Applications Bring Subscribers; Revenue Brings Developers

Applications Bring Subscribers; Revenue Brings Developers Which Mobile Operating Systems Will Pay Out Big for Developers Through 2014? Todd Day Industry Analyst Mobile & Wireless Communications Group Information & Communication Technologies April 15, 2010

Focus Points
Storefronts and Value Chain Participants
Primary Application Storefront Features
Application Storefront Snapshots – by Smartphone OS
Developer Revenue Share
Application and Game Downloads
Smartphone OS Participant Notes
1 2 3 4 5 6

Storefronts and Value Chain Participants
Increased revenue from demand for smartphones
Leverage manufacturer-specific applications to increase user base and quality of products
Ability to partake in mobile advertising as another revenue stream
Value Chain Participants Smartphone Application Storefronts Targeted App Stores Independent App Stores Independent app stores are offered by industry participants offering direct-to-consumer smartphone application distribution services Applications targeted at multiple smartphone platforms or device types are offered Independent app store providers also power other smartphone storefronts on a branded or a white-label basis Targeted app stores are usually managed by device vendors or OS providers, and are meant for a well-defined set of end-user devices Targeted app store providers can also work very closely with independent app store providers to leverage their expertise in managing highly scalable application storefront services

Primary Application Storefront Features Chart Proprietary App Source Phone Client Desktop Multiple Device Support Non-App Content Billing System Return Policy Carrier-Specific Stores Developer Share Developer Fee App Listings Minimum Nonfree Price Notable Restrictions Yes Yes Yes No No iTunes No No 70% $99 One Time Unlimited $0.99 Stock App Duplication No Yes No Yes No Google Checkout 24 Hours Yes 70% $25 One Time Unlimited $0.99 Carrier Demands No Yes No Yes No PayPal No No 80% $200 One Time $200 for every 10 $2.99 None No Yes TBD Yes TBD CC, Carrier 24 Hours Yes 70% $99 Annual 5, then $99/Year TBD None Yes Yes TBD Yes No CC TBD TBD 70% $99 One Time TBD TBD Non-native SDK No Yes No Yes Yes CC, Carrier No Yes 70% Free Unlimited TBD None Apple Google RIM Symbian Palm Microsoft Source: Gizmodo, Frost & Sullivan

Android – Google Inc. Android Market has seen rapid growth in both number of applications, and number of total downloads since launching late in 2008. It’s worth noting, however, that the application development and rapid growth didn’t start full speed until 2009 when more Android devices were launched.
2009:
21,100 total applications
309+ million downloads through Android market and independent app stores
$128 million in application revenue
$3.30 average price per paid app through Android Market
$9.80 average price per paid app through independent app stores
Approximately 12.6% of total downloads were paid applications
2014 Projections:
8.7 billion downloads through Android Market and independent app stores
$3.6 billion in application revenue
2 nd by a small margin in applications and downloads to iPhone
Android OS Storefronts Snapshot

iPhone OS – Apple Inc. iTunes and the App Store are the only two places which applications can be bought for iPhone OS devices, which currently include the iPhone, iTouch, and iPad. iPad currently uses a different version of the iPhone OS, making some applications specific for the iPad. Apple is the clear leader in the application storefront market, and will likely continue to be one of the key driving forces behind its growth over the next three to five years. iPhone OS Storefront Snapshot
2009:
2.7 billion downloads
$1.38 billion in developer revenue
$589 million in Apple revenue (excluding developer fees)
$3.55 average price per paid app
2014 Projections:
11.2 billion downloads
Still leading the market in total applications and downloads

Symbian OS – Symbian Ltd. Symbian OS has the largest smartphone market share worldwide. Much of this is attributed to the connection between Symbian Ltd. and Nokia. Although, Symbian is also used by companies such as LG, Motorola, Samsung, and Sony Ericsson. Nokia’s app store “Ovi” is currently the primary application storefront for the Symbian OS. Symbian just released their OS to manufacturers as a complete open source OS. This should help increase development efforts on the Symbian platform in the long-term. Symbian OS Storefronts Snapshot
2009:
128.5 million downloads
$3.55 average price per paid app through Ovi app store
2014 Projections:

BlackBerry OS – Research In Motion BlackBerry App World was launched in 2009, and has seen growth in application development. However, given BlackBerry’s position in the global smartphone market and a core user base of enterprise customers, many of the applications have a different purpose. With this enterprise focused purpose and usability comes a higher price point on applications. As a result, BlackBerry OS has the highest average price per paid application in the smartphone market. BlackBerry OS Storefront Snapshot
2009:
$191.4 million in application revenue
$8.20 average price per paid app through App World app store
2014 Projections:
330 million downloads

webOS – Palm Palm Catalog was launched in 2009 and in its first year has had limited success in attracting new developers, which has led to a limited number of applications and the smallest application storefront of all the smartphone operating systems in the market. With a limited number of devices, the WebOS platform hasn’t seen the growth comparable to Android, despite having one of the best OS platforms on the market. Without changing their OS strategy, Palm will likely continue to see limited success in the market. Palm OS Storefronts Snapshot (due to emulation on WebOS devices, the numbers for Palm include the older Palm applications)
2009:
$2.50 average price per paid app through Palm Catalog
2014 Projections:

Windows Mobile – Microsoft Windows Mobile is one of the original smartphone operating systems on the market. As a result, prior to launching Windows Marketplace in 2009, independent app stores were the only place to buy applications for the Windows Mobile OS. To date, application development has been slow, with Windows Marketplace having the smallest number of apps available. However, Windows Mobile continues to be a strong application development platform in independent app stores. Windows Mobile Storefronts Snapshot
2009:
$7.00 average price per paid app through Windows Marketplace
2014 Projections:

Developer Revenue Share Forecast Source: Frost & Sullivan
All of the primary application stores share 70% of application revenue with developers, with the exception of App World (BlackBerry) which shares 80% of application revenue
Rapid growth in the mobile application market helped the application revenue to reach nearly $3 billion total revenue in 2009
Developers will likely see over $3 billion in 2010 and approximately $10.5 billion in 2014
By 2014, the total application market is expected to be close to $15 billion
As new products (like the iPad) and competing devices running Android, webOS, Windows Mobile 7, or Symbian enter the market over the next two to three years, downloads will continue to increase

Application and Game Downloads
Apple’s iPhone OS and Google’s Android are positioned to account for 80% - 90% of downloads in the application storefront space
2009 saw approximately 3.4 billion total downloads. Due to continued growth of smartphones and increased competition, than number is expected to grow just over 500% by 2014
Major changes in OS or device strategy by Palm, Microsoft, RIM, or Nokia could drastically change the competitive landscape of the market
Convergence of applications between targeted and independent application storefronts for Apple’s competitors will benefit all participants in gaining market share back from Apple.
Source: Frost & Sullivan

Smartphone OS Participant Notes Apple’s success to date has been one of the key driving forces behind the rapid evolution of both smartphones and applications. With the new iPad release, Apple has added yet another product into its ecosystem. As a result, the iPhone OS will likely remain the top smartphones OS in terms of applications, downloads, and revenue generation in the app store space through 2014. Google’s Android is currently the fastest growing smartphone OS globally due in large part to its availability, costs, and functionality. With handset manufacturers the likes of Samsung, LG, Motorola, HTC, and others looking to compete with Apple, Android is a perfect fit. Currently, there aren’t as many applications, however over the next two to three years, Android will begin to challenge Apple. RIM has a long tradition of smartphones which function exceptionally well for the enterprise users. However, in recent years, smartphones have begun to established themselves as a must-have consumer device. RIM has still been relatively successful to date, however, they will need to continue to evolve their developer ecosystem in order to compete with Apple and Google. Symbian was just released as open source by the Symbian Foundation in February, 2010. In doing so, it is likely that more developers and manufacturers alike will take another look at designing applications and services into the Symbian OS. In order to remain the top OS however, Symbian will need to gain a larger share in the North American market where app stores are leading in growth. Palm’s webOS is a very compelling and unique operating system – the first to offer true multitasking capabilities. Despite the value of the OS, the closed environment and few devices are limiting the growth of the webOS ecosystem. In the long-term, Palm will likely need to merge with one of the other major participants (RIM or Nokia are good choices), or license their OS in order to compete. Windows Mobile was one of the original smartphone OS’s, and like RIM, has a big enterprise space. Licensing fees are one of the biggest challenges facing Microsoft. How do they compete with open-source OS’s like Android? Windows Mobile will likely continue to be a competitor due to their customer base, however, like Palm, they will need to evaluate their strategy for long-term success. Apple Google RIM Symbian Palm Microsoft

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For Additional Information
Jake Wengroff Corporate Communications Information & Communication Technologies (210) 247-3806 [email_address] Craig Hays Sales Manager Information & Communication Technologies (210) 247-2460 [email_address] Brent Iadarola Research Manager Mobile & Wireless Communications (210) 481-0752 [email_address]

Applications Bring Subscribers; Revenue Brings Developers

by Frost & Sullivan on Apr 19, 2010

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