3. Key findings
•
•
•
•
•
•
€63 billion revenue opportunity in 2018, over half contract work
Gaming = ‘superstar’ economy to-date
Only 42% of independent developers do work-for-hire today
4.8 million jobs supported in 2018, including 2.8 million developers
Business bottlenecks outweigh technical challenges
Key potential bottleneck relief:
– Discovery platforms
– Marketplaces
4. European app economy
Aftermarket
New Platforms
New Platforms
App Developer Types
Originator
Environment
Social
OS suppliers
API suppliers
Devices
Large
Independent
Developers
Mobile
In-house
Developers
Smart TV
Small
Independent
Developers, H
obbyists
Revenue/Spending
• Consumer spending
• Business spending
• Advertising
• In-app spending (virtual
goods)
Jobs/employment
App Stores, 3rd party app-discovery
5. New platforms: smartphones just reaching mass
market status in EU, 4G lags badly
(millions)
Smartphone Shipments, 2012-2017
500
450
400
350
300
250
200
150
100
50
0
2012
North America
2013
2014
2015
Western Europe
2016
Japan
2017
China
Source: Smith's Point Analytics/Gigaom Research, 2013
6. While Facebook adoption passing 50%
Facebook Subscriber Growth
250
(millions)
200
150
100
50
0
Mar-11
Jun-11
Europe
Seo 2011
Asia
Dec-11
Mar-12
North America
Source: Internet World Stats, 2012
7. Missed opportunity – contract development
How does your company try to make money off
apps?
Charge for apps
44%
Develop apps for others
42%
Advertising
31%
In-app charges
30%
Licensing tech to others
20%
App is promotion for something else
11%
We don't try to make money off apps
14%
0%
20%
40%
60%
80%
100%
Share of respondents
Source: Gigaom Research EU independent developers survey, 4Q 2013 N= 199
8. In-house developers feel more successful
Satisfaction with app objectives
19%
Usage, adoption
Revenue, business benefits
39%
16%
To improve customer experience of our…
Independent
developers
35%
40%
38%
Marketing for products, services
39%
38%
To sell products, services
37%
Reduce customer service costs
38%
Charge for apps themselves
Internal use by employees
0%
Very satisfied
28%
35%
29%
32%
38%
20%
In-house
developers
34%
40%
60%
Somewhat satisfied
80%
100%
Share of respondents
Source: Gigaom Research EU independent developers survey, 4Q 2013 N= 193
Gigaom Research EU In-house developers survey, 3Q 2013 N= 517
9. More apps, especially from in-house developers
Number of apps planned
8%
5%
One
27%
24%
2-3
4-6
24%
21%
7-15
22%
24%
16-30
9%
12%
More than 30
Independent developers
In-house developers
8%
12%
4%
2%
None
0%
20%
40%
60%
80%
100%
Share of respondents
Source: Gigaom Research EU independent developers survey, 4Q 2013 N= 199
Gigaom Research EU In-house developers survey, 3Q 2013 N= 522
10. Key drivers and inhibitors
Market Drivers
•
•
•
•
Smartphones have hit mainstream and tablets are chasing hard
App spending is accelerating across diverse age groups
In app billing is emerging as ‘the freemium model that works’
The market is at an early stage of growth (lots of growth potential)
Market Inhibitors
•
•
•
•
•
•
There is a heavy skew towards games, especially for in-app purchases
There is a heavy concentration of revenue in a small number of companies
Games is a hit business – makes sustainability challenging
Many smartphone users are ‘dumb’ users
Rise of large emerging markets will absorb much future revenue growth
Large amount of EU revenue flows out to cheap non-EU developers
12. The EU app store balance of trade
EU App Store Spending and Revenue
20,000 €
€ 18,668
€ 17,369
EU App Balance
of Trade
2013: -€128m
2018: -€1.3bn
15,000 €
10,000 €
€ 5,987 € 6,115
5,000 €
0€
2013
2018
App Store EU Developer Revenue
App Store EU Consumer Spending
Source: Gigaom Research, 2014
13. The app store ‘Superstar’ economy
42%
€
28
Top 100 grossing
mobile apps are
by EU developers
Top 100 app
revenue earned by
EU developers
Number of EU
companies in the
top 100
800m
14. Half of in-house developers also use 3rd party developers
Mobile and social apps approach
Develop in-house
63%
Outsource to third parties
53%
Integrate with commercial apps from
consumer apps stores
39%
Integrate with commercial apps from
business apps stores
19%
0%
20%
40%
60%
80%
100%
Share of respondents
Source: Gigaom Research EU In-house developers survey, 3Q 2013 N= 525
16. Contract work drives total developer revenue from
€17.5B to €63B
(millions)
EU app developer revenue, 2013-2018
€ 50,000
€ 45,000
€ 40,000
€ 35,000
€ 30,000
€ 25,000
€ 20,000
€ 15,000
€ 10,000
€ 5,000
€0
2013
2014
2015
2016
2017
App store revenue (paid, in-app, advertising)
Contract work revenue
Source: Gigaom Research, 2014
2018
17. Distribution of 2013 EU app income
App Store Revenue
Contract Work 0
Revenue
€ 318
€ 1,144
€ 3,669
€ 7,861
€ 4,526
Small independent developers
Large independent developers
In-house developers
Source: Gigaom Research, 2014
18. EU app economy powers 1.8M jobs now, could go
to 4.8M in 2018
EU app economy jobs, 2013-2018
3,000
(thousands)
2,500
2,000
1,500
1,000
500
2013
2014
App Developers
2015
2016
2017
Additional app economy jobs
Source: Gigaom Research, 2014
2018
19. 2.7M developers in 2018, most at independents
EU app developer jobs, 2013-2018
1,200
(thousands)
1,000
800
600
400
200
2013
2014
Small independent developers
In-house developers
2015
2016
2017
2018
Large independent developers
Source: Gigaom Research, 2014
21. Independent EU developers cite business, talent bottlenecks
Most challenging bottlenecks for independent EU
developers
Business & financial
13%
38%
Talent 11%
Technical 8%
32%
28%
Market 5% 22%
0%
Most difficult
50%
Somewhat difficult
100%
Share of respondents
Source: Gigaom Research EU independent developers survey, 4Q 2013 N= 197
22. Independents: difficult to charge, expensive to gain
customers
Top business & financial bottlenecks for EU independent developers
40%
Users won't pay at all or pay enough
30%
Expensive customer acquisition costs
Platform revenue sharing demands
22%
Proprietary or fragmented payments systems
17%
Lack of 3rd party discovery/promotion
17%
Complex taxation environment
16%
Low spending on app advertising
15%
Access to capital/finance
14%
Restrictive privacy or data regulation
0%
12%
20%
40%
60%
80% 100%
Share of respondents
Source: Gigaom Research EU independent developers survey, 4Q2013 N=197
23. Talent bottlenecks include salaries, education, business skills
Top talent bottlenecks for European apps
36%
40%
Harder to attract talent: lower salaries for
developers vs. US
31%
33%
Relatively less-developed coding, mobile and
social networking app development education
27%
32%
Independent developers
Lack of business expertise at startup
developers
29%
In-house developers
28%
Relatively fewer software companies to spin off
developers
25%
24%
Relatively fewer developers
0%
20%
40%
60%
80%
100%
Share of respondents
Source: Gigaom Research EU independent developers survey, 4Q2013 N=194,
Gigaom Research EU In-house developers survey, 3Q 2013 N= 522
24. Developers frustrated by platform divergence
Top tech bottlenecks for European apps
33%
38%
Lack of cross-platform compatibility
21%
28%
Lagging European 4G adoption
Breadth, depth of services/tech aviailable via
API
23%
19%
Difficulty in adding social functionality to apps
Programming or development tools
Difficulty in delivering good/common user
experience across mobile and web
Immaturity of open-source tech, community
Data available via API
0%
8%
18%
Independent developers
24%
18%
In-house developers
31%
18%
16%
16%
24%
14%
20%
40%
60%
80%
100%
Share of respondents
Source: Gigaom Research EU independent developers survey, 4Q2013 N=193,
Gigaom Research EU In-house developers survey, 3Q 2013 N= 522
25. Platforms again, and a variety of market fragmentation
issues
Top market bottlenecks for European apps
App platforms dominated by
Apple, Google, Facebook, etc.
37%
31%
33%
30%
Multiple languages
25%
28%
Inconsistent regulatory policies
17%
24%
Restrictive regulatory policies
Euro users lag other markets in tech
adoption
Independent developers
25%
19%
In-house developers
21%
19%
Small European country markets
6%
Multiple currencies
0%
15%
20%
40%
60%
80%
100%
Share of respondents
Source: Gigaom Research EU independent developers survey, 4Q2013 N=197,
Gigaom Research EU In-house developers survey, 3Q 2013 N= 522
26. Key solutions and opportunities
• Reducing customer acquisition • Hubs (could be part of
costs
Marketplace)
– Third-party discovery platform
– Search-marketing techniques (paid
listings, enforced relevance)
• Marketplaces
– Matchmaking
– Qualifying
– Negotiating
– Business skills education
– Technical education
– Code sets, templates
• Cross-platform solutions
– Technologies
(HTML5), methodologies
(responsive design)
Hinweis der Redaktion
US just under 50% 4GW. Europe 2-3% 4G today, growing to 9% in 2014; 50% by 2017
FB 1.2B MU, over 900 million mobile 750 daily. $7.8BTwitter – not so much an app platform as a data platform. Twitter user growth a little sluggish. 240Mactive MU, up only 4% sequentially
Overall, the in-house developers are succeeding better at their objectives. But that’s at least partly because they’re not facing user resistance to paying for apps. In some ways, their commercial objectives are easier than those of a company depending on apps for its revenue.
53% of all the companies we surveyed said they outsourced app development. Even those that did their own development in-house also used third parties – just over half said they also outsourced. This is a great opportunity for independent developers, as only 42% of them said they did that kind of work currentlyMonitise Create (formerly Grapple Mobile), a U.K.-based digital agency, builds apps for brands that use them for marketing. It counts NatWest, Barclay’s, Tesco, McDonald’s, and Premiere Inn among its customers. Three years ago, Grapple Mobile was a 3-person firm. It now has 120 employees and is set to double in size. Similarly, Golden Gekko (based in London with a large Barcelona office) plans to grow its staff 40 percent to 50 percent next year.
53% of all the companies we surveyed said they outsourced app development. Even those that did their own development in-house also used third parties – just over half said they also outsourced. This is a great opportunity for independent developers, as only 42% of them said they did that kind of work currently (see slide 3).
The EU app developer workforce will grow from 1 million in 2013 to 2.7 million in 2018. By that point 39 percent of developers will be small independent developers, 37 percent large independent developers, and 24 percent in-house developers. Contract work will account for the majority of the revenue for the small, independent developer segment.
The developer category is biased slightly toward highly educated, experienced coders. Scripters and designers are next in the hierarchy, but even testers do relatively wellOur surveys suggested that support staff at the small independents were actually more experienced and better compensated than developers. As noted, at more-established companies, the jobs that support apps are more diversified. On average, fewer than 50 percent had three or more years of experience, although a similar three-quarters had college or advanced degrees.
We asked the independent developers about challenges they faced. The next 4 slides following go into detail on each of the categories summarized here:Business & financial – includes revenue issues like user willingness to pay, fees, payment systems, and financial issues like access to capitalResources – includes staffing issues like competitive salaries, education, skillsTechnical – includes technology-related issues related to platforms, APIs, development toolsMarket – includes EU market conditions like multiple languages, smaller country markets, regulationIndependent developers said that business and resource bottlenecks were causing them the most difficulty.
This slide represents the detailed bottlenecks under the broader heading of business and financial challenges. Remember that the independent developers’ preferred revenue model was charging for apps, with in-app charges also ranked high. Here they show they’re afraid that customers won’t pay, or properly value apps. Almost a third (30%) specified customer acquisition costs as a key challenge. That’s probably exacerbated by a lack of third party discovery and promotion vehicles. They also resent platform revenue-sharing demands – e.g., developers that sell an app through Apple’s app must share 30% of the fee with Apple – another factor related to charging for apps. Advertising issues don’t concern them as much, but many haven’t tried selling advertising yet. Note that relatively few (14%) cited access to capital or financing as one of their top challenges. This contrasts with what we heard at the workshops, and may just indicate that the initial startup costs for a tiny shop are low, and they haven’t really tried to scale yet.(We didn’t ask the ICT developers about these, because few in-house developers are trying to make money directly off apps.)
Both the independents and the in-house developers listed salary competition with US companies as the top resource bottleneck. The other bottlenecks didn’t trail far behind the top challenges, so there’s no single solution to try to identify, though it might be easier to address education and business expertise through policies and initiatives than it would be to achieve higher wages.
Both types of developer feel the strain of developing for multiple platforms. ICT developers list slow EU mobile bandwidth as a relatively threatening bottleneck, but the independents see delivering cross-platform experiences as a bigger challenge. Fewer than a quarter of either group called out API issues. However, most of these bottlenecks – similar to the resource bottlenecks – attracted the same 15% to 25% of responses. That means it’s harder to identify the biggest bottleneck, or solution.
Similarly, there wasn’t one dominating bottleneck for European market conditions. We got more or less similar feedback from the workshops and 1:1 interviews. However, US platform companies seem to be a bigger bottleneck than the interviews or workshops indicated. Perhaps the companies we talked to were more excited about reaching US markets than those we surveyed.
The discovery engine: Amazon, perhaps, but this could be done by a startup as long as the platform companies allowed their app directories to be public. I think they'd have to, but they could make it difficult. There have been a few attempts to do this, but they didn't achieve critical mass (e.g., Appsfire; GetJar was just acquired)The marketplace. This could be a startup or a joint venture, possibly involving universities. Alternatively, enterprise software companies like SAP might be able to do it. I don't think telcos could, but possibly systems integrators. The concept shares some DNA with startup accelerators, too. If I really stretch, I could see LinkedIn or a similar company building an app B2B marketplace.