Global app revenue to double in four years, with money coming from emerging markets
After the smoke has cleared, the app just might emerge as the one tech development to rule them all. Its popularity, power, and profitability rising higher than tech contenders like the smartphone, the tablet, the laptop, and the fast-disappearing desktop.
According to marketing research company Ovum, the revenue of apps globally will double in five years’ time, speeding past the rate of downloads. In short, the customers who pay for the app and its use will outnumber those who just download them—and many of these new patrons of the almighty US app will come or be based in other countries. The annual global app revenue, which reached $36 billion in 2015, will jump to $79 billion in 2020. This 2.2 percent increase is strikingly higher than the increase in the 1.8 percent rate of downloads during the same period, from a download rate of 211 billion in 2015 to 378 billion in five years’ time.
This paradox can be explained by the triumph of quality over quantity. As the smartphone market matures and their owners become more discerning of the kind of apps that they put on their devices, the number of downloads will go down. However, the payment for the more useful apps that smartphone owners are happy with will rise. Ovum principal analyst Guillermo Escofet elaborates, “Downloads will, however, see a marked slowdown in mature smartphone markets as they approach saturation and as user acquisition costs escalate. Revenue, on the other hand, will continue on a higher growth trajectory as people spend more time on apps and as in-app spending intensifies.”
Arc Applause traces the source of app income to two wildly popular categories: games and music. The users of these apps are all-too-willing to pay a few dollars to avail of an app or subscribe to a monthly plan just to get their favorite fix of entertainment. Clash of Clans, Monster Strike, Puzzle & Dragons, Game Of War, and Candy Crush headlined the top five bestselling game apps in 2015, contributing a bulk of the profits enjoyed by both the Apple Store and Google Play. Games provide a huge share of the earning power of both online stores: 75 percent for the former, and 90 percent for the latter. Meanwhile, Spotify still rules as the number one non-game revenue-generating app with 18.75 out of its 75 million subscribers paying $9.99 a month to have the power to choose and download their favorite tunes and organize them into a playlist that is available anytime.
Another mark of the popularity of an app is its international reach, and tech journalists and business reporters have noted that a huge part of both revenue and downloads will come from outside the United States. Cell device owners in emerging regions and countries will discover the tech benefits that their newfound buying and download power can give them, and will be more eager to try out new apps while continuing to subscribe to their traditional favorites. According to ZDNet, the data-consuming community of cell device owners in the Middle East, which grew by 74 percent in 2015, still prefer to download and/or buy international (and presumably American apps) because of their proven quality. These cell device owners, based in countries like Egypt, Lebanon, Saudi Arabia, and the United Arab Emirates, download more than five apps a month and play at least one of them every single day.
China, however, is ascending as the main competitor for app dominance, both as a patron of international apps and a creator of its own localized ones. In a Mediapost report, the economic giant is the number two app revenue-generating in the entire world with a more than 200 percent growth from the first quarter of 2015 to 2016. It also raced past the US to become the largest market for app downloads. While Spotify remains supreme in the global arena, the second and third-largest earning music apps in China happen to be homegrown: QQ Music and Tidal.
The market of international app users, while growing, still carries a huge potential for apps that can provide relevant services while blending the local flavor with a more global perspective. Though many news apps like BBC, Bloomberg, and Born2Invest earn revenues from other means like digital advertising, their non-stop expansion into many countries and regions of the world show a huge consumer base with an appetite for downloading that can, over time, translate into sizeable revenues.
The sky seems to be the limit for the app world. With millions of cell device users all over the planet exploring apps and finally making them a part of their lifestyle, there seems to be no slowdown for the foreseeable future.