy opened 2025 on solid footing, with mobile app purchases and digital ad spending continuing their upward trajectory. According to Sensor Tower’s Q1 2025 Digital Market Index, both consumer in-app spending and advertising investments posted double-digit year-over-year growth, buoyed by increased interest in generative AI and emerging entertainment formats like short drama apps.
Consumer spending within mobile apps reached a new quarterly record of $40 billion globally, marking an 11% year-over-year increase. This sustained momentum represents the sixth consecutive quarter of double-digit growth in in-app purchases (IAPs), further cementing mobile as a dominant force in digital consumer behavior.
Non-gaming apps led much of this growth, with IAP revenue reaching $19.4 billion, up 24% year-over-year. Generative AI tools and short-form entertainment apps were major contributors to this trend. This surge indicates a potential tipping point in the mobile economy, with non-game apps poised to overtake games in revenue within the year — a reversal from 2020 when games outpaced other categories by 2.5 times.
Games, however, still generated the most IAP revenue, totaling $20.6 billion, a marginal 1% increase from the previous year. Japan emerged as a key driver with 9% growth, rebounding after several years of decline, while the U.S. saw a 3% decrease, signaling a possible plateau following periods of sustained gains.
The rise of generative AI was evident in Q1’s app rankings. ChatGPT nearly broke into the top five apps by in-app purchase revenue, landing at #6 after bringing in $330 million—a nearly 50% increase from the previous quarter. The app also moved up to #3 globally in downloads, behind TikTok and Instagram.
The growing popularity of short drama apps also marked a notable trend. Apps like DramaBox and ReelShort showed some of the strongest quarter-over-quarter IAP revenue growth, expanding to new markets beyond their original U.S. base. New entrants such as Dramawave are also making strides, ranking among the top apps by download growth.
On the advertising front, U.S. digital ad spend across mobile, desktop, and OTT reached $31 billion in Q1, reflecting a 12% year-over-year increase. The number of ad impressions hit 3.9 trillion, also an all-time high.
Video advertising formats — including story posts, reels, and OTT — were a major growth driver. Spending on video formats rose 18% YoY, contrasting with a 6% decline in non-video ad spend. Social media platforms accounted for over 75% of U.S. digital ad spend, with platforms like YouTube and TikTok continuing to gain ground.
Growth was also strong across Europe and Asia. Markets such as France (+17%), Italy (+16%), Spain (+16%), and the UK (+15%) posted robust increases. In Asia, South Korea and Japan led gains, reflecting expanding digital investment in these regions.
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