The App Economy Forecast 2016

The App Economy Forecast 2016

21st June 2016

It’s estimated that the global app economy will be worth in excess of $100 billion between now and 2020. Key insights from the recent App Annie ‘App Economy Forecast’ suggest that the overall value of the global app market is set to continue it’s impressive growth trajectory. App Annie is a US based firm providing data analytics and insight for mobile developers. The report is designed to track the progress of the global app economy and the key drivers responsible for growth within the market. The report is based upon industry leading metrics that form the basis of what your business needs to do to succeed and thrive in mobile.

The unstoppable rise of mobile

Apps have become the primary interface through which we live, work and communicate. If your business is technology (and particularly software), mobile has changed everything within less than a decade. Mobile has radically altered the way in which we engage with the media, each other and businesses. Since 2007 the global app economy has undergone significant transformation, rapidly shifting from entertainment focused apps and games towards enterprise focused mobile apps. In 2016 it’s essential for all businesses to possess a mobile strategy. Mobile apps enable businesses to drive new streams of revenue (and enhance existing revenue opportunities) and enable brands to create deeper levels of engagement with new and existing users.

Key findings from the global App Economy Report 2016

The IoT is driving growth in the global app economy

We recently covered why the IoT matters for your business, but what impact will the IoT have on the global app economy? Gartner estimate that by 2020 there will be over 26 billion web connected devices. Some analysts have suggested that this is a conservative estimate, with the possibility there could be over 100 billion web connected devices by 2020. This will create an enormous demand for the development of new apps specifically designed for the IoT. As broadband penetration increases and becomes more ubiquitous, the cost of connecting to the web is dropping. As an increasing number of mobile devices are developed with web connectivity and sensors, the demand for accompanying mobile apps will grow rapidly. Combined with explosive growth in consumer adoption of smartphones, tablets and wearable technology, the IoT is having an enormous impact on the global app economy and is expected to drive the development of millions of new apps.

App Store gross revenue to reach $51 billion in 2016

The revenue for global mobile app store activity is set to reach $51 billion in 2016 and reach over $100 billion by the year 2020. There are two key drivers that are causing growth within the overall app economy. Firstly, between now and 2020 there will be strong mobile app adoption in developing economies. The second key driver will be the fact that app users in developed economies will continue to spend more money and new and existing apps.

“Global mobile app store revenue is expected to grow by 24% to $50.9 billion in 2016” (App Annie, 2016)

App Store downloads to reach 284 billion by 2020

The number of apps being downloaded to different mobile devices will more than double in the next four years. Between now and 2020, global mobile app store download figures will skyrocket to 284 billion. Again, much of this growth is being triggered by new device adoption from within developing economies, with countries such as China and India driving much of the growth. Android plays a crucial role in this explosive growth trajectory through the proliferation of affordable mobile devices in developing territories where current device penetration is still growing at a rapid rate.

iOS is still the top platform for monetisation (for now)

Whilst Android is successful in terms of device penetration in developing economies, the Apple App Store still rules when it comes to revenue generation. However this is set to change in 2017. It’s estimated that in the next 12 months Apple will lose it’s position in terms of gross revenue leadership to Google Play. In 2017 it’s predicted that a combination of Google Play and third party Android app store revenue will surpass Apple’s overall contribution to the global app economy. This is largely due to an increase in Android device penetration globally, with a specific focus on developing economies.

Mature markets are switching to revenue growth.

Mature app markets within the global mobile economy are now characterised by growing in-app usage and revenue generation as opposed to growth in the overall number of app downloads. The US market has consistently been characterised as being driven through strong growth in terms of the total number of app downloads but this is set to change. Western mobile markets are now displaying strong growth in terms of increased monetisation and use of existing mobile app products. We recently discussed in our latest Mary Meeker blog how chat apps are driving exponential growth in terms of consumer behaviour and overall app usage consumption in developed countries.

Mobile is switching away from games towards the enterprise

We recently explored why demand for mobile capability is damaging big business. Rewind back to 2007 and app store monetisation was largely driven by the development of games. Fast forward to 2016 and the landscape is still undergoing rapid transformation as monetisation shifts towards commercial apps for enterprise. Whilst revenue from mobile games is still strong throughout the forecast period (monetisation through games will more than quadruple between now and 2020), revenue through games will start to represent less than 25% of overall app store revenue. Time spent within chat apps, social apps and apps relating to mobile commerce and transportation (think Uber) will represent over 75% of all app store revenue. For businesses developing apps aimed at operational efficiency and sales enablement, there are significant opportunities within the rapidly expanding mobile landscape.

Mobile apps are eating the web

Mobile apps have now become the go-to resource for most of our everyday business dealings and interactions. In the past 5 or so years, the time spent using mobile apps has skyrocketed globally and app usage is the new world currency. Between 2014 and 2015 time spent using Android apps grew by over 60%. Not only are more devices being shipped in developing economies, but globally speaking app consumers are spending more and more time attached to their mobile devices. This seismic shift is being driven by enhanced mobile app development services and UI interfaces that enable consumers and businesses to spend more time using mobile apps. But it’s not just better app development services and UX design that’re causing users to spend more time using mobile, the availability of sensors and connected beacons has also served to create a more rich and immersive user experience for mobile consumers and businesses.

In 2016 mobile app usage represents the best way to engage your users and the amount of time your prospective customers spend browsing the web is diminishing rapidly at the expense of increased mobile app consumption. Take Tinder (and online dating in general) as an example. Historically, growth in online dating usage was driven by desktop PC usage, fast forward to 2016 and online dating is dominated by mobile, as users swipe and tap their way through potential matches. This is just one of the many industries, traditionally dominated by web browsing behaviour, that is now diminishing due to increased content consumption via mobile devices.

The future of mobile apps

Since 2007 mobile apps have become a central component of our business lives, rapidly altering the way we work and communicate. The reality is that between now and 2020, mobile apps are set to become even more important, particularly in the enterprise. In 2015 Mary Meeker highlighted the untapped potential within mobile advertising (this was a continued theme in 2016 as advertisers failed to capitalise on the vast opportunities mobile has to offer) as mobile owns 24% of overall media consumption and less than 8% of total ad expenditure.

As app usage and monetisation continues to grow, advertisers will increasingly redirect ad expenditure towards mobile, so if you’re a marketer, it’s essential to get to grips with mobile marketing now as the current rewards are potentially vast. As advertisers shift towards mobile and usage patterns increase, the global app economy will continue to grow at a rapid pace.

If you’re a business or brand yet to develop a mobile strategy, the time to start is now. It’s important to consider that we are still in the very earliest stages of the global app economies overall growth trajectory. The App Annie report suggests that mobile apps will eventually become the most fundamental interface between brands, businesses and consumers as mobile usage continues to explode. It’s fair to say that mobile apps have already shattered previous revolutions within the computing industry and here at Waracle we look to more continued growth between now and 2020.

Looking to develop a mobile app or optimise an existing one? Contact us today for more details.

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