Mobile App stores have been the flavor of the season for some time now and we have covered them here at PI in the past. Everyone in the mobile game from Apple to handset manufacturers like HTC have jumped into the game and has an app store now. How is this trend going to progress and how are app stores going to shape up are the main questions which come to the mind immediately. This excellent analysis by Chetan Sharma brings up some very interesting points about the app store ecosystem and their possible future.
The report questions the logic of separating phones into smartphones and feature phones in today’s world when the boundaries are very blurred. In spite of the IDCs of the world coming up with their numbers every year, we also fundamentally agree with Chetan regarding the futility of separating the two and trying to address each market separately. He says from his observations and we quote “We are clearly seeing a middle category emerge that provides functionality of a smartphone in the form factor of a featurephone”.
In 2009, the total number of apps downloads (global) were approximately 7 billion with Asia leading the way with 37% of the global downloads. By 2012, the total number of apps downloads are expected to grow at 92% CAGR to almost 50 billion downloads per year (figure 5). This is in part due to increasing number of featurephone users becoming active app users and due to the increase in the number of apps downloads/user/month across the board.
Global Mobile Apps Market
Asia had the highest percentage of the download share, North America had the highest share of the apps revenue accounting for over 50% of the total revenue.
Advertising based revenue accounted for about 12% of the overall revenue though by 2012, advertising is expected to generate 28% of the app revenue.
Business Model for Mobile Apps
The main forms of monetization for apps are:
1. Paid – a. Subscription, b. In-app
2. Advertising – a. Impression-based, b. Performance-based, c. Promotion
3. Virtual Goods
4. Up-selling/cross-selling other goods
The report has mainly focused on paid and advertising categories and an important statistics to know is that in 2009, advertising contributed almost 12% to the overall apps revenue. This share is expected to more than double by 2012 to almost 28%. In some of the developing regions, advertising will account for more than 50% of the apps revenue by 2012.
The report talks about (an extremely important point) the way apps come into the phone – on deck and off deck. Most analyses concentrate on the Apple model (typically off deck through downloading) and miss on the huge upside for Nokia types apps which come on deck. It would have been very interesting to see the virtual goods monetization model a la QQ – although this report doesnt really cover that aspect.
Lastly the report finishes with an aspect that raises the importance of this whole report greatly. This is comparing native apps to web based apps on the mobile phone. As in the PC space, is there a possibility if mobile browsers becoming highly powerful and apps being browser based” than native? We believe that is a very important question he covers which indicates maturity in terms of the analyser to look at the whole ecosystem rather than just the first level numbers.
Its important to note the winner is not clear yet – its early days IMHO and the opposing technologies (within their constraint) both look promising.
Few interesting stats / observations –
- Advertising revenue is about 12% today though by 2010 it will be 28%
- Europe showed an inordinately large percentage of growth in the mobile apps market (in $). The reason for that was not clear from the stats.
- General trend of users paying for apps (amount) is decreasing
- Tracking mechanisms will make response ad based systems on mobile phones more common
- The number of downloads is going to almost triple from 2010 – A very high jump according to us.
For a report, this is an extremely comprehensive one. However we think this would have been better had he covered a few of the marketplaces (like the BB app store and their metrics). That would have been interesting to note vis a vis total BB users etc. I would also have preferred a slice and dice according to regions (e.g. Market Japan – and trends and future prospects). To be fair, there are many snippets of such observations through the document and they make up for most of the need. Also I would have loved to hear some thoughts on operators (the Big Brothers in this space) and their effect on this market.
So what do you think? How is this market going to shape up in the times to come? Do go through the analysis and let us know your thoughts!