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Vision mobile Developer economics 2013

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The full Developer Economics 2013 report - the definitive report on developer tools an

The full Developer Economics 2013 report - the definitive report on developer tools an

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    Vision mobile   Developer economics 2013 Vision mobile Developer economics 2013 Document Transcript

    • ContentsKey takeawaysChapter 1 - Mobile Duopolies:The widening gap between the haves and the have notsChapter 2 - The Developer Tools Landscape:The cogs and gears of the app economyChapter 3 - Rise of the Mega SDKs:The developer tools landgrabAlso by VisionMobile®Mobile Innovation Economics WorkshopA strategy workshop introducing the new economicthinking necessary for successful innovation by telcos.Find out more visionmobile.com/strategy 1 © VisionMobile 2013 | www.DeveloperEconomics.com
    • About VisionMobile ™ ContentsVisionMobile ™ is an ecosystems analyst firm working with Key takeawaystop-5 telcos and handset makers. We are best known forDeveloper Economics, the de-facto knowledge hub of the Chapter 1: Mobile duopoliesapp economy. We are also behind Innovation Economics, The widening gap between the haves and the have notsthe strategy workshops helping CxOs to define winninginnovation strategies. Our mantra: distilling market noise Chapter 2: The Developer Tools Landscapeinto market sense. The cogs and gears of the app economyVisionMobile Ltd.90 Long Acre, Covent Garden, Chapter 3: The rise of the Mega SDKs vendors:London WC2E 9RZ Consolidation in the developer tools land grab+44 845 003 8742www.visionmobile.com/blogFollow us on twitter: @visionmobileTerms of re-use Also by VisionMobile1. License Grant. Subject to the terms and conditions of thisLicense, VisionMobile™ hereby grants you a worldwide, royalty- Mobile Innovation Economics Workshopfree, non-exclusive license to reproduce the Report or to incorporateparts of the Report (so long as this is no more than five pages) into A strategy workshop introducing the new economicone or more documents or publications. thinking necessary for successful innovation by telcos.2. Restrictions. The license granted above is subject to andlimited by the following restrictions. You must not distribute theReport on any website or publicly accessible Internet website (such Find out more visionmobile.com/strategyas Dropbox or Slideshare) and you may distribute the Report onlyunder the terms of this License. You may not sublicense the Report.You must keep intact all notices that refer to this License and to thedisclaimer of warranties with every copy of the Report youdistribute. If you incorporate parts of the Report (so long as this isno more than five pages) into an adaptation or collection, you mustkeep intact all copyright, trademark and confidentiality notices forthe Report and provide attribution to VisionMobile™ in alldistributions, reproductions, adaptations or incorporations whichthe Report is used (attribution requirement). You must not modifyor alter the Report in any way, including providing translations ofthe Report.3. Representations, Warranties and DisclaimerVisionMobile™ believes the statements contained in thispublication to be based upon information that we consider reliable,but we do not represent that it is accurate or complete and it shouldnot be relied upon as such. Opinions expressed are current opinionsas of the date appearing on this publication only and theinformation, including the opinions contained herein, are subject tochange without notice. Use of this publication by any third party forwhatever purpose should not and does not absolve such third partyfrom using due diligence in verifying the publication’s contents.VisionMobile disclaims all implied warranties, including, withoutlimitation, warranties of merchantability or fitness for a particularpurpose.4. Limitation on Liability: VisionMobile™, its affiliates andrepresentatives shall have no liability for any direct, incidental,special, or consequential damages or lost profits, if any, suffered byany third party as a result of decisions made, or not made, or actionstaken, or not taken, based on this publication.5. Termination: This License and the rights granted hereunderwill terminate automatically upon any breach by you of the terms ofthis License.Copyright © VisionMobile 2013v.016 2 © VisionMobile 2013 | www.DeveloperEconomics.com
    • Key messagesThe following are based on VisionMobile’s recent survey of 3,460 developers across 95countries, with a balanced sample across North America, Europe and Asia, plusdeveloper interviews and research insights.Mobile market duopoliesMobile handset Industry growing at 23% CAGR. Despite the doom and gloomcircling many mobile handset makers, the industry has been on a steady growthtrajectory achieving a 23% CAGR in revenues since 2009. Underlying this growth arethe increasing smartphone sales that now account for over 40% of all handset sales,fuelled by low cost Android devices that are rapidly eating away feature phone marketshare.A game of duopolies. The 700 million smartphones shipped in 2012 areunderpinned by the Google / Apple duopoly in mobile platforms which jointlycommands 80% in mobile developer mindshare. This is underscored by the Samsungand Apple handset maker duopoly, which combines a smartphone market share of 46%,and accounts for 98% of handset industry profits across the top-8 handset OEMs.Excluding Apple, total handset industry profits are at 2009 levels, implying that Appleis reaping all of the added value out of the apps-based mobile computing paradigmwhich it introduced. In this same period, Samsung captured the remaining value byquickly transforming from a feature phone incumbent to a smartphone leader, eatingaway the profits of the old guard Nokia who was slow to react to the changing basis ofcompetition - from the best phones, to the best apps.Samsung’s profit recipe. As the top-selling handset OEM in 2012, Samsung’s stellarsuccess with Android smartphones is down to three differentiating elements: firstly in-house ownership of the most expensive hardware components, ensuring both earliestavailability and lowest bill of materials. Secondly, fastest time to market in launching anew smartphone based on the latest Android software release. Thirdly, a strong Galaxybrand and marketing campaigns that differentiate Samsung from the crowd of tens ofAndroid handset makers.Tablets are still outsold 3 to 1 by PCs, but they are expected to reach parity in thenext 1-2 years. This will be a critical inflection point for the PC duopoly of Microsoftand Intel, who are seeing their once-dominant position in computing being severelydisrupted by mobility, where Android dominates platforms and ARM licenseesQualcomm and Mediatek dominate chipsets.Platform haves and have notsDevelopers swarm around iOS/Android but keep looking for viablealternatives. Having established a dominant position in consumer markets, Androidcontinues to lead mobile developer mindshare, with 72% of developers now developingfor the platform, a 4 percentage point increase compared to our 2012 survey. iOS showsa 5 percentage point drop in Mindshare, which we attribute mostly to the influx ofAsian developers showing a clear preference towards Android. Developer mindsharevaries widely by region, with Android leading in Asia and Europe, while North America 3 © VisionMobile 2013 | www.DeveloperEconomics.com
    • shows platform parity. The considerable share of mobile developers intending to adoptWindows Phone (47%) and BB10 (15%) indicate that there is still developer interest in aviable third app ecosystem.HTML is the main technology co-opetitor to the Android-iOS duopoly.HTML is the third most popular choice among mobile developers, 50% of whom usethe HTML-based set of technologies as a deployment platform (to create mobile webapps) or as a development platform (to create hybrid apps or HTML code translatedinto native apps). Overall, HTML is much more successful as a technology, not aplatform, with Firefox OS (and WebOS before that) being the main web-centricattempts at creating a complete alternative to iOS and Android, including nativeplatform APIs, and a means to distribute and monetise apps. HTML should thereforebe seen not as competition, but rather as a complement to native platforms, and onethat reduces externalities by lowering barriers to entry and exit from these platforms.Windows Phone: buy it and they will come. Windows Phone remains unchangedin developer mindshare at 21% of developers despite the very high intention to adopt inour previous 2012 survey. Developers seem to be waiting for the right market signals –a critical mass of handsets - before investing in the platform. Despite Windows Phonechallenges, Microsoft has positioned Windows 8 as a tablet-too platform, and thanks tostrong Windows license renewals, the company is able to reposition mobile marketshare figures to their advantage.BlackBerry mobile mindshare remains stable at 16%, with developers being onstandby mode in anticipation of BB10 sales. Moreover, Intentshare, i.e. developer plansto adopt BlackBerry, has not subsided since our 2012 survey, indicating that the majoroutreach effort undertaken by RIM during the build-up to BB10 release is having somepositive impact. Symbian mindshare, on the other hand, is rapidly and predictablydisappearing, as is, Samsung’s Bada, despite outperforming Windows Phone sales inQ3 2012.74% of developers use 2+ platforms concurrently, but money isconcentrated in iOS/Android. At the same time, developer platform choices arenow narrowing. On average mobile developers use 2.6 mobile platforms in our latestsurvey, compared to 2.7 in 2012 and 3.2 in our 2011 survey. 80% of respondents in oursample develop for Android, iOS or both, making them the baseline in any platformmix. Developers that do not develop for one of these two platforms generate, onaverage, half the revenue of those developers that do, leaving little doubt as to theconcentration of power within these two major ecosystems.Most developers are iOS-first. iOS is a clear winner in the shoot-out againstAndroid, with 42% of Apple/Google developers prioritising iOS, against 31% forAndroid. Several other factors come into play when making a decision on the “leadplatform”, such as prior experience or local handset sales patterns, but iOS comes outas a clear winner across all platform competitive points except cost and learning curve.iOS, Android and BlackBerry are lead platforms. In our survey of 3,460developers, iOS emerged as the highest priority platform, with 48% of iOS developersusing it as the lead platform among all others. iOS, Android and BlackBerry constitutelead platforms, which are most often used as a main platform among their developers.Windows Phone and HTML are extension platforms, as they are typically used by 4 © VisionMobile 2013 | www.DeveloperEconomics.com
    • developers to extend their app footprint into customer segments or regions notadequately covered by their lead platform. At the tail end of developer preference areSymbian, Qt, Flash and JavaME ,the “gap fillers”, now used to address all remainingmarket niches.HTML5 needs better native platform APIs, and development environment.HTML5 is becoming a viable alternative to native for developers working on appcategories such as Business & Productivity (used by 42% of HTML developers),Enterprise (32%) and Media apps (28%). To compete with native, HTML5 needs betternative API access (35% of HTML developers), a better development environment(34%), better debugging support (22%). More importantly, optimised HTML5 deviceswere not seen as important as the native API access or dev environment. This leads usto conclude that HTML proponents such as Facebook, Mozilla and Google should focuson cross-platform tools and development environments on at least equal measures asthey focus on full platform efforts like Facebook Platform, Firefox OS and Chrome OS.Tablets reaching developer mindshare parity with smartphones, but TVsremain niche. The majority (86%) of 3,460 developers in our survey targetsmartphones, while a large share of them also develop on tablets, led by iOS developers(76%) indicating the attractiveness of the iPad as a development and monetisationplatform. TV development remains niche (6% of Android developers), as the hype cyclearound the “Smart TV” experience is yet at a very early stage.The revenue haves and have notsThe steep learning curve of app entrepreneurship. Developers have a lot toimprove in planning their app business. 49% of developers in our sample build appsthey want to use themselves, but end up generating the least revenue. The mostrevenue-generating app planning strategies are those that extend an app either intoverticals or different geographies. To some extent, these strategies rely on an alreadyestablished and successful business: apps that have been tried and proven in at leastone market and are generally less risky options or “low hanging fruit” for developers.Advertising is now the most popular revenue model for apps, used by 38% ofdevelopers in our global sample. At the same time, it is the monetisation model with theleast revenue per app. In-app purchases and Freemium are on the rise, having grown by50% compared to our 2012 survey and are now used by more than a quarter of thedevelopers in our survey. In-app purchase is now the second most popular revenuemodel on iOS, with 37% of developers using it, falling slightly behind Pay per download.Lack of customer understanding in lean app development. We find itremarkable that only 24% of developers in our sample plan their apps based ondiscussions with users, a figure which does not change with development experience orproficiency. This indicates that the bottleneck of the build-measure-learn cycle of leandevelopment is the “measuring”, or understanding customers. This highlights the needfor a frictionless two-way feedback channel between developers and users, much likewhat GetSatisfaction pioneered for web apps, and which now HelpShift is pioneeringfor mobile apps. 5 © VisionMobile 2013 | www.DeveloperEconomics.com
    • The Developer Tools LandscapeOver 500 tools for today’s app developers, designers and entrepreneurs. Inthe last 3 years, developers have moved from being coders, to innovators, designers andmakers - and a prized customer for the 100s of firms making up the SDK economy, partof the bigger B2D (business to app developer) market. Developer expectations for toolsand services have changed in the recent years due to the flurry of startups, fromAppcelerator to Zong, which emerged. App developers today have over 500 third partytools (APIs, SDKs, components) to choose from, catering to every stage along thedeveloper journey. Developer tools, from ad networks to user analytics SDKs are a corepart of the Android and iOS platform economics, and a major platform differentiator.Ad services mainstream, other tools use is fragmented. 90% of the nearly3,460 developers we surveyed use at least one third-party tool or service, with anaverage of 1.47 tools used concurrently. Among those developer services that webenchmarked the most popular is ad networks and exchanges (34% of developers),reflecting the widespread popularity of advertising as a revenue model. Advertising isthe most popular revenue model, while ads can also act as a promotion channel thatfacilitates app discovery. User analytics (28%) and cross platform tools (27%) follow inpopularity with a longer tail formed by developers of crash analytics, BaaS, crosspromotion networks and voice services.Google’s AdMob, is clearly the dominant mobile ad platform, adopted by65% of developers that use ad services. AdMob has recently expanded to adexchange services, a move that aims to counter the threat that ad exchanges pose forGoogle. Second runners, each used by 12% of developers in our sample, are Inneractive,an ad-exchange/mediation service and InMobi, an ad network growing out of India tobecome a major player in emerging markets. Apple’s iAd service comes fourth overallwith 11%, and despite being quite popular among iOS developers, AdMob is the leadingad service on iOS, used by 66% of iOS developers that we surveyed.PhoneGap and Appcelerator lead developer mindshare across 100+ crossplatform tools. PhoneGap tops CPT rankings, used by 34% of developers, followed byAppcelerator and Adobe Air with 21% and 19% developer mindshare respectively. Withover 100+ cross platform tools available, the choice for developers can be a challenge.Amidst differentiating features for CPTs are access to native APIs, performanceoptimisation and the ability to reproduce native UI elements on each platform.The user analytics duopoly: Google (69%) and Flurry (49%) are well aheadof competition. User analytics services are becoming increasingly important as a toolto optimise app engagement and reach, and act as a proxy for user feedback. Useranalytics services are significantly more important for iOS developers - used by 39% ofiOS developers in our survey vs. 28% for Android, 25% for WP and 15% for BlackBerry.Usage of analytics serves as an indicator of the level of competition among developerson different platforms.Parse leads with 28% mindshare in Backend-as-a-Service tools butcompetition for second spot is heating up as BaaS rises in popularity. As mobile appsbecome more sophisticated, so the need increases for back-end features like managingusers, introducing social features, or synchronizing cloud data. Mindshare leader Parseis followed by enterprise-focused CloudMine (11%). Sencha.io and ACS, both 6 © VisionMobile 2013 | www.DeveloperEconomics.com
    • commanding a 10% share among developers using BaaS, are solutions that are wellintegrated with their corresponding development frameworks (Sencha andAppcelerator) and therefore do not directly compete with services such as Parse orStackMob. The Backend-as-a-service market is in early stages, crowded with over 30vendors that strive to differentiate by constant innovation and additions to their featuresets - we have yet to see any service dominating the sector to the extent observed inother developer tools sectors, such as ad services or user analytics tools.TapJoy (53%) is the leader in cross-promotion network mindshare,according to our survey of 3,460 developers, with Flurry AppCircle (20%) andChartboost (18%) following behind. Cross-promotion networks (CPNs) are used bydevelopers both as a means for promoting their apps by means of free traffic exchangeacross apps, ads paid by cost-per-app-install or in some cases incentivised installs.CPNs are also used as a revenue model, for developer acting as inventory publishers.Voice APIs have not made the transition from web to mobile. While voiceservices cater to diverse use cases, their mobile developer mindshare is limited to singledigits, as voice APIs are still tied to the developer perception of telephony, a long wayfrom the future voice-enabled apps. Voice-enablement leaders Twilio and Voxeo havebeen much popular within web developer circles, with Twilio rising once in late 2011 toa top-10 API provider ahead of Facebook, as tracked by ProgrammableWeb. Yet thesevoice services are yet to make a major impact in mobile apps. Skype (telephony URIs)and Microsoft (speech recognition and transcription) are often used, followed by Twilioand Tropo API users who focus on conference calls, inbound/outbound calling andvoice portal services. Telcos like AT&T, Verizon, Telefonica and Deutsche Telekom havealso released voice APIs in 2012 in a move to extend telephony assets into new revenue-generating voice use cases.The Developer tools universe expands and consolidates. The Business toDeveloper (B2D) market, has seen a continual expansion in the last three years, with aflurry of B2D startups emerging to address the ever increasing developer needs. Forevery 1,000 app startups, there is a developer tools startup. In parallel, there isconsolidation taking place via organic expansion (e.g. Flurry, Papaya expandingservices organically) and via mergers and acquisitions (e.g. Appcelerator acquiredAptana, Cocoafish, Particle Code and Nodeable, Apigee acquired Usergrid and Instaops,Burstly acquired TestFlight and Flurry acquired Trestle).Consolidation to continue to 2015, led by mobile marketing and enterprise.We expect the trend of consolidation of the tools landscape to continue unabated until2015, six years after the B2D market for apps was born, while expansion will focus onlyon unaddressed developer tools sectors in the post-launch phase of the developerjourney. We expect two main clusters of developer tools to lead the consolidation:firstly, marketing tools, as the discovery bottleneck will only worsen as we go from 1.5Mto 10M apps, and while the Apple and Google stores continue to dominate appdistribution. Secondly, Enterprise Mobile Services, which are creating revenue demandfor vendors to mobilise their intranets, and to allow employees to bring their owndevice (BYOD) to work. Unlike the consumer apps space, enterprises have a substantialIT budget per employee, and very stringent requirements for data security, identitymanagement, backend systems integration, and support-level agreements. 7 © VisionMobile 2013 | www.DeveloperEconomics.com
    • About Developer EconomicsWelcome to Developer Economics 2013, the fourth in our de-facto research series of thedeveloper economy. This report focuses on developer tools, examining six developersectors: ad-networks and mediation engines, backend-as-a-service, cross-platformtools, cross-promotion networks, user analytics, and voice services.We also take a close look at many of the critical issues for developers today, such asmost popular platforms, opportunities and challenges with HTML5, cross-screendevelopment, app revenue models, monetisation potential and much more.The findings of this report are based on an online survey of over 3,400 developers, aswell as 20 qualitative interviews, conducted in October 2012. Our sample was trulyglobal, with a balanced sample across North America, Europe and Asia, but alsosignificant minorities of developers from Africa, Oceania and Latin America.We hope this report gives you insight into the latest trends on mobile development andan understanding of the rules of the new app economy emerging around apps andecosystems. We hope you enjoy reading it - as much as we enjoyed writing it!AndreasP, Matos, Christina, AndreasC, Mark, Vanessa, Chris, Michael andStijn at VisionMobile.@visionmobilewww.visionmobile.com/blogThank you!Wed like to thank all the people and organizations that helped us make this projectpossible. Special thanks go to:Our sponsors, without whom we wouldnt have been able to complete this project:AT&T, Mozilla, Nokia, BlackBerry, BrightCove and Telefonica.Our Marketing and Regional partners that helped us reach an unprecedented 3,460developers across the globe, breaking new records for the largest, global mobiledeveloper survey.The developers and mobile insiders that took the time and interest to share theirexperience with us.Alexey Sazonov, Christopher Kassulke, George Karavias, Raj Singh, MaximilianoFirtman, Tzach Hadar in our Developer Advisory Board that provided valuablefeedback throughout this research.And finally, Kinvey and SoundCloud for their input during the preparation of theresearch. 8 © VisionMobile 2013 | www.DeveloperEconomics.com
    • 9© VisionMobile 2013 | www.DeveloperEconomics.com
    • Research methodologyThe Developer Economics January 2013 research is based on a large-scale onlinedeveloper survey and one-to-one interviews with app developers.The online survey was designed, produced and carried out by VisionMobile over aperiod of five weeks between October and early November 2012. One to one interviewswere conducted from November to December 2012. The online survey received over3,400 responses, more than double the number of our previous 2012 survey.Respondents came from 95 countries. The online survey was available in 7languages (English, French, German, Korean, Portuguese, Russian and Spanish) andpromoted by 25 marketing and regional partners within the app developmentindustry. As a result, the survey reached a substantial number of respondents across allcontinents. The survey respondents were balanced across Europe (39%), Asia(27%) and North America (24%). We also gathered a developer sample from Africa(4%) and South America (4%). In terms of countries, respondents came primarily fromthe US (18.7%), India (13.9%) and the UK (5.6%) followed by Russia, Germany andFrance. We also received responses from Venezuela, Uruguay, Vietnam and Kazakhstanto name a few of the 95 countries in total, making this report truly reflective of the new,global, mobile app economy.Respondents were asked to indicate the main platform they use for development among14 mobile and desktop platforms. To minimise the sampling bias for platformdistribution, we compared the distribution across a number of different developeroutreach channels and identified statistically significant channels that exhibited the 10 © VisionMobile 2013 | www.DeveloperEconomics.com
    • lowest variability from the platform medians across our whole sample base. We deriveda representative platform distribution based on these channels and weighted ourresults based on this distribution, as depicted in the graph below. In order to excludeoutliers in our sampling, we derived median rather than mean values whereappropriate. Re-calibrating and adjusting our research methodology was deemednecessary as we strive to capture trends across an ever growing, diverse and widelydistributed developer population. 11 © VisionMobile 2013 | www.DeveloperEconomics.com
    • 12© VisionMobile 2013 | www.DeveloperEconomics.com
    • 13© VisionMobile 2013 | www.DeveloperEconomics.com
    • CHAPTER ONEMobile duopoliesThe widening gap between the haves and the have notsDespite the doom and gloom circling the mobile handset industry, and the slowdown inhandset shipments observed in Q3 2012, the industry has been in fact on a steadygrowth trajectory achieving a 23% CAGR in revenues since 2009. Underlyingthis growth are the increasing smartphone sales that now account for over 40% of allhandset sales, a massive 12.5 percentage point rise since Q3 2011. The growth insmartphone sales, is fuelled by low cost Android devices that rapidly eat away featurephone market share. 14 © VisionMobile 2013 | www.DeveloperEconomics.com
    • 2012 was the year that established Android’s dominance in the smartphone market. InQ3 2012 Android accounted for 74% of all smartphones sold and 30 % of all handsetssold.Propelled by Android, Samsung became the top-selling mobile handset OEM,starting in Q1 2012, and ending a 14-year reign by Nokia. Samsung’s successwith Android is down to three differentiating elements, as we covered in our MobileInsider note on The Apple and Samsung Profit Recipe (www.visionmobile.com/insider)- ownership of the most expensive hardware components, including screens, memoryand processors, ensuring both earliest availability and lowest bill of materials.- fast time to market in launching a new Android handset based on the latestAndroid software release, beating all other handset makers to early adopter profits.- strong Galaxy brand and marketing campaigns that differentiate Samsung fromthe crowd of tens of Android handset makers.Samsung has led not just the Android race, but has also challenged the iPhone on asingle handset basis: for the first time, an Android handset, Samsung’s flagship GalaxyS3, became the top selling smartphone, outselling the iPhone 4S during Q3 2012.Meanwhile Apple experienced a slump in sales during most of the year, despite having avery successful Q4 2011. At the same time, Apple is expected to recover in Q4 2012 15 © VisionMobile 2013 | www.DeveloperEconomics.com
    • following a strong performance by the iPhone 5. Industry analyst consensus forecastsrecord iPhone sales, in the region of 43 to 63 million units; a wide range indeed, buthigher than any previous quarterly actuals.Handset industry profits grew thanks to AppleThe booming handset industry is underpinned by the Google / Apple duopoly inmobile platforms; a duopoly that, in turn sustains the handset maker duopoly ofApple and Samsung. With a combined smartphone market share of 46%, Samsung andApple account for nearly all handset industry profit – in Q3 2012 Apple and Samsungtook 60% and 38%, respectively of all profits across the top-8 handset OEMs.Excluding Apple, total handset industry 2012 profits are at 2009 levels,implying that Apple is reaping all of the added value out of the apps-based mobilecomputing paradigm which it introduced. In this same period, Samsung captured theremaining value by quickly transforming from a feature phone incumbent to asmartphone leader, eating away the profits of the once dominant Nokia who was slowto react to the changing basis of competition - from the best phones, to the best apps.To sustain its profits Apple needs to refresh its unique product experiences which arechallenged by the Galaxy S3, and to continue spearheading new unique productexperiences in TVs, e-readers, watches and beyond. 16 © VisionMobile 2013 | www.DeveloperEconomics.com
    • The lack of profitability among established handset vendors is not a sign of anunhealthy industry but of an industry in transformation. As mobile devices becomemobile computers the value will be increasingly shifting towards apps and third partydevelopers, a similar path to that tracked by the PC industry. In this new paradigm onlythose who are offering integrated experiences through a tailored value chain willremain profitable, as shown by Apple and Samsung, and much like Harvard ProfessorMichael Porter has observed in every other industry.Tablets challenge the PC status quoGoogle has raised the bar on the tablet front by releasing a high quality device (Nexus 7)at a low price-point ($199 for the basic version), putting its weight behind the low-enddisruption of the tablet status quo and the rise of the 7-inch tablet. Apple’s reaction,releasing a less expensive iPad, is a clear sign that the Android threat in tablets is avalid one, and a rare concession in Apple’s recent history. While Apple’s iOS remainsthe dominant platform in tablets with a powerful ecosystem fuelled by a steady supplyof apps, the iPad will be challenged by the Nexus, much like the iPhone 4S sales werechallenged by the Galaxy S3.Tablets are still outsold 3 to 1 by PCs, but they are expected to reach parity in thenext 1-2 years. This will be a critical inflection point for the likes of Microsoft and Intelwho are seeing their once-dominant position in computing being disrupted by mobility,where the Android platform and ARM-licensed Qualcomm and MediaTek chipsetsdominate. While smartphones can barely be seen as competitors to PCs and notebooks,tablets present a real PC substitute for the majority of consumer use-cases. The dangerfor Microsoft and Intel is not just the dwindling size of the PC market relative to mobilecomputing, but also the threat of being uprooted from their dominant position in theirown (PC) market.The economics of appsDevelopers and publishers mostly value reach and revenue opportunities, in that order.This is directly reflected in the choice of platforms they develop on – iOS and Android –which offer the widest reach, as we will see in the next section. The choices thatdevelopers make, translate into consumer demand via the added value created by apps,which then translates into developer supply. This cycle of consumer demand anddeveloper supply is known as the network effects that have transformed the mobileindustry in recent years.Consumer choices are extensively reported and tracked by handset vendors andanalysts alike. In Developer Economics we examine the less known and understood“developer” part of the equation. In the Developer Economics 2013 survey, attractingmore than 3,400 respondents, we asked developers about their choice of platforms andscreens, revenue models, third party services they use and many other importantelements of the app economy.In doing so we aim to understand how developer choices, together with consumers’choices will affect the future of the mobile industry, an industry that now attracts VCfunding that exceeds the R&D expenditure of each of Google, IBM, Apple or Nokiaaccording to investment firm Rutberg & Co. With 30% of that funding going to mobileapplications, developers are now at the centre stage of the mobile industry dollars. 17 © VisionMobile 2013 | www.DeveloperEconomics.com
    • Developers Driving EcosystemsHTML is the main technology alternative to the Android-iOS duopolyfor mobile developer mindshare Having established a dominant position in consumer markets, Android continues to lead mobile developer mindshare, with 72% of developers now developing for the platform, a 4 percentage point increase compared to our 2012 survey. While Android is still perceived by developers as a less profitable platform compared to iOS (as we shall see), its market share offers the potential for unprecedented reach into smartphone users. The long term health of the Android ecosystem will depend on Google’s ability to manage API and screen fragmentation especially as the majority of the Android installed base is running an API version that was introduced at least two years before the latest version of the API, as of January 2013. Android developers must also consider different ways to engage with a demographically diverse and fragmented user base, the average purchasing power of which is significantly diluted by rock-bottom priced Android devices attracting low-income consumers. iOS shows a 5 percentage point drop in Mindshare, which we attribute mostly to the influx of Asian developers showing a clear preference towards Android. Developer mindshare varies widely by region: for example mobile mindshare for iOS in Asia is 48% vs. 76% for Android, while in North America the two platforms command an equal mindshare of 65%. Platform mindshare varies also between mobile 18 © VisionMobile 2013 | www.DeveloperEconomics.com
    • and desktop developers, i.e. developers who develop only on mobile, versus those thatalso develop apps for desktop platforms.HTML is the third most popular choice among mobile developers, 50% of whom usethe HTML-based set of technologies as a deployment platform (to create mobileweb apps) or as a development platform (to create hybrid apps or HTML codetranslated into native apps). Note that we have not compared our HTML mindshareresults to the earlier 2012 survey, as the latter looked only at mobile web as adeployment platform.Overall, HTML is much more successful as a technology, rather than aplatform, with Firefox OS (and before it WebOS) being the only attempt at creating acomplete, web-centric alternative to iOS and Android, including native APIs, and ameans to distribute and monetise apps. With Firefox OS in early commercialisationstages, HTML should be seen not as competition, but rather as a complement to nativeplatforms, and one that reduces externalities by lowering barriers to entry and exit fromthese platforms.Windows Phone mindshare remains unchanged despite the very high Intentshare scorein our previous Developer Economics survey. Developers seem to be waiting for theright market signals – a critical mass of handsets - before adopting the platform. Therelease of Windows 8 could help Windows developers make the leap into mobiledevelopment however there are only anecdotal signs to this effect as sales of WindowsPhone 8 devices have been lacklustre. Microsoft’s attempt to harmonise the user anddeveloper experience across screens is the right strategy for protecting their existing PCrevenue streams and establishing a foothold on the mobile computing market.Moreover, Microsoft has positioned Windows 8 as a tablet-too platform, and thanks tostrong Windows license renewals, the company is able to reposition mobile marketshare figures to their advantage. To provide a fighting chance for their mobile strategyto succeed, Microsoft must iterate fast both its platform and own hardware (Surface) inorder to reach the right product-market fit.BlackBerry mobile mindshare remains unchanged at 16%, with BlackBerrydevelopers being on standby mode in anticipation of BB10 sales. Moreover,Intentshare, i.e. interest in BlackBerry has notsubsided since our last Developer Economicssurvey, indicating that the huge outreach “We try to address 90% of alleffort undertaken by RIM during the build-up Android users. This includesto BB10 release is having some positive about 60% of users who are 5impact. Symbian mindshare, on the other versions behind.”hand, is rapidly but predictably disappearing, Founderas is, Samsung’s Bada, despite outperforming App development houseWindows Phone sales in Q3 2012. 19 © VisionMobile 2013 | www.DeveloperEconomics.com
    • Windows Phone: buy it and they will comeMobile developer Intenshare shows 47% of developers plan to adoptWindows Phone but poor consumer adoption is holding them back Microsoft’s Windows 8 & Phone 8 strategy brings a unified Metro interface to all devices and enables significant code sharing between apps across PCs, tablets and smartphones. However these synergies have yet to pay off and Windows Phone is facing a bootstrapping issue despite Microsoft’s multi-billion-dollar investment in the platform. Lack of developer interest is not the issue here, as highlighted by the high levels of Intentshare. Developers seem to be on standby, waiting for the market signals – the consumer adoption - that justify an investment in the platform. Moreover, Microsoft’s attempt to fund development of Windows Phone apps created misalignment of developer incentives. Instead of focusing on consumers, developers were focused on getting the easy money, which resulted in sub-par apps. As we said earlier, you can’t buy developer love. The majority of mobile developers have already adopted iOS and Android, hence the relatively low Intentshare among those platforms. Beyond iOS and Android, mobile developers are showing interest in Facebook, with 23% of mobile developers indicating that they plan to adopt the platform. Facebook offers little in terms of mobile app development at present but it provides unprecedented reach. With around 1Bn active users, it is one of the widest reaching digital platforms on the planet. 20 © VisionMobile 2013 | www.DeveloperEconomics.com
    • The considerable levels of Intentshare for Windows Phone (47%) and BB10 (15%)indicate that there is still developer interest in a viable third app ecosystem. 21 © VisionMobile 2013 | www.DeveloperEconomics.com
    • Multi-platform developers are better off74% of developers use two or more platforms concurrently 74% of developers use two or more platforms concurrently. At the same time, developer platform choices are now narrowing. On average mobile developers use 2.6 mobile platforms in our latest research, compared to 2.7 in 2012 and 3.2 in our 2011 research. The Android-iOS duopoly in smartphone sales is gradually creating a concentration of developers around these two platforms: 80% of respondents in our sample develop for Android, iOS or both, making them the baseline in any platform mix. Developers that do not develop for one of these two platforms generate, on average, half the revenue of those developers that do, leaving little doubt as to the concentration of power within these two major ecosystems. In our Developer Economics 2013 survey of over 3,400 developers we found that 49% of developers use just one or two mobile platforms concurrently and 75% use up to three mobile platforms. The number of platforms developers use depends to some extent on which is their lead platform. In mobile development, loyalty to one platform is not something that pays off. Our research shows that the revenues are higher when using more platforms. For example, an iOS developer porting an app on Android is likely to experience some growth in revenue. At the same time, for developers working on four or more platforms, higher revenues are probably the result of extending an already successful app to more platforms. Obviously, this is not something that all developers can afford to do; it is a strategy more suited to large publishers or commissioned developer teams that are large enough to support a number of platforms. 22 © VisionMobile 2013 | www.DeveloperEconomics.com
    • iOS vs Android shoot-outiOS is the best platform for generating revenue but Android provides abetter learning curve and lower cost With iOS and Android forming the baseline for mobile app development, the obvious question is: which is best for app discovery, learning curve, cost and revenue potential? The shoot-out between the platforms favours iOS, which was ranked higher on four out of the seven platform aspects, with a clear advantage on app discovery (50% iOS vs. 23% Android) and revenue potential (66% iOS vs. 12% Android). The perception that iOS provides better monetisation opportunities is well established with developers as evidenced by our survey data. The iOS platform also leads, but with a smaller margin on development environment and documentation. On the other hand, Android has a clear advantage on cost (32% Android vs. 14% iOS) and a small lead on learning curve. For most developers, the platform perceptions boil down to a decision about which platform to prioritise, or which of the two platforms to develop for first, where iOS clearly comes on top with 42% against 31% for Android. Several other factors may come into play when making a decision on the “lead platform”, such as prior experience or regional platform mix, but it is fair to say that iOS comes out as the winner in developer perceptions. 23 © VisionMobile 2013 | www.DeveloperEconomics.com
    • Most mobile developers are iOS-first48% of iOS developers prioritise Apple against all other platforms. Theyare followed by Android and BlackBerry developers In our survey of over 3,400 developers, we compared platform preference, by asking developers which is their main platform among all the platforms they are using. iOS emerged as the highest priority platform, with 48% of iOS developers using it as the lead platform among all others. Among Android developers, 44% use it as a lead platform. BlackBerry developers also tend to prioritise their platform: 38% of those using BlackBerry, use it a their lead platform. Together iOS, Android and BlackBerry constitute the lead platforms. Besides lead platforms, Windows Phone and HTML are seen as a main platform by about a quarter of all developers that use them. We call these extension platforms, as they are typically used by developers to extend their app footprint into customer segments or regions that are not adequately covered by their lead platform. At the tail end of developer preference are Symbian, Qt, Flash and JavaME , which we call “gap fillers”. These are mainly older-generation platforms that are now used to address all remaining mobile market niches, but cannot survive as lead platforms on their own. Symbian for example, still has a large installed base, almost double that of BlackBerry, but given the expiry date set on Symbian handset production, few developers will invest much effort on the platform. 24 © VisionMobile 2013 | www.DeveloperEconomics.com
    • HTML5 trades off capability for portabilityHTML5 wins in code portability and low cost development but needs abetter dev environment and native API access to compete with native HTML5 is becoming a viable alternative to native development across a number of app categories. In Developer Economics January 2013 we found that HTML developers mainly focus on specific app categories such as Business & Productivity (42% of HTML developers), Enterprise (32%) and Media apps (28%). On the other hand, Games are not a common category among HTML developers (12%). We asked developers that use or are planning to use HTML about the reasons for platform selection. The majority indicated code portability as the main incentive for using HTML5. Low cost development is the second driving force “Multi-platforms development is a for HTML5 adoption, highlighted by 51% of major challenge. For a solo developers. developer there is so much they need to look at. You can use cross- HTML is still an “extension platform” as we saw platform tools like PhoneGap but earlier. We asked developers that use, have used or it’s not that simple, there is a lot of are planning to use HTML what they think HTML5 tweaking to be done. Going native needs to compete with native platforms. Access to can also be hard, it takes a lot of native APIs is a top challenge with 35% of time and patience. HTML5 will help developers indicating this as a critical success things go in the right direction.” factor. HTML5 will always be a step behind in Glenn Stein support for native APIs, given that platform Java developer and Maker of PhraZapp 25 © VisionMobile 2013 | www.DeveloperEconomics.com
    • vendors are always a step ahead of cross platform tools and browser vendors. Inaddition, the HTML5 development experience is subpar, with developers indicatingthat a better development environment (34%) and better debugging support (22%) areneeded. More importantly, optimised HTML5 devices were not seen as important asthe native API access or dev environment. This leads us to conclude that HTMLproponents such as Facebook, Mozilla and Google should focus on cross-platform tools and development environments on at least equal levels asthey focus on full platform efforts like Facebook Platform, Firefox OS andChrome OS. 26 © VisionMobile 2013 | www.DeveloperEconomics.com
    • Tablets go mainstream, TV apps still niche64% of developers now develop for tablets, while HTML is equally usedacross smartphones, tablets and desktop The majority (86%) of 3,460 developers in our survey develop on smartphones, while a large share of them also develop on tablets, led by iOS developers (76%) indicating the attractiveness of the iPad as a development and monetisation platform. Despite the rise in Android tablet share during 2012, we did not observe a significant increase in the share of Android developers targeting tablets (64% vs. 62% in our Q1 2012 survey) although we believe this is likely to change in the near future. HTML developers take a more platform-agnostic approach, as they develop across smartphones, tablets and PCs almost equally, according to our survey, a testament to the use of HTML as cross-screen app development technology. At the same time, HTML limitations, such as lack of support for native APIs, tooling and device optimizations, “The next 6 months will be about the prevent it from becoming a swiss-army knife for tablet war. As cheaper models enter cross-platform development. the market, consumption of both the devices and the apps that run on TV development remains niche, at the same them will increase tremendously.” levels reported in Developer Economics 2012, as George Karavias the hype cycle around the “Smart TV” experience Developer and CEO is yet at a very early stage. This seems in line with Anlock findings from research firm NPD, who reports that 27 © VisionMobile 2013 | www.DeveloperEconomics.com
    • only 15% of Smart TVs are connected to the internet, limiting their appeal to appdevelopers.It is also worth noting the trend of using phones or tablets as a remote control for othersmart, connected appliances in home automation, in-car entertainment, healthmonitoring, retail, logistics and even industrial monitoring. 28 © VisionMobile 2013 | www.DeveloperEconomics.com
    • Advertising is the most popular revenue modelAdvertising used by 38% of developers but is the monetisation modelwith the least revenue per app Advertising has increased in popularity over the past year and has now overtaken pay-per-download as the most popular revenue model, used by 38% of mobile developers in our survey. Advertising is particularly popular on Android and Windows Phone, used by 45% and 53% of developers respectively. This is consistent with the view that consumer spending on Android is generally lower than on iOS, leading developers to select alternative means for monetising their apps. However, advertising lags behind all other revenue models when it comes to monetisation, bringing on average of around $1,000 per app-month, considerably lower than other revenue models. Advertising is particularly popular in Asia (50% of developers in Asia), in Africa (42%) and South America (41%). These are mainly emerging economies where direct consumer spending on apps may be lower than more affluent regions. Pay-per-download (PPD) remains popular, used by 34% of the developer population in our survey. However, it is still the dominant revenue model on BlackBerry and iOS, with 53% and 38% of developers of those platforms using it. In terms of revenue, PPD fares better than advertising, generating about 30% more revenue per app-month, 29 © VisionMobile 2013 | www.DeveloperEconomics.com
    • however it comes second to last among all revenue models. PPD is more frequentlyused by developers in Europe (33%) and the US (32%).In-app purchases and Freemium are on the rise, having grown by 50%compared to our 2012 survey and are now used by more than a quarter of thedevelopers in our survey. In-app purchase is now the second most popular revenuemodel on iOS, with 37% of developers using it, falling slightly behind PPD. Aftersubscriptions, IAP brings in the highest average app-month revenue at $1,835. IAP andFreemium are used much more widely in Asia than in any other region (30% and 31%respectively, of developers in Asia).Subscription-based models, while not very popular (used by just 12% of developers),come out on top in terms of revenue per app-month, at an average of $2,649.As mentioned in our previous Developer Economics report, while the subscriptionmodel is more lucrative than other revenue models, it is not a model that any developercan use as it requires significant investment in ongoing, engaging content thatconsumers will pay for an a regular basis. 30 © VisionMobile 2013 | www.DeveloperEconomics.com
    • Revenue haves and have notsFor developers interested in making money, 67% earn less than $500per app per month and are below the app poverty line. Around 18% of 3,460 respondents in the Developer Economics 2013 survey indicated that they are not interested in making money from apps. Nevertheless, out of the vast majority of developers that are in it for the money, 67% are not making enough to sustain them or their business, i.e. they are below the “app poverty line” of $500 per app per month. For the majority of developers, app development is not financially rewarding. Overall, less than 1 in 5 Blackberry developers make more than $500 per app-month. The situation is almost as challenging on Windows Phone where just 19% of developers generate more than $500 per app-month, with 61% below the poverty line. The findings of our survey are somewhat better for Android and iOS although these platforms too, are far from a developer paradise: 55% of iOS and 54% of Android developers are below the poverty line. Excluding developers that are not interested in profit, 62% of iOS developers and 67% of Android developers are not making more than $500 per month per app. 31 © VisionMobile 2013 | www.DeveloperEconomics.com
    • HTML seems a surprise here with just 45% of HTML developers under the poverty line,far lower than any other platform. However, there are fundamental differences betweenHTML and native platforms which are responsible for the differences observed here:developers using HTML for web development have access to a much larger user basecomprising desktop and mobile users, irrespective of platform. Among HTMLdevelopers, subscription-based revenue models are much more popular than on nativeplatforms pointing to established online content or service businesses that haveexpanded on to mobile. 32 © VisionMobile 2013 | www.DeveloperEconomics.com
    • The steep learning curve of app entrepreneurship49% of developers build apps they want to use themselves, but end upgenerating the least revenue Almost half of developers (49%) in our survey decide which apps to develop based on their own needs. Those same developers end up generating the least amount of revenue per app per month, indicating that they have a lot to learn in how they plan their app business. Naturally, planning a business based on own needs may yield a good customer understanding, but lacks the rigor of market research or of extending proven app recipes into new countries or verticals. We find it remarkable that only 24% of “The developer learning curve is developers in our sample plan their apps based far steeper on the business side on discussions with users, a figure which does than on the coding side, and its not change with development experience or getting steeper.” proficiency. This indicates that the bottleneck of the build-measure-learn George Karavias Developer & CEO cycle of lean development is the Anlock “measuring”, or listening in to user needs. This highlights the need for a frictionless 2-way feedback channel between developers and users, much like what GetSatisfaction pioneered 33 © VisionMobile 2013 | www.DeveloperEconomics.com
    • for web apps, and which now HelpShift is “Competitive analysis is the keypioneering for mobile apps. when it comes to decide what app to develop next.To decide which apps to build, a sizeable share ofdevelopers uses market research and competitive Jai Jaisimha CEOintelligence. Market research and competitive Open Mobile Solutionsintelligence are well-established practices inbusiness development and we expect that theincreasingly business-savvy developer populationwill, in the near future, invest more effort in theseelements when designing a product strategy.Developers that publish more apps per year tend to make decisions based on differentcriteria than those publishing only a few apps per year. For developers publishing 16+apps, the decision mainly lies with clients or management - these are mostlyprofessional developers that work on commissioned apps or as employees of largerpublishers where the decision on which app to work on is mainly based on a defendablebusiness case. Developers publishing more apps also tend to rely on market researchmore, whether that is purchased research or own research through app storemonitoring and analytics services.The most successful strategies are those that extend an app into markets,either into verticals or different geographies. To some extent these strategiesrely on an already established and successful business: these are apps that have beentried and proven in at least one market and are generally less risky options or “lowhanging fruit” for developers. 34 © VisionMobile 2013 | www.DeveloperEconomics.com
    • 35© VisionMobile 2013 | www.DeveloperEconomics.com
    • CHAPTER TWOThe Developer Tools LandscapeThe cogs and gears of the app economyApp developers have witnessed many, radical changes since the creation of the appseconomy. In 2008, app developers were the engineers and geeks experimenting withnew mobile software platforms. In the next two years to 2010, developers transitionedfrom engineers to entrepreneurs, and the mobile industry moved from “developers willcome to us” to “we must go to them”. Developers moved from being coders, toinnovators, entrepreneurs, designers and marketers. Today the developer is not just anengineer, entrepreneur, designer or marketers - developers are a prized customerfor the 100s of firms making up the SDK economy, part of the bigger B2D(business to app developer) market.Developer needs have grown, too, to cover the entire lifecycle of an app, acrossplanning, development, reach, monetisation and customer support. The focus ofdeveloper attention has moved from coding to marketing and to supporting customers.We model developer needs based on “jobs to be done”, from the seminal workof Harvard Professor Clayton Christensen in understanding user incentives as a way todesign products.Developers are called to answer key questions such as: How do I select a platform? Howdo I identify my target market and which devices are my customers using? How do Imonetise my apps? What is the best way to promote my apps? How do I beta test withreal users? How do I go about setting a pricing strategy? How do I get user feedbackand manage reputation in the marketplace?All these questions correspond to the numerous “jobs to be done” for developers,mapping to the needs that developers have to address along the app lifecycle. Thesesame jobs create opportunities for SDK and tools vendors. The jobs to be done andopportunities for SDK vendors are best illustrated by the DeveloperJourney, a concept we first introduced in our Developer Economics 2010 report,shown on the next page.The structure of the Developer Journey “Tool and libraries significantlyhasn’t changed much in the last three changed the way apps areyears; what has changed is the flurry of developed today. Primarily savingstartups that emerged to cater to those time on coding and influencingneeds, making the developer journey the way one decides about featuresconcept a compass for opportunities in the (based on availability of libraries)SDK economy. This SDK economy, and new capabilities.”popularised by the likes of Appceleratorand Zong, has emerged to support the Shai Levy Freelance Android developerdiverse and growing range of developer Israelneeds. 36 © VisionMobile 2013 | www.DeveloperEconomics.com
    • App developers today have over 500 third party tools (APIs, SDKs, components) tochoose from, catering to every stage along the developer journey. These tools lowerbarriers to entry, reducing development costs,smoothing the learning curve, multiplying go to “Searching for developer tools onmarket channels and streamlining marketing. Google isn’t effective – it’s not theDeveloper tools, from ad networks to user results, I just don’t know how toanalytics SDKs are a core part of the Android and describe the tools I am lookingiOS platform economics. Such tools augment the for.”networks effects present in platform ecosystems by Raj Singhaccelerating app creation and reducing developer Founder & CEO Tempo AI, Inccosts and risks. At the same time, lack of such toolson competing platforms like Windows Phone orHTML is a serious handicap making competitionwith the incumbent duopoly even harder. Whileleading platforms like Apple often divide and “Having presence in 12 countriesconquer among SDK vendors with changes to API meant that localisation has been aor app store policies, follower platforms like real challenge during appWindows Phone often subsidize and bundle development. Adapting contentdeveloper tools within their marketing campaigns. and ensuring that everything isDeveloper tools have become a major right for the particular audienceplatform differentiator and a developer required significant effort.”attractor. Alexander Löffler Senior Product Manager (mobile)Developers today have at their disposal an Yelster digitalabundance of tools including app store analytics, 37 © VisionMobile 2013 | www.DeveloperEconomics.com
    • user analytics, cross-platform tools, crash analytics, marketing and monetisation tools, all of them with zero entry-level pricing. We have been researching the SDK economy for the past few years, and have been tracking a growing number of (currently) over 20 developer tools categories. For detailed tool listings see our developer portal on build.DeveloperEconomics.com.Table: Developer Tools and ServicesName Description Example of vendorsA/B testing tools Allow developers to measure user reactions Pathmapp, Swrve, Amazon A/B Testing and performance when introducing new app features.Ad exchanges Technology platforms for buying and selling Inneractive, MobClix, Burstly online ad impressionsAd networks Ad networks connect advertisers to in-app AdMob, InMobi, Leadbolt inventory.App discovery services Tools to facilitate discovery of mobile apps AppCarousel, Appsfire, Chomp (now Apple) through search or recommendations.App factories Code-free, visual design tools for easily Mobile Roadie, Appflight, Red foundry, building mobile applications, aimed at non- iBuildApp codersApp store analytics Tools to analyse app downloads and sales Distimo, App Annie, AppFiguresApp testing & certification Mobile application testing and certification Apkudo, TRUSTe, uTest services.Back-end as a Service Cloud services providing data storage, user Parse, CloudMine, Sencha.io management and messaging servicesBeta-testing tools Platforms facilitating app testing by end TestFlight, The Beta Family, Mob4Hire usersCrash analytics tools Tools for app crash analytics, bug tracking, BugSence, TestFlight, Crittercism beta distribution, performance analysis.Cross platform tools Tools to create applications for multiple PhoneGap, Appcelerator, Adobe Air platforms from almost the same codebase or design tool.Cross-promotion services Ad networks, or promotion channels that Tapjoy, Flurry, Chartboost allow the promotion of apps within other appsCustomer support Streamlined customer feedback and support HelpShiftIn-app purchase tools Allow developers to monetise by in-app Boku, PapayaMobile, Fortumo selling of additional content, features or virtual goodsPerformance management Tools monitoring and managing the app Soasta, New Relic (web), Compuware performance and availabilityProject management Tools & services used to manage app Microsoft Project, Basecamp, Pivotal Tracker, development projects, both for agile and Assembla, Redmine traditional structured methodologiesPush notifications Enables pushed message to be sent to an warp.ly, Urban Airship app as part of notifications or marketing campaignsSource code management Configuration management and code Git, Mercurial, SVN, GitHub, BitBucket, Kiln collaboration tools, either self-hosted or cloud-basedTranslation / localisation Translation services and localisation tools Transifex, Applingua, Localeyestools for appsUI prototyping tools Tools to prototype the user interface of an Balsamiq, InVision app applicationUser Analytics Tools that track app usage in order to Google, Flurry, Apsalar, Tapstream optimize user engagement. Source: VisionMobile 38 © VisionMobile 2013 | www.DeveloperEconomics.com
    • In Developer Economics 2013 we surveyed six “Marketing has been a steepdeveloper tools sectors: advertising, back-end as a learning curve for us. When weservice, cross-platform tools, cross-promotion started we knew nothing aboutnetworks, user analytics and voice services. We ‘ll be it.”taking a closer look at these sectors next. Duncan Steele Co-FounderWe picked the key players in each sector and ranked Valetta Venturesthem by their popularity among developers. We alsoasked developers about the reasons they selectedeach service and identified the top decision criteriafor each tool and sector. Finally, we found out howpopular each tool sector is and how its usage varies across the major mobile platforms.In the next section we present our key findings for most of these sectors. We will bedissecting these results even further on our developer portal atbuild.DeveloperEconomics.com providing more detailed information onindividual tools, and what developers think about each one of them. 39 © VisionMobile 2013 | www.DeveloperEconomics.com
    • Advertising is the most popular developer service34% of developers integrate an advertising service within their app butonly 14% use a back-end service As part of the Developer Economics 2013 research, we found that 90% of the 3,460 developers we surveyed use at least one 3rd-party tool or service, with an average of 1.47 tools used concurrently. Among the top mobile platforms (Android, iOS, HTML, BlackBerry and WP), iOS developers tend to use third party tools and services more frequently, followed closely by Android, indicating the higher maturity of tools in the two main ecosystems. Usage of third party tools and services is highest among developers working on media apps (including news, sports, weather, magazines) and games developers, using on average 1.80 and 1.75 tools respectively. Use of third party tools and services rises with the number of apps developed and therefore the scale of the organisation which developers work for. Developers who have worked just on one app during the past 12 months use, on average, 1.27 of the developer tools in our survey, rising to 2 tools for developers working on 10 or more apps. However, usage does not increase with the number of apps for all the developer tools surveyed. For example, cross platform tool (CPT) usage is stable for developers working on 2+ apps. On the other hand, usage of advertising services rises with the number of apps a developer is working on. 40 © VisionMobile 2013 | www.DeveloperEconomics.com
    • Developers below the poverty line (less than $500 per app per month) use on average1.55 tools; this creates a negative feedback cycle where revenue expectations can’tjustify an investment in tools to improve the app development or marketing process.More affluent developers are using 1.94 tools on average, which indicates that they aremore sophisticated in their marketing and development process.Among those developer services that we benchmarked the most popular is ad networksand exchanges, reflecting the widespread popularity of advertising as a revenue model.Advertising is the most popular revenue model but developers also use it as apromotion channel that facilitates app discovery.The next most popular tool category is user analytics, i.e. tools that track usage of anduser behaviour within an app. Visibility into user behaviour is essential for developersthat want to decide which modules and features are used most by end-users andoptimise their app accordingly. User analytics services also help developers understandtheir user-base and improve user targeting. Cross-platform tools are almost as popularas user-analytics overall, used by 27% of developers.Crash analytics services help developers identify bugs in live apps by generating crashreports and sending them to the developer. Despite the profound benefits that suchservices can have on the quality and user experience, our survey shows that just 17% ofdevelopers use crash analytics or bug tracking services.A sector that has been on the rise lately is the Backend-as-a-Service, providing servicessuch as user management, remote data storage and push notifications to developers.14% of developers in our survey employ BaaS services. Coming next in popularity arecross-promotion networks, only used by 7% of our sample.It is important to note that some of the developer tools we benchmarked competedirectly with services available by native platforms. For example, iOS provides crashreporting and sales analytics, while Google provides user analytics. However nativeplatform services usually lack in terms of features or flexibility compared to dedicated3rd party developer tools. 41 © VisionMobile 2013 | www.DeveloperEconomics.com
    • Cross Platform ToolsPhoneGap and Appcelerator lead developer mindshare across tens ofCPTs Cross-platform tools (CPTs) address real challenges for developers. Cross-platform tools allow developers to create applications for multiple platforms - usually mobile, but increasingly tablets or TV screens - from almost the same codebase or from within the same design tool. CPTs reduce the cost of platform fragmentation and allow developers to target new platforms at a small incremental cost. More importantly, cross-platform tools allow software companies targeting multiple platforms to reuse developer skills, share codebases, synchronise releases and reduce support costs. CPTs can be used to develop native, hybrid and web apps and come in several technology flavours: JavaScript frameworks, App factories, Web-to-native wrappers, Runtimes and Source code translators. There are over 100 CPTs that we identified in our Cross Platform Tools report published in February 2012. Developers most often use several cross-platform tools; on average CPT developers will use 1.91 CPTs, confirming the lack of maturity and niche nature of cross platform tools 42 © VisionMobile 2013 | www.DeveloperEconomics.com
    • much like we observed in our dedicated CPT survey just over a year ago. Moreover, wefound that one in four developers will use more than three cross platform tools. Thelack of a one-size-fits-all and immaturity in the CPT landscape is what is stalling crossplatform tools from shifting the balance of power in the iOS / Android duopoly towardsalternative platforms.Cross platform tools are most popular for developers focusing on HTML development,with 38% of of them using CPTs for development. CPTs and particularly JavaScriptframeworks and web-to-native wrappers (e.g. PhoneGap), provide a relatively smoothtransition to mobile apps for web developers: in our Cross-Platform Developer Tools2012 report we found that 60% of developers using CPTs have over 5 years experiencein web development. Usage of CPTs is popular among iOS developers, while usageamong Windows Phone developers is much lower, presumably due to historical lack ofsupport for the iOS platform from CPT vendors and Microsoft’s financial incentives forthe creation of native apps.PhoneGap tops CPT rankings, used by 34% of developers, followed by Appcelerator andAdobe Air with 21% and 19% developer mindshare respectively. With over 100+ crossplatform tools available, the choice of which is “the right tool” for developers can be adaunting challenge. Choosing between CPT technologies is not straightforward (i.e.whether to go for a web-to-native wrapper or a JavaScript framework). Moreover,developers need to try out a cross-platform tool to see if it aligns with their needs interms of performance, learning curve, access to native APIs or look & feel. It’s never ablack or white decision.The most important selection criterion for CPTs is their availability across platforms.Due to their deep platform integration, CPT tools support iOS/Android platforms first,and others secondly. Beyond cross-platform availability, 38% of developers using CPTsselect their tools based on development speed and 33% based on the learning curve.Since CPTs aim to expedite and facilitate development across platforms, they shouldprovide a clear advantage over native platforms when it comes to speed and ease ofdevelopment to justify their use. Amidst differentiating features for CPTs are access tonative APIs, performance optimisation and the ability to reproduce native UI elementson each platform. 43 © VisionMobile 2013 | www.DeveloperEconomics.com
    • Ad networks and mediation enginesAdMob dominates ad networks (65%) and Inneractive leads among adexchanges (12%) With advertising being the most widely used revenue model among developers, advertising services attract considerable developer interest taking the top spot among the developer tools that we benchmarked. Providers of ad services monetise their service by taking a direct cut of advertising revenue generated by developers through revenue models like cost-per-click, cost-per-impression or cost-per-action. With 100+ ad networks and exchanges, there is intense competition, regional specialisation and vertical-oriented solutions. In spite of this diversity, several ad services are not profitable. The ad services we benchmarked are either “Selecting an ad network is a advertising networks that provide direct access to lottery. It’s easier if you have a their own pool of ads, or ad exchanges (also known regional-centric app, but it’s a as mediation engines, but excluding real-time challenge if you have a global app, bidding exchanges) that act as aggregators, as there’s no best-performer automating access to a large number of individual globally.” ad networks. Ad exchanges offer some flexibility to John Cooper Founder Pyxis 44 © VisionMobile 2013 | www.DeveloperEconomics.com
    • developers by allowing them to select between “Were reviewing and changingmultiple ad networks through a single SDK - the ad-networks we work with onoffering better fill rates and eCPMs. At the same a monthly basis to get the besttime, ad network SDKs often provide access to deals available.”more features available, than the genericfeatures available through an ad exchange. CTO Games industryOur survey of 3,460 developers indicates that,among developers using ad services, 27% use anexchange and on average use 1.59 ad servicesproviders. There is a large variance in the number of developers using ad servicesdepending on the scale of development: those developing less than 5 apps per year tendto use ad-services much less than those developing more than 5 apps per year. Amongdevelopers that develop more than 16 apps per year, most likely working for largepublishing houses, software services companies or agencies, about 60% use ad servicesin their apps.Ad services are most popular with those who develop primarily on Windows Phone andAndroid (46% of WP developers and 43% of Android developers), and less so on iOSand BlackBerry (35% and 31% respectively). This is in agreement with our findings onrevenue models being used on each platform, with developers on Android andWindows Phone relying heavily on advertising to monetise their apps.AdMob, a service acquired by Google in 2010 is clearly the dominantplatform in mobile ad services, adopted by 65% of developers that use adservices. AdMob has recently expanded to ad exchange services, a move that aims tocounter the threat that ad exchanges pose for Google. Second runners, each used by12% of developers, are Inneractive, an ad-exchange/mediation service and InMobi, anad network growing out of India to become a major player in emerging markets:InMobi’s mindshare is 17% in Asia and 33% in Africa according to our survey. Apple’siAd service comes fourth overall with 11%, and despite being quite popular among iOSdevelopers, AdMob is the leading ad service on iOS, used by 66% of iOS developers thatwe surveyed.Ad exchanges are complementary to ad networks. For example, developers will use oneservice with high eCPM but low fill rate and another with lower eCPM but nearly 100%fill to plug the gaps in the better paying service. When selecting an ad network orexchange, availability across platforms comes on top in both cases. Ease of integrationis also very important, particularly so for developers using ad networks. Supported adformats, revenue potential and fill rate are secondary selection criteria, and thereforeconstitute differentiation factors across advertising services. 45 © VisionMobile 2013 | www.DeveloperEconomics.com
    • User AnalyticsThe user analytics duopoly: Google (69%) and Flurry (49%) are wellahead of competition User analytics services are becoming increasingly important as competition for app users continues to rise. The ability to track how users interact with apps is extremely valuable for app developers, designers and product managers alike, and to some extent acts as a proxy for user feedback. The absence of a direct two-way communication channel between developers and users means that user analytics often provide the only feedback channel from user to developer. Our survey of 3,460 developers shows that 28% of developers use user analytics services overall, and the usage rises with the number of apps developed, reaching 39% among developers working on more than 10 apps per year. User analytics services are significantly more important for iOS developers that developers of other platforms - used by 39% of iOS developers in our survey vs. 28% for Android, 25% for WP and 15% for BlackBerry. Usage of analytics serves as an indicator of the level of competition among developers on different platforms. The greater the competition, the higher the need for insights on user 46 © VisionMobile 2013 | www.DeveloperEconomics.com
    • behaviour provided by user analytics services. The red ocean competition in the iOSApp Store pushes developers towards increased sophistication in tracking andimproving user engagement and retention efforts, and therefore greater use of useranalytics tools. In comparison, among the top platforms, user analytics tools are theleast popular with BlackBerry developers (15%), indicating lower levels of competitionamong developers on this platform.The picture in user analytics services is quite telling with two services dominating:Google and Flurry. Google has traditionally been strong in web analytics but it has nowextended its stronghold on to mobile platforms commanding a 69% mindshare amongdevelopers employing user analytics services. Its dominance is mainly observed amongHTML developers. Runner-up Flurry, is used by 49% of developers employing useranalytics services, particularly on iOS (64% vs. 58% for Google). Flurry, being one ofthe pioneers in user analytics is the de-facto analytics platform for developers reachingover 700 million devices each month. Beyond these two services, there are numeroussmaller players vying for third place, currently held by Testflight Live, a service recentlyacquired by ad mediation service Burstly. Note that user analytics are a distinct toolssector to app store analytics (e.g. AppAnnie, Distimo), which provide analysis of appsales and downloads.User Analytics services are mostly used in media and entertainment apps (36% ofdevelopers). Google analytics is stronger overall across all these categories, with theexception of Games where both Google and Flurry are equally strong.Developers opt for analytics services that are easy to integrate within their apps or thatare available across several platforms as indicated by 51% and 49% of developers usinguser analytics services, respectively.Optimising analytics comes as thirdpriority, with 31% of developers using “Mobile analytics help you understanduser analytics services being concerned how users interact with the apps and whatwith the depth of analytics, and 13% customers really want. They arebeing interested in real-time reports. ultimately useful to UX specialists to helpCost is also a deciding factor as pointed them find out where to aim, how to giveout by 28% of developers employing user real value to the user, which features toanalytics. offer, and how to improve the overall experience.” Dimitris Makris Co-Founder and Head of Mobile Trebbble 47 © VisionMobile 2013 | www.DeveloperEconomics.com
    • Backend-as-a-ServiceParse leads with 28% but competition for second spot is heating up asBaaS rises in popularity As mobile apps become more sophisticated, so the need increases for back-end features like managing users, introducing social features, or synchronizing data with the cloud. App design and development is usually the focus of the initial app efforts, with back- end features lacking sophistication or scalability, until the very time when they are mostly needed. Off-the-shelf mobile Back-end-as-a-service (BaaS) services can save considerable time for developers that need backend support for their apps. At the very basic level, mobile BaaS services offer a managed, cloud-hosted database that scales as the user base grows. BaaS services provide additional functionality on top of this base layer that usually includes user management, push-notifications, social features and large-file cloud storage. Our survey of 3,460 developers indicates that backend services are currently used by 14% of developers, and more frequently by developers working on 16+ apps per year (25%). Backend services are used slightly more on iOS (18% of iOS developers) than on 48 © VisionMobile 2013 | www.DeveloperEconomics.com
    • Android or WP (15%), while BlackBerry “Startups usually fail in the back-enddevelopers use these services much less (9%), because they are more likely to go viralas a result of limited support among these very quickly and might not be able to scaletools for BlackBerry. their back-end fast enough. People don’t perceive a failure of a back-end as a back-The undisputed mindshare leader in mobile end failure. They say that the game is tooBaaS is Parse, used by 28% of all BaaS users, slow or doesn’t work pretty well.”followed by enterprise-focused CloudMine(11%). Sencha.io and ACS, both commanding a Toli Lerios Engineer (backend development)10% share among developers using BaaS, are Facebooksolutions that are well integrated with theircorresponding development frameworks(Sencha and Appcelerator) and therefore donot directly compete with services such as Parse or StackMob. The Backend-as-a-service market is in early stages, crowded with over 30 vendors that strive todifferentiate by constant innovation and additions to their feature sets but we have yetto see any service dominating the sector to the extent observed in other developer toolssectors, such as ad services or user analytics tools.Although core features are common among most BaaS providers, there are differencesbetween them that make the selection easier. For example, the ability to export data isnot offered by all services. Developers often find BaaS restrictive for their apprequirements, which has led to BaaS providers such as Parse, StackMob and Kinvey toenable developers to implement custom business logic. At present however, our datashows that developers frequently opt for a custom-built backend solution rather than aBaaS for greater flexibility.The main BaaS selection criterion for developers is, as in most third-party developerservices, availability across platforms. However, the richness of the feature set is almostequally important, as is the flexibility of the service, e.g. the ability to implementcustom business logic. Ease of integration and use, stability and performance areimportant to 25% of developers using backend services. Another important aspect ofbackend services is pricing flexibility, i.e. the way costs scale with usage. Developerswhose apps experience a sudden surge in user base may find it challenging to scale theircosts as usage grows.We also asked developers using backend services to highlight the most important BaaSfeature. 28% of developers using backend services indicated data management and 18%indicated user management and authentication. Next most important features are pushnotifications and content management, followed by e analytics (9%), file storage (7%),cloud code (custom logic) (6%) and social graphs (3%).The backend service sector is relatively young and expected to grow as developersfamiliarise themselves with such services and realise their potential. At the same time,there is much room for improvement as BaaS providers better understand and adapttheir services to developer needs such as flexible and customisable business logic. Theneed for flexibility and relative feature parity points to the opportunity for an opensource back-end service that can be monetized like Github. 49 © VisionMobile 2013 | www.DeveloperEconomics.com
    • Cross Promotion NetworksTapJoy (53%) is the leader in cross-promotion promotion, with Flurry(20%) and Chartboost (18%) following behind Cross-promotion networks (CPNs) are used by developers both as a means for promoting their apps and monetising apps. When used for promotion purposes, there are numerous revenue models, some offering free traffic exchange between apps, enabling developers to run low cost or free promotions. However, several CPNs operate on a cost-per-install basis, with developers paying for each user acquired. A special case of cross-promotion is incentivised installs, where the user gets rewarded for installing an app, a practice that Apple has been trying to restrict on the App Store. Used by 7% of developers overall, usage of cross-promotion services is not very high and does not vary significantly by platform. Usage is higher among developers that develop games (13% of all games developers) and higher than average among developers working on comms & social networking apps (9%), entertainment apps (10%) and music & video apps (10%). Overall, developers using CPNs will use 1.7 CPNs on average. 50 © VisionMobile 2013 | www.DeveloperEconomics.com
    • Cross promotion network usage increases with the number of apps developed, rising to15% among developers who work on more than 16 apps per year. For developersworking on several apps it makes sense to cross-promote within and across their appportfolio, a strategy widely practiced by Facebook games market leader Zynga.Based on our survey of 3,460 developers, TapJoy is leading in the cross-promotionspace, used by 53% of developers that use CPNs. Flurry AppCircle and Chartboost,follow at some distance and are competing for second spot (20% and 18%), while thereare numerous other providers with over 5% mindshare.In the competition among cross-promotion networks, the three most importantselection criteria are the number of users reached, cross-platform availability and easeof integration. For developers who use CPNs for promotion purposes, cost is alsoimportant. We found that, on average, the typical CPI (cost-per-install) was $0.60among iOS and Android developers in our survey, with no notable difference betweenthese platforms. When used as a revenue source, the revenue potential becomesimportant, as indicated by 25% of developers using CPNs. 51 © VisionMobile 2013 | www.DeveloperEconomics.com
    • Voice ServicesSkype (39%) is leading, with Twilio (31%) following Voice APIs allow developers to integrate voice-call functionality within their apps, bypassing the telco services that traditionally provided these capabilities. Developers use voice services to enable a number of use cases such as voice calls, conference calls, video calls, voice transcription and voice portal services. Telcos are reacting to this trend for enabling use cases beyond classic telephony by opening up access to their services via APIs. The latest AT&T Call management API, powered by Voxeo Labs’ Tropo Platform, allows users to link their mobile number to over-the-top voice services provided via AT&Ts API, avoiding the need for a new phone number. AT&T has also partnered with Twilio as part of their “Advanced Communications Suite” allowing businesses to manage a host of comms services, including SMS shortcodes and teleconferencing via the Twilio API. While voice services cater to a number of different use cases, their use is relatively low among developers due to lack of awareness. We believe that voice services are still tied to the developer perception of telephony, and have a long way to go to the future voice- enabled apps where voice will become a third medium for in-app user interaction 52 © VisionMobile 2013 | www.DeveloperEconomics.com
    • beyond keys and touch. Voice-enablement leaders Twilio and Voxeo have seen muchpopularity within web developer circles, with Twilio rising once in late 2011 to a top-10API ahead of Facebook, as tracked by ProgrammableWeb. Yet these voice services areyet to make a major impact in mobile apps.The voice services surveyed cater to a diverse mix of use cases, and therefore do notoften compete against each other. Developers integrating voice services in their appstend to use them primarily for enabling voice call capabilities within their apps,including conference calls (33% of developers utilising voice services), outbound calls(29%), and inbound calls (24%). About a quarter of developers using voice services, areinterested in speech recognition while 20% use them to implement voice portalapplications or callback functionality.Skype leads in developer mindshare when it comes to voice services, used by 39% ofdevelopers that integrate voice services within their mobile or web apps. Skype does notprovide services through an API but rather through URIs that allow developers toinitiate Skype calls and chats directly from their websites, desktop and mobile apps.Developers using Skype use it primarily for conference calling (55% of developersutilising Skype in our survey), video calls (43%) and outbound calls (37%).Twilio follows at a short distance, utilised by 31% of developers implementing voiceservices. Twilio APIs allow developers direct access to voice services within their apps.Twilio users mostly use the service for outbound and inbound calls. Microsoft Voiceservices, used by 27% of developers using voice services, use it mainly for speechrecognition and speech transcription.Telco APIs such as those provided by AT&T and Verizon are less popular (17% and 10%of developers using voice services). The AT&T API is mainly used for conference callsand callback (36% and 32% respectively). Tropo is used by 5% of developers using voiceservices and is mainly used for Conference calls (50% of developers using Tropo),speech recognition (41%) and voice portal functionality.Most developers (39% of those using voice services) highlighted performance andquality as a top selection criterion for voice services. Voice quality is not guaranteed onmobile data networks but is critical in most use cases where voice services are used,particularly in real-time voice such as conference calling. While network quality is oftenout of the direct control of voice services providers, there is still a lot that can be doneon the service providers’ side such as optimising encoding algorithms and scaling thearchitecture of their voice infrastructure. Ease of integration and availability acrossplatforms are the prevailing selection criteria among all third-party tools and servicesare also important when selecting voice services, as highlighted by 35% and 34% ofdevelopers using voice services, followed by cost (27%). 53 © VisionMobile 2013 | www.DeveloperEconomics.com
    • 54© VisionMobile 2013 | www.DeveloperEconomics.com
    • CHAPTER THREERise of the mega-SDK vendorsThe developer tools land-grabSince 2007, the app economy has gone through three distinct phases: theexperimentation phase, with the first iPhone and Android models, when developersexperimented with the new platforms and saw the very first examples of successful appshitting the mainstream tech media.The second phase was about “celebrity apps” - Angry Birds, Cut the Rope and the manyovernight successes inspired hundreds of thousands of budding entrepreneurs anddevelopers bored with their day job. The tech media became preoccupied with findingthe next success story to write about. The VCs took notice too: investment in mobileapplications has steadily grown since 2009 and reached 15% of total VC funding in H12012, according to investment bank Rutberg & Co.The third and current phase is the establishment of apps as an economy. An era ofdevelopers as entrepreneurs, designers and marketers, rather than coders. Asdevelopers strive to create a sustainable app - whether consumer, enterprise, andwhether standalone, a web extension or a brand extension - new needs emerge alongthe journey of app planning, development, design, reach, monetisation and support.Those needs have spawned the creation of an SDK economy beneath the surface of theapp economy. This is the market of developer tools which form the cogs and gears ofthe app economy.The gold rush to develop apps has triggered a second gold rush to create services tocater to developer needs. Today there are around 500,000 app developers (incl.publishers) and 500 developer tools companies. For every 1,000 app startups,there is a developer tools startup.One of the very first developer tools to emerge was app store analytics, catering to thedeveloper need for tracking app downloads and sales. Mobile Ad networks alsoemerged early in the smartphone era, providing a solution to the monetisation problemfor developers. Ad networks, including ad exchanges form one most heavily supplieddeveloper tools sector, with 100s of companies participating. For example, Smaato, apopular ad exchange, connects to over90 ad networks and 35 DSPs. “Some tools are real pain killers – forCross platform tools followed soon after, example, we pay for things like customerhelping develop apps for more support, beta testing and crash managementplatforms, from a single code base. Led tools. Many tools will struggle as they are tooby PhoneGap and Appcelerator, the vertical and I find they keep undercuttingsupply of CPTs has exceeded 100 each other as a way to acquire customers..”vendors, many of which were covered in Raj Singhour Cross Platform Tools 2012 report, Co-Founder and CEOpractically making this area of the tools Tempo AI, Inc 55 © VisionMobile 2013 | www.DeveloperEconomics.com
    • economy a red ocean. “Consolidation is coming upon 3rd party services fast: One SDK to rule them all. YouThese days developers have have to be big and relevant to be successful:hundreds of tools to choose from, its going to be a one-stop shop is the future.”catering to every stage along thedeveloper journey - planning, Panos Papadopoulos Founderdeveloping, reaching, monetising BugSenseand supporting apps. These rangefrom UI prototyping and appdiscovery tools to localisation and customer support tools. The full list of developertools categories is listed in the introduction to Chapter 2. These tools allow developersto dramatically cut costs and effort in creating, marketing and monetising apps. Moreimportantly, the tools have lowered barriers to market entry, enabling smallerdevelopers to do much more than they would be able to do without them. A solodeveloper or small independent team is unlikely to be able to justify the investmentrequired to roll their own analytics, advertising or user management platform, or get tomarket in reasonable time building apps for multiple platforms simultaneously. Inother words, the SDK economy has lowered the entry barriers and as suchaccelerated the growth of the app economy.The Business to Developer (B2D) market, has seen a continual expansion in the lastthree years, with a flurry of startups emerging to address the ever increasing developerneeds. Besides the expansion, there is consolidation taking place inparallel. Consolidation is observed in two ways:Via organic expansion. For example Papaya started as a social SDK for games andexpanded to a virtual currency enabler, cross-platform games engine and more recentlya cross-promotion network. Flurry, a leader in user analytics launched AppCircle, across-promotion network. AppsFire, a leading app discovery tool, expanded into across-promotion network, push notifications and app store analytics.Via mergers and acquisitions. For example Appcelerator (a cross platform tool)acquired Aptana (IDE), Cocoafish (back-end-as-a-service) Particle Code (HTMLdevelopment) and Nodeable (big data processing). Apigee, a leader in API managementacquired Usergrid to expand to BaaS and Instaops for user analytics. Ad mediationengine Burstly acquired TestFlight. Flurry acquired Trestle, a back-end-as-a-servicecompany.Consolidation of developer tools is driven by four factors: integrationchallenges, end-to-end performance monitoring, discovery bottlenecks andthe tough B2D economics.The Developer Economics 2013 research found that ease-of-integration is a top-2reason for tool selection, across the majority of tools that we researched. By offeringmultiple tools in one, vendors reduce the integration overheads for developers.Secondly, consolidation is driven by the need for end-to-end app performancemonitoring. It’s not enough to understand the download patterns of an app, but tounderstand which ad network and channel led to that download, and which of thosedownloads have resulted in engaged users. Here, consolidation alongside the developerjourney make sense, as in the case of app store analytics vendor Distimo expanding 56 © VisionMobile 2013 | www.DeveloperEconomics.com
    • organically into user analytics. The benefits of expanding the range of services offeredacross the developer journey, also serves to deepen the developer profile informationheld by the vendor.Table: Mergers and Acquisitions in the Developer Tools space Company Product & type Acquired by Date Aptana Development environment Appcelerator Jan-11 Metismo Bedrock Java-to-native source Software AG May-11 code translator TapJS Game hosting platform and API AppMobi Jun-11 TapLynx App factory Push IO Jun-11 RhoMobile Rhodes enterprise apps Motorola Solutions Jul-11 framework Particle Code HTML development tools Appcelerator Oct-11 Nitobi Makers of PhoneGap Adobe Oct-11 Strobe Web app framework and app Facebook Nov-11 management platform Usergrid Backend-as-a-Service Apigee Jan-12 Cocoafish Post-download app services Appcelerator Feb-12 Worklight Enterprise app platform IBM Feb-12 Chomp App store search and discovery Apple Feb-12 TestFlight Beta testing Burstly Mar-12 Trestle Back-end-as-a-service Flurry Jul-12 Appstatics App performance tracking Appsfire Jul-12 service Instaops User analytics Apigee Aug-12 Cabana A tool to turn Facebook pages to Twitter Oct-12 mobile apps Nodeable Big data processing Appcelerator Nov-12 Source: VisionMobileThirdly, consolidation is driven by the increasing maturity of the B2D market. Tooldiscovery by developers is as challenging as app discovery is by consumers. There is stillno search engine or developer tools directory that we are aware of besides our ownDeveloper Economics portal. Vendors with a first mover advantage such as Flurry, orwith a desktop dominance advantage like Google analytics usually survive the toolsdiscovery bottleneck. As a result, many developer tools sectors are showingtrends of consolidating around a single or two players: Google and Flurry inuser analytics, App Annie and Distimo for app store analytics, Parse in back-end-as-a-service, Google (AdMob) in ad networks, Tapjoy and Flurry in cross-promo networks.Finally, consolidation is driven by the tough economics of the B2D sector. Developerservices have always had zero barriers to entry, meaning that developers should have a 57 © VisionMobile 2013 | www.DeveloperEconomics.com
    • zero cost, minimum effort experience in adopting a new developer tool, a trend that’sbeen inherited from the PC/Internet market for developers. Developer tools startupsusually have a reach-first, revenue-second strategy and need to drop SDK prices to zeroin order to acquire users, well before they can charge for services.As such, bootstrapped tools vendors find it hard to compete with VC-funded startups,and soon give up or get acquired. As the market matures, only the vendors with thestrongest financials will survive.We expect the trend of expansion and consolidation of the tools landscape to continueunabated until 2015, six years after the B2D market for apps was born. At the sametime, this should not be a reason for developers to delay a decision to adopt a new tool.A business-as-usual dictates, developers should be carrying out a due diligence beforeselecting a tool, to avoid pitfalls where the vendor might disappear out of lack of markettraction.Consolidation will give rise to a new class of Mega SDK vendors that willintegrate the most popular types of tools along the developer journey. We see thisconsolidation format around two types of tools: marketing tools and enterprise mobileservices. It’s not just that these two sectors are popular; it’s that they can commanddirect developer revenues, and therefore have a greater chance of survival.Mobile marketing will only increase in importance as the app discoverybottleneck persists. Today’s developers must be not just coders, designers andentrepreneurs, but more importantly astute marketers, to turn ideas into awarenessand money. The discovery bottleneck will only worsen as we go from 1.5 million to 10million apps, and while the Apple and Google stores dominate app distribution. Thetraditional approach to app marketing has been mobile advertising, which is estimatedto be a $11.4bn market in 2012, according to Gartner. This space is crowded with 100sof ad networks and ad exchanges. Yet, there are a few clear winners, like Google, atraditional online ad network that acquired AdMob to extend their service to mobileand allowed out-of-box integration with Android apps.Enterprise Mobile services is another category that has emerged out of the need forenterprises to mobilise their intranets, and to allow employees to bring their own device(BYOD) to work. Unlike the consumer apps space, enterprises have a substantial ITbudget per employee, and very stringent requirements for data security, identitymanagement, backend systems integration, and support level agreements. The firstMega SDK vendors in this area will likelyemerge in the form of cross-platform toolvendors like Appcelerator, IBM (acquired “The consumer app space was mostly drivenWorklight) and Xamarin who are now by hypes and fancy hero apps. In thepositioning themselves as mobile enterprise enterprise world, you have to convinceapplication platforms (MEAPs) by business people of the ROI. It’s not aboutincorporating the entire develop-deploy- click-and-buy. It’s a longer sales process, butmanage workflow. with a more scalable & profitable business model.”With over 500 tools or SDKs on offer for Louis Jonckheereapp developers, it’s becoming increasingly Co-Founder, Showpadhard to find a blue ocean - an untapped 58 © VisionMobile 2013 | www.DeveloperEconomics.com
    • market – amidst the red, highly competitive, ocean of developer tools. First moveradvantage is now extremely rare to establish, with very few sectors - such as customersupport and customer ratings management - left unexploited.Many B2D startups are hoping for acquisition before organic monetisation. Meanwhileseveral tools sectors are becoming undifferentiated making it hard to compete for non-integrated players, i.e. those that do not offer added services on top of their coreservice. The consolidated Mega SDKs by Appcelerator, Flurry and Google are increasingbarriers to entry. At the same time, consolidation is good news for developers, as thechoices are stabilising and the B2D market is maturing. Whether we like it or not,building and marketing an app is becoming business as usual, following in the footstepsof website development and software development before it. 59 © VisionMobile 2013 | www.DeveloperEconomics.com
    • distilling market noise into market sense 60© VisionMobile 2013 | www.DeveloperEconomics.com