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The Global
State of the
App Industry
February 2018
www.techwitty.com.au
Joseph GillespieAuthor:
SYDNEY OFFICE
Phone: +61 2 9387 5900
Mobile: +61 426 239 090
Suite 5, Level 2,
2 Grosvenor Street Bondi Junction,
NSW 2022 Australia
PO Box 2499 Bondi Junction,
NSW 1355 Australia
MELBOURNE OFFICE
Phone: +61 2 9387 5900
Mobile: +61 452 556 007
84 Hotham St, Preston VICTORIA
3072 Australia
The State of the Global App Industry – February 20182
E x e c u t i v e
S u m m a r y
	 New Opportunities, Drastically Decreased
Barriers to Entry have Created a Thriving
App Economy - With the invention of the
smartphone and the automation of online
payment & distribution, an unprecedented
thriving industry has emerged.
	 The Large Number of Apps Launched has
led to the Rapid Growth in the Industry
value – Currently around 5.2 million apps
just on the apple and google play store
alone, the app economy has grown to $143
billion (App Economy, 2018)1
.
	 Gross User Spend in the Global App Market
Expected to Grow from $1.31 Trillion
in 2016 to $6.35 Trillion – Total spend
estimated to double every two years for the
next 5 years (Statista, 2017)2
.
Increasingly Saturated App Market has
made it increasingly difficult to have your
App noticed by Customers – As more apps
are becoming available across both IOS
and Android, currently around 90% of apps
cannot be found without a specific search.
This causes these ‘zombie’ apps to be less
likely to succeed.
	 Gaming Apps are the Most Popular Apps –
By category, games represent the largest
amount of available app, and the highest
earner.
1
2
3
4
5
3The State of the Global App Industry – February 2018
The Global
Mobile
Application
Industry
01
The State of the Global App Industry – February 20184
The Global Mobile Application Industry
Today, the app economy is part of
a thriving ecosystem worth more
than $143 billion (App Economy,
2018)1
. The industry has seen massive
growth as smartphones in the global
populous have become not only
the norm, but also an addictive part
of people’s daily lives. According
to Figure 1 below, China has the
largest gross spend on apps across its
app market with a total annualised
spend in 2016 of approximately $790
million, with the USA coming in
second at around $200 million.
The total gross spend on mobile
phone applications is estimated to
grow by as much as 385% between
2016 and 2021 representing one
of the fastest growing industry
sectors on earth (Statista, 2017)2
.
The global app industry is literally
huge and without doubt, growing
exponentially. Looking at the global
growth download and revenue
statistics, there appears to be no end
in sight.
With the growth in App demand,
as one would imagine, the mobile
application developer community
has boomed, with the number of
mobile apps in the market hitting
new heights in 2017.
Figure 1: 385% Growth Forecast for the Global App Economy
5The State of the Global App Industry – February 2018
A new report from app analytics firm‘App Annie’estimates the global app economy will be worth $6.3 trillion
by 2021, up from $1.3 trillion last year (See Figure 2 Below), With China representing the largest contribution
to the global market spend at around 60% of total market spend (App Annie, 2017)3
.
Industry Drivers
From an analysis of the market, the major drivers behind the rapid growth of the industry include:
Historically, independent software companies have faced steep barriers to entry. Much of their revenue
opportunity was typically derived from adding new features to existing software products and charging for
the upgraded feature sets.
1.	 The unique business conditions
2.	 Evolution of technology (both hardware and software)
3.	 Increase in popularity of smartphones
Figure 2: Mobile App Forecast – Total Spend
The State of the Global App Industry – February 20186
The introduction of the App Store coupled with
a change in the way consumers are prepared to
interact with mobile applications has completely
disrupted the historic revenue models and allowed
developers to create products marketed directly to
consumers (The App Economy, 2017)4
.
With the introduction of the app store, the logistics
of payment and distribution channels for software
developers changed dramatically. The App store,
users could more easily download content online
and consumers could purchase without the need of
human labour to transact. In addition to providing
a centralised system for launching and distributing
mobile phone applications, and providing a standard
framework for app developers, the app store did 3
key things:
�	 It provided the security of the online payment method
�	 It customised the payment process
�	 It popularised downloading software through the removal of the physical limitation of 			
		 manufacturing and delivery
Needless to say, the advent of the App Store brought
trust and utility to a sector that had previously been
fraught with proprietary solutions that were typically
sold through the purchase of expensive licences, and
then distributed in hard copy on CD. Now, people
could discover many new vendors, read reviews
of particular products, and in the click of a button,
install the software on their devices.
Figure 3 shows a timeline demonstrating
the various technology enhancements and
advancements in mobile applications and App
Stores, from 2007 when Steve Jobs introduced the
iPhone to 2014 when the Apple App Store reached
a total of 75 billion downloads.
7The State of the Global App Industry – February 2018
Figure 3: Timeline of Technology Advancements in Smartphones, App Stores and Apps
The State of the Global App Industry – February 20188
Just How Many
Apps Are Being
Downloaded?
02
9The State of the Global App Industry – February 2018
Since the inception of the first app
store introduced by Steve Jobs back
in 2008, the number of apps has
grown from just a few hundred on
the first day to over 2.2 million in
2017 (just in the apple app store
alone). As of March 2017, Android
users had the option to choose just
over 2.8 million apps. In the Q3 of
2017, the Amazon app store had
approximately 376,520 apps (Statista,
2018)5
.
Although Android’s primary app
store‘Google Play’and other third-
party Android app stores far out-
weigh IOS in downloads, IOS is the
highest earner in the market. IOS
users are more willing to pay for
in-app purchases and paid apps as
compared to its android counter-
part.
While IOS is predicted to continue
as the biggest earner, the number
of app downloads from Google Play
are expected to far outpace the
number of downloads made from
the Apple App Store. This is primarily
due to the significant imbalance
of preference for Android mobile
phones over iOS mobile phones in
developing countries. In Indonesia,
it is estimated that the proportion
of Android operating systems to
iOS is approximately 85% to 15%
respectively. This trend (while not
as extreme) of Android preference
over IOS is similar in many other
developing economies including
South Africa, Central Africa, Malaysia,
Philippines, and Singapore (Apple vs
Android, 2017)6
.
In regards to China having the largest
gross spend, according to Statista in
China, Android hold by far the largest
market share of mobile operating
systems with 78% registered as
Android compared to IOS with 19%
(Statista, 2018)7
.
While it may be the case that Android
is the preferred operating system in
the developing economy, regardless
of the sales of its devices, it will take
Google Play a little longer to catch
up with the Apple Store with regard
to revenue generation. In the Q3 of
2016, combined Apple App Store
and Google Play app revenues in
the United States amounted to 2.23
billion U.S. dollars with over two
thirds generated by the Apple App
Store (Statista, 2017)8
.
Cumulative App Downloads from Apple’s App Store
from July 2008 to June 2017
Figure 4: Cumulative app downloads from Apple’s App Store
Just How Many Apps Are Being Downloaded?
The State of the Global App Industry – February 201810
Figure 4 shows the number of cumulative app downloads from Apple’s App Store from July 2008 to June 2017
(Statista, 2017)9
. As of the last reported period in 2017, Apple announced that 180 billion apps had been downloaded
cumulatively from its App Store.
Figure 5: Global App Downloads
This statistics in Figure 5 present the total number of
app downloads during 2016 and 2017 (as a forecast)
and then a forecast for the number of mobile app
downloads worldwide in 2021. In 2016, consumers
downloaded 149.3 billion mobile apps to their
connected devices. In 2021, this figure is projected to
grow to 352.9 billion app downloads (Statista, 2017)10
.
Mobile games are also set to generate a large volume
of app downloads to mobile devices - all of the
leading gaming app publishers in the Google Play
Store had double-digit download figures without any
signs of slowing down.
In 2016, the global mobile internet user penetration
exceeded half the world’s population, while the
average daily time spent accessing online content
from a mobile device, such as a smartphone, a tablet
computer or wearable, reached 185 minutes daily
among Millennials, 110 minutes for Generation X and
43 daily minutes for Boomers.
Number of Mobile App Downloads Worldwide
11The State of the Global App Industry – February 2018
The Uses and
Utility of Apps
03
The State of the Global App Industry – February 201812
The Uses and Utility of Apps
Mobile apps have a huge variety of utilities including but
not limited to entertainment, productivity, education,
retail, medical, food delivery, social media, transportation,
gaming, forums, finance, communication, news, maps,
weather, meditation, dating, exercise, music, podcasts
and many more.
There are different categories of apps that are defined
by their uses, and there are different segments defined
by the market that a product is sold into. The categories
currently listed in the app store include AR Apps, Books,
Business, Education, Entertainment, Finance, Food &
Drink, Health & Fitness, Kids, Lifestyle, Magazines &
Newspapers, Medical, Music, Navigation, News, Photo
& Video, Productivity, Reference, Shopping, Social
Networking, Sports, Travel, Utilities and Weather with a
specific tab to itself for games because of their massive
popularity and extensive diversity. Figure 6 shows the
most popular App Store categories in 2017.
Gaming apps are the most popular apps based on availability, as about 23 percent of the all apps available fit
in this category (Statista, 2018)11
.
Figure 6: Most Popular App Store Categories
Most Popular App Store Categories in January 2018, by share of available apps
13The State of the Global App Industry – February 2018
As of April 2017, Clash of Clans and Clash Royale were the top grossing gaming apps with each generating
more than 1 million U.S. dollars in revenue per day. The average price for a gaming app is about 48 cents,
while the average app price is just over one U.S. dollar.
Business is the second most popular category in the Apple App Store, accounting for around 10 percent of
all apps available, closely followed by the education. Lifestyle and entertainment complete the top 5 most
popular iOS app categories list. Both lifestyle and entertainment have a broad market reach, as they both had
approximately 63 percent reach among global iOS mobile users as of December 2016.
Figure 7: Distribution of time spent on apps in the US
According to research on the distribution of user engagement, 20 percent of U.S. mobile app usage time was
spent on social networking. Music including streaming services such as Pandora or Spotify accounted for 18
percent of mobile app usage time.
Distribution of time spent on mobile apps in the US in June 2017 by category
The State of the Global App Industry – February 201814
Figure 8: Year on Year Growth in Time Spent on Mobile Apps
According to Figure 8, in terms of the fastest growing mobile app categories based on year-on-year growth
of consumer time spend, shopping made the biggest gain of 54%. The mobile app category with the largest
loss was lifestyle apps with a 40 percent decrease. The most profitable category is gaming, generating
$50.4 billion U.S. dollars in annual revenue, compared to 11.5 billion U.S. dollars spent on non-gaming apps
worldwide in 2016 (Statista, 2017)12
.
Year on Year Growth in Time Spent per Mobile App category in 2017
15The State of the Global App Industry – February 2018
Strategies for
Launching
and Marketing
Apps
04
The State of the Global App Industry – February 201816
Strategies for Launching
and Marketing Apps
Apps can fail for many reasons but the most common
reason of failure is owners of the app do not carefully
plan to launch the app. To launch an app, there must
be a robust go-to-market strategy that encompasses
both a marketing strategy and a positioning
strategy. As a result of poor planning and little to no
marketing, many of the worlds most technically genius
applications fail, and never exceed more than a few
hundred downloads.
Across all industries, it is important to note that even
if you are achieving downloads, 80% of all app users
churn within 90 days. What people didn’t take into
account is the fickleness of these users, with 25% of
them only using an app once (Localytics, 2017)13
.
Figure 9: Year on Year Growth in Time Spent on Mobile Apps
Figure 9 showcases the average retention rate by industry after 30, 60, and 90 days respectively. As
you can see, the average retention rate varies by industry.
17The State of the Global App Industry – February 2018
Research:
Who is your app for? You need to identify the audience that your app is designed for and marketed toward. This should
be done by identifying a specific pain point of an audience and developing a solution to that problem. This should be
done before your app even goes into development, but can be done again once your audience has been refined.
App Store Optimisation:
App Store Optimisation refers to the specific factors a developer can change about the overview appearance of the app
to a potential user. The goal is to improve the app’s rank within an app stores feature lists and app search engine results
to:
•	 Be more easily discovered
•	 Outrank other competitors
•	 Increase user exposure and conversion
App Name:
To effectively name your app, the normal procedure is to combine the unique brand of the app with the most
significant feature. For example: Snapchat and TripView
App Description:
The story is designed to convey the advantages of using the app to attract new users. With the Google Play
Store, the algorithm factors the words of the description with the words used in a search, meaning that the
description has a significant effect in the differentiation of one product over another product. It is strongly
advised to use appealing terminology that is unused by competing apps.
Social Media and Networking:
Leveraging social media, and social media influencers is a strong way to capture audience attention and
participation with an app. Also, creating content for other engagement platforms such as YouTube can
also create a following to be redirect traffic to download an app. Another way to use social media to your
advantage is creating incentives for your current user base to invite their friends, receiving benefits such as
in-game currency when their friends join.
Website & Google Search Optimisation:
By creating a website for the app, the app has a greater discoverability to the target audience. Consumers
can find the website, see a more in-depth overview of the apps functionality and a link should be provided to
divert the traffic to the app on the app store to increase downloads.
The State of the Global App Industry – February 201818
Paying for Advertising:
This can be a viable way to promote your app, but only once you have established your revenue model
and understand how much money you earn on average per download. If you are able to generate enough
revenue per customer to cover the costs of buying new customers via ads, then paying for advertising is very
viable.
Releasing Android apps on multiple App Stores:
There are many other Android app stores besides Google Play. This allows the app to have greater coverage
and potentially have different streams of revenue from different app stores if the monetisation model works
with it.
Managing User Reviews and Making Changes:
Mobile apps live and die by user reviews. Apps that are successful at getting good reviews typically have one
thing in common. They ask users to leave reviews. There should be a responsive team that deals with user
reviews to respond to positive reviews with praise and with negative review by sending the problems and
bugs to the development team to fix and upgrade.
International Market Positioning:
With a few simple changes, several apps can be marketed on an international level, extensively expanding
your reach. Changing trends in diverse markets can affect your app’s reputation. If you observe that your app
category is trending in South American regions for instance, then it is wise to produce a Spanish-language
version of your app to attain maximum exposure.
19The State of the Global App Industry – February 2018
Pricing
Strategies
for Mobile
Applications
05
The State of the Global App Industry – February 201820
Pricing Strategies for Mobile Applications
Before pricing an app, understand that it is a way to
set user expectations. Users usually expect apps to
be either free or priced at 99 cents. Other complex
apps sell for $2.99 to $4.99. Apps in higher range
should have expansive features and have a highly
polished UI and UX if they plan to do well in the
competitive market – that is, they should look
attractive and provide value for users.
If you have a paid app, you’ll be able to experiment
with your pricing, but be careful of the image you
give to your potential users. It’s easier to start at a
higher price and do“price drops”than to suddenly
charge twice the original price.
The price you can charge people depends on your
target audience and your app. Some people will
happily drop $9.99 for an app. But in the same
demographic, there will most certainly be people
that will not even pay $0.99 for apps. This is where
split testing your audience comes in. In many cases,
it is actually possible to survey
large segments of an audience prior to setting a
more permanent pricing strategy.
Split testing audiences refers to sending one version
of a pricing strategy to an audience for feedback,
and then another version of the strategy to a
separate audience for feedback. There are many
firms that specialise in assisting with development
of a mobile application pricing strategy, such as
Accenture and Gartner, but it is also possible to split
test an audience by yourself.
Using social media, it is possible to run surveys in
an audience of your chosen demographic and to
ask people what they think… It is also possible to
pay affiliate database marketing groups to be able
to send a survey out to their audiences, and to get
the information this way. Either way, it is absolutely
critical that prior to launching a pricing strategy, to
obtain feedback on the pricing strategy.
Factoring in both free and paid apps, data from
mobile analytics experts indicate that the average
price for an iPad app is roughly 10 times the cost
of an Android app and an IPhone app is roughly 6
times the cost of an android app (Flurry, 2013)14
.
Should the app be free or paid? Firstly, it is very important to do a competitive analysis to find out what’s
going on in the market? What other similar apps are there and what are their prices? You can attract
attention by simply undercutting your competitors on the price factor. However, if your app is more
advance, or complex, you should charge more for superior offerings.
21The State of the Global App Industry – February 2018
Figure 10: Average Pricing Point for Apps by Sector
The State of the Global App Industry – February 201822
Revenue
Models and
Monetisation
Methods
06
23The State of the Global App Industry – February 2018
Revenue Models and Monetisation Methods
The financial outcome remains the key indicator of success of an app. The methods of monetisation have a
fundamental impact on the initial exposure, the length of the user lifespan and the revenue generated by the
user.
�	 Premium Model – One time, up-front fee: The
most straightforward, but not the most desirable.
The reason is that you are supporting an increasing
number of users and you have to get even more
users to fund your future development costs.
�	 Up-front fee + in-app purchases: This is probably the
hardest sell because you are asking people to pay
twice. It only works in certain niches.
�	 Free Model: You simply want to acquire users for a
future purpose.
�	 Free (“light version”) + paid version: This can be a
great model if you have a strong value proposition
that can be showcased in a free version of your app.
�	 Freemium Model – Free + in-app purchases: Most
of the ridiculously profitable games in the world
use this model. It should be one of the first revenue
models you should explore.
�	 In-App Purchases Model: A model that is becoming
increasingly popular because it provides recurring
income to cover future development costs.
�	 In-App Advertising Model – Free + Advertising:
Advertising is generally a bad four letter word, but it
can be a good revenue model, if you have no other
options. Consider offering an in-app purchase that
removes the ads.
�	 Sponsorship: Sponsorship is a rather new
monetization model. Users act as an advertising
sponsor in exchange for a fee. A share from each fee
goes to the developers.
�	 Combination model: Use of two or more of the
above models.
Figure 11: Monetisation Strategies of Mobile Applications
The State of the Global App Industry – February 201824
Case studies
of Successful
Apps
07
25The State of the Global App Industry – February 2018
Name: 		 Clash of Clans
Type: 		 Gaming Application
Revenue Model: 	 Free download, and in-app purchase
Why it works: Clash of clans is a strategy game, designed to acquire a large user base of
downloads with the base free gameplay. With the game taking increasing time to progress, it is
designed to allow players to reduce this time through the purchase of in-app currency. The app
makes the majority of it revenue from gamers who are loyal to the game and spend $1000’s of
their money to progress faster than the games bottle-neck progression system physically allows.
Case studies of Successful Apps
Name: 		 Barron’s
Type: 		 News Paper
Revenue Model:	 Free to download and in-app purchase model (subscription payments)
Why it works: Barron’s, is a prestigious financial‘must-read’newspaper. It has a long built client
base previous to the invention to the app. The app offers access to the digital version of the
newspaper. With its client base and brand already established, Barron’s charges high yearly
subscriptions for access.
Name: 		 Snapchat
Type: 		 Social Media
Revenue Model: 	 Free download, in-app purchases and in-app advertising
Why it Works: Snapchat is a social media company that allows its users to send and receive timed,
self-deleting pictures. Snapchat built up a solid user base during its launch and development
before building in the monetisation features. With a large user base, they created a section for
selected advertisers to create ads with the theme of timed picture deletion. This allows Snapchat
to have advertisers without the negative response from the user base.
The State of the Global App Industry – February 201826
What is
the Future
for Mobile
Applications
08
27The State of the Global App Industry – February 2018
Augmented Reality (AR) and Virtual Reality (VR) Application Development:
We are expected to see VR and AR apps in the retail industry (actually, Gartner predicts that by 2020, 100
million consumers will shop in augmented reality), real estate, travel, education, manufacturing, healthcare
and many more industry sectors in the coming years. It’s hard to understand how this will affect us as
consumers and users, but just imagine the opportunities that VR brings to real estate. Exploring houses before
purchase will be a lot more efficient and a lot more fun. Figure 12 below provides research from Goldman
Sachs global investment research, relating to the expected market for AR and VR software in upcoming years.
What is the Future for Mobile Applications
Enterprise mobile app development:
A growing need for mobilising enterprise systems, and/or sticking with the same old desktop or even web
systems just won’t fly with the Millennials. Some businesses are building their own custom apps (such as Sumo
Salad, a chain of restaurants that built an app for managing their waiting lists) while others rely on existing
3rd party apps, to run their logistics. Gartner also says that companies will choose to invest in micro-apps
development to allow employees to enjoy specific features of the enterprise solution (such as check list apps).
The State of the Global App Industry – February 201828
Artificial Intelligence (AI) / Machine Learning:
2016 has introduced us to various AI apps such as the famous‘Google Now’and‘Prisma’. The implications of AI
as implemented in chat bots are already quite widely adopted, and the future holds even greater innovations
in this field.
Internet Of Things (IoT):
The massive growth in the IoT has been exponential and almost every IoT solution needs an accompanying
mobile app, using its smart device sensors to assist the user to control the smart device. In fact, Android just
released its own package for developing IoT apps. One concern with this growing trend is security. With all
those connected devices, chances for breeches are higher. So not only will IoT continue to grow stronger, it
opens a whole new market for IoT security apps!
Figure 12: Predicted growth of VR and AR Applications
29The State of the Global App Industry – February 2018
References
„„
1
The State of the App Economy (5th ed.), The App Association, Retrieved from https://actonline.org/wp-		
	content/uploads/App_Economy_Report_2017_Digital.pdf
„„
2
Infographic: 385% Growth Forecast for the Global App Economy, Statista (Retrieved 31 January 2018), 		
	 available at: https://www.statista.com/chart/10033/385-growth-forecast-for-the-global-app-economy/
„„
3
App Market Forecast 2017, App Annie (Retrieved 27 January 2018), available at: http://go.appannie.com/	
	report-app-annie-market-forecast-2017
„„
4
State of the App Economy (4th ed.), The App Association, Retrieved from https://actonline.org/wp-content/	
	uploads/2016_State_of_App_Economy.pdf
„„
5
Number of Available Apps in the Amazon App store, Statista (Retrieved 26 January 2018), available at: 		
	 https://www.statista.com/ statistics/307330/number-of-available-apps-in-the-amazon-appstore/
„„
6
Apple Vs Android — A comparative study 2017, AndroidPub (Retrieved 27 January 2018), available at: 		
	https://android.jlelse.eu/apple-vs-android-a-comparative-study-2017-c5799a0a1683
„„
7
Mobile OS share in China 2013-2017, Statista (Retrieved 25 January 2018), available at: https://www.		
	statista.com/statistics/262176/market-share-held-by-mobile-operating-systems-in-china/
„„
8
Google Play: number of downloads 2010-2016, Statista (Retrieved 31 January 2018), available at: https://	
	www.statista.com/statistics/281106/number-of-android-app-downloads-from-google-play/
„„
9
Apple store downloads 2016, Statista (Retrieved 28 January 2018), available at: https://www.statista.com/	
	statistics/263794/number-of-downloads-from-the-apple-app-store/
„„
10
Annual number of mobile app downloads worldwide 2021, Statista (Retrieved 31 January 2018), available 	
	 at: https://www.statista.com/statistics/271644/worldwide-free-and-paid-mobile-app-store-downloads/
„„
11
Fastest growing mobile app categories 2017, Statista (Retrieved 1 February 2018), available at: https://	
	www.statista.com/statistics/251096/fastest-growing-shopping-app-categories/
„„
12
Global mobile app revenue by category 2021, Statista (Retrieved 26 January 2018), available at: https://	
	www.statista.com/statistics/269024/distribution-of-the-worldwide-mobile-app-revenue-by-category/
„„
13
Mobile Apps: What’s A Good Retention Rate, Localytics (Retrieved 25 January 2018), available at: http://	
	info.localytics.com/blog/mobile-apps-whats-a-good-retention-rate
„„
14
The History of App Pricing, Flurry Blog (Retrieved 26 January 2018), available at: http://flurrymobile.tumblr.	
	com/post/115189750715/the-history-of-app-pricing-and-why-most-apps-are
THANK YOU
www.techwitty.com.au
SYDNEY OFFICE
Phone: +61 2 9387 5900
Mobile: +61 426 239 090
Suite 5, Level 2,
2 Grosvenor Street Bondi Junction,
NSW 2022 Australia
PO Box 2499 Bondi Junction,
NSW 1355 Australia
MELBOURNE OFFICE
Phone: +61 2 9387 5900
Mobile: +61 452 556 007
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The Global State of the App Industry

  • 1. The Global State of the App Industry February 2018 www.techwitty.com.au Joseph GillespieAuthor: SYDNEY OFFICE Phone: +61 2 9387 5900 Mobile: +61 426 239 090 Suite 5, Level 2, 2 Grosvenor Street Bondi Junction, NSW 2022 Australia PO Box 2499 Bondi Junction, NSW 1355 Australia MELBOURNE OFFICE Phone: +61 2 9387 5900 Mobile: +61 452 556 007 84 Hotham St, Preston VICTORIA 3072 Australia
  • 2. The State of the Global App Industry – February 20182 E x e c u t i v e S u m m a r y New Opportunities, Drastically Decreased Barriers to Entry have Created a Thriving App Economy - With the invention of the smartphone and the automation of online payment & distribution, an unprecedented thriving industry has emerged. The Large Number of Apps Launched has led to the Rapid Growth in the Industry value – Currently around 5.2 million apps just on the apple and google play store alone, the app economy has grown to $143 billion (App Economy, 2018)1 . Gross User Spend in the Global App Market Expected to Grow from $1.31 Trillion in 2016 to $6.35 Trillion – Total spend estimated to double every two years for the next 5 years (Statista, 2017)2 . Increasingly Saturated App Market has made it increasingly difficult to have your App noticed by Customers – As more apps are becoming available across both IOS and Android, currently around 90% of apps cannot be found without a specific search. This causes these ‘zombie’ apps to be less likely to succeed. Gaming Apps are the Most Popular Apps – By category, games represent the largest amount of available app, and the highest earner. 1 2 3 4 5
  • 3. 3The State of the Global App Industry – February 2018 The Global Mobile Application Industry 01
  • 4. The State of the Global App Industry – February 20184 The Global Mobile Application Industry Today, the app economy is part of a thriving ecosystem worth more than $143 billion (App Economy, 2018)1 . The industry has seen massive growth as smartphones in the global populous have become not only the norm, but also an addictive part of people’s daily lives. According to Figure 1 below, China has the largest gross spend on apps across its app market with a total annualised spend in 2016 of approximately $790 million, with the USA coming in second at around $200 million. The total gross spend on mobile phone applications is estimated to grow by as much as 385% between 2016 and 2021 representing one of the fastest growing industry sectors on earth (Statista, 2017)2 . The global app industry is literally huge and without doubt, growing exponentially. Looking at the global growth download and revenue statistics, there appears to be no end in sight. With the growth in App demand, as one would imagine, the mobile application developer community has boomed, with the number of mobile apps in the market hitting new heights in 2017. Figure 1: 385% Growth Forecast for the Global App Economy
  • 5. 5The State of the Global App Industry – February 2018 A new report from app analytics firm‘App Annie’estimates the global app economy will be worth $6.3 trillion by 2021, up from $1.3 trillion last year (See Figure 2 Below), With China representing the largest contribution to the global market spend at around 60% of total market spend (App Annie, 2017)3 . Industry Drivers From an analysis of the market, the major drivers behind the rapid growth of the industry include: Historically, independent software companies have faced steep barriers to entry. Much of their revenue opportunity was typically derived from adding new features to existing software products and charging for the upgraded feature sets. 1. The unique business conditions 2. Evolution of technology (both hardware and software) 3. Increase in popularity of smartphones Figure 2: Mobile App Forecast – Total Spend
  • 6. The State of the Global App Industry – February 20186 The introduction of the App Store coupled with a change in the way consumers are prepared to interact with mobile applications has completely disrupted the historic revenue models and allowed developers to create products marketed directly to consumers (The App Economy, 2017)4 . With the introduction of the app store, the logistics of payment and distribution channels for software developers changed dramatically. The App store, users could more easily download content online and consumers could purchase without the need of human labour to transact. In addition to providing a centralised system for launching and distributing mobile phone applications, and providing a standard framework for app developers, the app store did 3 key things: � It provided the security of the online payment method � It customised the payment process � It popularised downloading software through the removal of the physical limitation of manufacturing and delivery Needless to say, the advent of the App Store brought trust and utility to a sector that had previously been fraught with proprietary solutions that were typically sold through the purchase of expensive licences, and then distributed in hard copy on CD. Now, people could discover many new vendors, read reviews of particular products, and in the click of a button, install the software on their devices. Figure 3 shows a timeline demonstrating the various technology enhancements and advancements in mobile applications and App Stores, from 2007 when Steve Jobs introduced the iPhone to 2014 when the Apple App Store reached a total of 75 billion downloads.
  • 7. 7The State of the Global App Industry – February 2018 Figure 3: Timeline of Technology Advancements in Smartphones, App Stores and Apps
  • 8. The State of the Global App Industry – February 20188 Just How Many Apps Are Being Downloaded? 02
  • 9. 9The State of the Global App Industry – February 2018 Since the inception of the first app store introduced by Steve Jobs back in 2008, the number of apps has grown from just a few hundred on the first day to over 2.2 million in 2017 (just in the apple app store alone). As of March 2017, Android users had the option to choose just over 2.8 million apps. In the Q3 of 2017, the Amazon app store had approximately 376,520 apps (Statista, 2018)5 . Although Android’s primary app store‘Google Play’and other third- party Android app stores far out- weigh IOS in downloads, IOS is the highest earner in the market. IOS users are more willing to pay for in-app purchases and paid apps as compared to its android counter- part. While IOS is predicted to continue as the biggest earner, the number of app downloads from Google Play are expected to far outpace the number of downloads made from the Apple App Store. This is primarily due to the significant imbalance of preference for Android mobile phones over iOS mobile phones in developing countries. In Indonesia, it is estimated that the proportion of Android operating systems to iOS is approximately 85% to 15% respectively. This trend (while not as extreme) of Android preference over IOS is similar in many other developing economies including South Africa, Central Africa, Malaysia, Philippines, and Singapore (Apple vs Android, 2017)6 . In regards to China having the largest gross spend, according to Statista in China, Android hold by far the largest market share of mobile operating systems with 78% registered as Android compared to IOS with 19% (Statista, 2018)7 . While it may be the case that Android is the preferred operating system in the developing economy, regardless of the sales of its devices, it will take Google Play a little longer to catch up with the Apple Store with regard to revenue generation. In the Q3 of 2016, combined Apple App Store and Google Play app revenues in the United States amounted to 2.23 billion U.S. dollars with over two thirds generated by the Apple App Store (Statista, 2017)8 . Cumulative App Downloads from Apple’s App Store from July 2008 to June 2017 Figure 4: Cumulative app downloads from Apple’s App Store Just How Many Apps Are Being Downloaded?
  • 10. The State of the Global App Industry – February 201810 Figure 4 shows the number of cumulative app downloads from Apple’s App Store from July 2008 to June 2017 (Statista, 2017)9 . As of the last reported period in 2017, Apple announced that 180 billion apps had been downloaded cumulatively from its App Store. Figure 5: Global App Downloads This statistics in Figure 5 present the total number of app downloads during 2016 and 2017 (as a forecast) and then a forecast for the number of mobile app downloads worldwide in 2021. In 2016, consumers downloaded 149.3 billion mobile apps to their connected devices. In 2021, this figure is projected to grow to 352.9 billion app downloads (Statista, 2017)10 . Mobile games are also set to generate a large volume of app downloads to mobile devices - all of the leading gaming app publishers in the Google Play Store had double-digit download figures without any signs of slowing down. In 2016, the global mobile internet user penetration exceeded half the world’s population, while the average daily time spent accessing online content from a mobile device, such as a smartphone, a tablet computer or wearable, reached 185 minutes daily among Millennials, 110 minutes for Generation X and 43 daily minutes for Boomers. Number of Mobile App Downloads Worldwide
  • 11. 11The State of the Global App Industry – February 2018 The Uses and Utility of Apps 03
  • 12. The State of the Global App Industry – February 201812 The Uses and Utility of Apps Mobile apps have a huge variety of utilities including but not limited to entertainment, productivity, education, retail, medical, food delivery, social media, transportation, gaming, forums, finance, communication, news, maps, weather, meditation, dating, exercise, music, podcasts and many more. There are different categories of apps that are defined by their uses, and there are different segments defined by the market that a product is sold into. The categories currently listed in the app store include AR Apps, Books, Business, Education, Entertainment, Finance, Food & Drink, Health & Fitness, Kids, Lifestyle, Magazines & Newspapers, Medical, Music, Navigation, News, Photo & Video, Productivity, Reference, Shopping, Social Networking, Sports, Travel, Utilities and Weather with a specific tab to itself for games because of their massive popularity and extensive diversity. Figure 6 shows the most popular App Store categories in 2017. Gaming apps are the most popular apps based on availability, as about 23 percent of the all apps available fit in this category (Statista, 2018)11 . Figure 6: Most Popular App Store Categories Most Popular App Store Categories in January 2018, by share of available apps
  • 13. 13The State of the Global App Industry – February 2018 As of April 2017, Clash of Clans and Clash Royale were the top grossing gaming apps with each generating more than 1 million U.S. dollars in revenue per day. The average price for a gaming app is about 48 cents, while the average app price is just over one U.S. dollar. Business is the second most popular category in the Apple App Store, accounting for around 10 percent of all apps available, closely followed by the education. Lifestyle and entertainment complete the top 5 most popular iOS app categories list. Both lifestyle and entertainment have a broad market reach, as they both had approximately 63 percent reach among global iOS mobile users as of December 2016. Figure 7: Distribution of time spent on apps in the US According to research on the distribution of user engagement, 20 percent of U.S. mobile app usage time was spent on social networking. Music including streaming services such as Pandora or Spotify accounted for 18 percent of mobile app usage time. Distribution of time spent on mobile apps in the US in June 2017 by category
  • 14. The State of the Global App Industry – February 201814 Figure 8: Year on Year Growth in Time Spent on Mobile Apps According to Figure 8, in terms of the fastest growing mobile app categories based on year-on-year growth of consumer time spend, shopping made the biggest gain of 54%. The mobile app category with the largest loss was lifestyle apps with a 40 percent decrease. The most profitable category is gaming, generating $50.4 billion U.S. dollars in annual revenue, compared to 11.5 billion U.S. dollars spent on non-gaming apps worldwide in 2016 (Statista, 2017)12 . Year on Year Growth in Time Spent per Mobile App category in 2017
  • 15. 15The State of the Global App Industry – February 2018 Strategies for Launching and Marketing Apps 04
  • 16. The State of the Global App Industry – February 201816 Strategies for Launching and Marketing Apps Apps can fail for many reasons but the most common reason of failure is owners of the app do not carefully plan to launch the app. To launch an app, there must be a robust go-to-market strategy that encompasses both a marketing strategy and a positioning strategy. As a result of poor planning and little to no marketing, many of the worlds most technically genius applications fail, and never exceed more than a few hundred downloads. Across all industries, it is important to note that even if you are achieving downloads, 80% of all app users churn within 90 days. What people didn’t take into account is the fickleness of these users, with 25% of them only using an app once (Localytics, 2017)13 . Figure 9: Year on Year Growth in Time Spent on Mobile Apps Figure 9 showcases the average retention rate by industry after 30, 60, and 90 days respectively. As you can see, the average retention rate varies by industry.
  • 17. 17The State of the Global App Industry – February 2018 Research: Who is your app for? You need to identify the audience that your app is designed for and marketed toward. This should be done by identifying a specific pain point of an audience and developing a solution to that problem. This should be done before your app even goes into development, but can be done again once your audience has been refined. App Store Optimisation: App Store Optimisation refers to the specific factors a developer can change about the overview appearance of the app to a potential user. The goal is to improve the app’s rank within an app stores feature lists and app search engine results to: • Be more easily discovered • Outrank other competitors • Increase user exposure and conversion App Name: To effectively name your app, the normal procedure is to combine the unique brand of the app with the most significant feature. For example: Snapchat and TripView App Description: The story is designed to convey the advantages of using the app to attract new users. With the Google Play Store, the algorithm factors the words of the description with the words used in a search, meaning that the description has a significant effect in the differentiation of one product over another product. It is strongly advised to use appealing terminology that is unused by competing apps. Social Media and Networking: Leveraging social media, and social media influencers is a strong way to capture audience attention and participation with an app. Also, creating content for other engagement platforms such as YouTube can also create a following to be redirect traffic to download an app. Another way to use social media to your advantage is creating incentives for your current user base to invite their friends, receiving benefits such as in-game currency when their friends join. Website & Google Search Optimisation: By creating a website for the app, the app has a greater discoverability to the target audience. Consumers can find the website, see a more in-depth overview of the apps functionality and a link should be provided to divert the traffic to the app on the app store to increase downloads.
  • 18. The State of the Global App Industry – February 201818 Paying for Advertising: This can be a viable way to promote your app, but only once you have established your revenue model and understand how much money you earn on average per download. If you are able to generate enough revenue per customer to cover the costs of buying new customers via ads, then paying for advertising is very viable. Releasing Android apps on multiple App Stores: There are many other Android app stores besides Google Play. This allows the app to have greater coverage and potentially have different streams of revenue from different app stores if the monetisation model works with it. Managing User Reviews and Making Changes: Mobile apps live and die by user reviews. Apps that are successful at getting good reviews typically have one thing in common. They ask users to leave reviews. There should be a responsive team that deals with user reviews to respond to positive reviews with praise and with negative review by sending the problems and bugs to the development team to fix and upgrade. International Market Positioning: With a few simple changes, several apps can be marketed on an international level, extensively expanding your reach. Changing trends in diverse markets can affect your app’s reputation. If you observe that your app category is trending in South American regions for instance, then it is wise to produce a Spanish-language version of your app to attain maximum exposure.
  • 19. 19The State of the Global App Industry – February 2018 Pricing Strategies for Mobile Applications 05
  • 20. The State of the Global App Industry – February 201820 Pricing Strategies for Mobile Applications Before pricing an app, understand that it is a way to set user expectations. Users usually expect apps to be either free or priced at 99 cents. Other complex apps sell for $2.99 to $4.99. Apps in higher range should have expansive features and have a highly polished UI and UX if they plan to do well in the competitive market – that is, they should look attractive and provide value for users. If you have a paid app, you’ll be able to experiment with your pricing, but be careful of the image you give to your potential users. It’s easier to start at a higher price and do“price drops”than to suddenly charge twice the original price. The price you can charge people depends on your target audience and your app. Some people will happily drop $9.99 for an app. But in the same demographic, there will most certainly be people that will not even pay $0.99 for apps. This is where split testing your audience comes in. In many cases, it is actually possible to survey large segments of an audience prior to setting a more permanent pricing strategy. Split testing audiences refers to sending one version of a pricing strategy to an audience for feedback, and then another version of the strategy to a separate audience for feedback. There are many firms that specialise in assisting with development of a mobile application pricing strategy, such as Accenture and Gartner, but it is also possible to split test an audience by yourself. Using social media, it is possible to run surveys in an audience of your chosen demographic and to ask people what they think… It is also possible to pay affiliate database marketing groups to be able to send a survey out to their audiences, and to get the information this way. Either way, it is absolutely critical that prior to launching a pricing strategy, to obtain feedback on the pricing strategy. Factoring in both free and paid apps, data from mobile analytics experts indicate that the average price for an iPad app is roughly 10 times the cost of an Android app and an IPhone app is roughly 6 times the cost of an android app (Flurry, 2013)14 . Should the app be free or paid? Firstly, it is very important to do a competitive analysis to find out what’s going on in the market? What other similar apps are there and what are their prices? You can attract attention by simply undercutting your competitors on the price factor. However, if your app is more advance, or complex, you should charge more for superior offerings.
  • 21. 21The State of the Global App Industry – February 2018 Figure 10: Average Pricing Point for Apps by Sector
  • 22. The State of the Global App Industry – February 201822 Revenue Models and Monetisation Methods 06
  • 23. 23The State of the Global App Industry – February 2018 Revenue Models and Monetisation Methods The financial outcome remains the key indicator of success of an app. The methods of monetisation have a fundamental impact on the initial exposure, the length of the user lifespan and the revenue generated by the user. � Premium Model – One time, up-front fee: The most straightforward, but not the most desirable. The reason is that you are supporting an increasing number of users and you have to get even more users to fund your future development costs. � Up-front fee + in-app purchases: This is probably the hardest sell because you are asking people to pay twice. It only works in certain niches. � Free Model: You simply want to acquire users for a future purpose. � Free (“light version”) + paid version: This can be a great model if you have a strong value proposition that can be showcased in a free version of your app. � Freemium Model – Free + in-app purchases: Most of the ridiculously profitable games in the world use this model. It should be one of the first revenue models you should explore. � In-App Purchases Model: A model that is becoming increasingly popular because it provides recurring income to cover future development costs. � In-App Advertising Model – Free + Advertising: Advertising is generally a bad four letter word, but it can be a good revenue model, if you have no other options. Consider offering an in-app purchase that removes the ads. � Sponsorship: Sponsorship is a rather new monetization model. Users act as an advertising sponsor in exchange for a fee. A share from each fee goes to the developers. � Combination model: Use of two or more of the above models. Figure 11: Monetisation Strategies of Mobile Applications
  • 24. The State of the Global App Industry – February 201824 Case studies of Successful Apps 07
  • 25. 25The State of the Global App Industry – February 2018 Name: Clash of Clans Type: Gaming Application Revenue Model: Free download, and in-app purchase Why it works: Clash of clans is a strategy game, designed to acquire a large user base of downloads with the base free gameplay. With the game taking increasing time to progress, it is designed to allow players to reduce this time through the purchase of in-app currency. The app makes the majority of it revenue from gamers who are loyal to the game and spend $1000’s of their money to progress faster than the games bottle-neck progression system physically allows. Case studies of Successful Apps Name: Barron’s Type: News Paper Revenue Model: Free to download and in-app purchase model (subscription payments) Why it works: Barron’s, is a prestigious financial‘must-read’newspaper. It has a long built client base previous to the invention to the app. The app offers access to the digital version of the newspaper. With its client base and brand already established, Barron’s charges high yearly subscriptions for access. Name: Snapchat Type: Social Media Revenue Model: Free download, in-app purchases and in-app advertising Why it Works: Snapchat is a social media company that allows its users to send and receive timed, self-deleting pictures. Snapchat built up a solid user base during its launch and development before building in the monetisation features. With a large user base, they created a section for selected advertisers to create ads with the theme of timed picture deletion. This allows Snapchat to have advertisers without the negative response from the user base.
  • 26. The State of the Global App Industry – February 201826 What is the Future for Mobile Applications 08
  • 27. 27The State of the Global App Industry – February 2018 Augmented Reality (AR) and Virtual Reality (VR) Application Development: We are expected to see VR and AR apps in the retail industry (actually, Gartner predicts that by 2020, 100 million consumers will shop in augmented reality), real estate, travel, education, manufacturing, healthcare and many more industry sectors in the coming years. It’s hard to understand how this will affect us as consumers and users, but just imagine the opportunities that VR brings to real estate. Exploring houses before purchase will be a lot more efficient and a lot more fun. Figure 12 below provides research from Goldman Sachs global investment research, relating to the expected market for AR and VR software in upcoming years. What is the Future for Mobile Applications Enterprise mobile app development: A growing need for mobilising enterprise systems, and/or sticking with the same old desktop or even web systems just won’t fly with the Millennials. Some businesses are building their own custom apps (such as Sumo Salad, a chain of restaurants that built an app for managing their waiting lists) while others rely on existing 3rd party apps, to run their logistics. Gartner also says that companies will choose to invest in micro-apps development to allow employees to enjoy specific features of the enterprise solution (such as check list apps).
  • 28. The State of the Global App Industry – February 201828 Artificial Intelligence (AI) / Machine Learning: 2016 has introduced us to various AI apps such as the famous‘Google Now’and‘Prisma’. The implications of AI as implemented in chat bots are already quite widely adopted, and the future holds even greater innovations in this field. Internet Of Things (IoT): The massive growth in the IoT has been exponential and almost every IoT solution needs an accompanying mobile app, using its smart device sensors to assist the user to control the smart device. In fact, Android just released its own package for developing IoT apps. One concern with this growing trend is security. With all those connected devices, chances for breeches are higher. So not only will IoT continue to grow stronger, it opens a whole new market for IoT security apps! Figure 12: Predicted growth of VR and AR Applications
  • 29. 29The State of the Global App Industry – February 2018 References „„ 1 The State of the App Economy (5th ed.), The App Association, Retrieved from https://actonline.org/wp- content/uploads/App_Economy_Report_2017_Digital.pdf „„ 2 Infographic: 385% Growth Forecast for the Global App Economy, Statista (Retrieved 31 January 2018), available at: https://www.statista.com/chart/10033/385-growth-forecast-for-the-global-app-economy/ „„ 3 App Market Forecast 2017, App Annie (Retrieved 27 January 2018), available at: http://go.appannie.com/ report-app-annie-market-forecast-2017 „„ 4 State of the App Economy (4th ed.), The App Association, Retrieved from https://actonline.org/wp-content/ uploads/2016_State_of_App_Economy.pdf „„ 5 Number of Available Apps in the Amazon App store, Statista (Retrieved 26 January 2018), available at: https://www.statista.com/ statistics/307330/number-of-available-apps-in-the-amazon-appstore/ „„ 6 Apple Vs Android — A comparative study 2017, AndroidPub (Retrieved 27 January 2018), available at: https://android.jlelse.eu/apple-vs-android-a-comparative-study-2017-c5799a0a1683 „„ 7 Mobile OS share in China 2013-2017, Statista (Retrieved 25 January 2018), available at: https://www. statista.com/statistics/262176/market-share-held-by-mobile-operating-systems-in-china/ „„ 8 Google Play: number of downloads 2010-2016, Statista (Retrieved 31 January 2018), available at: https:// www.statista.com/statistics/281106/number-of-android-app-downloads-from-google-play/ „„ 9 Apple store downloads 2016, Statista (Retrieved 28 January 2018), available at: https://www.statista.com/ statistics/263794/number-of-downloads-from-the-apple-app-store/ „„ 10 Annual number of mobile app downloads worldwide 2021, Statista (Retrieved 31 January 2018), available at: https://www.statista.com/statistics/271644/worldwide-free-and-paid-mobile-app-store-downloads/ „„ 11 Fastest growing mobile app categories 2017, Statista (Retrieved 1 February 2018), available at: https:// www.statista.com/statistics/251096/fastest-growing-shopping-app-categories/ „„ 12 Global mobile app revenue by category 2021, Statista (Retrieved 26 January 2018), available at: https:// www.statista.com/statistics/269024/distribution-of-the-worldwide-mobile-app-revenue-by-category/ „„ 13 Mobile Apps: What’s A Good Retention Rate, Localytics (Retrieved 25 January 2018), available at: http:// info.localytics.com/blog/mobile-apps-whats-a-good-retention-rate „„ 14 The History of App Pricing, Flurry Blog (Retrieved 26 January 2018), available at: http://flurrymobile.tumblr. com/post/115189750715/the-history-of-app-pricing-and-why-most-apps-are
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