The mobile app market has grown significantly in recent years due to improvements in smartphones and the introduction of app stores. Apple's App Store currently dominates app revenues, but Android Market revenues are forecast to grow substantially. Games are the most popular app category. Mobile apps allow content owners to engage audiences across devices and generate additional revenues through paid downloads and advertising. However, monetizing content and addressing device fragmentation and market saturation remain challenges in the mobile app industry.

1. Mobile Media
Making the app market pay
Ronan de Renesse
Senior Analyst, IHS Screen Digest
Analyst
June, 2011

2. Application store/smartphone combination
revolutionised mobile media
• Smartphones offer better tech for rich
media co su pt o o mobile (
ed a consumption on ob e (WiFi, ,
memory, processing, power, screen
size)
• Applications stores have broken
operators’ walled-gardens and fuelled
innovation
• Improved browsing experience has
brought online and mobile together
Android Market
• Remaining issues:
• Addressable market still small
• Monetisation can be difficult
• Over crowded market place
• Device fragmentation
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3. UK leads European smartphone market
EU5: Smartphone installed base (m) iOS installed base by country (m)
180 20
18
160
16
140
14
120 12
10
100
8
80
6
60 4
40 2
0
20
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
France Germany Italy Spain UK 2011 2014
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4. Smartphone market was a three-horse race
Europe: 2010 smartphone installed Europe: 2015 smartphone installed
base market share by OS (%) base market share by OS (%)
3.7% 5.1%
4.0%
7.9%
22.9%
0.3%
6.0% 32.7%
38.3%
20.2%
47.9%
11.0%
iPhone Android BlackBerry iPhone Android BlackBerry
Symbian Windows Others Symbian Windows Others
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5. Apple dominates 2010 app revenues
2010: leading application stores' share • Apple’s App Store took 82.5% of
pp pp
of revenues (%) - total €1 6bn
€1.6bn
revenues from the four leading stores
7.6% in 2010 with revenues of €1.3bn.
4.9% Apple will maintain its lead with
5.0%
5 0%
around 60% market share among g
leading stores to 2014.
• In January 2011, Apple passed 10bn
total downloads. By May 2011
downloads 2011,
Google had served 4.5bn – with
Nokia and RIM some distance
82.5% behind.
Apple: App Store
• Despite growth in downloads, Google
Google: Android Market
has so far struggled to monetise
Nokia: Ovi Store
many Android Market users. But
y
RIM: BlackBerry App World
improvements are on the way.
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6. …but Android Market will catch-up fairly
q
quickly
y
Application stores revenue forecast (€bn)
7
6
5
4 Blackberry App World
Nokia Ovi Store
3 Google Android Market
Apple App Store
2
1
0
2008 2009 2010 2011 2012 2013 2014
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7. What about others?
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8. Games is the leading app category
World App Store downloads (bn)
Q1 2011: major publishers’ iOS
10 releases
9
EA Mobile
8
Capcom
7
Glu Mobile
6
Gameloft
5
Digital Chocolate
4
Namco
3
Hands-On Mobile
2
Disney Mobile
1
0 THQ Wireless
2008 2009 2010 2011 2012 2013 2014
0 2 4 6 8 10
Games Others
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9. The application market goes beyond
distributing repurposed content to mobile
g p p
Number of apps by TV network
• For TV companies, mobile applications offer the (total = 78)
opportunity to:
t it t
• increase the length of the relationship with MTV NBC
consumers by making content accessible anywhere
at anytime
• create a more intimate contact with the audience with Fox Disney
interactive features evolving around key TV CBS
programmes
• improve brand image by creating ‘cool’ apps
p g y g pp Number of apps by g
pp y genre
Sports
• increase viewership and address an audience Travel
unreachable on any other platforms
• generate additional revenues through paid News
Games
downloads/subscriptions and/or advertising
• Popular applications tend to be more innovative
Lifestyle
by taking advantage of the mobile experience to Entertainment
bring another dimension to existing services. Finance
Others
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10. Online freemium music providers see
mobile as a way to improve their business
case
• Spotify, Deezer both launched
mobile applications on Android
and iPhone/iPod Touch in 2009
• Spotify: 1m paying subs from
6.7m active users in a region
g
resistant to paying for music
i t tt i f i
• Deezer: 800,000 paying
subscribers
• Mobile operators embrace the
unlimited music on-demand craze
• 3UK bundled a Spotify premium
subscription with its latest Android
handset
• Orange made a strategic investment
in Deezer in 2010 and also bundles it
with some of its services
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11. But, rich media is still only a small subset of
mobile content and data revenues
Rich media as % of data & content revenues
14%
12%
10%
8%
6%
4%
2%
0%
2006 2007 2008 2009 2010 2011 2012 2013 2014
Music Games TV & Video Application stores
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12. Mobile won’t offset decline in traditional
media revenue streams unless bundled
Top-tier customer
Piracy migration
Over-the-top Increased ARPU
Core Core
media Increased media Core Customer ownership
services p
competition services media Blended
ARPU ARPU services ARPU
Reduced churn
Tougher ARPU
regulation
Added value
Mobile ARPU
Differentiation
Mobile ARPU
Mobile ARPU
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13. The mobile data crunch. Who will pay for
data?
• Smartphones, mobile broadband and UK mobile data market
M2M are set to drive exponential 900 14
mobile data traffic growth
800
12
• Increasing competition and heavy 700
subsidies on data/smartphone 10
bundles will endanger mobile data
Revenu per GB (£)
600
monetisation
affic (PB)
500 8
ue
• There are three options for operators: 400
Tra
6
• Add extra capacity on the network and
increase prices 300
4
• Content delivery optimisation (IMB,
200
throttling, QoS, WiFi)
• Ch
Charge content providers ( bil d
id (mobile data 100
2
termination fees)
0 0
2010 2011 2012 2013 2014
• Video is set to contribute to more
than half of mobile data traffic by Smart phones Mobile Broadband Revenue per GB
2015
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14. Tablets: similar apps but better monetisation
- US case studyy
US: top grossing iPad apps
US: average price per paid game ($)
1% 1% 2% 1% 2%
1%
0.3% 3% 4
4% 4%
4%
0.3% 3%
3.5
3%
4% 3
1%
1%
2%
2.5
63%
2
1.5
Books Business Education
Entertainment Games Healthcare & Fitness 1
Lifestyle Medical Music
Navigation News Photography 0.5
Productivity Reference Social Networking
Sports
S t Travel
T l Utilities
Utiliti 0
Weather iPhone iPad
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15. Thanks
ronan.derenesse@ihs.com
Tel: 44
T l +44 207 424 2865
Twitter: @Ronan_SD