Mobile Applications Futures 2010-2015

© 2010, Portio Research. All Rights Reserved

1
Mobile Applications Futures 2010-2015

Portio Research Limited.
Published October 2010 by Portio Research Limited © Copyri...
Mobile Applications Futures 2010-2015

Contents
Introduction ................................................................
Mobile Applications Futures 2010-2015

Case Study: Vodafone 360 (Europe) ....................................................
Mobile Applications Futures 2010-2015

List of Figures
Figure 1:
Figure 2:
Figure 3:
Figure 4:
Figure 5:
Figure 6:
Figure ...
Mobile Applications Futures 2010-2015

Figure 42:
Figure 43:
Figure 44:
Figure 45:
Figure 46:
Figure 47:
Figure 48:
Figure...
Mobile Applications Futures 2010-2015

List of Tables
Table 1:
Table 2:
Table 3:
Table 4:
Table 5:
Table 6:
Table 7:
Table...
Mobile Applications Futures 2010-2015

Chapter 1
Introduction

8

© 2010, Portio Research. All Rights Reserved
Mobile Applications Futures 2010-2015

Introduction
Mobile phones today not only provide seamless connectivity and communi...
Mobile Applications Futures 2010-2015

new applications and services, which in turn help them to differentiate their offer...
Mobile Applications Futures 2010-2015

Chapter 2
Worldwide Mobile Market

© 2010, Portio Research. All Rights Reserved

11
Mobile Applications Futures 2010-2015

Worldwide Mobile Market
Worldwide
Our new subscriber forecasts reveal that the worl...
Mobile Applications Futures 2010-2015

The percentage contribution of the Asia Pacific and AME regions to the worldwide
su...
Mobile Applications Futures 2010-2015

The figure given below depicts the top-10 countries by mobile subscriber additions ...
Mobile Applications Futures 2010-2015

Chapter 3
Mobile Applications Market

© 2010, Portio Research. All Rights Reserved
...
Mobile Applications Futures 2010-2015

Mobile Applications Market
Mobile applications are functionalities provided to user...
Mobile Applications Futures 2010-2015

Evolution of Mobile Applications Market
The mobile applications market has evolved ...
Mobile Applications Futures 2010-2015

providing options for operator billing for in-app purchases, which simplifies app p...
Mobile Applications Futures 2010-2015

model will be more popular in Asia Pacific, along with ‘freemium’ applications (tri...
Mobile Applications Futures 2010-2015

to go (BlackBerry, Apple, Windows and Symbian Mobiles), eOffice (BlackBerry),
Micro...
Mobile Applications Futures 2010-2015

Comparing the Popularity and Potential of Different Application Types
The figure be...
Mobile Applications Futures 2010-2015

Proportion of Gaming Applications
(In Percent)

Figure 9: Break-out of Available Ap...
Mobile Applications Futures 2010-2015

Opportunities for Stakeholders
The mobile applications market is highly fragmented,...
Mobile Applications Futures 2010-2015

Application Stores
The phenomenal success of Apple’s App store – recording 6.5 bill...
Mobile Applications Futures 2010-2015

Apple also changed the game for developers with a simple, yet powerful distribution...
Mobile Applications Futures 2010-2015

Popular Mobile Application Stores
Application stores are the primary channel to acc...
Mobile Applications Futures 2010-2015

Apple App Store
Apple launched its ‘App Store’ in July 2008.
Highlights
•
•
•
•
•

...
Mobile Applications Futures 2010-2015

Google Android Market
Google launched its mobile application store ‘Android Market’...
Mobile Applications Futures 2010-2015

BlackBerry App World
Research In Motion launched its ‘BlackBerry App World’ store i...
Mobile Applications Futures 2010-2015

Nokia Ovi Store
Nokia launched its mobile application store ‘Ovi Store’ in May 2009...
Mobile Applications Futures 2010-2015

Windows Marketplace
Microsoft launched its mobile application store ‘Windows Market...
Mobile Applications Futures 2010-2015

Comparison of Application Stores
The following table provides a comparison summary ...
Mobile Applications Futures 2010-2015

Chapter 4
Market Size

© 2010, Portio Research. All Rights Reserved

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Mobile Applications Futures 2010-2015

Market Size
Forecast Methodology
Mobile applications are software programs that run...
Mobile Applications Futures 2010-2015

connects an application to an operator/vendor billing system for processing payment...
Mobile Applications Futures 2010-2015

The table below highlights the growth in the number of regional mobile applications...
Mobile Applications Futures 2010-2015

The figure below highlights the regional share in the worldwide mobile applications...
Mobile Applications Futures 2010-2015

In 2009, in terms of mobile application users as a percentage of the total regional...
Mobile Applications Futures 2010-2015

Table 10: Mobile Application Downloads – Regional (In Million, 2009 – 2015F) 20
Mob...
Mobile Applications Futures 2010-2015

Figure 24: Mobile Applications Revenue – Worldwide (In USD Billion, End 2009 – End ...
Mobile Applications Futures 2010-2015

The table below highlights the growth of regional mobile applications sales and
adv...
Mobile Applications Futures 2010 2015. Portio Research Ltd
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Mobile Applications Futures 2010 2015. Portio Research Ltd

  1. 1. Mobile Applications Futures 2010-2015 © 2010, Portio Research. All Rights Reserved 1
  2. 2. Mobile Applications Futures 2010-2015 Portio Research Limited. Published October 2010 by Portio Research Limited © Copyright 2010. 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 © 2010, Portio Research. All Rights Reserved
  3. 3. Mobile Applications Futures 2010-2015 Contents Introduction ..............................................................................................................................9 Worldwide Mobile Market ......................................................................................................12 Worldwide .......................................................................................................................................... 12 Mobile Applications Market...................................................................................................16 Growth of Mobile Applications Business ............................................................................................ 16 Evolution of Mobile Applications Market .......................................................................................... 17 Monetising the Mobile Applications Business .................................................................................. 17 Changing Market Dynamics ............................................................................................................ 18 Types of Mobile Applications ............................................................................................................. 19 Comparing the Popularity and Potential of Different Application Types ............................................. 21 Opportunities for Stakeholders .......................................................................................................... 23 Advertisers ...................................................................................................................................... 23 Owners – Smartphone Vendors and MNOs .................................................................................... 23 Developers ...................................................................................................................................... 23 Application Stores ........................................................................................................................... 24 Role of Handsets in the Uptake of Mobile Applications ...................................................................... 24 iPhone and the Growth of Mobile Applications ................................................................................ 24 Popular Mobile Application Stores ..................................................................................................... 26 Types of Application Stores ............................................................................................................. 26 Apple App Store .............................................................................................................................. 27 Google Android Market ................................................................................................................... 28 BlackBerry App World ..................................................................................................................... 29 Nokia Ovi Store ............................................................................................................................... 30 Windows Marketplace ..................................................................................................................... 31 Comparison of Application Stores ................................................................................................... 32 Market Size..............................................................................................................................34 Forecast Methodology ....................................................................................................................... 34 Market Size ........................................................................................................................................ 35 Mobile Application User Base ......................................................................................................... 35 Mobile Application Downloads ........................................................................................................ 38 Mobile Application Revenues – Application Sales, Advertisements and In-app Payments ............. 39 Regional Trends .....................................................................................................................46 Drivers and Inhibitors ......................................................................................................................... 47 Drivers ............................................................................................................................................. 47 Inhibitors.......................................................................................................................................... 48 Profiles of the US and UK Markets .................................................................................................... 50 Criteria for Selecting these Markets ................................................................................................ 50 The US ............................................................................................................................................ 51 The UK ............................................................................................................................................ 53 Value Chain .............................................................................................................................57 Business Models ....................................................................................................................60 App-centric Model .............................................................................................................................. 61 SWOT Analysis – App-centric Model .............................................................................................. 62 Operator-centric Model ...................................................................................................................... 63 SWOT Analysis – Operator-centric Business Model ....................................................................... 65 Blend of App-centric and Operator-centric Business Models ............................................................. 65 SWOT Analysis – Blend of App-centric and Operator-centric Business Models ............................. 66 Case Studies – Application Stores .......................................................................................68 Mobile Application Stores: Worldwide ................................................................................................ 68 Case Study: Apple App Store (North America) .................................................................................. 72 Business Model ............................................................................................................................... 72 Pricing ............................................................................................................................................. 72 Popular Mobile Applications ............................................................................................................ 72 Success Factors .............................................................................................................................. 73 Challenges ...................................................................................................................................... 73 Recent Developments ..................................................................................................................... 74 © 2010, Portio Research. All Rights Reserved 3
  4. 4. Mobile Applications Futures 2010-2015 Case Study: Vodafone 360 (Europe) ................................................................................................. 75 Business Model ............................................................................................................................... 75 Pricing ............................................................................................................................................. 75 Popular Applications........................................................................................................................ 75 Success Factors .............................................................................................................................. 76 Challenges ...................................................................................................................................... 76 Recent Developments ..................................................................................................................... 77 Case Study: China Mobile’s Mobile Market (Asia Pacific) .................................................................. 78 Business Model ............................................................................................................................... 78 Popular Mobile Applications ............................................................................................................ 78 Success Factors .............................................................................................................................. 79 Challenges ...................................................................................................................................... 79 Recent Developments ..................................................................................................................... 79 Case Studies – Popular Applications ..................................................................................81 Facebook ........................................................................................................................................... 81 Facebook Milestones ...................................................................................................................... 82 Features of Facebook ..................................................................................................................... 83 Pricing ............................................................................................................................................. 84 User Base ....................................................................................................................................... 84 Success Factors .............................................................................................................................. 84 Scope/Type of Advertisements ....................................................................................................... 85 Recent Developments ..................................................................................................................... 85 Pandora ............................................................................................................................................. 86 Pandora Milestones......................................................................................................................... 87 Features of Pandora........................................................................................................................ 88 Pricing ............................................................................................................................................. 89 User Base ....................................................................................................................................... 89 Success Factors .............................................................................................................................. 90 Scope of Advertisements ................................................................................................................ 90 Recent Developments ..................................................................................................................... 90 Future Outlook........................................................................................................................92 Current Growth Phase ....................................................................................................................... 92 Emerging Trends in the Enterprise Segment .................................................................................. 93 The Road Ahead ................................................................................................................................ 93 Disruptive Technologies ..................................................................................................................... 95 Augmented Reality .......................................................................................................................... 95 Cloud Computing ............................................................................................................................ 95 Future of Mobile Application Stores and Business Models ................................................................ 95 Conclusion ..............................................................................................................................98 Current Scenario ................................................................................................................................ 98 Incentives for stakeholders in the Mobile Applications market ........................................................ 99 Market Response ............................................................................................................................... 99 Market Diversification – A Move to Alternate Devices...................................................................... 100 Appendices ...........................................................................................................................102 Glossary ........................................................................................................................................ 103 Portio Research Classifications ..................................................................................................... 115 Companies Mentioned in this Report ............................................................................................ 116 About the Authors.......................................................................................................................... 120 Also available from Portio Research Limited ................................................................................... 121 4 © 2010, Portio Research. All Rights Reserved
  5. 5. Mobile Applications Futures 2010-2015 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: Smartphone User Base – Worldwide (In Millions, 2009 – 2015F) ....................................... 9 Mobile Subscribers — Worldwide (In Million, End 2009 – End 2015F) ............................. 12 Worldwide Mobile Subscriber Base — Regional Contribution (2009) ................................ 13 Worldwide Mobile Subscriber Base — Regional Contribution (2015F) ............................. 13 Top 10 Countries by Mobile Subscriber Additions — Worldwide (In Million, End 2009 – End 2015F) ....................................................................................................................... 14 Top 10 Countries by CAGR of Mobile Subscriber Base — Worldwide (In Percent, End 2009 – End 2015F) ........................................................................................................... 14 Mobile Applications with In-app Payment Features in the US – Apple iPhone (In Percent, June 2010) ........................................................................................................................ 18 Most Popular Paid Content – The US (June 2010) ........................................................... 21 Break-out of Available Applications at Application Stores by Games and Non-Games (Worldwide, August 2010) ................................................................................................ 22 Break-out of Mobile Applications Revenue (Excluding In-app Payments) by Application Stores (In Percent, 2010F)................................................................................................ 24 Apple’s App Store – Total Application Downloads............................................................. 25 Break-out of Available Mobile Applications by Free and Paid Application Type – The US (In Percent, July 2010) ...................................................................................................... 26 Break–out of Available Applications by Type – Apple App Store (In Percent, August 2010) .......................................................................................................................................... 27 Break–out of Available Applications between Games and Non-Games – Google Android Market (In Percent, August 2010) ..................................................................................... 28 Break–out of Available Applications by Type – BlackBerry App World (In Percent, August 2010) ................................................................................................................................ 29 Break–out of Available Applications by Type – Nokia Ovi Store (In Percent, July 2010) ... 30 Break-out of Available Applications by Type – Windows Marketplace (In Percent, EndAugust 2010) .................................................................................................................... 31 Mobile Applications User Base – Worldwide (In Million, 2009 – 2015F) ............................ 35 Worldwide Mobile Application Users – Regional Contribution (In Percent, 2009) ............. 36 Worldwide Mobile Application Users – Regional Contribution (In Percent, 2015F) ......... 37 Mobile Applications User Base Growth by Region (In Percent, 2009 – 2015F) ................ 37 Mobile Applications Users as a Percentage of Total Regional Mobile Subscribers – Regional (In Percent, 2009 and 2015F) ............................................................................ 38 Mobile Application Downloads – Worldwide (In Billion, 2009 – 2015F) ............................. 38 Mobile Applications Revenue – Worldwide (In USD Billion, End 2009 – End 2014F) ....... 40 Mobile Applications Sales and Advertisement Revenues – Worldwide (In USD Billion, 2009 – 2015F) ........................................................................................................................... 40 Worldwide Mobile Applications Sales and Advertisement Revenues – Regional Contribution (In Percent, 2009) ......................................................................................... 41 Worldwide Mobile Applications Sales and Advertisement Revenues – Regional Contribution (In Percent, 2015F)....................................................................................... 42 Growth of Mobile Applications Sales and Advertisement Revenues by Region (In Percent, 2009 – 2015F) .................................................................................................................. 42 In-app Payment Revenues – Worldwide (In USD Billion, 2009 – 2015F) .......................... 43 Break-out of In-app Payment Revenues by Type – Worldwide (In Percent, 2009)............ 43 Break-out of In-app Payment Revenues by Type – Worldwide (In Percent, 2015F) ......... 44 Drivers of Mobile Applications ........................................................................................... 47 Inhibitors of Mobile Applications ........................................................................................ 48 Mobile Application Downloads – Top 3 Countries (In Million, 2009) .................................. 50 Basic Value Chain of the Mobile Applications Market ....................................................... 57 App-centric Business Model .............................................................................................. 61 SWOT Analysis – App-centric Business Model ................................................................. 62 Operator-centric Business Model ...................................................................................... 63 Revenue Sharing in the Case of Third-party Stores Using Operator Billing ...................... 64 SWOT Analysis – Operator-centric Business Model ......................................................... 65 Blend of App-centric and Operator-centric Business Models ............................................ 66 © 2010, Portio Research. All Rights Reserved 5
  6. 6. Mobile Applications Futures 2010-2015 Figure 42: Figure 43: Figure 44: Figure 45: Figure 46: Figure 47: Figure 48: Figure 49: Figure 50: Figure 51: SWOT Analysis – Blend of App-centric and Operator-centric Business Models ............... 66 Mobile Application Stores Split – By Ownership Category (In Percent, July 2010) ........... 68 Facebook Milestones ........................................................................................................ 82 Features of Facebook for Mobile Users ............................................................................ 83 Facebook – Mobile User Base .......................................................................................... 84 Pandora Milestones ........................................................................................................... 87 Features of Pandora for Mobile Users ............................................................................... 88 Pandora – Mobile User Base............................................................................................. 89 Mobile Application Downloads and Revenue – Worldwide (2009 – 2015F) ..................... 92 Growth in Mobile Applications Available at Apple’s App Store and Google’s Android Market – Worldwide (In ‘000s, August 2009 – July 2010) ............................................................. 93 Figure 52: Mobile Application Users as a Percentage of Mobile Subscriber Base – Worldwide (In Percent, 2009 – 2015F) .................................................................................................... 94 Figure 53: Incentives for the different stakeholders ............................................................................ 99 Figure 54: Growth in the Number of Mobile Applications Stores (December 2009 – July 2010) ...... 100 6 © 2010, Portio Research. All Rights Reserved
  7. 7. Mobile Applications Futures 2010-2015 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: Table 31: Table 32: Mobile Subscribers — Worldwide (In Million, End 2009 – End 2015F) ............................. 12 Types of Applications Prevalent in the Mobile Applications Market ................................... 19 Most Popular Paid and Free Applications, Apple App Store (The US, July 2010) ............. 27 Most Popular Paid and Free Applications, Google Android Market (The US, July 2010) .. 28 Most Popular Paid and Free Applications, BlackBerry App World (US, July 2010) ........... 29 Most Popular Paid and Free Applications, Nokia Ovi Store (The US, July 2010) .............. 30 Most Popular Paid and Free Applications, Windows Marketplace (The US, July 2010) .... 31 Comparison of Application Stores ..................................................................................... 32 Mobile Applications User Base – Regional (In Million, 2009 – 2015F) .............................. 36 Mobile Application Downloads – Regional (In Million, 2009 – 2015F) ............................... 39 Mobile Applications Sales and Advertisement Revenues – Regional (In Billion, 2009 – 2015F) .............................................................................................................................. 41 Smartphone Users – Regional (In Million, 2009 – 2015F) ................................................. 46 Regional Drivers – An Overview........................................................................................ 49 Most Popular Paid and Free Applications – Apple App Store (The US, July 2010) ........... 51 Most Popular Paid and Free Applications – Google Android Market (The US, July 2010) 52 Most Popular Paid and Free Applications – BlackBerry App World (The US, July 2010) .. 52 Most Popular Paid and Free Applications – Windows Marketplace (The US, July 2010) .. 53 Most Popular Paid and Free Applications – Apple App Store (The UK, August 2009) ...... 53 Most Popular Paid and Free Applications – Google Android Market (The UK, August 2009) .......................................................................................................................................... 54 Most Popular Paid and Free Applications – Symbian Horizon (Worldwide, July 2010) ..... 54 Most Popular Applications Paid and Free – Vodafone 360 (The UK, July 2010)............... 55 Mobile App Stores – By OS Vendors, By MNOs, By Smartphone Vendors (Worldwide, July 2010) ................................................................................................................................ 69 Mobile App Stores by Third-Party Vendors (Worldwide, July 2010) .................................. 70 Top 10 Mobile App Stores by Total Downloads (Worldwide, June 2010) .......................... 70 Significant App Stores – Regional (June 2010) ................................................................. 71 Most Popular Paid and Free Applications – Apple App Store (North America, February 2010) ................................................................................................................................ 73 Most Popular Applications, Vodafone 360 (Europe, September 2009 to March 2010) ...... 76 Most Popular Paid and Free Applications – China Mobile’s Mobile Market (China, July 2010) ................................................................................................................................ 79 Success Factors – Facebook Mobile Application .............................................................. 84 Success Factors – Pandora Mobile Application ................................................................ 90 Mobile Application Users as a Percentage of Regional Mobile Subscriber Base – Regional (In Percent, 2009 – 2014F) ............................................................................................... 94 Total Mobile Application Downloads for Major Application Stores (In Million, End-June 2010) ................................................................................................................................ 98 © 2010, Portio Research. All Rights Reserved 7
  8. 8. Mobile Applications Futures 2010-2015 Chapter 1 Introduction 8 © 2010, Portio Research. All Rights Reserved
  9. 9. Mobile Applications Futures 2010-2015 Introduction Mobile phones today not only provide seamless connectivity and communication, but are also an essential source of information, entertainment and productivity, and often enable users to perform tasks which could previously only be completed on desktops and laptops. All new interactive features and services, such as Internet connectivity, social networking, blogs and discussion forums, gaming, music, news, navigation and location-based services, are all available to users on their mobile devices. The mobile market is growing at an exponential rate, and even witnessed an increase in the mobile subscriber base during the recent economic downturn. Promising prospects and huge potential have encouraged market players to innovate and develop advanced mobile services and applications. Mobile handset vendors, mobile network operators (MNOs) and other key stakeholders are all collaborating together to develop new devices and services to retain subscriber interest. Handset vendors are constantly trying to offer new handsets and features to be able to differentiate their portfolio, and this competition is especially intense in the smartphone arena. Smartphones – with large screen sizes and high resolution, along with advanced computing capabilities and abundant memory – allow users to download, install and run advanced applications. Moreover, the availability of high-end applications over high-speed Internet has propelled the growth of smartphones. The worldwide smartphone user base is forecast to grow at a Compound Annual Growth Rate (CAGR) of 25.3 percent between 2009 and 2015. The worldwide smartphone user base is forecast to grow at a CAGR of 25.3 percent between 2009 and 2015. Figure 1: Smartphone User Base – Worldwide (In Millions, 2009 – 2015F) 1,170.6 Smartphone User Base (In Million) 1,200 1,010.0 1,000 853.6 800 705.0 561.7 600 436.0 400 302.4 200 0 2009 2010F 2011F 2012F 2013F 2014F 2015F Year Source: Portio Research Ltd. F – Forecasted The adoption of smartphones is a key driver for the growth of mobile applications. The success of mobile applications is largely derived from the huge success of Apple’s iPhone and the massive number of apps downloaded by iPhone users in the last two years. In addition, the availability of high-speed data networks and operators’ efforts to increase mobile broadband penetration are further fuelling growth in the mobile applications market. The increasing potential in the applications market has encouraged new and established players, including smartphone vendors, MNOs and software developers, to invest their time, effort and money in innovating applications and relevant content for users. These players are developing their own app stores or are partnering with third-party store owners to offer © 2010, Portio Research. All Rights Reserved 9
  10. 10. Mobile Applications Futures 2010-2015 new applications and services, which in turn help them to differentiate their offerings, increase customer loyalty and generate new revenue streams. Mobile Applications Market App store owners are taking proactive initiatives to stay ahead of the competition and cater to the varied needs of users. The following factors are among those that help create a successful app store: 1. 2. 3. 4. 5. Ease of use Variety of applications Pricing Payment options Handsets supported In addition, advertisements and in-app payment features have been identified as essential ingredients for driving the growth of mobile applications, and are expected to play a major role in penetrating the market and enhancing the growth prospects of mobile apps. App store owners are recognising that one route to success lies in integrating applications with the ad-world. In-app payments have impressive potential and have become a major contributor to total mobile application revenues. The ‘in-app payment’ feature allows app stores to implement a ‘freemium’ strategy to increase awareness of their offerings and attract a large user base. ‘Freemium’ applications are trial or lite versions of premium applications that are generally available for free, and the ‘freemium’ model allows app stores to couple their free products with premium value-added features such as digital assets and gaming goods. In 2009, games and social networking sites accounted for a major portion of in-app payment revenues. The measurable success of in-app payment functions in games and social networking sites has encouraged app stores to install in-app payment functions in other niche applications. Region-wise, the mobile applications market has witnessed strong growth in North America, because of its larger smartphone subscriber base, availability of advanced networks and high mobile broadband penetration. However, due to a steep increase in smartphone shipments and users, Europe is expected to outperform North America over the next five years and achieve the largest regional applications user base by end-2015. App store owners have now acknowledged the growth prospects in emerging markets, wherein there is an increasing demand for value-added services on-the-go, and rising popularity and availability of smartphone devices. App store owners need to devise innovative strategies, such as attractive pricing, multiple payment options and customised applications, to be able to succeed and benefit from the growing demand in emerging markets. 10 © 2010, Portio Research. All Rights Reserved Europe is expected to outperform North America over the next five years and achieve the largest regional applications user base by end2015.
  11. 11. Mobile Applications Futures 2010-2015 Chapter 2 Worldwide Mobile Market © 2010, Portio Research. All Rights Reserved 11
  12. 12. Mobile Applications Futures 2010-2015 Worldwide Mobile Market Worldwide Our new subscriber forecasts reveal that the worldwide mobile subscriber base is projected to grow at a CAGR of 7.9 percent between 2009 and 2015, and is expected to reach nearly 7.4 billion by end-2015. Asia Pacific and Africa and Middle East (AME) will outpace other regions in subscriber growth between 2009 and 2015. Figure 2: Mobile Subscribers — Worldwide (In Million, End 2009 – End 2015F) Mobile Subscribers (In Million) 10,000 CAGR = 7.9% 8,000 6,000 4,655.8 5,254.6 5,787.1 6,262.5 2012F 7,037.9 2013F 7,351.5 2014F 6,675.1 2015F 4,000 2,000 0 2009 2010F 2011F Year Source: Portio Research Ltd. F – Forecasted Table 1: Mobile Subscribers — Worldwide (In Million, End 2009 – End 2015F) 1 Mobile Subscribers (In Million) 2009 2010F 2011F 2012F 2013F 2014F 2015F CAGR (In Percent, 2009-2015) Western Europe 499.9 518.3 530.5 540.7 549.3 556.6 562.8 2.0 Eastern Europe 538.4 560.3 584.6 600.5 613.0 622.8 630.3 2.7 Asia Pacific 2,132.1 2,521.2 2,856.5 3,156.4 3,416.5 3,643.9 3,838.1 10.3 North America 313.5 334.6 352.1 368.0 382.2 395.0 406.3 4.4 Latin America 494.0 534.8 574.4 608.1 637.9 663.9 686.5 5.6 Africa and Middle East 677.9 785.4 889.0 988.8 1,076.1 1,155.7 1,227.5 10.4 Total 4,655.8 5,254.6 5,787.1 6,262.5 6,675.1 7,037.9 7,351.5 7.9 Region Source: Portio Research Ltd. 1 Note: The total number may not add up to the sum of regional numbers because of rounding off errors. 12 © 2010, Portio Research. All Rights Reserved Asia Pacific and Africa and Middle East (AME) will outpace other regions in subscriber growth between 2009 and 2015.
  13. 13. Mobile Applications Futures 2010-2015 The percentage contribution of the Asia Pacific and AME regions to the worldwide subscriber base is expected to increase over 2009-2015, at the expense of the remaining regions that will see declines during the same period. 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 3: Worldwide Mobile Subscriber Base — Regional Contribution (2009) 45.8% 6.7% 10.6% 14.6% 11.6% 10.7% Western Europe Eastern Europe Asia Pacific North America Latin America Africa and Middle East Source: Portio Research Ltd. Figure 4: Worldwide Mobile Subscriber Base — Regional Contribution (2015F) 2 5.5% 52.2% 9.3% 16.7% 8.6% 7.7% Western Europe Eastern Europe Asia Pacific North America Latin America Africa and Middle East Source: Portio Research Ltd. 2 Note: The total may not add up to 100 percent because of rounding off errors. © 2010, Portio Research. All Rights Reserved 13
  14. 14. Mobile Applications Futures 2010-2015 The figure given below depicts the top-10 countries by mobile subscriber additions between 2009 and 2015 worldwide. 900 833.3 750 600 402.4 450 71.6 63.3 54.0 The Philippines 85.4 Egypt 87.3 Bangladesh 104.0 Brazil 126.4 150 The US 300 49.9 Vietnam Nigeria Indonesia China 0 India Mobile Subscriber Additions (In Million) Figure 5: Top 10 Countries by Mobile Subscriber Additions — Worldwide (In Million, End 2009 – End 2015F) Country Source: Portio Research Ltd. F – Forecasted The figure given below depicts the top-10 countries by CAGRs of mobile subscriber base between 2009 and 2015 worldwide. Figure 6: Top 10 Countries by CAGR of Mobile Subscriber Base — Worldwide (In Percent, End 2009 – End 2015F) 3 21.3% 16.1% 15.4% 15.4% 13.1% 13.1% 12.9% 12% 11.5% 11.0% DR Congo 17.2% 18% Qatar CAGR (In Percent) 24% 6% Mozambique Egypt Lesotho Bangladesh Uganda Nigeria India Sudan 0% Country Source: Portio Research Ltd. F – Forecasted 3 Note: CAGRs were calculated to four decimal places with each country securing a distinct CAGR value. Due to rounding off to one decimal place, a few countries appear to have the same CAGR. 14 © 2010, Portio Research. All Rights Reserved
  15. 15. Mobile Applications Futures 2010-2015 Chapter 3 Mobile Applications Market © 2010, Portio Research. All Rights Reserved 15
  16. 16. Mobile Applications Futures 2010-2015 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 is 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 Marketplace), GetJar and 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 Symbian, BlackBerry, iPhone OS, Microsoft Windows Mobile, Android, Linux and WebOS. Some applications also require supporting platforms, such as Brew, Java and FlashLite. Content and applications add a dimension of multi–functionality to handsets and are being used by handset vendors as differentiating factors for their devices. Users’ demand to do more with their handsets has increased the attractiveness of the mobile applications market, and in turn has created opportunities for smartphone vendors, OS vendors and application developers, and has led to the market entry of many new players. The mobile applications market has become competitive and all stakeholders are fighting for a share in the market. Mobile applications are used by both the consumer and enterprise segments. The consumer segment selects applications from app stores and installs them on their handsets or smartphones, whereas – typically – enterprise users have applications selected and installed on their devices by the enterprise on their behalf. A wide variety of mobile applications are available in the market, offering different features and options, and the extent to which they require network connectivity depends on their functionalities. Some apps (such as browsers, chat clients, social networking sites, multi player games) require continuous network connectivity, while others (such as audio–video players, address book, dictionary, MS–office, image and graphics viewer) do not require any connectivity or only require intermittent network connectivity (such as e-mail clients and news reader apps). 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 over 95 percent 4 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. 4 Source: http://arstechnica.com/apple/news/2010/01/apple-responsible-for-994-of-mobile-app-sales-in-2009.ars 16 © 2010, Portio Research. All Rights Reserved 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.
  17. 17. Mobile Applications Futures 2010-2015 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 missing then, to achieve the same success as today, 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 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 are 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. Recent developments relating to the use of in-app payments as a means of monetising the mobile apps market include: • Fortumo, a mobile payment solutions provider, is offering Android developers its mobile payment Software Development Kit (SDK) covering 40 countries worldwide. Moreover, in June 2010, the firm announced its plans to cover 50 countries and to launch its services in Latin America and Africa by end-2010. The payment solution enables developers to charge users through operator billing. 5 • In June 2010, PayPal, an online payment enabler, introduced its Adaptive Payments service that permits users to make in-app payments with credit cards. This allows users to make direct online payments even if they do not have a PayPal account. 6 • In April 2010, PayPal announced the launch of PayPal solutions enabling in-app payments for iPhone and Android applications. In Q2 2010, PayPal launched in-app payment services in Australia, Canada, France, Italy, the Netherlands, the UK and the US. 7 • BOKU, a payment platform for Android phones, was launched in June 2009. The firm allows users to make payments through their operator accounts (charges included in operator billing). In June 2010, it launched BOKU Payments SDK which enables Android developers to offer in-app payment features through an in-app billing library. 8 As these developments attest, 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 5 Source: http://www.mobilecommercedaily.com/fortumo-rolls-out-in-app-payments-for-android-developers/ Source: http://www.digitaltransactions.net/newsstory.cfm?newsid=2568 7 Source: http://thenextweb.com/mobile/2010/04/24/paypal-offer-app-purchases-iphone-android/ 8 Source: http://www.rev2.org/2010/06/04/boku-launches-in-app-billing-for-android/ 6 © 2010, Portio Research. All Rights Reserved 17 In-app payments are expected to be a key tool for facilitating revenue generation in the mobile apps market.
  18. 18. Mobile Applications Futures 2010-2015 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). Apple is a front-runner in the adoption of in-app payment features in its mobile applications. The prominence of in-app payments in some of the key content categories for Apple’s App Store in the US is depicted in the figure below. Figure 7: Mobile Applications with In-app Payment Features in the US – Apple iPhone (In Percent, June 2010) Mobile Applications with In-app Payment Features (in Percent) 5% 4% 4% 4% 3% 3% 3% 2% 2% 1% 1% 0% Games Social Networking Navigation Productivity Music News/Weather Period Source: Apple, Portio Research Ltd. App stores are also 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. Changing Market Dynamics As noted earlier, the marketplace for mobile applications is highly fragmented. Mobile operators and platform providers are focusing on launching their own app stores, while there is intense competition among independent application developers and third-party aggregators. This is pushing down application prices making it commercially challenging for the applications ecosystem; however, the lower price of apps is helping to stimulate demand. Also, the industry is witnessing both consolidation and the formation of consortiums to better challenge Apple’s supremacy. In April 2009, Vodafone, China Mobile, SoftBank and Verizon Wireless established a Joint Innovation Lab (JIL) to develop mobile Internet services including mobile applications, for their combined worldwide customer base of over 1.1 billion. 9 The initiative is also being supported by leading handset vendors including LG Electronics, Research In Motion (RIM), Samsung Electronics and Sharp. Consolidationwise, the recent acquisition of Handango by PocketGear makes the latter one of the largest cross-platform independent app stores, with a catalogue size the second largest after Apple’s App Store. 10 The apps market has huge potential, with mobile applications already having captured consumers’ attention and imagination, but there remain challenges that could restrict the growth of the market and its ability to achieve this full-potential. For example, the ad-funded 9 Source: http://www.vodafone.com/start/innovation/jil.html Source: http://corp.pocketgear.com/press,release20100223,PocketGear-Acquires-Handango-Creating-theWorlds-Largest-Cross-Platform-Open-App-Store.html 10 18 © 2010, Portio Research. All Rights Reserved While Apple has built its success on direct billing through the iTunes account, operator billing is the most preferred mechanism in the mass market.
  19. 19. Mobile Applications Futures 2010-2015 model will be more popular in Asia Pacific, along with ‘freemium’ applications (trial or lite versions of premium applications that are available for free); this region will witness high app downloads if app pricing strategies are effectively executed. Also, app store owners will have to provide multiple payment options, including operator billing and integrated in-app purchases, particularly to users in emerging markets, due to a low penetration of credit cards. Thus, these regional nuances will have to be balanced accurately to maximize the success of mobile apps. 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 250,000 applications for iPhone, iPod Touch and iPad users. The following table provides a list of different types of applications prevalent in the mobile applications market. 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. • • 11 Games – ‘Games’ have been the most lucrative app type in the mobile applications market, to-date. Handset and OS vendors are working on innovative ways to improve the user experience by providing interactive user interfaces, improved audio and graphics, and larger screen sizes and resolution for a more intense gaming experience. Games on social networking sites are also gaining popularity. The top 10 games on Facebook alone have a user base of 458.3 million. 11 Productivity/Enterprise – Productivity applications prove popular as they allow users to make presentations and edit word documents on-the-go, manage data and schedule meetings, access bank accounts and make payments on the move, and identify the location of persons, objects or places, etc. Examples of such apps include: Documents Source: http://gorumors.com/crunchies/largest-social-game-developers-on-facebook/ © 2010, Portio Research. All Rights Reserved 19 The top 10 games on Facebook alone have a user base of 458.3 million.
  20. 20. Mobile Applications Futures 2010-2015 to go (BlackBerry, Apple, Windows and Symbian Mobiles), eOffice (BlackBerry), Microsoft office Mobile (Windows Mobile), and Multi–Reader (Apple). • Multimedia – Multimedia apps have further transformed handsets into personal multimedia devices. Multimedia applications allow users to record media content, playback stored audio and video files, stream audio and video content from Web browsers, and view images and presentations, etc. Examples of such apps include: mspot (music player), Deezer (radio), Concert vault (streaming videos), Pic Paint (edit pictures) and YouTube downloader video box. • Communication – Communication applications give users greater freedom to instantly connect and communicate. These apps allow users to chat with other users, write blogs and start discussion forums, send and receive e-mails, and browse the Internet via their smartphones. The growth of communication apps is being driven by the need to be accessible and approachable, and to build social networks. Examples of such apps include: Facebook and MySpace (social networking sites), Nimbus (chat client), Opera Mini (web browser) and Google Mobile Client (e-mail client). • Travel – These applications offer various travel features to users. For instance, installed apps might offer users on-the-go access to flight schedules, city guides including popular tourist attractions and hotels, weather forecasts, currency exchange rates, and GPS and navigation maps. Itinerary apps help users to plan their vacation and guide them during their vacation. • Utilities – With a range of services such as Profile Manager, Task Manager, Call Manager and Address Book, today’s mobile user is empowered to prioritise their tasks, contacts and other useful content. For example, a typical task manager application will allow a user to save a to-do list and shopping list; the user can then tick the list of grocery items with a click of button. A call manager enables users to connect with peers effectively and can be integrated with Microsoft Outlook, or customer relationship management (CRM) systems such as ‘Salesforce’ or ‘Microsoft dynamics’. Users can also personalise their response to incoming calls. The address book enables users to centrally store contact numbers along with other details, including e-mail addresses, social media and IM addresses. The file manager helps users store, manage and prioritise the folders. 20 © 2010, Portio Research. All Rights Reserved The growth of communication apps is being driven by the need to be accessible and approachable, and to build social networks.
  21. 21. Mobile Applications Futures 2010-2015 Comparing the Popularity and Potential of Different Application Types The figure below depicts the popularity of different types of applications based on the number of downloads of paid applications in the US for leading application stores. Figure 8: Most Popular Paid Content – The US (June 2010) 12 Apple App Store Windows MarketPlace 37% 32% 44% 53% 15% 19% Games Entertainment Other Nokia Ovi Store Games Tools Other BlackBerry App World 31% 46% 30% 47% 23% Games Utilities Other 23% Themes Games Other Source: Distimo and Portio Research Games are the most popular and most downloaded paid content in the US mobile applications market. At the Apple App Store, 53 percent of paid content is accounted for by games. 13 The popularity of games is also clear from the BlackBerry App World data, though BlackBerry handsets are perceived to be for the enterprise segment. The limited availability of alternative gaming sources and the presence of micropayment options (mobile transactions that involve small sums of money) are driving the growth of mobile games in developing nations. Gamers can now try different games through micropayment options on their mobiles. The figure below depicts the break-out of available applications in leading application stores by games and non-games applications. 12 13 Source: http://www.slideshare.net/distimo/distimo-mobile-20-europe-presentation Source: http://mobile20.eu/2010/06/21/state-of-play-of-mobile-app-stores-presentation-distimo/ © 2010, Portio Research. All Rights Reserved 21 At the Apple App Store, 53 percent of paid content is accounted for by games.
  22. 22. Mobile Applications Futures 2010-2015 Proportion of Gaming Applications (In Percent) Figure 9: Break-out of Available Applications at Application Stores by Games and Non-Games (Worldwide, August 2010) 100% 80% 60% 67.7% 85.4% 87.7% 84.5% 94.0% 40% 20% 32.3% 14.6% 12.3% 0% Apple App Store Google Android Market 15.5% 6.0% BlackBerry App Nokia Ovi Store* World Windows Marketplace Mobile Application Store Games Non-Games Source: Portio Research Ltd. *Note: The break-out for Nokia is for July 2010. The mobile applications market is witnessing a paradigm shift with the introduction of tools such as e-Readers, in so much as books are now trumping games to the position of ‘total number of active applications’ at the Apple App store. In August 2010, the number of book applications reached 43,250 compared with 36,250 games. This reflects the growing user interest in reading books while-on-the-go, and the introduction of iPad is expected to be one of the key drivers for the future growth of books apps. Social networking sites have already made a big impact on the market, and the use of mobiles to access social networking sites and update their statuses – via installed social networking apps for the likes of Twitter and Facebook – is gaining popularity. Locationbased technology combined with status updates is expected to gain popularity – for example ‘Facebook Places’. The success of social networking sites presents a potential opportunity for advertisers, since the sites have the capability to profile and segment target customer bases. 22 © 2010, Portio Research. All Rights Reserved In August 2010, the number of book applications at Apple App Store reached 43,250 compared with 36,250 games.
  23. 23. Mobile Applications Futures 2010-2015 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 38.7 million at end-2009, 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 80 million in 2009, while revenue generated through ad-placements in mobile applications is expected to reach nearly USD 250 million in 2010. 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 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. Developers normally get 60-70 percent of the revenues generated from mobile application sales, and the growing demand for apps and favourable revenue split of 70/30 between developer and mobile store is attracting large numbers of individual developers and development companies. The integration of advertisements with mobile applications has opened new avenues of revenue generation for developers. Moreover, technology advancements in platform development facilitate the development process, minimise the development and deployment time, and quicken the revenue generation process. There is a huge potential for mobile applications in developing markets. However, since user demographics and preferences vary from one region to another, application providers are required to introduce localised apps to succeed in a particular region, and this need for localised applications is further driving the demand for developers. © 2010, Portio Research. All Rights Reserved 23 Revenue generated through ad-placements in mobile applications is expected to reach nearly USD 250 million in 2010.
  24. 24. Mobile Applications Futures 2010-2015 Application Stores The phenomenal success of Apple’s App store – recording 6.5 billion downloads in little over two 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. Worldwide mobile applications revenue (excluding in-app payments) is forecast to be nearly 3.1 billion at end-2010. Apple App Store is expected to be the biggest contributor with revenues of nearly USD 1.6 billion in 2010. Figure 10: Break-out of Mobile Applications Revenue (Excluding In-app Payments) by Application Stores (In Percent, 2010F) 7.0% 6.0% 36.0% 51.0% Apple App Store Google Android Nokia Ovi Others Source: Portio Research Ltd. 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. 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 August 2010, Apple has sold 120 million iOS devices 14 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 250,000 applications available at the Apple App Store (as of end-August 2010) and consumers have downloaded more than 6.5 billion applications 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. 14 Source: http://www.techtree.com/India/News/Apple_ships_over_120_million_iOS_devices/551-112737-615.html 24 © 2010, Portio Research. All Rights Reserved Worldwide mobile applications revenue (excluding in-app payments) is forecast to be nearly 3.1 billion at end-2010. Apple App Store is expected to be the biggest contributor with revenues of nearly USD 1.6 billion in 2010.
  25. 25. Mobile Applications Futures 2010-2015 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, 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. “Three billion applications downloaded in less than 18 months – this is like nothing we’ve ever seen before. The revolutionary App Store offers iPhone and iPod touch users an experience unlike anything else available on other mobile devices, and we see no signs of the competition catching up anytime soon.” Steve Jobs CEO, Apple, Inc. The Apple App Store registered 6.5 billion downloads to-date as of end-August 2010. The following figure shows the App Store’s performance since its launch in July 2008. Figure 11: Apple’s App Store – Total Application Downloads 6,500 5,500 6000 5000 4,000 4000 3,000 3000 2,000 2000 1,000 10 100 Sep-08 1000 Jul-08 Downloads (In Million) 7000 Aug-10 Jun-10 Apr-10 Jan-10 Sep-09 Apr-09 0 Period Source: Apple, Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 25 The key factors that determine the success of application stores are the choice of applications available and convenience.
  26. 26. Mobile Applications Futures 2010-2015 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, Microsoft Windows Marketplace, Symbian Horizon, etc. Stores by handset manufacturers: Apple App Store, BlackBerry App World, Nokia Ovi Store, etc. Stores by mobile network operators: Vodafone 360, O2 Litmus, Orange App Shop, etc. Third-party app stores: GetJar, Mobango, PocketGear, etc. • • • In this section, we will be covering the popular application stores and providing the following details: • Available applications • Break-out of mobile applications on the basis of content categories • Break-out of mobile applications on the basis of free/paid applications 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 in the US – from some of the leading app stores owned by smartphone vendors and OS providers – by free and paid applications. Figure 12: Break-out of Available Mobile Applications by Free and Paid Application Type – The US (In Percent, July 2010) Mobile Applications Break-out (In Percent) 100% 80% 60% 41% 71% 75% 74% 79% 25% 26% 21% BlackBerry App World Nokia Ovi Store Windows Marketplace 40% 59% 20% 29% 0% Apple App Store Google Android Market Mobile Application Store Free Applications Paid Applications Source: Distimo, August 2010 Among the US mobile applications stores by major smartphone vendors and OS providers, Google Android Market has the highest percentage of free applications available at its store. 26 © 2010, 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.
  27. 27. Mobile Applications Futures 2010-2015 Apple App Store Apple launched its ‘App Store’ in July 2008. Highlights • • • • • Number of Applications: 250,000+ (August 2010) Free and Paid Applications in the US: 29% Free, 71% Paid (August 2010) Average Price for Paid Applications for iPhone in the US: USD 4.31 (July 2010) Number of Active Developers: 50,000 (August 2010) User Base – 120 million iOS devices (including iPhone, iPod Touch and iPad users, endAugust 2010) Application Downloads – 6.5 billion (end-August 2010) Applications are available under five major types – Books, Games, Entertainment, Education and Lifestyle. The applications such as travel, utilities, music, sports, business, news, productivity, healthcare and navigation are included under ‘Others’. Figure 13: Break–out of Available Applications by Type – Apple App Store (In Percent, August 2010) 6.2% 7.7% 11.5% 42.7% 14.6% 17.3% Books Games Entertainment Education Lifestyle Others Source: 148Apps, Portio Research Ltd. Table 3: Rank Most Popular Paid and Free Applications, Apple App Store (The US, July 2010) Paid Applications – Apple iPhone Free Applications – Apple iPhone 1 Angry Birds (Games; Price: USD 0.99) Type n Talk (Entertainment) 2 Doodle Jump (Games; Price: USD 0.99) iBooks (Books) 3 Fruit Ninja (Games; Price: USD 0.99) Jailbreaker (Games) 4 Doodle God (Games; Price: USD 0.99) Zombie Duck Hunt (Games) 5 FatBooth (Entertainment; Price: USD 0.99) Spawn Glow (Entertainment, Games) Source: Distimo, August 2010 © 2010, Portio Research. All Rights Reserved 27
  28. 28. Mobile Applications Futures 2010-2015 Google Android Market Google launched its mobile application store ‘Android Market’ in October 2008, and the store is now available in 46 countries. Android Market offers the highest percentage of free applications, with 63 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 Applications: 115,000+ (August 2010) Free and Paid Applications, Worldwide: 63% Free, 37% Paid (August 2010) Average Price for Paid Applications in the US: USD 3.23 (July 2010) Number of Active Developers: 10,000 (August 2010) Application Downloads – 1 billion+ (end-August 2010) 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 14: Break–out of Available Applications between Games and Non-Games – Google Android Market (In Percent, August 2010) 12.3% 87.7% Games Other Applications Source: Androlib, Portio Research Ltd. Table 4: 2010) Rank 1 2 3 4 5 Most Popular Paid and Free Applications, Google Android Market (The US, July Paid Applications Beautiful Widgets (News & Weather; Price: USD 1.82) WeatherBug Elite (News & Weather; Price: USD 1.99) MyBackup Pro (Tools, Price: USD 4.99) Documents ToGo Full Version Key (Productivity; Price: USD 14.99) PicSay Pro – Photo Editor (Multimedia; Price: USD 3.65) Free Applications Pandora Radio (Multimedia) Google Maps (Travel) T–Mobile My Account (Tools) Google Sky Map (Reference) Facebook for Android (Social) Source: Distimo, August 2010 28 © 2010, Portio Research. All Rights Reserved Android Market offers the highest percentage of free applications, with 63 percent available as free downloads worldwide; the store relies on advertisements for revenue generation.
  29. 29. Mobile Applications Futures 2010-2015 BlackBerry App World Research In Motion launched its ‘BlackBerry App World’ store in April 2009; BlackBerry App World has a presence in 65 countries and is approaching 1 million application downloads per day. BlackBerry has introduced device independent user identification, which means that a user can now manage downloaded apps under ‘My World’ or archive them on a micro SD card, so that if the user changes mobile handsets, all the previous apps can be transferred to the new handset using the user’s unique ID. Users can pay for application downloads through credit cards, operator billing and PayPal. Highlights • • • Number of Applications: 9,700+ (August 2010) Free and Paid Applications in the US: 25% Free, 75% Paid (July 2010) Average Price for Paid Applications in the US: USD 6.68 (July 2010) User Base – 20 million active users (June 2010) Application Downloads: 255 million (end-August 2010) Popular application types are themes, games, e-books, utilities and entertainment. Applications such as business, education, music, productivity, sports, finance, news, photos and videos, and travel are included under ‘Others’. Figure 15: Break–out of Available Applications by Type – BlackBerry App World (In Percent, August 2010) 15 7.0% 15.5% 4.8% 17.0% 33.3% 22.5% Themes Reference and e-books Games Utilities Music&Audio Others Source: Portio Research Ltd. Table 5: Rank Most Popular Paid and Free Applications, BlackBerry App World (US, July 2010) Paid Applications Free Applications 1 Love Football Love KAKA Animated Edition (Themes, Price: USD 2.99) BlackBerry Messenger (IM & Social Networking) 2 Animated Lightning Theme Half Price (Themes, Price: USD 2.99) Pandora (Music) 3 Juicy Girl Theme (Themes, Price: USD 3.99) Poynt (Maps & Navigation) 4 Ultra Today Plus (Productivity, Price: USD 4.99) crunchSMS (IM & Social Networking) 5 Upgrade your homescreen to Sky2 Livescreen (Theme, Price: USD 3.99) ScoreMobile for BlackBerry (Sports and Recreation) Source: Distimo, August 2010 15 Note: The percentages do not add up to 100 percent because of rounding off errors. © 2010, Portio Research. All Rights Reserved 29 BlackBerry has introduced device independent user identification, which means that a user can now manage downloaded apps under ‘My World’ or archive them on a micro SD card, so that if the user changes mobile handsets, all the previous apps can be transferred to the new handset using the user’s unique ID.
  30. 30. Mobile Applications Futures 2010-2015 Nokia Ovi Store Nokia launched its mobile application store ‘Ovi Store’ in May 2009. At end-August 2010, Ovi Store had a presence in more than 190 countries with applications available in 30 languages, and developers from 90 countries distributing their content through the store. Nokia’s strong presence in Europe and growing popularity in Asia and Latin America has helped Nokia to reach 1.7 million downloads per day. Highlights • • • Number of Applications: 9,500+ (April 2010) Free and Paid Applications in the US: 26% Free, 74% Paid (July 2010) Average Price for Paid Applications in the US: USD 2.68 (July 2010) User Base – 83 million active users (April 2010) Application Downloads – 382.5 million (end-August 2010) Applications are sold directly to users and revenue is shared between developers and Nokia. However, if operator billing is used, operators also get a share of the revenue. Applications are categorised as games (puzzles, role playing, action, arcade, etc.), audio and video (Podcasts, Videos, etc.), personalisation (Ringtones, wallpapers, etc.) and utilities (business, news, sports, etc). Figure 16: Break–out of Available Applications by Type – Nokia Ovi Store (In Percent, July 2010) 5.0% 29.0% 40.0% 20.0% 6.0% Games Audio & Video Personalisation Utilities Others Source: Portio Research Ltd. Table 6: Rank 1 2 3 Most Popular Paid and Free Applications, Nokia Ovi Store (The US, July 2010) Paid Applications Free Applications ToonWarz (Games; Price: USD 2.99) ZumZum (Games) Armageddon Squadron (Games; Price: USD 2.99) Animated Theme, Street Fever (Themes; Price: USD 2.99) TuneWiki – Lyrics with Music (Music) The Flashlight + SOS (Entertainment) 4 ShoppingList 2.1 (Utilities; Price: USD 0.99) Opera Mini Web browser (Utilities) 5 Hip Hop All Star (Games; Price: USD 0.99) Netflix Queue Manager (Entertainment) Source: Distimo, August 2010 30 © 2010, Portio Research. All Rights Reserved Nokia’s strong presence in Europe and growing popularity in Asia and Latin America has helped Nokia to reach 1.7 million downloads per day.
  31. 31. Mobile Applications Futures 2010-2015 Windows Marketplace Microsoft launched its mobile application store ‘Windows Marketplace’ in October 2009, and the store is now available in 30 countries. Windows Marketplace offers credit card and operator billing payment options to users. Users are required to create ‘Windows Live IDs’ to download or buy apps. Windows Marketplace provides a ‘No Regrets’ option to users, which allows them to return the application if they do not like it – within 24 hours of purchase – and get their money refunded as per Windows Marketplace’s mobile refund policy. Highlights • • • Number of Applications: 1,250+ (August 2010) Free and Paid Applications in the US: 21% Free and 79% Paid (July 2010) Average Price for Paid Applications in the US: USD 5.72 (July 2010) User Base – 30million+ (July 2010) Popular application types are games, tools, lifestyle, entertainment and reference. Applications such as social networking, communication, travel, books, news and weather are included under ‘Others’. Figure 17: Break-out of Available Applications by Type – Windows Marketplace (In Percent, EndAugust 2010) 16 7.3% 8.0% 6.3% 14.9% 31.1% 32.3% Games Tools LifeStyle Entertainment Reference Others Source: Portio Research Ltd. Table 7: Rank Most Popular Paid and Free Applications, Windows Marketplace (The US, July 2010) Paid Applications Free Applications 1 Meon (Games, Price: USD 2.99) Microsoft My Phone (Tools) 2 SPB Mobile Shell (Tools, Price: USD 29.99) Meon Lite (Games) 3 TouchTwit (Social Networks; Price: USD 2.99) AP Mobile (News & Weather) 4 Scrub (Communication, Price: USD 0.99) Mobile Manager for Netflix (Entertainment) 5 Reboot (Tools, Price: USD 0.99) WeatherBug (News & Weather) Source: Distimo, August 2010 16 Note: The percentages do not add up to 100 percent because of rounding off errors. © 2010, Portio Research. All Rights Reserved 31 Windows Marketplace provides a ‘No Regrets’ option to users, which allows them to return the application if they do not like it – within 24 hours of purchase – and get their money refunded as per Windows Marketplace’s mobile refund policy
  32. 32. Mobile Applications Futures 2010-2015 Comparison of Application Stores The following table provides a comparison summary of the profiled popular application stores, including: total number of available applications, split between games and nongames, split between free and paid, and average selling price for paid applications. Table 8: Comparison of Application Stores App Stores Apple App Store Google Android Market BlackBerry App World Nokia Ovi Store 17 Windows Marketplace Launch Date July 2008 October 2008 April 2009 May 2009 October 2009 Total Number of Applications (Worldwide, in August 2010) 250,000+ 115,000+ 9,700+ 9,500+ 1,250+ Percentage of Games Applications (Worldwide, August 2010) 14.6% 12.3% 15.5% 6.0% 32.3% Percentage of NonGames Applications (Worldwide, August 2010) 85.4% 87.7% 84.5 94.0% 67.7% Percentage of Free Applications (The US, July 2010) 21% 59% 25% 26% 21% Percentage of Paid Applications (The US, July 2010) 79% 41% 75% 74% 79% Average Selling Price for Paid Applications in the US (July 2010) USD 4.31 USD 3.23 USD 6.68 USD 2.68 USD 5.72 Source: Portio Research Ltd. 17 Note: The total number of applications available at the Nokia Ovi Store is over 9,500 (as of April 2010). The percentage split of applications between games and non-games is for July 2010. 32 © 2010, Portio Research. All Rights Reserved
  33. 33. Mobile Applications Futures 2010-2015 Chapter 4 Market Size © 2010, Portio Research. All Rights Reserved 33
  34. 34. Mobile Applications Futures 2010-2015 Market Size Forecast Methodology Mobile applications are software programs that run on handheld devices such as smartphones, feature phones or the recently introduced 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 pre-installed 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. Unmonetised 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 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 34 © 2010, Portio Research. All Rights Reserved Smartphones have operating systems and independent developers can develop mobile applications for them using a Software Development Kit specific to that OS.
  35. 35. Mobile Applications Futures 2010-2015 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 forecasts for the mobile applications market in terms of user base, application revenues, and the number of downloads from 2010 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 38.7 million at end-2009. 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 37 percent between 2009 and 2015 to reach nearly 255.9 million by end-2015. Worldwide, the percentage of mobile users downloading mobile applications is expected to grow from 0.8 percent at end-2009 to 3.5 percent by end-2015. The figure below depicts the mobile applications user base from 2009 to 2015. Mobile Applications User Base (In Million) Figure 18: Mobile Applications User Base – Worldwide (In Million, 2009 – 2015F) 300 255.9 250 213.9 200 174.9 136.3 150 100.4 100 50 69.1 38.7 0 2009 2010F 2011F 2012F 2013F 2014F 2015F Year Source: Portio Research Ltd. F – Forecasted © 2010, Portio Research. All Rights Reserved 35 Worldwide, the percentage of mobile users downloading mobile applications is expected to grow from 0.8 percent at end-2009 to 3.5 percent by end-2015.
  36. 36. Mobile Applications Futures 2010-2015 The table below highlights the growth in the number of regional mobile applications users from 2009 to 2015. Table 9: Mobile Applications User Base – Regional (In Million, 2009 – 2015F) 18 Mobile Applications User Base (In Million) Region 2009 2010F 2011F 2012F 2013F 2014F 2015F Europe 10.9 20.0 30.6 45.5 61.4 77.6 93.6 Asia Pacific 11.7 17.6 24.3 32.1 41.6 51.7 61.9 North America 14.5 28.7 41.1 52.1 61.9 68.9 76.0 Rest of World 1.6 2.8 4.4 6.6 10.0 15.7 24.4 Total 38.7 69.1 100.4 136.3 174.9 213.9 255.9 Source: Portio Research Ltd. North America had the largest regional user base of mobile applications in 2009, constituting 37.4 percent of the worldwide mobile application user base. It was followed by Asia Pacific and Europe, with 30.2 percent and 28.3 percent shares respectively. The figure below breaks out the worldwide mobile application user base in 2009 by regions. Figure 19: Worldwide Mobile Application Users – Regional Contribution (In Percent, 2009) 19 30.2% 37.4% 28.3% Europe Asia Pacific 4.2% North America Rest of World Source: Portio Research Ltd. Europe’s smartphone shipments and user base witnessed an upsurge during the first half of 2010, which is leading to a steep rise in its mobile applications’ user base. Europe is expected to outstrip North America and Asia Pacific to achieve the largest regional user base of mobile applications in the next five years. The region will have 36.6 percent of the worldwide mobile applications user base by end-2015, followed by North America with 29.7 percent. 18,19 36 Note: Sum of regional numbers may not add up to the total due to rounding off errors. © 2010, Portio Research. All Rights Reserved Europe is expected to outstrip North America and Asia Pacific to achieve the largest regional user base of mobile applications in the next five years.
  37. 37. Mobile Applications Futures 2010-2015 The figure below highlights the regional share in the worldwide mobile applications user base in 2015. Figure 20: Worldwide Mobile Application Users – Regional Contribution (In Percent, 2015F) 24.2% 29.7% 36.6% Europe 9.5% 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 37 percent between 2009 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 21: Mobile Applications User Base Growth by Region (In Percent, 2009 – 2015F) CAGR (In Percent) 60 50 57.1 CAGR Worldwide = 37.0 % 43.0 CAGR 37.0% 40 32.0 31.8 Asia Pacific North America 30 20 10 0 Europe Rest of World Region Source: Portio Research Ltd. F – Forecasted © 2010, Portio Research. All Rights Reserved 37 High growth is anticipated in all regions, as most markets aren’t expected to saturate in the next five years
  38. 38. Mobile Applications Futures 2010-2015 In 2009, in terms of mobile application users as a percentage of the total regional mobile subscriber base, North America recorded the highest level with 4.6 percent, followed by Europe with 1.1 percent. The figure below compares the percentage of mobile applications users in the regional subscriber base at end-2009 with that at end-2015F. Figure 22: Mobile Applications Users as a Percentage of Total Regional Mobile Subscribers – Regional (In Percent, 2009 and 2015F) 18.7 Mobile Applications Users' Contribution (In Percent) 20 15 10 7.8 4.6 5 1.1 1.6 0.5 0.1 1.3 0 Europe Asia Pacific North America Rest of World Region 2009 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 53.2 percent in the period between 2009 and 2015, and this is depicted in the figure below. Mobile Application Downloads (In Billion) Figure 23: Mobile Application Downloads – Worldwide (In Billion, 2009 – 2015F) 37.6 40 35 29.6 30 22.6 25 20 16.3 15 11.1 10 5 6.7 2.9 0 2009 2010F 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. 38 © 2010, Portio Research. All Rights Reserved The number of downloads is expected to increase at a CAGR of 53.2 percent in the period between 2009 and 2015.
  39. 39. Mobile Applications Futures 2010-2015 Table 10: Mobile Application Downloads – Regional (In Million, 2009 – 2015F) 20 Mobile Application Downloads (In Million) Region 2009 2010F 2011F 2012F 2013F 2014F 2015F Europe 819 1,593 2,326 3,280 4,476 6,328 8,460 Asia Pacific 853 1,989 3,406 5,381 7,938 10,944 14,233 North America 1,165 3,033 4,918 6,523 8,393 10,209 11,931 Rest of World 79 118 476 1,143 1,751 2,134 2,991 Total 2,915 6,733 11,125 16,327 22,557 29,616 37,615 Source: Portio Research Ltd. In 2009, North America contributed 40 percent of the total mobile application downloads. It was followed by Asia Pacific and Europe amassing 29.2 percent and 28.1 percent respectively. In 2015, Asia Pacific is expected to overtake North America in download-terms, contributing 37.8 percent to the worldwide total, while North America will be accounting for 31.7 percent, followed by Europe with 22.5 percent. The contribution from Rest of World will increase slowly from 2.7 percent in 2009 to 8 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, embedded advertisements and in-app payments. 20 Note: Sum of regional numbers may not add up to the total due to rounding off errors. © 2010, Portio Research. All Rights Reserved 39 In 2015, Asia Pacific is expected to overtake North America in download-terms, contributing 37.8 percent to the worldwide total.
  40. 40. Mobile Applications Futures 2010-2015 Figure 24: Mobile Applications Revenue – Worldwide (In USD Billion, End 2009 – End 2014F) Revenue (In USD BIllion) 25 23.3 19.4 20 16.0 15 12.6 8.8 9.5 10 6.6 5 3.1 2009 0 6.8 5.0 3.5 3.6 2.0 1.6 2010F 12.8 10.7 7.2 8.7 4.5 5.8 2011F 2012F 2013F 2014F 10.5 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 25: Mobile Applications Sales and Advertisement Revenues – Worldwide (In USD Billion, 2009 – 2015F) 12 10.5 Revenue (In USD BIllion) 10 8.7 7.2 8 5.8 6 4.5 3.1 4 2 1.6 0 2009 2010F 2011F 2012F 2013F 2014F 2015F Year Source: Portio Research Ltd. F – Forecasted 40 © 2010, Portio Research. All Rights Reserved
  41. 41. Mobile Applications Futures 2010-2015 The table below highlights the growth of regional mobile applications sales and advertisement revenues from 2009 to 2015. Table 11: Mobile Applications Sales and Advertisement Revenues – Regional (In Billion, 2009 – 2015F) 21 Mobile Applications Sales and Advertisement Revenues (In Billion) Region 2009 2010F 2011F 2012F 2013F 2014F 2015F Europe 0.46 0.92 1.37 1.92 2.52 3.21 3.96 Asia Pacific 0.44 0.74 0.94 1.17 1.42 1.86 2.35 North America 0.63 1.41 1.98 2.33 2.66 3.00 3.32 Rest of World 0.04 0.05 0.19 0.41 0.56 0.63 0.83 Total 1.57 3.12 4.49 5.82 7.16 8.69 10.47 Source: Portio Research Ltd. In 2009, North America had the highest revenue share (39.9 percent) of worldwide mobile application sales and embedded advertisements, followed by Europe (29.2 percent) and Asia Pacific (28.1 percent). The figure below shows the regional share of worldwide mobile application sales and advertisement revenues in 2009. Figure 26: Worldwide Mobile Applications Sales and Advertisement Revenues – Regional Contribution (In Percent, 2009) 22 28.1% 39.9% 29.2% Europe Asia Pacific 2.7% North America Rest of World Source: Portio Research Ltd. Europe is expected to overtake North America in this respect by end-2015, when it will account for 37.9 percent of the worldwide mobile application revenue (excluding in-app payments), against 31.7 percent for North America and 22.5 percent for Asia Pacific. The next figure highlights the regional share of worldwide mobile application sales and advertisement revenues in 2015. 21 22 Note: Sum of regional numbers may not add up to the total due to rounding off errors. Note: The percentages do not add up to 100 percent because of rounding off errors. © 2010, Portio Research. All Rights Reserved 41

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