Disruptive Mobile Applications and Services 2011- 2015

© 2011, Portio Research. All Rights Reserved

1
Disruptive Mobile Applications and Services 2011-2015

Portio Research Limited.
Published July 2011 by Portio Research Lim...
Disruptive Mobile Applications and Services 2011-2015

Contents
Introduction ................................................
Disruptive Mobile Applications and Services 2011-2015

Recent Developments ..................................................
Disruptive Mobile Applications and Services 2011-2015

List of Figures
Figure 1:
Figure 2:
Figure 3:
Figure 4:
Figure 5:
F...
Disruptive Mobile Applications and Services 2011-2015

Figure 45: Duration of YouTube Videos viewed across Social Networki...
Disruptive Mobile Applications and Services 2011-2015

List of Tables
Table 1:
Table 2:
Table 3:
Table 4:
Table 5:
Table 6...
Disruptive Mobile Applications and Services 2011-2015

Chapter 1
Introduction

8

© 2011, Portio Research. All Rights Rese...
Disruptive Mobile Applications and Services 2011-2015

Introduction
Disruptive technology can be defined as a high impact ...
Disruptive Mobile Applications and Services 2011-2015

case are all present. There is neither dearth in the videos being u...
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Figure 1: Smartphone Shipments – Worldwide (In Million, 2008 – 2015...
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Chapter 2
Worldwide Mobile Market

12

© 2011, Portio Research. All...
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Worldwide Mobile Market
The worldwide mobile industry continues to ...
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Table 1:

Mobile Subscribers – Regional (In Million, 2008 – 2015F)
...
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Asia Pacific’s subscribers constituted 48.6 percent of the worldwid...
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Chapter 3
Mobile Applications Market

16

© 2011, Portio Research. ...
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Mobile Applications Market
Mobile applications are functionalities ...
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Table 2:

Types of Applications Prevalent in the Mobile Application...
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missing then was the commercial channel to promote and distribute s...
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The Apple App Store became an instant success with 10 million appli...
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Figure 7: Apple’s App Store – Total Application Downloads (In Milli...
Disruptive Mobile Applications and Services 2011-2015

and stickiness towards their products and services. Since handsets ...
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Chapter 4
Market Size

© 2011, Portio Research. All Rights Reserved...
Disruptive Mobile Applications and Services 2011-2015

Market Size
Forecast Methodology
Mobile applications are software p...
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payments because of the growing use of apps from categories such as...
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The table below highlights the growth in the number of regional mob...
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The figure below highlights the regional share in the worldwide mob...
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In 2010, in terms of mobile application users as a percentage of th...
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Table 4:

Mobile Application Downloads – Regional (In Million, 2009...
Disruptive Mobile Applications and Services 2011-2015

Figure 14: Mobile Applications Revenue – Worldwide (In USD Billion,...
Disruptive Mobile Applications and Services 2011-2015

The table below highlights the growth of regional mobile applicatio...
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Figure 17: Worldwide Mobile Applications Sales and Advertisement Re...
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In-app Payment Revenues
In-app payments are made by users to migrat...
Disruptive Mobile Applications and Services 2011-2015

Figure 20: Break-out of In-app Payment Revenues by Type – Worldwide...
Disruptive Mobile Applications and Services 2011-2015

Comparison between new and previous forecasts
Between our report Mo...
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Table 6: Comparison of New and Old Forecasts – Mobile Applications ...
Disruptive Mobile Applications and Services 2011-2015

Table 7: Comparison of New and Old Forecasts – Mobile Application D...
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Chapter 5
Value Chain

38

© 2011, Portio Research. All Rights Rese...
Disruptive Mobile Applications and Services 2011-2015

Value Chain
The mobile applications ecosystem comprises platform de...
Disruptive Mobile Applications and Services 2011-2015

•

40

invest their time in managing the content or the application...
Disruptive Mobile Applications and Services 2011-2015

Chapter 6
Popular Mobile Application Stores

© 2011, Portio Researc...
Disruptive Mobile Applications and Services 2011-2015

Popular Mobile Application Stores
Application stores are the primar...
Disruptive Mobile Applications and Services 2011-2015

Apple App Store
Apple launched its ‘App Store’ in July 2008.
Highli...
Disruptive Mobile Applications and Services 2011-2015

Figure 26: Apple App Store – Quarterly App Additions (In Thousands)...
Disruptive Mobile Applications and Services 2011-2015

Google Android Market
Google launched its mobile application store ...
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Analysis of New Disruptive Apps and Growth Forecasts for the Worldwide Mobile Applications Market to 2015

With new forecasts and market sizing, the rapidly evolving worldwide mobile applications market is comprehensively reassessed in this exciting market study - with particular focus on the new breed of hugely popular disruptive applications and services (Mobile Video Streaming, Social Networking, Mobile VoIP, Bulk Messaging Services, and Mobile Payments) and the threats and opportunities that they respectively present to mobile operators.

With analysis also of app stores and app development, this 162-page report covers: YouTube, Facebook, Twitter, Skype, Angry Birds, MobiTV, Google+, Nimbuzz, SMS GupShup, Square, Bango, Boku, Apple App Store, Google Android Market, BlackBerry App World, Nokia Ovi Store, Windows Phone 7 Marketplace and much more.

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Disruptive Mobile Applications and Services 2011-2015

  1. 1. Disruptive Mobile Applications and Services 2011- 2015 © 2011, Portio Research. All Rights Reserved 1
  2. 2. Disruptive Mobile Applications and Services 2011-2015 Portio Research Limited. Published July 2011 by Portio Research Limited © Copyright 2011. www.portioresearch.com info@portioresearch.com Disclaimer and Legal Notices Disclaimer Every care has been taken in the preparation of this study to ensure that the information contained herein is accurate, factual and correct to the best of our knowledge, at time of publishing. All opinions, suppositions, estimates and recommendations included in this document are solely the opinions of the authors unless otherwise stated. Portio Research Limited accepts no liability for any loss or damage or unforeseen consequential loss or damage arising from the use of the information contained within this document. The opinions, suppositions, estimates and recommendations within this document cannot be guaranteed, and readers use this information at their own risk. The information published in this document is subject to change without notice at any time, and Portio Research Limited accepts no liability or obligation to inform the reader of such changes. Portio Research Limited do not promote or endorse any specific companies or products, the views and opinions we express in this document are wholly our own assessments, and independent from any external interest or influence. Many terms and phrases and trade names used in this document are proprietary and Portio Research Limited recognises and acknowledges that all trademarks are copyright, belonging to their respective owners. Where possible, this document accords such terms and phrases and trade names to their respective owners. All Rights Reserved. No part of this document can be copied, shared, redistributed, transmitted, displayed in the public domain, stored or displayed on any internal or external company or private network or electronic retrieval system, nor reprinted, republished or reconstituted in any way without the express written permission of the publisher. Forwarding of this electronic document without the correct legal licence is theft. It’s unethical, immoral and against the law. If you have any questions about the legal licence conditions under which this document has been distributed, please contact Portio Research on info@portioresearch.com If you did not buy this document and a colleague or associate has sent it to you, do not assume you are legally entitled to read it, it is your responsibility to ensure you have the correct legal licence to read this document. 2 © 2011, Portio Research. All Rights Reserved
  3. 3. Disruptive Mobile Applications and Services 2011-2015 Contents Introduction ..............................................................................................................................9 Worldwide Mobile Market ......................................................................................................13 Mobile Applications Market...................................................................................................17 Types of Mobile Applications ............................................................................................................. 17 Growth of Mobile Applications Business ............................................................................................ 18 Evolution of Mobile Applications Market .......................................................................................... 18 Monetising the Mobile Applications Business.................................................................................. 19 Role of Handsets in the Uptake of Mobile Applications...................................................................... 19 iPhone and the Growth of Mobile Applications ................................................................................ 19 Opportunities for Stakeholders .......................................................................................................... 21 Advertisers ...................................................................................................................................... 21 Owners – Smartphone Vendors and MNOs .................................................................................... 21 Developers ...................................................................................................................................... 22 Application Stores ........................................................................................................................... 22 Market Size..............................................................................................................................24 Forecast Methodology ....................................................................................................................... 24 Market Size ........................................................................................................................................ 25 Mobile Application User Base ......................................................................................................... 25 Mobile Application Downloads ........................................................................................................ 28 Mobile Application Revenues – Application Sales, Advertisements and In-app Payments ............. 29 Comparison between new and previous forecasts............................................................................. 35 Value Chain .............................................................................................................................39 Popular Mobile Application Stores.......................................................................................42 Types of Application Stores............................................................................................................. 42 Apple App Store .............................................................................................................................. 43 Google Android Market ................................................................................................................... 45 BlackBerry App World ..................................................................................................................... 47 Nokia Ovi Store ............................................................................................................................... 49 Windows Phone 7 Marketplace ....................................................................................................... 51 Comparison of Application Stores ................................................................................................... 54 Mobile Apps Development ....................................................................................................56 Mobile Apps Market – A Growing Phenomenon ................................................................................ 56 Opportunities for Developers ............................................................................................................. 56 Revenue Model .................................................................................................................................. 57 What Goes into Developing a Successful Mobile App ....................................................................... 58 Success Stories ................................................................................................................................. 59 Case Study: Angry Birds ................................................................................................................. 59 App Development – Is there any money in it? ....................................................................62 Disruptive Applications and Services – Opportunity or Threat to MNOs? ......................66 Mobile Video Streaming ........................................................................................................68 Case Study: YouTube ........................................................................................................................ 69 YouTube Milestones........................................................................................................................ 69 Pricing ............................................................................................................................................. 70 Success Factors .............................................................................................................................. 70 Big Question: Is YouTube an Opportunity or a Threat to MNOs? ................................................... 73 Case Study: MobiTV .......................................................................................................................... 76 MobiTV Milestones .......................................................................................................................... 77 Pricing ............................................................................................................................................. 78 User Base ....................................................................................................................................... 79 Success Factors .............................................................................................................................. 79 Big Question: Is MobiTV an Opportunity or a Threat to MNOs?...................................................... 80 Social Networking ..................................................................................................................82 Case Study: Facebook....................................................................................................................... 83 Facebook Milestones ...................................................................................................................... 84 Features of Facebook ..................................................................................................................... 85 Pricing ............................................................................................................................................. 86 User Base ....................................................................................................................................... 86 Success Factors .............................................................................................................................. 87 Scope/Type of Advertisements ....................................................................................................... 87 © 2011, Portio Research. All Rights Reserved 3
  4. 4. Disruptive Mobile Applications and Services 2011-2015 Recent Developments ..................................................................................................................... 87 Big Question: Is Facebook an Opportunity or a Threat to MNOs? .................................................. 88 Case Study: Twitter............................................................................................................................ 90 Twitter Milestones ........................................................................................................................... 91 Features of Twitter .......................................................................................................................... 91 Pricing ............................................................................................................................................. 92 Success Factors .............................................................................................................................. 92 Recent Developments ..................................................................................................................... 92 Big Question: Is Twitter an Opportunity or a Threat to MNOs? ....................................................... 93 Mobile VoIP .............................................................................................................................95 Case Study: Skype ............................................................................................................................ 96 Skype Milestones ............................................................................................................................ 96 Features of Skype ........................................................................................................................... 97 Pricing ............................................................................................................................................. 97 User Base ....................................................................................................................................... 99 Success Factors ............................................................................................................................ 100 Recent Developments ................................................................................................................... 100 Skype and Microsoft Deal ............................................................................................................. 101 Big Question: Is Skype an Opportunity or a Threat to MNOs? ...................................................... 103 Case Study: Nimbuzz ...................................................................................................................... 105 Nimbuzz Milestones ...................................................................................................................... 105 Features of Nimbuzz ..................................................................................................................... 106 Pricing ........................................................................................................................................... 106 User Base ..................................................................................................................................... 107 Success Factors ............................................................................................................................ 107 Big Question: Is Nimbuzz an Opportunity or a Threat to MNOs? .................................................. 108 Bulk Messaging Services ....................................................................................................111 Case Study: SMS GupShup ............................................................................................................ 112 SMS GupShup Milestones ............................................................................................................ 112 Features of SMS GupShup ........................................................................................................... 113 Pricing ........................................................................................................................................... 113 User Base ..................................................................................................................................... 114 Success Factors ............................................................................................................................ 116 Big Question: Is SMS GupShup an Opportunity or a Threat to MNOs? ........................................ 117 Mobile Payments ..................................................................................................................119 Introduction ...................................................................................................................................... 119 Mediums of Mobile Payments .......................................................................................................... 120 Square Mobile Payment Solution .................................................................................................. 122 Mobile Ticketing and Coupons ...................................................................................................... 125 Drivers for Mobile Payments ............................................................................................................ 126 Inhibitors for Mobile Payments ......................................................................................................... 128 Case Studies of Key Players ........................................................................................................... 128 Case Study: Bango ....................................................................................................................... 129 Case Study: Boku.......................................................................................................................... 130 Recent Developments in Mobile Payments ..................................................................................... 131 Conclusions and Future Outlook .......................................................................................133 Appendices ...........................................................................................................................143 Glossary ........................................................................................................................................ 144 Portio Research Classifications ..................................................................................................... 157 Companies Mentioned in this Report ............................................................................................ 158 About the Authors.......................................................................................................................... 163 Also available from Portio Research Limited ................................................................................... 164 4 © 2011, Portio Research. All Rights Reserved
  5. 5. Disruptive Mobile Applications and Services 2011-2015 List of Figures Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Figure 6: Figure 7: Figure 8: Figure 9: Figure 10: Figure 11: Figure 12: Figure 13: Figure 14: Figure 15: Figure 16: Figure 17: Figure 18: Figure 19: Figure 20: Figure 21: Figure 22: Figure 23: Figure 24: Figure 25: Figure 26: Figure 27: Figure 28: Figure 29: Figure 30: Figure 31: Figure 32: Figure 33: Figure 34: Figure 35: Figure 36: Figure 37: Figure 38: Figure 39: Figure 40: Figure 41: Figure 42: Figure 43: Figure 44: Smartphone Shipments – Worldwide (In Million, 2008 – 2015F) ....................................... 11 Smartphone Shipments as a Percentage of Handset Shipments – Worldwide (In Million, 2008 – 2015F) .................................................................................................................. 11 Mobile Subscriber Base – Worldwide (In Million, 2008 – 2015F) ...................................... 13 Mobile Subscriber Base – Regional (In Million, 2008 – 2015F) ......................................... 14 Worldwide Subscriber Base – Regional Contribution (In Percent, 2010) .......................... 15 Worldwide Subscriber Base – Regional Contribution (In Percent, 2015F) ........................ 15 Apple’s App Store – Total Application Downloads (In Million) ........................................... 21 Mobile Applications User Base – Worldwide (In Million, 2009 – 2015F)............................ 25 Worldwide Mobile Application Users – Regional Contribution (In Percent, 2010) ............. 26 Worldwide Mobile Application Users – Regional Contribution (In Percent, 2015F)......... 27 Mobile Applications User Base Growth by Region (In Percent, 2010 – 2015F) ................ 27 Mobile Applications Users as a Percentage of Total Regional Mobile Subscribers – Regional (In Percent, 2010 and 2015F) ............................................................................ 28 Mobile Application Downloads – Worldwide (In Billion, 2009 – 2015F) ............................ 28 Mobile Applications Revenue – Worldwide (In USD Billion, End 2010 – End 2015F) ....... 30 Mobile Applications Sales and Advertisement Revenues – Worldwide (In USD Billion, 2010 – 2015F) .................................................................................................................. 30 Worldwide Mobile Applications Sales and Advertisement Revenues – Regional Contribution (In Percent, 2010) ......................................................................................... 31 Worldwide Mobile Applications Sales and Advertisement Revenues – Regional Contribution (In Percent, 2015F)....................................................................................... 32 Growth of Mobile Applications Sales and Advertisement Revenues by Region (In Percent, 2010 – 2015F) .................................................................................................................. 32 In-app Payment Revenues – Worldwide (In USD Billion, 2009 – 2015F) ......................... 33 Break-out of In-app Payment Revenues by Type – Worldwide (In Percent, 2010) ........... 34 Break-out of In-app Payment Revenues by Type – Worldwide (In Percent, 2015F) ......... 34 Smartphone Shipments Y-o-Y Growth by Region (In Percent, 2009 & 2010)................... 35 Basic Value Chain of the Mobile Applications Market ....................................................... 39 Break-out of Available Mobile Applications by Free and Paid Application Type – Worldwide (In Percent, June 2011)................................................................................... 42 Break–out of Available Applications by Type – Apple App Store (Worldwide, In Percent, June 2011) ........................................................................................................................ 43 Apple App Store – Quarterly App Additions (In Thousands) ............................................. 44 Break–out of Available Applications between Games and Non-Games – Google Android Market (Worldwide, In Percent, June 2011)...................................................................... 45 Google Android Market – Quarterly App Additions (In Thousands) .................................. 46 Break–out of Available Applications by Type – BlackBerry App World (Worldwide, In Percent, June 2011) ......................................................................................................... 47 BlackBerry App World – Number of Downloads per Day (In Million) ................................ 48 Break–out of Available Applications between Games and Non-Games – Nokia Ovi Store (Worldwide, In Percent, June 2011)................................................................................. 49 Nokia Ovi Store – Number of Downloads per Day (In Million) .......................................... 50 Break-out of Available Applications by Type – Windows Phone 7 Marketplace (Worldwide, In Percent, June 2011) ..................................................................................................... 51 Windows Phone 7 Marketplace – Number of Available Applications (In Thousands) ....... 52 Windows Phone 7 Marketplace – Number of Registered Developers .............................. 52 Mobile Applications – Revenue Models ............................................................................ 57 Angry Birds – Number of Downloads (In Millions)............................................................. 60 Apple App Store – Break-out of Paid and Free App Downloads (In Percent, June 2011) 62 Google Android Market vs. Apple App Store – Monthly App Additions (In Thousands) .... 63 Google Android Market – Break-out of Paid App Downloads (In Percent, June 2011) ..... 64 Google Android Market – Break-out of Free App Downloads (In Percent, June 2011) ..... 64 YouTube Milestones ......................................................................................................... 69 Number of Hours of Video Uploaded Per Minute to YouTube .......................................... 70 Number of Views of the Top 5 Most viewed YouTube Videos (In Millions, June 2011) .... 71 © 2011, Portio Research. All Rights Reserved 5
  6. 6. Disruptive Mobile Applications and Services 2011-2015 Figure 45: Duration of YouTube Videos viewed across Social Networking Websites per day (In Years, May 2011) ........................................................................................................ 72 Figure 46: Number of Views per day via Mobile Devices (In Millions) ............................................... 73 Figure 47: Break-out of Worldwide Mobile Data Traffic (In Percent, End-2010) ................................ 74 Figure 48: MobiTV Milestones ........................................................................................................... 77 Figure 49: MobiTV – User Base (North America, In Million) .............................................................. 79 Figure 50: Facebook Milestones ........................................................................................................ 84 Figure 51: Features of Facebook for Mobile Users ............................................................................ 85 Figure 52: Facebook – Total User Base (In Million) ........................................................................... 86 Figure 53: Facebook – Mobile User Base (In Million) ........................................................................ 86 Figure 54: Twitter Milestones ............................................................................................................. 91 Figure 55: Features of Twitter ............................................................................................................ 91 Figure 56: Skype Milestones.............................................................................................................. 96 Figure 57: Skype – Active User Base (Worldwide, In Million) ............................................................ 99 Figure 58: Skype – Regional Active User Base (In Percent, 2010).................................................... 99 Figure 59: Valuation of Skype (In USD Billion, 2005 - 2011) ........................................................... 102 Figure 60: Nimbuzz Milestones........................................................................................................ 105 Figure 61: Features of Nimbuzz....................................................................................................... 106 Figure 62: Nimbuzz – User Base (Worldwide, In Million) ................................................................. 107 Figure 63: Number of Downloads from GetJar and Nokia Ovi Store of the Nimbuzz Application (In Million) ............................................................................................................................ 108 Figure 64: SMS GupShup Milestones .............................................................................................. 112 Figure 65: Features of SMS GupShup ............................................................................................. 113 Figure 66: SMS GupShup – User Base (India, In Million) ................................................................ 114 Figure 67: User Base – SMS GupShup vs. Networking Websites (India, May 2011, In Million) ...... 115 Figure 68: SMS GupShup - Number of Messages Processed per Month (India, In Millions) ........... 115 Figure 69: Mobile Payment Opportunities for Key Stakeholders (WIP) ........................................... 119 Figure 70: How NFC Payments work .............................................................................................. 121 Figure 71: Square Card Reader....................................................................................................... 122 Figure 72: How Square Card Reader works .................................................................................... 123 Figure 73: Subscribers using Mobile Applications – Worldwide (In Percent, 2009 – 2015F) ........... 133 Figure 74: Average Number of Mobile Applications Downloaded per User Yearly – Worldwide (2009 – 2015F) ............................................................................................................... 134 Figure 75: SWOT Analysis – Mobile Applications ............................................................................ 135 Figure 76: SWOT Analysis – Mobile Video Streaming ..................................................................... 136 Figure 77: SWOT Analysis – Social Networking .............................................................................. 137 Figure 78: SWOT Analysis – Mobile VoIP ....................................................................................... 138 Figure 79: SWOT Analysis – Bulk Messaging Services ................................................................... 139 Figure 80: SWOT Analysis – Mobile Payments ............................................................................... 140 6 © 2011, Portio Research. All Rights Reserved
  7. 7. Disruptive Mobile Applications and Services 2011-2015 List of Tables Table 1: Table 2: Table 3: Table 4: Table 5: Table 6: Table 7: Table 8: Table 9: Table 10: Table 11: Table 12: Table 13: Table 14: Table 15: Table 16: Table 17: Table 18: Table 19: Table 20: Table 21: Table 22: Table 23: Table 24: Table 25: Table 26: Table 27: Table 28: Table 29: Table 30: Mobile Subscribers – Regional (In Million, 2008 – 2015F) ................................................ 14 Types of Applications Prevalent in the Mobile Applications Market ................................... 18 Mobile Applications User Base – Regional (In Million, 2009 – 2015F) .............................. 26 Mobile Application Downloads – Regional (In Million, 2009 – 2015F) ............................... 29 Mobile Applications Sales and Advertisement Revenues – Regional (In USD Billion, 2010 – 2015F) ........................................................................................................................... 31 Comparison of New and Old Forecasts – Mobile Applications User Base (In Million, 2010 – 2015F) .............................................................................................................................. 36 Comparison of New and Old Forecasts – Mobile Application Downloads (In Million, 2010 – 2015F) .............................................................................................................................. 37 Most Popular Paid and Free Applications, Apple App Store (The US, April 2011) ............ 44 Most Popular Paid and Free Applications, Google Android Market (The US, April 2011) . 46 Most Popular Paid and Free Applications, BlackBerry App World (Worldwide, April 2011) .. ..................................................................................................................................... 48 Most Popular Paid and Free Applications, Nokia Ovi Store (The US, April 2011) ............ 50 Most Popular Paid and Free Applications, Windows Phone 7 Marketplace (The US, April 2011) ................................................................................................................................ 53 Comparison of Application Stores..................................................................................... 54 Facts about Angry Birds ................................................................................................... 59 Success Factors – YouTube ............................................................................................. 72 Pricing – MobiTV Applications .......................................................................................... 78 Success Factors – MobiTV Mobile Application ................................................................. 79 Social Networking Sites – Active Users (In Million, May 2011) ......................................... 82 Success Factors – Facebook Mobile Application.............................................................. 87 Success Factors – Twitter ................................................................................................ 92 Features of Skype............................................................................................................. 97 Skype - Free vs. Paid Features ........................................................................................ 98 Success Factors – Skype ............................................................................................... 100 Skype – Usage Statistics including via Mobile (Worldwide, 2008-2010) ......................... 103 Success Factors – Nimbuzz ........................................................................................... 107 Growth of SMS – Worldwide (In Billion, 2000 – 2015F) .................................................. 111 Success Factors – SMS GupShup ................................................................................. 116 Regional Drivers – An Overview of Mobile Payments..................................................... 127 Inhibitors for Different Mobile Payment Platforms ........................................................... 128 Subscribers using Mobile Applications – Regional (In Percent, 2009 – 2015F).............. 134 © 2011, Portio Research. All Rights Reserved 7
  8. 8. Disruptive Mobile Applications and Services 2011-2015 Chapter 1 Introduction 8 © 2011, Portio Research. All Rights Reserved
  9. 9. Disruptive Mobile Applications and Services 2011-2015 Introduction Disruptive technology can be defined as a high impact innovation which changes the existing market environment. The term “disruptive technologies” is associated with technological innovations which are generally not expected to cause ripples in the marketing ecosystem, but actually do just the opposite and in fact have the capability of completely redefining an industry with their performance. As a result, they represent potent and often unquantifiable threats to incumbent businesses, meaning – in some cases – before incumbents realise it, their businesses are already facing the serious possibility of extinction. Mobile Network Operators (MNOs) are facing a similar threat from disruptive mobile applications and services. MNOs have turned to value-added services in order to counter their falling voice ARPUs (Average Revenue per User) by increasing data ARPUs. In the quest to increase revenue, strategies are witnessing a seismic shift towards a stronger mobile applications focus. Mobile applications and services have taken the mobile industry by storm and have created new opportunities. Applications and services – such as mobile VoIP, social networking, mass messaging apps/websites, mobile payments and usergenerated content – dominate the mobile market. They are transforming the mobile market, and MNOs can ill afford to ignore them. The innovative and new league of apps and services has attracted millions of users worldwide and has helped MNOs to gain subscribers’ loyalty, and this same app revolution is helping to drive the next wave of subscriber acquisition. Data traffic has outpaced voice traffic and has helped MNOs increase their data revenue. Although the strategy seems largely to be working well in the short term, MNOs need to be mindful of the long term ramifications – including that emerging disruptive applications and services threaten to de-value MNOs’ key revenue generators: voice and SMS. Today’s mobile users are getting used to mobile applications, leading to a decline in the time spent by users on mobile voice services. This cycle is impacting the voice revenues that operators can earn. In addition to revenue, MNOs are faced with another big challenge – that of limited network capacity to absorb the ever growing data traffic. Mobile applications, particularly the ones which demand high bandwidth availability, can cause clogging of the bandwidth available for voice calls. Mobile operators have to compromise on the services they offer due to bandwidth issues, which adversely affects the customer experience. Users can encounter poor network performance and face problems such as dropped calls, delayed text messages and sluggish download speeds. Moreover, with every MNO providing these applications and services, it has very much become a commonplace part of every operator’s offering and is often therefore no longer a differentiating factor in terms of competitiveness in the mobile apps market. As such, it has become critical for MNOs to analyse whether these applications and services help them to attract and acquire new subscribers or instead create greater problems without any actual returns. Video services are at the forefront of the disruptive mobile applications that are impacting the voice services of the mobile operators. This segment includes the VoIP services offered by, for example, Skype and online video streaming services – including the wealth of usergenerated content therein – offered by websites such as Youtube.com. The mobile industry is a perfect example of the fact that incumbents can simply not afford to rest on past laurels. The times when voice calling was sufficient to meet communication needs are long gone in virtually all markets worldwide, as user needs have radically changed over time. Services (such as VoIP) have evolved simultaneously with this user metamorphosis, but the vital underpinning infrastructure is still not fully developed across the board. YouTube has become a basic entertainment need in today’s world, and again the service elements in this © 2011, Portio Research. All Rights Reserved 9 MNOs have turned to valueadded services in order to counter their falling voice ARPUs (Average Revenue per User) by increasing data ARPUs. In the quest to increase revenue, strategies are witnessing a seismic shift towards a stronger mobile applications focus.
  10. 10. Disruptive Mobile Applications and Services 2011-2015 case are all present. There is neither dearth in the videos being uploaded, nor the videos being streamed, but the limitation is the infrastructure setup. Another such disruptive application is social networking. This has revolutionised the concept of networking, linking it intrinsically with entertainment. As an example, the Facebook application on mobile phones is a huge hit. This app is supported by the handset manufacturers’ and operating system (OS) developers’ strategy of making the user interface for social networking as smooth as possible. Mobile operators are effectively now forced to offer data plans which enable the user to spend maximum time on Facebook – because of its popularity. With the likes of Skype, YouTube and Facebook, mobile operators are facing the heat of these mobile applications combined with a compromised performance in terms of voice services. Mobile applications present themselves as a disruptive technology, and mobile operators will need to think outside of the box to address the fear of plummeting voice revenues. Mobile payments began as a complimentary service to facilitate transactions through a mobile phone, but over recent years has emerged as a separate industry. Mobile phones have become electronic wallets that can store the information required for a financial transaction. They are now capable of completing a financial transaction without any need for credit or debit cards, and consequently mobile payment mechanisms have begun to disrupt the traditional card-based payment market. The innovations taking place around the mobile payments market compelled payment giants such as Visa and Mastercard to enter the mobile market. MNOs have also unveiled initiatives – AT&T, Verizon Wireless and Deutsche Telekom have jointly announced their Isis service. Apple has also marked its entrance with its partnership with Square. Smartphones are majorly responsible for the massive popularity of mobile applications. In 2010, the smartphone market witnessed a staggering year-on-year growth of 74.2 percent to reach 298.7 million shipments. Smartphone shipments are expected to increase to 909.3 million shipments in 2015, growing at a CAGR of 24.9 percent through 2010-2015. The figure on the next page depicts smartphone shipments from 2008-2015. 10 © 2011, Portio Research. All Rights Reserved In 2010, the smartphone market witnessed a staggering year-on-year growth of 74.2 percent to reach 298.7 million shipments. Smartphone shipments are expected to increase to 909.3 million shipments in 2015, growing at a CAGR of 24.9 percent through 2010-2015.
  11. 11. Disruptive Mobile Applications and Services 2011-2015 Figure 1: Smartphone Shipments – Worldwide (In Million, 2008 – 2015F) Smartphone Shipments (In Million) 1000 909.3 900 791.6 800 671.7 700 549.0 600 500 420.3 400 298.7 300 147.3 171.5 2008 200 2009 100 0 2010 2011F 2012F 2013F 2014F 2015F Year Source: Portio Research Ltd. F – Forecasted Smartphones are gaining popularity in all regions worldwide. As a result, smartphone shipments as a percentage of handset shipments are expected to increase through 20102015. Share of Smartphone Shipments (In Percent) Figure 2: Smartphone Shipments as a Percentage of Handset Shipments – Worldwide (In Million, 2008 – 2015F) 46.0% 50% 41.9% 37.6% 40% 32.8% 27.7% 30% 21.6% 20% 12.2% 14.7% 10% 0% 2008 2009 2010 2011F 2012F 2013F 2014F 2015F Year Source: Portio Research Ltd. F – Forecasted The availability of advanced networks has further fueled the data usage among mobile users. While the emerging markets have started exploring 3G benefits, developed markets are witnessing 3.5G and 4G deployments. © 2011, Portio Research. All Rights Reserved 11 The availability of advanced networks has further fueled the data usage among mobile users. While the emerging markets have started exploring 3G benefits, developed markets are witnessing 3.5G and 4G deployments.
  12. 12. Disruptive Mobile Applications and Services 2011-2015 Chapter 2 Worldwide Mobile Market 12 © 2011, Portio Research. All Rights Reserved
  13. 13. Disruptive Mobile Applications and Services 2011-2015 Worldwide Mobile Market The worldwide mobile industry continues to grow at a significant rate. Since inception, this industry’s prolific growth rate has perpetually amazed all, including experts themselves, and will be strengthened further with the ongoing convergence of services with mobile communications, and initiatives by Mobile Network Operators (MNOs). At end-2010, worldwide mobile subscribers stood at nearly 5.4 billion. This subscriber base is now projected to grow at a Compound Annual Growth Rate (CAGR) of 6.8 percent between 2010 and 2015, and is expected to reach nearly 7.5 billion by end-2015. The figure below highlights the growth in worldwide mobile subscriber base during 20082015. Please note that within these new forecasts we have revised our worldwide and regional mobile subscriber base forecasts based on actual, currently-stated subscriber figures for end-2010. Figure 3: Mobile Subscriber Base – Worldwide (In Million, 2008 – 2015F) Mobile Subscriber Base (In Million) 8,000 6,355.1 6,775.2 7,144.8 7,464.2 5,871.0 6,000 5,362.4 4,655.8 4,044.8 4,000 2,000 0 2008 2009 2010 2011F 2012F 2013F 2014F 2015F Year Source: Portio Research Ltd. F – Forecasted Asia Pacific is the largest mobile market worldwide. At end-2010, the region’s mobile subscriber base stood at over 2.6 billion and is forecast to surpass 3.9 billion by end-2015 – growing at a CAGR of 8.5 percent during 2010-2015. Europe is the second-largest region worldwide in terms of subscribers and was nearing 1.1 billion subscribers at end-2010. The next table highlights regional mobile subscriber levels during 2008-2015. © 2011, Portio Research. All Rights Reserved 13 At end-2010, worldwide mobile subscribers stood at nearly 5.4 billion. This subscriber base is now projected to grow at a Compound Annual Growth Rate (CAGR) of 6.8 percent between 2010 and 2015, and is expected to reach nearly 7.5 billion by end-2015.
  14. 14. Disruptive Mobile Applications and Services 2011-2015 Table 1: Mobile Subscribers – Regional (In Million, 2008 – 2015F) 1 Mobile Subscribers (In Million) Region 2008 2009 2010 2011F 2012F 2013F 2014F 2015F Europe 999.7 1,038.3 1,066.4 1,102.6 1,128.5 1,149.4 1,166.2 1,179.8 Asia Pacific 1,733.8 2,132.1 2,605.1 2,913.6 3,219.5 3,484.8 3,716.8 3,914.8 North America 291.9 313.5 343.4 361.4 377.7 392.3 405.4 417.0 Latin America 449.5 494.0 549.2 589.9 624.5 655.1 681.8 705.0 Africa and Middle East 570.1 677.9 798.3 903.5 1,004.9 1,093.7 1,174.6 1,247.6 Total 4,044.8 4,655.8 5,362.4 5,871.0 6,355.1 6,775.2 7,144.8 7,464.2 Source: Portio Research Ltd. The figure below is the graphical representation of Table 1 above. Figure 4: Mobile Subscriber Base – Regional (In Million, 2008 – 2015F) Mobile Subscribers (In Million) 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2008 Europe 2009 Asia Pacific 2010 2011F North America 2012F Latin America 2013F 2014F 2015F Africa and Middle East Source: Portio Research Ltd. F – Forecasted 1 14 Note: Sum of regional numbers may not equal total due to rounding off errors. © 2011, Portio Research. All Rights Reserved
  15. 15. Disruptive Mobile Applications and Services 2011-2015 Asia Pacific’s subscribers constituted 48.6 percent of the worldwide mobile subscriber base in 2010, while the second largest contribution was Europe with 19.9 percent. The figure below depicts regional contribution to the worldwide mobile subscriber base in 2010. Figure 5: Worldwide Subscriber Base – Regional Contribution (In Percent, 2010) 48.6% 6.4% 10.2% 14.9% 19.9% Europe Asia Pacific North America Latin America Africa and Middle East Source: Portio Research Ltd. Between 2010 and 2015, the percentage contribution of the Asia Pacific and Africa and Middle East (AME) regions to the worldwide subscriber base is expected to increase at the expense of the remaining regions, which will see declines during the same period. Asia Pacific will continue to dominate the worldwide mobile market, and in 2015 over 52 percent of worldwide mobile subscribers will originate from this region. The increase in subscriber base share for the Asia Pacific and AME regions can be ascribed to the strong subscriber base growth in the emerging markets. Figure 6: Worldwide Subscriber Base – Regional Contribution (In Percent, 2015F) 2 5.6% 52.4% 9.4% 16.7% 15.8% Europe Asia Pacific North America Latin America Africa and Middle East Source: Portio Research Ltd. F – Forecasted 2 Note: The percentages do not add up to 100 percent because of rounding off errors. © 2011, Portio Research. All Rights Reserved 15 The increase in subscriber base share for the Asia Pacific and AME regions can be ascribed to the strong subscriber base growth in the emerging markets.
  16. 16. Disruptive Mobile Applications and Services 2011-2015 Chapter 3 Mobile Applications Market 16 © 2011, Portio Research. All Rights Reserved
  17. 17. Disruptive Mobile Applications and Services 2011-2015 Mobile Applications Market Mobile applications are functionalities provided to users by software that performs specific tasks. These applications now come pre-installed on handsets, or can be downloaded by users and installed on their handsets. Mobile applications are rapidly changing the nature of the mobile industry, supporting the ongoing transformation of handsets from simple communication devices into gadgets with powerful information, entertainment and productivity features, as well as boosting the use of mobile data services. The marketplace for mobile applications remains highly fragmented. The mobile applications ecosystem encompasses platform developers, application developers, aggregators, mobile operators, handset and operating system (OS) vendors, and application store owners. Prominent players in the market include Apple (Apple App Store), Google (Android Market), Nokia (Ovi Store), Research In Motion (BlackBerry App World), Microsoft (Windows Phone 7 Marketplace), GetJar and Appia (formerly known as PocketGear), each offering an application storefront to users. Mobile applications can only be downloaded on to handsets that have an operating system and an application programming interface (API) capable of interacting with these third party applications. Some of the popular operating systems are iPhone OS, Android, Symbian, BlackBerry OS, Windows Mobile and WebOS. Some applications also require supporting platforms, such as BREW, Java and FlashLite. A wide variety of mobile applications are available in the market for both the consumer and enterprise segments, offering different features and options, and the extent to which they require network connectivity depends on their functionalities. Types of Mobile Applications To satisfy the varied needs of users, there are numerous free and paid applications available in the market, typically concentrated towards the convenience and entertainment needs of users. Apple alone provides a wide spectrum of over 425,000 applications for iPhone, iPod Touch and iPad users. The table on the next page provides a list of different types of applications prevalent in the mobile applications market. © 2011, Portio Research. All Rights Reserved 17 Mobile applications can only be downloaded on to handsets that have an operating system and an application programming interface (API) capable of interacting with these third party applications.
  18. 18. Disruptive Mobile Applications and Services 2011-2015 Table 2: Types of Applications Prevalent in the Mobile Applications Market Games Productivity/ Enterprise Multimedia Communication Travel Utilities Arcade Directory Service Image Viewer Social Networking City Guide Screen Saver/Themes Action Calendar Audio/Video Player E-mail Client GPS/Maps Profile Manager Puzzle/ Word Game LocationBased Service (LBS) Presentation Viewer Instant Messaging (IM) Client Flight/Train Tracking Task Manager Role Playing Calculator Karaoke Player Mobile Internet browser Currency Converter Address Book Strategy Banking and Finance Audio/Video Recorder On–Device Portal Scheduler File Manager Simulation Spreadsheet Radio Sports/Racing Word Processor Casino/Cards News/ Weather Antivirus Search Board Game Source: Portio Research Ltd. Growth of Mobile Applications Business Mobile applications have created a lot of hype in the market and have witnessed huge expansion since the launch of Apple’s App Store in July 2008. Apple owned 99.4 percent 3 of the mobile applications market in 2009, driving much of the growth in the market, and the success of the App Store has prompted others to follow, with MNOs, handset and OS vendors, and independent companies all keen to jump on the app store bandwagon. The primary factors driving the growth of the mobile applications market are the growing popularity of smartphones and consumer demand for such apps. Also, mobile access to high-speed data networks and affordable tariff plans have led to a continuous growth in mobile broadband penetration, providing a much needed impetus to the mobile applications market. In addition, developers are attracted to the mobile applications market with its favourable revenue sharing models and accessible distribution channels for their apps. Evolution of Mobile Applications Market The mobile applications market has evolved from the mobile content market of the past, where open platforms – such as BREW, Symbian, Palm and others – introduced APIs allowing third-party developers to create content for their platforms. However, what was 3 Source: http://arstechnica.com/apple/news/2010/01/apple-responsible-for-994-of-mobile-app-sales-in-2009.ars 18 © 2011, Portio Research. All Rights Reserved The primary factors driving the growth of the mobile applications market are the growing popularity of smartphones and consumer demand for such apps.
  19. 19. Disruptive Mobile Applications and Services 2011-2015 missing then was the commercial channel to promote and distribute such content and services. Apple has engineered the success of its App Store by not only allowing developers to produce creative content and applications for consumers, but also by changing the way in which content is distributed, through its direct distribution mechanism that bypasses content aggregators, content retailers and mobile operators. Consumers get the content they need with convenient app search, download and payment features, while developers receive their fair share of revenue. The success of Apple App Store has inevitably led to others in the mobile space following suit and introducing their own application storefronts. Today, there is a rapidly increasing number of app stores in the market, with no signs of the trend slowing. Handset and platform vendors, including Nokia, RIM, Microsoft, Google, Sony Ericsson and others, have launched their application stores; MNOs, including Vodafone, Orange, TIM, O2, Verizon Wireless, China Mobile and others, are quite active in the mobile applications space; and – demonstrating that mobile apps present great opportunity for all – third-party players and independent retailers are also entering the mainframe mobile applications market. Monetising the Mobile Applications Business Business models for mobile applications have also evolved over time, with market players now experimenting with different models to monetise the mobile apps market. Apps are available not only as paid downloads, but also for free as ad-sponsored downloads. In addition, in-app payments are catching on fast, creating new revenue streams for developers. Developers create basic or lite versions of some applications that are launched for free, but which have built-in in-app payment options that facilitate subsequent purchases by the users. In-app payments are expected to be a key tool for facilitating revenue generation in the mobile apps market. Moreover, in-app payment enablers are providing options for operator billing for in-app purchases, which simplifies app purchases – as users no longer require credit cards or other online payment accounts (e.g. PayPal). App stores are experimenting with different payment mechanisms, such as direct billing through payment gateways, operator billing and in-app purchases. While Apple has built its success on direct billing through the iTunes account, operator billing is the most preferred mechanism in the mass market. Role of Handsets in the Uptake of Mobile Applications With a growing demand for data services, mobile users are seeking devices that bring together technology and entertainment, to extend handset functionality beyond just voice calls or messaging. Users’ demands for converged devices with multiple features, such as intuitive touch interfaces, high-resolution cameras, Web browsers, integrated GPS and WiFi, have proliferated the demand for smartphones; and in turn smartphones – with their operating systems enabling app downloads – are helping boost the uptake of mobile apps. iPhone and the Growth of Mobile Applications Apple App Store has been the catalyst for growth in the mobile applications market. Apple has spurred the growth of mobile apps by engaging end users with their compelling devices and backing these up with its extensive library of mobile applications at the Apple App Store. © 2011, Portio Research. All Rights Reserved 19 With a growing demand for data services, mobile users are seeking devices that bring together technology and entertainment, to extend handset functionality beyond just voice calls or messaging.
  20. 20. Disruptive Mobile Applications and Services 2011-2015 The Apple App Store became an instant success with 10 million applications downloaded within three days of the store’s July 2008 launch, but the store’s success is inextricably linked to the phenomenal success of Apple’s devices; as of May 2011, Apple has sold 200 million iOS devices 4 including the iPhone, iPod Touch and iPad. The iPhone revolutionised the smartphone market with a large touch screen, engaging interface and exciting features and functionalities, and has transformed the behavior of mobile users and the way people communicate and consume data-based services. There are over 425,000 applications available at the Apple App Store (as of June 2011) and consumers have downloaded more than 15 billion applications 5 (as of early-July 2011) on their Apple devices. It is fair to say that the App Store is promoting sales of iPhones, and that the iPhone is increasing the demand for mobile applications. A similar pattern is now fast developing with Google Android’s application store and Android devices. Apple also changed the game for developers with a simple, yet powerful distribution platform that both reaches a large user base and offers an incentivised revenue share. In addition, the single device API makes the Apple App Store more attractive to developers, as it provides an application marketplace without the need for them to worry about the different device SDKs (Software Development Kits), screen sizes/resolutions, processors, etc. The key factors that determine the success of application stores are the choice of applications available and convenience; this includes convenience for both user and developer communities, in terms of the ease of discovery of applications, one-click download features, trouble-free billing and payment options. The Apple App Store provides a wide choice of applications across different categories, along with application reviews and recommendations, etc. Also, the store is well-managed with convenient billing and payment features. Thus, Apple’s compelling service experience and the application ecosystem is what is keeping both users and developers happy. This is evident from a growing number of downloads at the Apple App Store and the phenomenal success it has achieved since its July 2008 launch. January 2011: “With more than 10 billion apps downloaded in just two and a half years—a staggering seven billion apps in the last year alone—the App Store has surpassed our wildest dreams.” Philip Schiller Senior Vice President, Apple, Inc. The Apple App Store registered more than 15 billion downloads to-date as of early-July 2011. The figure on the next page shows the App Store’s performance since its launch in July 2008. 4 Source: http://www.phonearena.com/news/Apple-has-sold-200-million-iOS-devices-and-distributed-14-billionapps_id19359 5 Source: http://www.apple.com/pr/library/2011/07/07Apples-App-Store-Downloads-Top-15-Billion.html 20 © 2011, Portio Research. All Rights Reserved There are over 425,000 applications available at the Apple App Store (as of June 2011) and consumers have downloaded more than 15 billion applications (as of early-July 2011) on their Apple devices.
  21. 21. Disruptive Mobile Applications and Services 2011-2015 Figure 7: Apple’s App Store – Total Application Downloads (In Million) 15,000 Downloads (In Million) 16,000 14,000 12,000 10,000 7,000 8,000 6,500 5,500 4,000 3,000 4,000 2,000 10 Jul-08 Sep-08 1,000 100 Jul-11 May-11 Jan-11 Oct-10 Aug-10 Jun-10 Apr-10 Jan-10 Sep-09 Apr-09 0 Period Source: Apple, Portio Research Ltd. Opportunities for Stakeholders The mobile applications market is highly fragmented, with stakeholders both fighting for market share and seeking ways to monetise applications – all the while as this very competition drives down the prices of paid apps. Advertisers The growing popularity of mobile applications has created attractive opportunities for advertisers. With a mobile application user base of 73.9 million at end-2010, advertisers see the potential for placing adverts in mobile apps. Mobile advertisements covered a critical mass of users and generated estimated revenues of over USD 445 million in 2010, and revenue generated through ad-placements in mobile applications is expected to almost double to USD 982 million in 2011. Adverts can be delivered to consumers in the following ways: • Built into mobile applications such as games, e–books and online TV • Adjoined with downloaded or streaming audios and videos • Placed next to search results • Displayed on web browsers and websites accessed by mobile users • Sent via text and multimedia messages Placing advertisements within a mobile application generates new streams of revenue for application publishers, developers and app stores. This additional revenue helps users in two ways—reduced application prices, or large numbers of free applications and services that are made available to users. Meanwhile, application stores and developers are able to maximise the number of users and increase their reach. Owners – Smartphone Vendors and MNOs Smartphone vendors and MNOs have developed their own developer communities to be able to launch their own application stores. Besides generating new streams of revenue for themselves, the objective of launching their own app stores is to increase customer loyalty © 2011, Portio Research. All Rights Reserved 21 Mobile advertisements covered a critical mass of users and generated estimated revenues of over USD 445 million in 2010, and revenue generated through ad-placements in mobile applications is expected to almost double to USD 982 million in 2011.
  22. 22. Disruptive Mobile Applications and Services 2011-2015 and stickiness towards their products and services. Since handsets have become so much more than mere communication devices, mobile applications are now effectively a prerequisite for users, and so owning an application store becomes a requirement for smartphone vendors and MNOs to be able to acquire new customers and concurrently minimise customer churn. Developers To satisfy the ever increasing needs of users and to stay ahead of the competition, application stores are required to add new apps to their portfolios, on a regular and frequent basis; and it is this need for continuous development of new applications that justifies the high demand for developers in the mobile market. Application Stores The phenomenal success of Apple’s App store – recording 15 billion downloads in just three years since its launch – has drawn many other players into the mobile applications market. Application stores offer apps across different types – such as games, productivity, multimedia, travel, communications and utilities – to meet the varied demands of mobile users, and make money from paid applications, advertisements and in–app purchases. 22 © 2011, Portio Research. All Rights Reserved
  23. 23. Disruptive Mobile Applications and Services 2011-2015 Chapter 4 Market Size © 2011, Portio Research. All Rights Reserved 23
  24. 24. Disruptive Mobile Applications and Services 2011-2015 Market Size Forecast Methodology Mobile applications are software programs that run on handheld devices such as smartphones, feature phones or tablets. However, the distinction between feature phones and smartphones is the inability of feature phones to install, download or remove external applications – as they are devoid of operating systems (OS). Smartphones have operating systems and independent developers can develop mobile applications for them using a Software Development Kit (SDK) specific to that OS; feature phones sometimes have preinstalled mobile applications provided by the handset manufacturer. Therefore, we have excluded the feature phone handset user base from our study while forecasting the target market for mobile applications, as these devices do not download apps from application stores. Mobile application users are a sub-set of smartphone users and are calculated as a percentage of the worldwide smartphone user base, taking into account regional variations. Various factors – such as differences in technology evolution, availability of smartphones, user awareness, and the state of the market – affect the adoption of mobile apps, and a normalising factor has therefore been assigned to each region while estimating the mobile application user base. To further estimate mobile application downloads, data for some of the major mobile application stores – including Apple, Android, Nokia Ovi, GetJar and BlackBerry – was collected and split across various regions. Total mobile application downloads can be broadly categorised into three categories: • • • Paid-for Applications: These are apps for which download charges are borne by the consumer. Ad-funded Free Applications: These are funded by advertisers. Advertisers post ads on applications and in return pay the mobile application providers for app downloads. They come as free applications for users. Un-monetised Applications: These are provided free of charge to users, irrespective of whether the advertiser is sponsoring it or not. Therefore, a mobile application store earns revenues from either paid-for apps or through ad-funded mobile apps. Revenue for paid-for applications is calculated using the mobile application downloads data and the average selling price of the most popular apps on various application stores. The revenue model of ad-funded applications works in two ways: • Cost per Mille (CPM): It refers to the revenue earned by the mobile application provider per 1,000 views of the advert. • Cost per Action (CPA): It refers to the revenue earned by the mobile application provider when a user undertakes a specified action, such as a click or download, etc. CPM has a broader scope and includes the CPA approach as well, as it counts revenues from views. For the purpose of our study, we have determined the total ad-impressions in ad-funded downloads, and have used the CPM method to calculate revenues from adfunded mobile apps. In addition to the two revenue models described above, another model that is fast emerging is in-app payments. In-app payments are payments made by users within an application for application upgrades, virtual goods, updates, alerts, etc. There has been a surge in in-app 24 © 2011, Portio Research. All Rights Reserved Smartphones have operating systems and independent developers can develop mobile applications for them using a Software Development Kit (SDK) specific to that OS.
  25. 25. Disruptive Mobile Applications and Services 2011-2015 payments because of the growing use of apps from categories such as games, social networking and music, which carry various avenues for making in-app purchases. The in-app payment function is enabled within an application with the help of an application programming interface (API), which allows developers to embed a payment platform directly within their apps. Developers implement in-app purchases in their applications using the Software Development Kit (SDK) provided by the platforms and payment enablers. The API connects an application to an operator/vendor billing system for processing payments. After in-app payments are processed, the user is notified and is provided with access to the addon items purchased. In this section, we have provided the new forecasts for the mobile applications market in terms of user base, application revenues, and the number of downloads from 2011 to 2015. Market Size Mobile Application User Base The mobile applications market is gaining momentum worldwide. The evolution of mobile networks and enhanced mobile handset capabilities have enabled high-speed data transfers and thus improved the user experience—resulting in a spur in mobile application downloads and use. The worldwide user base for mobile applications stood at 73.9 million at end-2010. With smartphone vendors, software developers and MNOs making huge investments to improve the quality and utility of mobile apps, the mobile applications user base is expected to grow at a CAGR of 42.8 percent between 2010 and 2015 to reach 438.9 million by end-2015. The reason behind this high number is the widespread availability of free applications, increasing range of applications, affordable data plans and increasing smartphone penetration – especially in the Asia Pacific and Rest of World regions. Worldwide, the percentage of mobile users downloading mobile applications is expected to grow from 1.4 percent at end2010 to 5.9 percent by end-2015. The figure below depicts the mobile applications user base from 2009 to 2015. Mobile Applications User Base (In Million) Figure 8: Mobile Applications User Base – Worldwide (In Million, 2009 – 2015F) 438.9 450 400 340.7 350 300 253.9 250 182.8 200 122.1 150 73.9 100 50 38.7 0 2009 2010 2011F 2012F 2013F 2014F 2015F Year Source: Portio Research Ltd. F – Forecasted © 2011, Portio Research. All Rights Reserved 25 The mobile applications user base is expected to grow at a CAGR of 42.8 percent between 2010 and 2015 to reach 438.9 million by end2015.
  26. 26. Disruptive Mobile Applications and Services 2011-2015 The table below highlights the growth in the number of regional mobile applications users from 2009 to 2015. Table 3: Mobile Applications User Base – Regional (In Million, 2009 – 2015F) 6 Mobile Applications User Base (In Million) Region 2009 2010 2011F 2012F 2013F 2014F 2015F Europe 10.9 20.5 29.5 41.5 54.6 68.4 85.4 Asia Pacific 11.7 22.1 36.1 56.9 86.5 123.1 164.7 North America 14.5 26.6 46.6 65.7 80.5 96.2 112.0 Rest of World 1.6 4.7 9.9 18.7 32.3 52.9 76.9 Total 38.7 73.9 122.1 182.8 253.9 340.7 438.9 Source: Portio Research Ltd. North America had the largest regional user base of mobile applications in 2010, constituting 36 percent of the worldwide mobile application user base. It was followed by Asia Pacific and Europe, with 29.9 percent and 27.7 percent shares respectively. The figure below breaks out the worldwide mobile application user base in 2010 by regions. Figure 9: Worldwide Mobile Application Users – Regional Contribution (In Percent, 2010) 29.9% 36.0% 27.7% Europe Asia Pacific 6.4% North America Rest of World Source: Portio Research Ltd. Asia Pacific’s smartphone shipments and user base witnessed an upsurge during the first quarter of 2011, despite declined demand from the Japanese market due to the devastating Tsunami. Other markets such as China, India and South Korea counterbalanced the Japanese performance. This is leading to a steep rise in Asia Pacific’s mobile applications’ user base. Asia Pacific is expected to outstrip North America and Europe to achieve the largest regional user base of mobile applications in the coming five years. The region will have 37.5 percent of the worldwide mobile applications user base by end-2015, followed by North America with 25.5 percent. 6 Note: Sum of regional numbers may not add up to the total due to rounding off errors. 26 © 2011, Portio Research. All Rights Reserved Asia Pacific is expected to outstrip North America and Europe to achieve the largest regional user base of mobile applications in the coming five years.
  27. 27. Disruptive Mobile Applications and Services 2011-2015 The figure below highlights the regional share in the worldwide mobile applications user base in 2015. Figure 10: Worldwide Mobile Application Users – Regional Contribution (In Percent, 2015F) 25.5% 37.5% 17.5% 19.5% Europe Asia Pacific North America Rest of World Source: Portio Research Ltd. F – Forecasted The worldwide mobile application user base is forecast to grow at a CAGR of 42.8 percent between 2010 and 2015. The ‘Rest of World’ (Latin America and AME) is expected to witness the highest percentage growth, since mobile applications user additions in this region will build on a lower existing user base compared with other regions. High growth is anticipated in all regions, as most markets aren’t expected to saturate in the next five years. Figure 11: Mobile Applications User Base Growth by Region (In Percent, 2010 – 2015F) CAGR (In Percent) 80 74.7 CAGR Worldwide = 42.8 % 70 60 CAGR 42.8% 49.5 50 40 33.3 33.0 30 20 10 0 Europe Asia Pacific North America Rest of World Region Source: Portio Research Ltd. F – Forecasted © 2011, Portio Research. All Rights Reserved 27 The ‘Rest of World’ (Latin America and AME) is expected to witness the highest percentage growth, since mobile applications user additions in this region will build on a lower existing user base compared with other regions.
  28. 28. Disruptive Mobile Applications and Services 2011-2015 In 2010, in terms of mobile application users as a percentage of the total regional mobile subscriber base, North America recorded the highest level with 7.7 percent, followed by Europe with 1.9 percent. The figure below compares the percentage of mobile applications users in the regional subscriber base at end-2010 with that at end-2015F. Figure 12: Mobile Applications Users as a Percentage of Total Regional Mobile Subscribers – Regional (In Percent, 2010 and 2015F) Mobile Applications Users' Contribution (In Percent) 30 26.9 25 20 15 10 5 7.7 7.2 4.2 1.9 3.9 0.8 0.4 0 Europe Asia Pacific North America Rest of World Region 2010 2015F Source: Portio Research Ltd. F – Forecasted Mobile Application Downloads The increasing number of mobile application downloads reflects the growing uptake of mobile application services. The number of downloads is expected to increase at a CAGR of 54.8 percent in the period between 2010 and 2015, and this is depicted in the figure below. Mobile Application Downloads (In Billion) Figure 13: Mobile Application Downloads – Worldwide (In Billion, 2009 – 2015F) 100 89.4 80 64.9 60 45.3 40 30.1 18.4 20 10.1 2.9 0 2009 2010 2011F 2012F 2013F 2014F 2015F Year Source: Portio Research Ltd. F – Forecasted The next table shows the regional contribution in mobile application downloads over the 2009-2015 period. 28 © 2011, Portio Research. All Rights Reserved The number of downloads is expected to increase at a CAGR of 54.8 percent in the period between 2010 and 2015
  29. 29. Disruptive Mobile Applications and Services 2011-2015 Table 4: Mobile Application Downloads – Regional (In Million, 2009 – 2015F) 7 Mobile Application Downloads (In Million) Region 2009 2010 2011F 2012F 2013F 2014F 2015F Europe 853 2,896 4,814 7,181 10,225 13,876 18,304 Asia Pacific 819 2,627 4,832 8,166 13,376 20,805 30,689 North America 1,165 4,200 7,798 12,516 17,066 21,553 26,491 Rest of World 79 344 970 2,239 4,652 8,620 13,890 Total 2,915 10,067 18,413 30,103 45,318 64,854 89,373 Source: Portio Research Ltd. In 2010, North America contributed 41.7 percent of the total mobile application downloads. It was followed by Europe and Asia Pacific amassing 28.8 percent and 26.1 percent respectively. In 2015, Asia Pacific is expected to overtake North America in download-terms, contributing 34.3 percent to the worldwide total, while North America will be accounting for 29.6 percent, followed by Europe with 20.5 percent. The contribution from Rest of World will increase slowly from 3.4 percent in 2010 to 15.5 percent in 2015. Mobile Application Revenues – Application Sales, Advertisements and In-app Payments Mobile applications are helping handset manufacturers to increase their market share, brand loyalty and revenues. Traditionally, handset and accessory sales have accounted for the dominant share in handset manufacturers’ revenues. However, with the emergence of the mobile app market, a new revenue stream has emerged for smartphone vendors. Apps are also helping MNOs to increase their revenues, especially data revenues, and are providing a new growing market for software developers. The figure on the next page provides the revenue forecasts for mobile applications accounting for mobile application sales, advertisements and in-app payments. 7 Note: Sum of regional numbers may not add up to the total due to rounding off errors. © 2011, Portio Research. All Rights Reserved 29 In 2015, Asia Pacific is expected to overtake North America in download-terms, contributing 34.3 percent to the worldwide total, while North America will be accounting for 29.6 percent, followed by Europe with 20.5 percent.
  30. 30. Disruptive Mobile Applications and Services 2011-2015 Figure 14: Mobile Applications Revenue – Worldwide (In USD Billion, End 2010 – End 2015F) 70 63.0 Revenue (In USD BIllion) 60 46.9 50 33.6 40 33.8 30 23.6 20 15.4 17.1 11.6 1.6 0 3.6 2.0 9.0 4.3 4.7 7.4 8.0 11.9 16.7 2009 10 24.4 2010 2011F 2012F 2013F 22.5 2014F 29.4 2015F Year Mobile Application Sales and Advertisement Revenues In-app Payment Revenue Source: Portio Research Ltd. F – Forecasted Mobile Applications Revenues – Sales and Advertisements Figure 15: Mobile Applications Sales and Advertisement Revenues – Worldwide (In USD Billion, 2010 – 2015F) 29.4 30 Revenue (In USD BIllion) 25 22.5 20 16.7 15 11.9 8.0 10 4.7 5 1.6 0 2009 2010 2011F 2012F 2013F 2014F 2015F Year Source: Portio Research Ltd. F – Forecasted 30 © 2011, Portio Research. All Rights Reserved
  31. 31. Disruptive Mobile Applications and Services 2011-2015 The table below highlights the growth of regional mobile applications sales and advertisement revenues from 2009 to 2015. Table 5: Mobile Applications Sales and Advertisement Revenues – Regional (In USD Billion, 8 2010 – 2015F) Mobile Applications Sales and Advertisement Revenues (In USD Billion) Region 2009 2010 2011F 2012F 2013F 2014F 2015F Europe 0.46 1.36 2.10 2.85 3.76 4.81 6.03 Asia Pacific 0.44 1.24 2.11 3.24 4.92 7.21 10.10 North America 0.63 1.98 3.40 4.96 6.28 7.47 8.72 Rest of World 0.04 0.16 0.42 0.89 1.71 2.99 4.57 Total 1.58 4.74 8.03 11.93 16.68 22.47 29.42 Source: Portio Research Ltd. In 2010, North America had the highest revenue share (41.7 percent) of worldwide mobile application sales and advertisements, followed by Europe (28.8 percent) and Asia Pacific (26.1 percent). The figure below shows the regional share of worldwide mobile application sales and advertisement revenues in 2010. Figure 16: Worldwide Mobile Applications Sales and Advertisement Revenues – Regional Contribution (In Percent, 2010) 26.1% 41.7% 28.8% Europe Asia Pacific 3.4% North America Rest of World Source: Portio Research Ltd. Asia Pacific is expected to overtake North America in this respect by end-2015, when it will account for 34.3 percent of the worldwide mobile application revenue (excluding in-app payments), against 29.6 percent for North America and 20.5 percent for Europe. The figure overleaf highlights the regional share of worldwide mobile application sales and advertisement revenues in 2015. 8 Note: Sum of regional numbers may not add up to the total due to rounding off errors. © 2011, Portio Research. All Rights Reserved 31 Asia Pacific is expected to overtake North America in this respect by end-2015, when it will account for 34.3 percent of the worldwide mobile application revenue (excluding in-app payments), against 29.6 percent for North America and 20.5 percent for Europe.
  32. 32. Disruptive Mobile Applications and Services 2011-2015 Figure 17: Worldwide Mobile Applications Sales and Advertisement Revenues – Regional 9 Contribution (In Percent, 2015F) 29.6% 34.3% 15.5% 20.5% Europe Asia Pacific North America Rest of World Source: Portio Research Ltd. F – Forecasted Worldwide mobile application revenues, excluding in-app payments, are forecast to grow at a CAGR of 44.1 percent between 2010 and 2015, and all regions are expected to record impressive CAGRs. Mobile handset manufacturers, software developers and MNOs have identified the potential in the mobile application market and are aggressively promoting their mobile applications among consumers. In recent times, all major smartphone vendors, OS providers and MNOs have launched app stores either individually or in collaborations, and are also working with payment enablers to ensure secure and user-friendly payment systems. The growth in Rest of World is over double the worldwide average because its starting base was quite small in 2010 as the mobile app industry therein remained nascent. Figure 18: Growth of Mobile Applications Sales and Advertisement Revenues by Region (In Percent, 2010 – 2015F) CAGR (In Percent) 100 95.1 CAGR Worldwide = 44.1% 90 80 70 60 52.2 CAGR 44.1% 50 34.6 40 34.5 Europe North America 30 20 10 0 Asia Pacific Rest of World Region Source: Portio Research Ltd. F – Forecasted 9 Note: The percentages do not add up to 100 percent because of rounding off errors. 32 © 2011, Portio Research. All Rights Reserved The growth in Rest of World is over double the worldwide average because its starting base was quite small in 2010 as the mobile app industry therein remained nascent.
  33. 33. Disruptive Mobile Applications and Services 2011-2015 In-app Payment Revenues In-app payments are made by users to migrate from a free (or lite) version of an app to the full premium paid-for version of the app, or to access additional features or content to enhance the user experience of a particular application. With in-app payment feature options available within an application, users can make payments without having to go through a separate payment site, thus ensuring a seamless application experience. Moreover, multiplatform application developers are collaborating with payment enablers to make payments possible across mobile platforms. Enhanced user experiences, combined with the growing awareness and uptake of mobile applications among users, will result in the continuous growth of in-app payment revenues over the next five years. Mobile In-app Payment Revenue (In USD BIllion) Figure 19: In-app Payment Revenues – Worldwide (In USD Billion, 2009 – 2015F) 33.6 35 30 24.4 25 20 17.1 15 11.6 7.4 10 5 4.3 2.0 0 2009 2010 2011F 2012F 2013F 2014F 2015F Year Source: Portio Research Ltd. F – Forecasted In 2010, mobile gaming applications accounted for a major portion (43.2 percent) of worldwide mobile in-app payment revenues, followed by social networking applications (32.5 percent) and other mobile applications (24.2 percent). © 2011, Portio Research. All Rights Reserved 33 In 2010, mobile gaming applications accounted for a major portion (43.2 percent) of worldwide mobile in-app payment revenues, followed by social networking applications (32.5 percent) and other mobile applications (24.2 percent).
  34. 34. Disruptive Mobile Applications and Services 2011-2015 Figure 20: Break-out of In-app Payment Revenues by Type – Worldwide (In Percent, 2010) 10 32.5% 24.2% 43.2% Gaming Social Networking Others Source: Portio Research Ltd. Mobile gaming applications will remain the largest contributor (57.9 percent) to mobile in-app payment revenues in 2015, followed by social networking applications (24.1 percent). Other applications are forecast to account for 18 percent of in-app payment revenues, with the majority of this expected to come from navigation maps, e-books and mobile payment apps. Figure 21: Break-out of In-app Payment Revenues by Type – Worldwide (In Percent, 2015F) 24.1% 57.9% 18.0% Gaming Social Networking Others Source: Portio Research Ltd. F – Forecasted 10 Note: The percentages do not add up to 100 percent because of rounding off errors. 34 © 2011, Portio Research. All Rights Reserved Mobile gaming applications will remain the largest contributor (57.9 percent) to mobile in-app payment revenues in 2015, followed by social networking applications (24.1 percent).
  35. 35. Disruptive Mobile Applications and Services 2011-2015 Comparison between new and previous forecasts Between our report Mobile Applications Futures 2010-2015 (published October 2010) and this report, our forecasts for mobile applications users and mobile application downloads have markedly altered. In this report, our applications users and mobile application downloads forecasts for all regions are more aggressive compared to the numbers published last year, except for the mobile applications user base forecast for Europe. The primary reason behind the revision is the unexpected behavior of the smartphone market. During the economic slowdown, smartphone shipments recorded modest growth worldwide which was less than our expectations prior to the crisis. The worldwide market recovered well in 2010. But with more intense market competition and the urge to tap the developing markets of Asia Pacific and Rest of World, smartphone shipments increased beyond expectations in these two regions. North America also showed better growth while Europe recorded mediocre growth owing to its high mobile penetration, which is reaching saturation in the major markets. The figure below shows the regional y-o-y growth of smartphone shipments in 2009 and 2010. Smartphone Shipments y-o-y Growth (In Percent) Figure 22: Smartphone Shipments Y-o-Y Growth by Region (In Percent, 2009 & 2010) 150 121.2 120 90 74.6 72.4 63.1 60 30 24.7 13.6 12.8 11.9 0 Europe Asia Pacific North America ROW Region 2009 2010 Source: Portio Research Ltd. With the growing smartphone penetration, the consumer segment will become even more active in the mobile applications domain and consumer demand for mobile applications is expected to rise in the coming years. Also, the adoption of advanced networks such as 3G, LTE and WiMAX, along with investments being made by operators in infrastructure, led us to scale up our forecasts for worldwide and regional app users and app downloads – except for Europe. The following table highlights the comparison between our new and old forecasts for regional mobile application user bases during 2010-2015. © 2011, Portio Research. All Rights Reserved 35 But with more intense market competition and the urge to tap the developing markets of Asia Pacific and Rest of World, smartphone shipments increased beyond expectations in these two regions.
  36. 36. Disruptive Mobile Applications and Services 2011-2015 Table 6: Comparison of New and Old Forecasts – Mobile Applications User Base (In Million, 11 2010 – 2015F) Mobile Applications User Base (In Million) Region 2010 2011F 2012F 2013F 2014F 2015F New 20.5 29.5 41.5 54.6 68.4 85.4 Old 20.0 30.6 45.5 61.4 77.6 93.6 New 22.1 36.1 56.9 86.5 123.1 164.7 Old 17.6 24.3 32.1 41.6 51.7 61.9 New 26.6 46.6 65.7 80.5 96.2 112.0 Old 28.7 41.1 52.1 61.9 68.9 76.0 New 4.7 9.9 18.7 32.3 52.9 76.9 Old 2.8 4.4 6.6 10.0 15.7 24.4 New 73.9 122.1 182.8 253.9 340.7 438.9 Old 69.1 100.4 136.3 174.9 213.9 255.9 Europe Asia Pacific North America Rest of World Worldwide Source: Portio Research Ltd. “Old” refers to forecasts published in the Portio Research report, Mobile Applications Futures 2010-2015. The change in forecasts for mobile app users naturally led to the evolution of our application download forecasts. However, changes here are also accounted for by booming mobile applications usage worldwide – bolstered by the wide range of available applications and supporting network deployments. The table on the next page highlights the comparison between our new and old forecasts for regional mobile application downloads during 2010-2015. 11 Note: Sum of regional numbers may not equal total due to rounding off errors. 36 © 2011, Portio Research. All Rights Reserved
  37. 37. Disruptive Mobile Applications and Services 2011-2015 Table 7: Comparison of New and Old Forecasts – Mobile Application Downloads (In Million, 12 2010 – 2015F) Mobile Application Downloads (In Million) Region 2010 2011F 2012F 2013F 2014F 2015F New 2,896 4,814 7,181 10,225 13,876 18,304 Old 1,593 2,326 3,280 4,476 6,328 8,460 New 2,627 4,832 8,166 13,376 20,805 30,689 Old 1,989 3,406 5,381 7,938 10,944 14,233 New 4,200 7,798 12,516 17,066 21,553 26,491 Old 3,033 4,918 6,523 8,393 10,209 11,931 New 344 970 2,239 4,652 8,620 13,890 Old 118 476 1,143 1,751 2,134 2,991 New 10,067 18,413 30,103 45,318 64,854 89,373 Old 6,733 11,125 16,327 22,557 29,616 37,615 Europe Asia Pacific North America Rest of World Worldwide Source: Portio Research Ltd. “Old” refers to forecasts published in the Portio Research report, Mobile Applications Futures 2010-2015. 12 Note: Sum of regional numbers may not equal total due to rounding off errors. © 2011, Portio Research. All Rights Reserved 37
  38. 38. Disruptive Mobile Applications and Services 2011-2015 Chapter 5 Value Chain 38 © 2011, Portio Research. All Rights Reserved
  39. 39. Disruptive Mobile Applications and Services 2011-2015 Value Chain The mobile applications ecosystem comprises platform developers, application developers, aggregators, mobile operators, smartphone vendors and application store owners. The following figure explains the generic value chain of the mobile applications market. Figure 23: Basic Value Chain of the Mobile Applications Market Applications OEM Platform Providers Application Developers Aggregators App Stores Consumers Revenue Flow Source: Portio Research Ltd. The value chain consists of the following stakeholders: • • • OEM Platform Providers – They provide the development platform and programming environment to the application developers. OEM Platform Providers do not get any direct revenue share from application sales, but their arrangement with developers helps them build a large application base. Developers are also benefitted from this arrangement as they gain direct access to the OEM’s customer base. OEM Platform Providers can be categorised into the following two segments:  Hardware and Software Services – Companies such as Apple, Microsoft and Google provide developers with hardware and software services.  Smartphone Vendors – Companies such as Sony Ericsson, Samsung and Nokia provide developers with programmatic access to device assets. Application Developers – These individuals or companies develop applications for multiple operating systems, platforms and devices across different application categories. Developers receive up to 70 percent of the revenues from application sales (net amount after the deduction of taxes and billing charges) depending upon their agreement with application store owners. Aggregators – They offer a common platform to both developers and users to respectively upload and download mobile apps that are compatible with different devices. They also simplify users’ search for apps by limiting their need to contact different application stores and mobile operators. They further facilitate billing mechanisms for smartphone vendors and application store owners, and provide payment solutions to users to purchase mobile content and apps. Aggregators act as a channel between mobile operators and developers; in case operators do not wish to © 2011, Portio Research. All Rights Reserved 39 Developers receive up to 70 percent of the revenues from application sales (net amount after the deduction of taxes and billing charges) depending upon their agreement with application store owners.
  40. 40. Disruptive Mobile Applications and Services 2011-2015 • 40 invest their time in managing the content or the application developers. Popular mobile aggregators are GetJar, Handmark and Appia. Application Stores – These are online or mobile marketplaces for end consumers to purchase mobile applications. Users can check the applications available in the store, demo these apps on their mobile phones, and download them for free or by paying a certain fee. The three types of app stores are mentioned below:  Device/OS-centric Stores – These app stores are built by device and operating system (OS) vendors, and offer applications which can only run on their respective devices. OS vendor stores include Apple’s App Store, Google’s Android Market, Symbian Horizon, and RIM’s BlackBerry App World; and device vendor stores include Nokia’s Ovi Store, Samsung’s Samsung Apps and Sony Ericsson’s PlayNow Arena. The device/OS vendor stores partner with developers for developing applications for their specific devices. These stores provide direct payment options to users and allow them to pay with credit cards when downloading paid applications. Revenues from application sales are shared between developers and store owners in the ratio of 70:30 respectively (as in the case of Apple’s App Store). Device/OS vendor stores, except for Apple, also provide an option of payment via operator billing. In this case, MNOs receive a share of 30-40 percent from app sales, which in turn reduces the developer’s share.  Operator Stores – MNOs including Vodafone (Vodafone 360), O2 (O2 Litmus) and Orange (Orange App Store) have entered the apps market to offer a complete package of services and build stronger relationships with their customers, and therefore avoid becoming ‘dumb pipes’. MNOs partner with application developers for application development. As operators have direct relationships with mobile customers, it allows them to offer personalised services to a large customer base.  Third–Party/White Label Stores – These are stores operated by third-party providers such as GetJar, Appia, Handmark and Mobango. They are crossplatform application stores and offer apps to users across a wide range of devices and operating systems. White label stores do not own the hosted applications and are operated by a third-party under the client’s brand name. For example, Sprint has outsourced designing, hosting and operational services of their application store to third-party store ‘Handmark’. © 2011, Portio Research. All Rights Reserved
  41. 41. Disruptive Mobile Applications and Services 2011-2015 Chapter 6 Popular Mobile Application Stores © 2011, Portio Research. All Rights Reserved 41
  42. 42. Disruptive Mobile Applications and Services 2011-2015 Popular Mobile Application Stores Application stores are the primary channel to access and download mobile applications. Application stores are classified on the basis of who owns the store (in the value chain), and the different types of app stores are mentioned below: Types of Application Stores • Stores by OS vendors: Google Android Market, Microsoft Windows Phone 7 Marketplace, Symbian Horizon, etc. Stores by handset manufacturers: Apple App Store, BlackBerry App World, Nokia Ovi Store, etc. Stores by MNOs: China Mobile, Vodafone 360, O2 Litmus, Orange App Shop, etc. Third-party app stores: GetJar, Appia, Mobango, Handmark etc. • • • Break-out Between Free and Paid Applications While paid applications have been the primary source of revenue for app stores, free applications have helped stores in attracting users. In some cases, developers make a trial or lite version of an app (with less features than the full version) that is offered free of charge. However, the full version of the application is made available for download through a one-time payment or through a micropayment feature provided inside the app – also known as an in-app payment. The figure below provides the break-out of mobile applications available worldwide – from some of the leading app stores owned by smartphone vendors and OS providers – by free and paid applications. Figure 24: Break-out of Available Mobile Applications by Free and Paid Application Type – Worldwide (In Percent, June 2011) Mobile Applications Break-out (In Percent) 100% 37.5% 80% 52.8% 61.5% 75.8% 60% 40% 62.5% 20% 47.2% 38.5% 24.2% 0% Apple App Store Google Android Market BlackBerry App World Windows Phone 7 Marketplace Mobile Application Stores Free Applications Paid Applications Source: 148apps Metrics, AndroLib 42 © 2011, Portio Research. All Rights Reserved While paid applications have been the primary source of revenue for app stores, free applications have helped stores in attracting users.
  43. 43. Disruptive Mobile Applications and Services 2011-2015 Apple App Store Apple launched its ‘App Store’ in July 2008. Highlights • • • • Number of Active Applications: 425,000+ (June 2011) Free and Paid Applications, Worldwide: 38.5% Free, 61.5% Paid (June 2011) Average Price for Paid Applications for iPhone: USD 3.66 (June 2011) Number of Active Developers: 91,350 (June 2011) User Base – 200 million iOS devices (including iPhone, iPod Touch and iPad users, end-May 2011) Application Downloads – 15 billion (early-July 2011) Applications are available under five major types – Games, Books, Entertainment, Education and Lifestyle. The applications such as travel, utilities, music, sports, business, news, productivity, healthcare and navigation are included under ‘Others’. Figure 25: Break–out of Available Applications by Type – Apple App Store (Worldwide, In Percent, June 2011) 7.6% 8.9% 10.8% 44.2% 13.5% 15.0% Games Books Entertainment Education Lifestyle Others Source: 148Apps, Portio Research Ltd. © 2011, Portio Research. All Rights Reserved 43
  44. 44. Disruptive Mobile Applications and Services 2011-2015 Figure 26: Apple App Store – Quarterly App Additions (In Thousands) 69.6 Quarterly App Addtions (In Thousands) 70 63.4 60 59.5 Q2 2010 Q3 2010 61.8 60.1 61.0 Q1 2011 Q2 2011 51.5 50 40 34.8 27.4 30 17.5 20 9.5 10 4.7 0 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q4 2010 Period Source: Apple, Portio Research Ltd. Table 8: Rank Most Popular Paid and Free Applications, Apple App Store (The US, April 2011) Paid Applications – Apple iPhone Free Applications – Apple iPhone 1 Angry Birds Rio (Games; Price: USD 0.99) Angry Birds Rio (Games) 2 Angry Birds (Games; Price: USD 0.99) Pickin’ Stix Classic (Games) 3 Tiny Wings (Games; Price: USD 0.99) Stupidness 2 (Games) 4 Air Penguin (Games; Price: USD 0.99) Facebook (Social Networking) 5 Fruit Ninja (Games; Price: USD 0.99) Words with Friends (Games) Source: Distimo, May 2011 44 © 2011, Portio Research. All Rights Reserved
  45. 45. Disruptive Mobile Applications and Services 2011-2015 Google Android Market Google launched its mobile application store ‘Android Market’ in October 2008, and the store now has commercial operations in 131 countries (as of end-June 2011). Android Market offers the highest percentage of free applications, with 62.5 percent available as free downloads worldwide; the store relies on advertisements for revenue generation. Google, unlike Apple, gives users flexibility to download Android apps from any other source, such as developers’ websites. Highlights • • • • Number of Active Applications: 273,000+ (June 2011) Free and Paid Applications, Worldwide: 62.5% Free, 37.5% Paid (June 2011) Average Price for Paid Applications: USD 3.23 (May 2011) Number of Active Developers: 16,000 (May 2011) User Base – 100 million active Android devices (May 2011) Application Downloads – 4.5 billion+ (May 2011) Google Android smartphones have a pre-installed application, named 'Market, which allows users to access the entire collection of Android applications via their smartphones. Revenue from apps is shared between the developer and Google in the ratio 70:30 respectively. Popular types of applications are games, multimedia, barcode scanners, location-based tools and travel guides. Figure 27: Break–out of Available Applications between Games and Non-Games – Google Android Market (Worldwide, In Percent, June 2011) 84.0% 16.0% Games Other Applications Source: AndroLib, Portio Research Ltd. © 2011, Portio Research. All Rights Reserved 45 Android Market offers the highest percentage of free applications, with 62.5 percent available as free downloads worldwide; the store relies on advertisements for revenue generation.

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