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© VisionMobile 2011 | www.DeveloperEconomics.com
                                                   1
About VisionMobile                                                         Contents
                                                                           Key takeaways                             3
VisionMobile is a leading market analysis and strategy firm,
for all the things connected. We offer competitive analysis,
                                                                           Chapter 1:
market due diligence, industry maps, executive training and
                                                                           Developer Mindshare:
strategy, ranging from the industry's hottest trends to under
                                                                           winners and losers in the platform race   11
the radar market sectors. Our mantra: distilling market
noise into market sense.
                                                                           Chapter 2:
VisionMobile Ltd.                                                          Taking applications to market             26
90 Long Acre, Covent Garden,
London WC2E 9RZ                                                            Chapter 3:
+44 845 003 8742                                                           The building blocks of mobile apps        43

www.visionmobile.com/blog
                                                                           Chapter 4:
Follow us: @visionmobile
                                                                           Brands go mobile                          51

About BlueVia
BlueVia is the new global developer platform from
Telefonica that helps developers take apps, web services,
and ideas to market. BlueVia is built on four Founding
principles: Scale, Tools, Business Models, and Path to
Market. BlueVia offers ground breaking, zero risk, business
models for developers, along with 'mix & match' models to
create multiple revenue streams.


License                                                                    Also by VisionMobile
Licensed under a Creative Commons
                                                                           Mobile Industry Atlas | 4th Edition
Attribution 3.0 License.
                                                                           The complete map of the mobile industry
Any reuse or remixing of the work should be
                                                                           landscape, mapping 1,350+ companies
attributed to the Developer Economics 2011
                                                                           across 85+ market sectors.
report.

Copyright © VisionMobile 2011                                              Available in wallchart and PDF format.
                                                                           www.visionmobile.com/maps

Disclaimer
VisionMobile believes the statements contained in this
publication to be based upon information that we consider
reliable, but we do not represent that it is accurate or
complete and it should not be relied upon as such. Opinions
expressed are current opinions as of the date appearing on
this publication only and the information, including the
opinions contained herein, are subject to change without
notice.

Use of this publication by any third party for whatever
purpose should not and does not absolve such third party
from using due diligence in verifying the publication’s
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incidental, special, or consequential damages or lost profits,
if any, suffered by any third party as a result of decisions
made, or not made, or actions taken, or not taken, based on
this publication.


                                                       © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                                                 2
Key messages

The race for developer mindshare
Use of mobile web accelerates. The last year has seen many twists and turns in the
race of mobile platforms to capture developer mindshare. Mobile web as a platform has
seen an impressive upturn in usage, and is now in third position in our Developer
Mindshare Index. Android and iOS continue to lead with 67% of developers currently
using Android and 59% using iOS.

Windows is not yet the third horse in the three-horse mobile race. Use of
Windows Mobile has dropped among developers in the last year, while Windows Phone
is not yet seen by developers as a commercially viable platform. Yet Windows Phone 7
has managed to establish itself in the number two spot after Android in our Developer
Intentshare Index, among platforms where developers plan to invest. Microsoft’s
advantage comes from the influx of PC and Xbox developers, Microsoft’s best-in-class
tools and the promise of a substantial user base with the Nokia deal.

Symbian, Java abandoned. Symbian and Java ME are the two platforms with the
highest developer abandonment rates; nearly 40% of developers currently using
Symbian and 35% of developers currently using Java ME are planning to drop the
platforms. Java ME is suffering from negative hype despite having been embedded on
more than three billion handsets. Symbian is now officially a platform with an expiry
date, with the Nokia Symbian handset line-up set to be discontinued.

Experimentation on the rise. Developers are increasingly experimenting with more
and more platforms and transitioning to new ones. Developers use on average 3.2
platforms concurrently based on our sample of 850+ online respondents, representing
a 15% increase from last year’s figure.

Show me the money
Money can't buy you love, but users can! Large market penetration (the ability to
reach users) is the most crucial factor for platform selection, important for nearly half
of the respondents across all platforms. Meanwhile, the ability to make money was
deemed important in platform selection by just a quarter of respondents, alongside the
low cost development tools and the ability to quickly code and prototype.

Losing money. In the gold rush to the applications economy, not everyone is making
money. About a third of respondents make less than $1,000 USD per application in
total, which is loss-making given that an application often takes months to develop.

Commissioned vs. direct monetisation. Approximately 50% of app developers in
our survey make money through a salary or commission, confirming that corporate
monetisation is becoming as important as making money directly through applications.
For developers making money directly, the top revenue model is pay-per-download,
followed by advertising and freemium (free download, then pay to upgrade).

Platform revenue potential. Not all platforms are born with equal revenue
potential. Our research revealed large discrepancies across platforms in terms of the
revenues applications are bringing to developers. iOS topped the chart, making 3.3x


                             © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                            3
more money per app than Symbian developers followed by Java ME (2.7x) and
BlackBerry (2.4x). Android (1.7x), mobile web (1.6x) were the weakest performing
platforms in terms of revenue per app and only ahead of Symbian (1.0).

Role of operators. Traditionally, application developers have been cold and
uncertain as to the role the operators can play in a software world. While the majority
of developers agree that the role of operators is to delivery data access (61%) and voice
(43%), there is no consensus on the role of operators in software. Developers across
regions disagree on whether operators should be a payment gateway, an API platform,
build the best mobile services, or just leave developers alone.

App stores deliver fragmented reach
App stores are a one-way street. App stores have irreversibly changed the
landscape of mobile app distribution. Today, app stores are the primary go-to-market
channel for 45% of mobile app developers across the eight major platforms. Use of
other application distribution channels has consistently declined across the board.
Moreover, operator portals, whose ‘walled gardens’ once dominated content
distribution, are now paling in significance compared to app stores.

App stores deliver reach. Reach is by far the most important reason behind
developers’ preference for app stores as a distribution channel. More than 50% of
developers distributing through Apple, Google, Nokia or BlackBerry app stores cite the
ability to sell to more users as the primary reason for app store selection.

App store fragmentation is an under-hyped challenge for developers. Each of the
fifty-plus app stores available has its own developer sign-up, app submission process,
artwork and paperwork requirements, app certification and approval criteria, revenue
model options, payment terms, taxation and settlement terms. The marginal cost of
distributing an application through one more app store is significant, contrary to
popular perception.

One size doesn’t fit all
Developer segmentation is as sophisticated as consumer segmentation. But in
whatever metric or measure is used, one needs to acknowledge that there are several
types of “developers” out there, from hobbyists and students, to start-ups, self-financed
professionals, commissioned developers, digital agencies, system integrators, as well as
developers working within established businesses developing B2B or B2C apps – all
having different incentives, aspirations, priorities, needs and wants.

Attracting talent. Developers who are experienced with PC/Internet software
development are jumping into mobile. However, our research shows that aside from
Apple and Microsoft, platform vendors are not attracting enough developers with
experience in mobile or PC/Internet development.

Developer-market balance. Android is the one and only platform that is tri-
laterally adopted by developers across all three major continents active in application
development - Europe, North America and Asia. On all other platforms, there is an
imbalance of developer supply and market demand across the globe. iOS is lagging in
developer mindshare in Asia while BlackBerry developers are almost completely lacking


                             © VisionMobile 2011 | www.DeveloperEconomics.com
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in Europe. The traditional sweet spot for Java developers has moved out of Europe to
emerging markets, with 42% more respondents coming from Asia, Africa and South
America. Flash Lite has weak supply in South East Asia where the platform can deliver
best-in-class experiences on mass-market phones.

Building mobile apps
Learning curve. Contrary to popular perception, mobile web isn’t such an easy
platform to learn, ranking sixth in terms of learning curve. This is due to the need for
web developers to learn a complex stack of languages and technology frameworks
across client and server environments, in addition to having to battle with the
challenges of cross-browser portability.

Fragmentation. Despite the bad press, Google is managing to contain Android
fragmentation relatively well. On the contrary, it’s BlackBerry and Java ME that exhibit
the greatest amount of fragmentation, with BB and Java developers needing to produce
almost twice the number of app versions compared to Android developers.

Localisation. Localisation will soon become a fundamental issue for mobile
developers, as it becomes easier to distribute apps globally, and to develop regionally-
sensitive apps and content like news, music and social networks. Developers who are
accustomed to creating apps for global distribution (for example Java ME developers)
in their majority are reporting localisation issues.

Cloud APIs. Cloud connectivity is not just a fad among developers; it’s also where a lot
of the innovation is taking place. We found that iOS, Android and mobile web
developers are the most active users of cloud APIs, while BlackBerry and Java
developers were the late adopters of the ‘cloud’.

Multi-screen future. The developer ecosystem is gearing up for a multi-screen
future. In our research, almost 50% of respondents who develop for smartphones also
develop for mid-range (messaging and Internet capable) phones. Nearly 25% of
Android, iOS, Java, mobile web and Qt respondents are planning to target TV and set-
top boxes in the future. Moreover, our research confirmed that mobile web is also the
most versatile platform, with mobile web developers currently targeting on average 2.5
different screen types.

Brands drive mobile
Brands go mobile Where there is a company website or a corporate intranet today,
there will be a mobile app tomorrow. Such is the momentum behind consumer brands
and virtually every self-respecting company out there, whether it’s B2C apps for
enhancing the core business, or B2B for mobilising the corporate intranet. More
importantly, while app stores kick-started the mobile app economy, it is brands that are
now fuelling it.

Brand journey through mobile. Despite the diversity across verticals and regions,
we found that all companies go through a three-stage journey as they extend their
digital strategies into mobile. In their first steps in going mobile, “newbie” brands think
of an app as a way to ‘advertise’ whatever product or service they are providing. As they
get Street Smart, brands ask, “How can we use apps to drive our core business?” And


                              © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                           5
finally as Connoisseurs, the question becomes “Can we turn apps into a new, revenue
generating business?”

The platform conundrum. For brands, extending their presence to mobile is a very
different beast, compared to any other digital medium. Whereas on the web one needs
compatibility with two or three mainstream browsers to reach 80% of users, going
mobile means using the top three or four mainstream native platforms (iOS, Android,
Symbian and BlackBerry) to reach just over 20% of the devices sold, on average.

Platform priorities For companies going mobile, platform priorities are mixed, but
the core challenge is common – market penetration and reach across the customer
base. Organisations developing B2C apps (targeted at consumers) are extending their
offering first Apple and then to Android, to mobile web, to BlackBerry and finally to
Windows Phone 7. For B2B apps (applications paid by the corporate IT manager or
CIO), HTML is already the platform of choice- not just for deployment on mobile web
browsers, but also by converting HTML and JavaScript into native iPhone and Android
apps using tools from companies such as Appcelerator, PhoneGap, RhoMobile and
Sencha.




                            © VisionMobile 2011 | www.DeveloperEconomics.com
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About Developer Economics
Welcome to Developer Economics 2011, the quintessential mobile developer research
report. In this second annual report, we explore both what drives developer mindshare,
and how brands are fast-forwarding into the world of mobile.

Developer Economics 2011 takes the reader across the entire developer journey, from
the shift of mindshare and why “users can buy you love,” to how money is made in
mobile. It covers the hottest issues, from app design and promotion to monetisation
and user support.

In this year’s research, we have delved into the world of brands that are going mobile,
to understand what makes them tick, and how they are planning to conquer the mobile
world. While app stores initially kick-started the mobile app economy, it is brands that
are now fuelling it.

We spent the last few months quizzing developers and industry executives about the
future of mobile. Our research included 20+ industry executives, along with 900+
developers from 75+ countries working on 8+ major platforms.

We believe our work has yielded important insights about the future of mobile
development and hope you enjoy reading this report as much we enjoyed writing it!

Matos, Elizabetta, Andreas, Michael, Anne and Vanessa at VisionMobile.
@visionmobile
www.visionmobile.com/blog



Thank you!
We‘d like to thank the executives and developers who helped make this report a reality
– those who spent the time on the phone or online to offer a glimpse of the world
through their eyes, with its ups and downs. You know who you are.

We’d also like to thank the many companies who helped us reach out to developers –
Distimo, Enough Software, Flurry, Funambol, GetJar, LiMo Foundation, MEX,
Microsoft, Mobile Monday London, Nokia, Oracle, Qualcomm, RIM, WAC, WIP –
without which we would not have been able to reach such a diverse spectrum of
developers.

And of course – a huge thank you to James Parton and the team at Telefonica, without
whose financial support this research would simply not have been possible.




                             © VisionMobile 2011 | www.DeveloperEconomics.com
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Welcome to Developer Economics 2011
How quickly time flies!

Last year we, like VisionMobile, felt there was a real gap in the market for a piece of
research that credibly identified the issues facing developers in the mobile space.

Based on the response to 2010’s inaugural report, it seems you agreed with us. The
success of the publication really surpassed our expectations. The report was
downloaded over 10 thousand times, while TechCrunch called it “one of the most
profound [reports on mobile development]…to date”.

We’re delighted to be supporting the project once again in 2011, as this allows the
research to be made freely available for download. Telefonica remains steadfastly
committed to understanding the needs of developers, in order to help shape the
BlueVia roadmap, and 2010’s Developer Economics findings were a key input into the
thinking that produced the initial release of BlueVia.

This year’s edition delves into the hottest issues in mobile apps: which platforms gained
and lost developer mindshare, what are the most popular revenue models, which go-to-
market channels are the fastest to pay, how apps in smartphones vs. tablets vs. TVs will
play a role in the future, and more.

We have more than doubled the number of respondents, compared to 2010’s research,
with developers now representing 75 countries. For the first time, we have added
insight into digital strategies from over 50 leading international and regional brands,
through 20 one-to-one interviews with digital agencies, media, retail and Internet
companies.

I hope you enjoy reading the report as much as we have enjoyed working with
VisionMobile to deliver it.

James Parton, Head of BlueVia Marketing
@jamesparton
www.bluevia.com




                              © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                          8
Research methodology
The Developer Economics 2011 research was conducted between January and April
2011. The research is based on a large-scale online developer survey, developer
interviews, and interviews with industry executives working in commercial
organisations and digital agencies.

Among the 900+ participating developers, 850+ took our online survey. These
developers represented 75 countries, across eight major platforms: Android, iOS,
Windows Phone, Symbian, Java ME, MeeGo, mobile web (HTML and JavaScript) and
Qt. Each platform was represented by at least 50 developers who reported spending the
majority of their time on that platform. To remove platform bias, we averaged all
results presented in this research across these eight major platforms.

The developers that took part in our online survey came in their majority (90%) from
Europe, North America and Asia while another 10% came from South America, Africa
and Oceania. Respondents included both novice and seasoned developers, with an
average of three years mobile experience, and six years PC development experience.




                            © VisionMobile 2011 | www.DeveloperEconomics.com
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Developers had a mix of roles, with 50% involved in a technical role, another 25%
employed in a commercial role, and 20% being hobbyists. Note that many respondents
were winners and runner-ups of developer awards, including Nokia’s Calling All
Innovators and the Android Challenge. Respondents also included five Microsoft
MVPs, and 16 Forum Nokia Champions.

In addition to the online survey, one-to-one interviews were carried out with over 40
developers. This group ranged from hobbyists to CEOs of games companies, and from
one-person startups to technology giants.

Moreover, 21 one-to-one interviews were carried out with senior executives from a wide
spectrum of commercial organisations and digital agencies. All the executives we talked
to had decision-making authority, and the majority worked within or with marketing
and strategy departments. Sectors covered directly or indirectly included digital
agencies, media, retail, pure Internet, telecoms, FMCGs (fast-moving consumer goods),
sports, banking & financial, marketing & communication, health, automotive, travel,
leisure, and music.




                            © VisionMobile 2011 | www.DeveloperEconomics.com
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© VisionMobile 2011 | www.DeveloperEconomics.com
                                                   11
WHO IS WINNING THE RACE?



1. Developer Mindshare:
   winners and losers in the platform race
The impact of apps and software ecosystems in the mobile industry has been nothing
short of astonishing.

Apps have turned the handset manufacturer business upside down in the last two years,
as players with strong software ecosystems like Apple and Google replaced the weakest
of the 'old guard’ in the leaderboard of top-five handset vendors by unit sales. Nokia
had clung for too long to the 10-year-old Symbian platform – and at the last minute it
had to “jump off a burning platform” by partnering with the lesser of two evils
(Microsoft rather than Google) to salvage its smartphone line. Sony Ericsson and
Motorola failed to recapture the glory of the RAZR and Cybershot days, and are
dropping off the top-ten chart.




                            © VisionMobile 2011 | www.DeveloperEconomics.com
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The total market share captured by the top-five handset OEM leader-board has shrunk
from 80% to under 60% in less that two years, as Apple stormed the high-end
smartphone market and modular platforms from Google and MediaTek made it
possible for tens of low-margin assemblers to take up around 30% of global handset
sales. The number two and three handset OEMs Samsung and LG are the only ones
who managed to survive with only minor scratch wounds, maintaining their sales
ranking by aggressively responding to mobile operators’ demand for smartphones with
numerous Android phone and tablet models.

Software has also disrupted the network operator world in many ways. Today, software
innovation outpaces network innovation by at least a factor of five: application
developers often reach market in only three to six months, while operators take 18-24
months to launch a new service. In other words, it has become impossible to innovate
outside software. Any such innovation will be outrun and marginalised by more agile,
more nimble software-led players.

More importantly, software-led players like Apple and Google have benefited at the
expense of the very network operators who funded their entry into mobile; the vast
majority of Android handset models produced in 2008-2010 have been sponsored by
operators in order to attract new subscribers, while the majority of iPhones have been
subsidised as part of a 12-24 month telco contract. It is these same software-led players
that are now competing with operator services and challenging their established control
points, including location look-ups, billing, service discovery, authentication. Software-
led players are even questioning the operator hold on mobile termination (see Google
C2DM) and subscriber activation (see soft SIMs).

As telecoms players are dragged to the software era, network operators and handset
OEMs need to become ‘platforms’ (enablers) for developer innovation. They also need
to rebuild their strategies on the game rules of software economics, as we shall see next.

The impact of software economics

The single biggest surprise that software has brought to the mobile industry has been
the change of economics – from supply-side economies of scale to demand-side
economies of scale.

The mobile industry has been built from the ground-up on supply side economies of
scale; billion-dollar investments behind handset vendors have created production
powerhouses where the few are able to dramatically drop supply and manufacturing
costs. This is why Nokia has been able to buy handset components in far higher
volumes and at far lower prices than everyone else, allowing Nokia to dominate
emerging markets in terms of price points. Supply-side economics of scale are common
sense: the bigger the company, the lower the costs; the lower the prices, the bigger the
sales.

What software introduced was demand-side economies of scale. Also known as
“network effects,” these economies are driven by demand, i.e., the number of users or
developers of a software platform. A classic case of network effects is a telephone
network: the utility of a network increases with the size of the network. The more users,
the more valuable the network is to those users. Software platforms like Windows,
Android and iOS operate based on network effects: the more users, the more devices


                             © VisionMobile 2011 | www.DeveloperEconomics.com
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are sold, the more developers are attracted to the platform, the more apps are
developed, the more users, etc. The next diagram illustrates network effects in the case
of Google’s Android platform.




The textbook ‘worst practice’ here is Nokia: the Finnish OEM has been excelling at
creating supply-side economies of scale. With over 400 million devices shipped in
2010, Nokia can demand unbeatable pricing from its suppliers, and thus has an
inherent advantage in cost-sensitive emerging markets.

At the same time, Nokia – like most of the traditional top-five OEMs including
Motorola and Sony Ericsson - failed to understand the demand-side economies of scale
practiced by Google and Apple. For too long, developers were a second priority for
Nokia’s Symbian and Java platforms. Lacking in the attractiveness of both its route to
market (Ovi) and its platforms, Nokia quickly saw developer mindshare migrate to iOS
and Android. Both these competing platforms managed to build self-sustaining
network effects of unprecedented scale; for example, Apple reached 10 billion app
downloads in the space of 30 months. Eventually, Nokia had to backtrack against 20
years of corporate strategy and outsource its smartphone platform to a coopetitor –
Microsoft – whose Windows business has flourished due to network effects.



Winners and losers in the platform race
Since the beginnings of the smartphone era, the platform race has never been so fast
moving. In the space of two years, Apple’s iOS and Google’s Android have captivated



                             © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                       14
the attention of users, industry brands and mobile developers alike. Nokia’s Symbian –
once the unquestioned king of mobile platforms, having been deployed in over 500
million devices as of Q1, 2011 – is now officially being phased out, while Nokia’s
quarterly smartphone sales volumes have for the first time fallen behind Android.
Microsoft’s Windows Phone 7 is making a strong comeback thanks to best-in-class user
experience and developer tools. However, Microsoft has a challenging year ahead as it
tries to stand on the shoulders of Nokia to compete in terms of user base with Apple
and Google.




Mobile web (the platform for apps written in HTML or JavaScript) is continually
increasing in terms of developer attention and media hype. At the same time, HTML
apps can’t compete on equal grounds with native platforms, in terms of user experience
or depth of API reach. Meanwhile Java, with its broken promise of write-once-run-
anywhere, is fast being eclipsed out of the smartphone-centric mobile developer
agenda, with Java’s advantages in the feature phone market largely being ignored by
developers.

All in all, the platform race has not only intensified, but also sped up. Yet, amidst all the
industry hype, there is no accurate metric of how mobile platforms are falling in or out
of favour with developers.

Our Developer Mindshare Index does exactly that, by tracking which mobile platforms
are mostly used among developers. The next chart shows the top eight mobile
platforms, and how the Developer Mindshare Index has changed in the last year.




                              © VisionMobile 2011 | www.DeveloperEconomics.com
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The past year has seen many twists and turns in the mobile platforms used most by
mobile developers.




 Developers are increasingly experimenting with more and more platforms. Developers
use on average 3.2 platforms concurrently based on our sample of 850+ online
respondents. This represents a 15% increase from last year’s figure, indicating how
developers are more willing to experiment with new platforms and actively
transitioning to new ones. In parallel, more experienced developers are entering the
mobile app economy, which helps boost the average platform numbers.

Android and iOS have further solidified their top two positions in the Mindshare Index,
and are now established in a league of their own in terms of both developer ecosystem
and user base. Apple’s iOS stands at over 350,000 apps and 110 million devices sold,
while Android stands at over 200,000 apps and 110 million devices sold, as of Q1 2011.

Mobile web as a platform has seen an impressive upturn in usage over the last year, and
is now in third position in the Developer Mindshare Index. The popularity of mobile
web as a platform is driven by four factors:

1. Mobile web is the primary choice for cross-platform development and for addressing
the long tail of device models beyond iPhone and Android.

2. Segments of web developers familiar with HTML and JavaScript development are
being attracted to develop for mobile devices. Moreover, web developers deal with
fragmentation (resolution, aspect ratio, input methods) as part of their day-to-day work
and so are well equipped to deal with the multi-platform nature of mobile.

3. Companies across industry verticals – from brands to banks – who are extending
their digital strategies into mobile apps are using the mobile web as a low-cost, mass-
reach platform across devices globally. Similarly, corporate IT departments that need to


                             © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                      16
take their legacy intranets to mobile devices are choosing mobile web as the default
platform.

4. A host of HTML-to-native development tools are helping HTML/JavaScript
developers target smartphone native app markets, as well as the long tail of mass-
market phone browsers. Examples include Appcelerator, PhoneGap, RhoMobile,
Sencha and The M Project. Moreover, native apps can be designed to encapsulate
functionality in the form of web content, which eases cross-platform development.

Windows is not yet the third horse in the three-horse mobile race. Use of Windows
Mobile has dropped among developers in the last year, due to two reasons. First, the
older Windows Mobile has been dying a slow death in the last two years, with Microsoft
unable to match Apple or Google in terms of device sales or developer hype. A large
number of Windows Mobile MVPs (most valuable professionals - the acknowledged
community opinion leaders) have been attracted by the strength of Apple’s consumer
apps proposition and switched to developing iPhone apps. Second, the newer Windows
Phone is suffering from lacklustre sales, estimated at just over three million handsets
sold by the end of Q1, 2011, according to Gartner and IDC figures.

Java ME and Symbian platforms show a steady mindshare decline. Java ME is suffering
from negative hype despite having been embedded on more than three billion handsets.
Symbian is now officially a platform with an expiry date, with the Nokia Symbian
handset line-up set to be discontinued.

Across mobile platforms, Android is not just the king of developer mindshare, it’s also
the easiest platform for developers to experiment with. This is for several reasons:

   1. Android has fewer restrictions on ‘deep’ APIs like access to the home screen,
   multimedia codecs, SMS texting, telephony and streaming functions when
   compared to the iPhone.

   2. Android Market offers instant publishing, versus Apple’s ‘undocumented’ app
   approval policy. That allows developers to iterate quickly on Android applications,
   versus waiting for Apple’s approval process to complete.

   3. Applications on the Android are easy to sideload (i.e., to install from a connected
   PC, rather than from an official app store). This facilitates beta testing among peers,
   without having to meet quality standards needed for publishing an app to the Apple
   App Store.

What’s even more telling of the future of the platform race? Our Developer Intentshare
Index, tracking the top-eight mobile platforms developers are planning to use.
Combined an indication of which platforms developers are abandoning, it shows the
ebb end flow of developer interest across mobile platforms.

Despite being a young, six-month old platform, Windows Phone 7 has managed to
establish itself in the number two spot, claiming nearly 35% in the Developer
Intentshare Index. Microsoft’s advantage comes from the strength of the XNA and
Silverlight developer tools and the promise of a substantial user base with the Nokia
deal. Microsoft has also cleverly targeted its Windows Phone platform - not to existing
Windows Mobile developers who are disillusioned with the legacy platform, but to



                             © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                          17
previously untapped segments of desktop and games (Xbox) developers, which are new
to mobile.

Google’s Chrome OS ranks highly with the promise to follow Android’s market
penetration with nearly one in four developer stating they plan to use - Google’s
Chrome OS ranks highly with the promise to follow Android’s market penetration with
nearly one in four developer stating they plan to use the platform.

MeeGo and Qt still garner developer optimism. Nokia has left developers with no
guidance as to the future of MeeGo and Qt, and yet developers show more interest in
these two platforms than BlackBerry, on which RIM is spending hundreds of millions in
acquisitions.

As the platform abandonment chart shows, Symbian and Java ME are the two
platforms with the highest developer abandonment rates; nearly 40% of developers
currently using Symbian and 35% of developers currently using Java ME are planning
to drop the platforms.

The Java ME abandonment comes as no                    “Windows Phone development tools
surprise: neither Oracle nor Sun have spent any        are first class - for example both
marketing dollars visibly promoting the Java           designers and developers can work
mobile platform. Moreover, what’s been missing         collaboratively on the same project.
in Java ME is the direct-to-consumer                   This level of sophistication isn’t
distribution channel (a.k.a. app store), which         available on either iOS or Android.”
Sun did not have the vision or commitment to           Andreas Tsouchlaris
introduce. In the case of Symbian, Nokia dealt         R&D Manager
an epic public relations blow to its own platform,     Binary Logic
announcing on February 11 it would put all its
smartphone eggs in the Microsoft basket.




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                                                                                     18
The Palm OS and WebOS mindshare decline is also to be expected, given that HP has
managed to convince neither the mainstream media nor developers that it can compete
as a platform vendor in a game where the rules are defined by Apple and Google.




Qualcomm’s BREW is perhaps the biggest surprise amidst platforms being abandoned.
With the latest BREW MP platform, Qualcomm made a platform investment of
hundreds of millions of dollars, including a development team of over three hundred
people. And, it managed a major feat, in closing deals for AT&T and Verizon feature
phone devices. Yet, with BREW remaining an aging development environment,
Qualcomm has not managed to retain developer mindshare and compete in the new
rules of the game, where apps and APIs matter over and above devices and carrier
deals. Already 25% of respondents using BREW are planning to abandon the platform.

Before WAC has managed to ship its first device (see our case study on Smart’s
Netphone), developers are already abandoning the widget-based, operator-backed
platform. This comes as little surprise given the poor track record of operator-driven
software platforms, including SavaJe, the i-mode alliance, LiMo Foundation, and now
WAC. Creating a developer ecosystem requires very different culture and organisational
DNA than what’s needed to build a telecoms network.

Flash is another platform that appears to be losing the battle for mobile developer
mindshare. While overall mindshare for the Flash platform increased in 2011, we
believe this is due to new segments of ActionScript developers and Flash designers who
are starting to develop for mobile. In parallel, Flash runs sixth among platforms
developers plan to abandon. The root cause is nothing else other than Adobe’s own
mobile strategy, who much like Sun failed to materialise the vision of a write-once-run-




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                                                                                       19
everywhere platform. We argue that the                  “Flash Lite is in decline and many
failings of Adobe’s strategy can be traced to           development houses have closed
three reasons:                                          shop. We ‘re one of the few Flash
                                                        Lite companies still running because
a. Reach over consistency. Adobe over-
                                                        we have been able to keep ourselves
prioritised reach over consistency in deploying
                                                        small.”
its Flash Lite across mobile platforms. Despite
having Flash Lite deployed across more than            Stefan Wessels
                                                       Co-founder
one billion handsets, the platform ended up            Breakdesign
being fragmented, inaccessible to developers
and with an aging platform installed base. As
such Adobe had to scrap Flash Lite and start from scratch with Flash on mobile.

b. Old-school culture. Adobe has traditionally had a US-centric, media-conglomerate
culture, contrary to Macromedia whose Flash Lite platform Adobe acquired. By being
US-centric, Adobe has been unable to realise the opportunities in developing regions
such as Asia. Moreover, by focusing on large business partners, it has been unable to
cultivate momentum among developers in the long-tail. Last but not least, Adobe has
not been playing fair with their developers, for example closing APIs in favour of
exclusive commercial deals around those APIs or shutting down products like Flash
Cast, completely. As a an old-timer Flash Lite developer notes, “you can never rely on
Adobe to put developers ahead of its commercial interests.”

c. Platform complexity. Adobe’ introduced a complex platform (ActionScript 3)
which alienated their designer, non-programmer developer audience who has since
been moving to native platform alternatives like iPhone and Android.

At the other end of the application economy, brands and companies across verticals
have had a slower, less refined approach to platform selection. Apple and, to a certain
extent, Android are the preferred entry point for brands and publishers who want to
extend their digital strategies to mobile with a ‘premium’ experience. Moreover, as
brands and organisations increase their understanding of mobile, so their digital
strategies demand reach into the mass-market. This demand for reach is usually served
through three means: mobile websites (developed internally or outsourced), and in
some cases use of mobile app publishing platforms (e.g. Communology, Conmio,
Mobiletech) or magazine-style publishing platforms like Flipboard, Taptu and Zite.



Users can buy you love
Developer mindshare has indeed shifted greatly within the last of 12 months. But what
are the drivers of platform selection? In other words, what makes developers invest
time and effort in this or that platform? Is it a question of money, features, fun or
reach?

We found that developers have become even more business-savvy in the last year.
Among the top five reasons for selecting a platform, there is just one technical reason
and four commercial ones, as shown in the next graph.

Money can't buy you love, but users can! Large market penetration (the ability to reach
users) was the most crucial factor for platform selection: half of the respondents across


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                                                                                          20
all platforms thought that market penetration was the top reason for platform selection.
Meanwhile, the ability to make money was deemed relevant by just a quarter of
respondents. In fact, the ability to make money, on average, is no more important than
the ability to code and prototype quickly.

Interestingly, the scoring of platform criteria doesn’t change significantly across
developers with a technical role, compared to those working in a commercial role
within a development house. The only notable difference was that revenue potential as
a reason for platform selection was, understandably, twice as important for developers
with a commercial role than for hobbyists.

Platform selection criteria do not vary significantly by company size, either. The only
notable insight is that as companies grow, platform selection criteria shift away from
market penetration and into prioritising the platform the client has requested.

However, before platform vendors go out and start adapting their marketing messages
to emphasize user reach, there is some very important small print here: platform
selection criteria differ considerably across developers using different platforms.

For example, platform selection for iOS
developers is heavily skewed towards                   “Low cost of entry is critical for a
commercial criteria. On the contrary, for              new platform. For a small company,
Windows Phone developers the selection is              the main considerations in adopting
heavily skewed towards technical criteria, an          a new platform are the cost of
indication that Microsoft does not yet have a          porting and hitting the max amount
commercially appealing platform. The next              of users with a single version.”
chart shows the importance of the top two
                                                       Roger Nolan
commercial and top two technical criteria              CTO at Ambient Industries,
for platform developers, relative to the               producer of the Flook location browser.
average, across the top-eight platforms.



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Preparing for a multi-screen future
It’s no secret the vast majority of mobile developers are targeting smartphones. Most of
the news buzz these days is focused on Android and iOS. But beneath the veneer of
‘smart’ devices, the developer ecosystem is gearing up for the multi-screen future where
smartphones are no longer the ‘cream of the crop’ amongst the digital channels to
consumers.

In our research, almost 50% of respondents who develop for smartphones also develop
for mid-range (messaging and Internet capable) phones. Moreover, we saw a four-fold
increase in the number of developers planning to develop apps for TV or set-top boxes,
indicating that the market for living room apps is developing momentum. Nearly a
quarter of Android, iOS, Java, mobile web and Qt respondents are planning to target
TV and set-top boxes in the future.

It is widely accepted that mobile web is the         “Programming and UI metaphors
prevalent choice for multi-screen app                are very different on all platforms
development. Our research confirmed that             (iOS, Android, WP7).. in practice the
mobile web is also the most versatile                code reuse is minimal between the
platform. Mobile web developers currently            platforms. We ‘re actively looking at
target on average 2.5 different screen types,        HTML5 for multi-platform
ahead of Android and Qt developers, each of          development.”
whom targets 1.8 screen types on average.
                                                     Mobile software developer,
                                                     working for a leading UK news publisher
Besides the mobile web, there is no other
mainstream platform today designed for



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                                                                                       22
cross-screen development. “Programming and UI metaphors are very different on all
platforms (iOS, Android, WP7).. in practice the code reuse is minimal between the
platforms. We ‘re actively looking at HTML5 for multi-platform development.” notes a
mobile software developer working for a leading news publisher in the UK.

Java, the king of cross-platform apps, has lost its allure. Java developers come third in
planning to target multiple screens. Moreover, Java developers show a very strong
intent in transitioning from mid-range to smartphones, away from the stronghold of
the Java platform.

The next graph shows the developers currently targeting different screen types.
Currently iOS developers show strongest preference for targeting smartphones,
whereas Java developers show strongest preference for targeting mid-range phones.
But future intent is very different; iOS and Blackberry developers show least interest in
a multi-screen future, whereas Qt and Android developers show most interest towards
coding for multiple screens.




Mobile developers: one size doesn’t fit all
We know by now that not all developers wear a ponytail, khaki shorts or propeller
beanies. Such misconceptions date from the days when software engineers were
perceived as unsociable geeks sitting in a back room, and never talking to their
customers.

Most network operators, handset OEMs or consumer brands often use the word
“developer” to attach a label to anyone developing mobile applications, whether a
hobbyist or a programmer within a Fortune-500 company. However, in today’s world,
where developers are the foremost mobile innovators, we need to become more savvy in
understanding who exactly these “developers” are.

There are many ways to segment “developers”: by geographical region, platform used,
level of experience, criteria for platform selection, by the category of applications they
are developing or by industry verticals they are catering to. Developer segmentation is
as sophisticated as consumer segmentation. But in whatever metric or measure is used,


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                                                                                        23
one needs to acknowledge that there are several types of “developers” out there, from
hobbyists and students, to startups, self-financed professionals, commissioned
developers, digital agencies, system integrators, as well as developers working within
established businesses developing B2B or B2C apps – all having different incentives,
aspirations, priorities, needs and wants.

We next look at some of the ways developers differ based on app categories, level of
experience and geographical location.

Application categories matter
Developers focus on different app categories based on their primary platform. We
found that business apps are particularly popular among Windows Phone developers,
but equally unpopular among Android developers. Entertainment apps are popular
among iOS and Qt developers. Games are popular among Qt and Java developers, but
rare among mobile web and Windows Phone developers.

This implies that platform vendors need to cover their soft spots, in terms of app
categories that developers are less active in. Operators, meanwhile, need to tap into the
right developers to address their service portfolio. Finally, for developers, genre gaps on
specific platforms may provide opportunities to stand out.

Experience matters
Every self-respecting software platform today needs to have a fast learning curve (more
on that in Chapter 3). At the same time, there’s no substitute for experience – and the
distribution of development experience is anything but balanced across the developer
ecosystem. We see platform vendors lacking sophistication in their targeting of the
developer ecosystem as we discuss next.

With the shift away from Symbian, Nokia is bleeding high-calibre mobile developers.
Symbian developers are on average the most experienced in mobile software, with these
developers being 15% more likely to have seven-plus years of mobile experience.

We can also quantify the signs of Apple’s allure towards experienced PC and Internet
developers, since the iOS platform attracts significantly more developers with seven-
plus years PC/Internet experience, compared to other platforms. This confirms that
experienced software developers are moving into mobile, using iOS as an entry
platform, in what we believe is driven by the sudden rise in demand for developer
talent, especially in North America.

Since launching in late 2010, Windows Phone 7 has done pretty well in attracting
seasoned developers. We see experienced mobile developers coming to Windows
Phone, with a significant bias of current Windows Phone developers having between
three and six years of mobile experience - an indication that Microsoft’s strategy to tap
into PC and Xbox developer segments is paying off.




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                                                                                         24
In conclusion, developers who are                   “Entry to Android is very very easy.
experienced with PC/Internet software               There will be a stampede of developers
development are jumping into mobile.                on Android.”
However, our research shows that aside
                                                    Kishore Karanala
from Apple and Microsoft, platform
                                                    Experienced Symbian developer
vendors are not attracting enough                   Teleca India
developers with experience in mobile or
PC/Internet development.



The developer-market mismatch
We firmly believe software innovation will not just be global; like news and music, we
believe that mobile apps will follow a regional route. That is, most popular mobile apps
will be local (or locally adapted) apps. As such, it is important for platform vendors and
OEMs to cultivate and capture local developer talent and mindshare. Yet, we are seeing
many regional gaps across the mobile developer ecosystem where developer supply
doesn’t match market demand, especially on BlackBerry, Java and Flash Lite platforms.

BlackBerry developers are naturally concentrated in North America, with 16% more
respondents from that region; but in addition, they are almost completely lacking in
Europe. This reveals a major gap in RIM’s developer marketing efforts.

The traditional sweet spot for Java developers has moved out of Europe to emerging
markets: Asia, Africa and South America, with 42% more respondents from these
regions. This is due to low penetration of iOS and Android in Asia, Africa, and South
America, and also to Java having suffered from negative hype in the traditional
development hubs of Europe and North America.

Flash Lite is another platform that exhibits a huge gap between markets (demand) and
developers (supply). The sweet spot for Flash Lite is in emerging markets where the
platform delivers best-in-class experiences on mass-market Nokia Series 40 handsets -
and not on the iPhone or Android platform where Flash can’t compete with native apps
in terms of user experience. Yet there are very few Flash developers targeting such
emerging markets. “We are one of very few developers for Nokia handsets in the South
East Asia region. The Flash Lite theme market for low-end phones is a blue ocean,”
notes Stefan Wessels, co-founder of Breakdesign, a company with more than 7 million
app downloads.

Android is the one and only platform that is tri-laterally adopted by developers across
all three major continents active in application development: Europe, North America
and Asia. “Entry to Android is very very easy. There will be a stampede of developers on
Android” notes Kishore Karanala, a seasoned Symbian developer with 5+ years of
mobile app experience working for Teleca India. In contrast, iOS is lagging in developer
mindshare in Asia, due to the relatively low penetration of Apple devices in Asian
countries.




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© VisionMobile 2011 | www.DeveloperEconomics.com
                                                   26
WHERE IS THE MONEY?


2. Taking Applications to Market

The developer journey
The life of a mobile developer is a complex one. It’s not just a two-step, idea-to-app
process. In today’s global application market, there are tens of steps in taking an idea to
market – including planning, developing, debugging, support forums, test frameworks,
packaging, pricing, publishing, billing, marketing, sales tracking, user support and
application updates, to name just a few.

To illustrate the intricacies of app development, we’ve put together the Developer
Journey, a chart showing the tens of touch points in the life of a mobile developer. The
Developer Journey is an important tool, not just for appreciating the complexity of
mobile development, but also for helping platform vendors map the competitive
landscape of supply and demand, and understand how to differentiate.

The Developer Journey consists of the following six stages. Note that the Developer
Journey presents a comprehensive model covering every possible touch point – which
implies that most developers will selectively touch on some of the stages below, but not
all.




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                                                                                         27
1. Application planning is the stage where a developer takes a concept through the
initial stages of feature design, prototyping, selecting the right platform, and designing
for the right users.

2. Develop & debug, is where the hard work takes place: coding the application,
designing the UI, testing and porting. This stage is where the vast majority of developer
programs are focused today.

3. Market readiness, an often under-hyped part of the developer journey where the
application is readied for publishing to the market – including localisation, packaging,
variant management, certification and submission.

4. Distribution & monetisation is the stage addressed by app stores. It involves
publishing the application, establishing billing and distribution agreements and making
money from application sales, ads or other monetisation means.

5. Retailing & discovery is the stage where an application needs to be promoted
through as many channels as possible, so as to grab user attention. Retailing is the stage
facing the most challenges today, due to the over-supply of applications and the
bottleneck of discovery.

6. In-life use is the final stage, in which developers need to track sales and usage
analytics, support users and manage ratings, as well as update the application with bug
fixes and features.

Chapter 1 in this report has looked at the application planning stage. Chapter 3 will look
at the develop & debug stage. The rest of this chapter will examine the last four stages
of the developer journey, i.e., the challenges and opportunities in taking applications to
market.



The application store duopoly
In 2011, app stores are a fact of life and they are here to stay. Our research found that
use of app stores as a primary distribution channel has surged by over 30% compared
to 2010. Today, app stores are the primary go-to-market channel for 45% of mobile app
developers across the eight major platforms.

App stores have irreversibly changed the landscape of mobile application distribution
today. In the last year, use of other application distribution channels has consistently
declined across the board; most notable are the year-on-year 20-30% declines in app
distribution via third party aggregators, on-device preloads, and via developers’
website.

Operator portals, whose ‘walled gardens’ once dominated content distribution, are
paling in significance compared to app stores. “Downloads through operator portals are
still less than one million per month on average per operator,” notes an executive at one
mobile app development house and continues, “Compare that to one billion per-month
downloads from the Apple App Store”.




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                                                                                           28
It’s no wonder operator portals have lost their shine. Telcos have typically outsourced
their portal operations and development to major IT suppliers who have lacked the
culture and incentives to evolve with the times. “The same people who failed in WAP
portals are doing operator app stores now,” points out the CEO of a leading mobile app
agency in Germany. Moreover, the discovery and purchase process through an operator
portal has major drawbacks to modern app stores. “It’s more complex to download a
game through an operator portal than to open a
bank account,” notes Christopher Kassulke, CEO
                                                             “What T-Mobile does in one
at Handygames, a major app development house.
                                                             year in terms of downloads,
And still, in 2011 – in the era dominated by app
                                                             we do in one week.”
stores and long-tail innovation – there are tier-one
telcos who require developers to sign 20-page                Manager
                                                             Top-ten games developer
contracts before they can discuss a deal.

Use of each channel to market also varies significantly per platform. App stores are
used primarily by iOS (77%) and Android (54%) developers. In contrast, mobile web
and Java ME developers distribute apps primarily through their own websites and
portals, due to the lack of app stores with sufficient reach and discoverability.

Reach is by far the most important reason behind developers’ preference for app stores
as a distribution channel. More than 50% of developers distributing through Apple,
Google, Nokia or BlackBerry app stores cite the ability to sell to more users as the
primary reason for app store selection.

Exclusivity is not a critical reason for app store selection, either; only one in five
Android and Blackberry developers choose an app store because it was the only
distribution channel available. Moreover, neither the revenue share split nor the speed
of payment are cited as important reasons for distributing via an app store. Support for
marketing and promotions is the third most important reason for using app stores as a
distribution medium; we expect marketing support to increase in importance as app
stores develop more sophisticated targeting and promotional programs.




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All in all, app stores dominate over every other distribution channel because of reach,
not exclusivity or payment terms.

App stores are relatively quick to pay, too. Just over 60% of respondents using app
stores get paid within one month from submission. The only distribution channel that’s
faster to pay is when developers are using their own website, where 75% of respondents
get paid within a month of the purchase.

Drilling down into the ins and outs of the four main app stores, our research reveals
significant differences across Android Market, Apple App Store, BlackBerry App World
and the Nokia Ovi Store – as the next chart reveals.

Apple’s App Store has a notoriously unpredictable quality control and curation process
during app submission, which causes some dissatisfaction across developers. The
mainstream press is peppered with stories of apps whose approval was inexplicably
delayed or even rejected when the apps conflicted with Apple’s own agenda.

Android, on the other hand, places priority on developers with an automatic
submission process with no QA or curation, resulting of course in an increase in ‘noise’
from low-quality and even copyright-infringing or malicious applications in the
Android Market. “The problem with Android Market is that you cannot tell if an
application is an official app or a look-alike” notes an application developer who’s been
developing on Symbian and Bada platforms. “Something needs to change in Android
Market to get the quality of apps up to the same level as the Apple App Store” says
Roger Nolan, CTO at Ambient Industries, producer of the Flook location browser.

The application quality review process is straightforward in the case of Android, but not
so for Nokia’s Ovi Store. Developers that we spoke to report that the Ovi Store
submission process is cumbersome and unnecessarily restrictive. Due to tough
approval criteria, an application typically takes five or more review cycles before it can


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                                                                                          30
appear on the shelf. Given that the turnaround time for each review cycle is 7-10 days
(compared to just 24 hours for the GetJar store), that means that the time-to-market
for Ovi Store apps is often 1.5-2 months. Moreover, Ovi Store content needs to be
approved on a country-by-country basis. To make things worse, the review cycle isn’t
streamlined, which means that each cycle is handled by a different reviewer within
Nokia. Another important issue is that the root certificates have not been installed on
some S40 handsets (esp. in India), which means that even if an application is approved,
it can’t install on the handset. “The only reason we persevere with Ovi is that once we
get the app approved, the downloads are quite substantial” notes an application
developer who uses a multi-channel distribution strategy.

Ovi is not alone in being criticised for its problematic     “Typically it takes 1-2 days to have
application submission process. “It’s difficult to get a     an app published on GetJar and 2-
sign-off for Bada apps. Every week we have a new             4 weeks on the Nokia Ovi Store.”
problem with the Samsung App Store, including
poor documentation, language barriers and                    Mark Shoebridge
                                                             Binu
unreasonable control from Samsung, even on                   Sydney, Australia
application design issues” notes a developer in the
UK who has already published four Bada apps.



The fragmented app store landscape
Besides the four main native app stores – Android Market, Apple App Store, BlackBerry
App World, and Nokia Ovi Store – there are hundreds of distribution channels to
market. There are over fifty different app stores, and many more if one includes the
many operator portals globally. Furthermore, the selection of app stores available
varies by region, operator or manufacturer deals.


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                                                                                      31
App store fragmentation is an under-hyped                     “Eventually apps will evolve to a
challenge for developers. Each of these fifty-plus            consolidation of submission and
app stores has its own developer sign-up process,             payment mechanisms but a
app submission process, artwork and paperwork                 multitude of discovery options. In
requirements, app certification and approval                  the world of scarcity you can win a
criteria, revenue model options, payment terms,               lottery ticket. In the world of
taxation and settlement terms. This implies that              abundance, the competition is for
the marginal cost of distributing an application              attention.”
through one more app store is significant, contrary
                                                              Jai Jaisimha
to popular perception.
                                                              CEO
                                                              Open Mobile Solutions
Therefore, while the native app store is used by
40-80% of developers (depending on the
platform), there is a significant opportunity – and associated cost – in using a multi-
channel strategy in app distribution.

In platforms like Android, where tens of app stores compete for user attention, the
picture is quite complicated. Unfortunately, the vast majority of developers do not have
the resources to distribute their apps through more than one or two app stores. At the
other end of the spectrum, only a dozen or so software houses can deliver apps to the
majority of app stores, with that number typically ranging to 70+ app stores.

We believe that the app economy needs a single entry point for application submission
(one per platform), along with a million distribution channels:

- one app submission process, i.e., a single website, single contract, single approval
process, single billing & settlement and a single mix of business models per platform

- a million distribution channels, i.e., a million different channels through which to
retail and sell apps to consumers with a variety of prices, promos, bundles, and regional
access that help developers more effectively market their applications.

An early role model for this single-in, many-out distribution model is perhaps Amazon.
Amazon’s app store addresses many of the challenges of Android Market, including
quality control and curation, relevance and recommendations, as well as device
compatibility, showing only those apps that are compatible with each handset model.
Amazon further leverages its retailing expertise and consumer insights to set the price
for each application, between 70% of the sale price and 20% of the list price.

More importantly, Amazon offers a wealth of cross-selling opportunities for
applications, by listing an application next to relevant digital or physical goods, based
on the click-stream of each user and their preferences. Amazon is playing the
“doorkeeper” role that operators used to play in the past, but more importantly, is
allowing developers to reach out to more users through cross-selling and
recommendations mechanisms.

We believe that app store fragmentation offers two opportunities. First, for app store
brokers with a develop-once-publish-many model, who can take an application and
publish it across multiple app stores. Second, for app stores that offer sophisticated
marketing and promotional channels that can optimise app pricing based on the user,
region or bundle the app appears with.


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                                                                                            32
Getting ready for launch
Planning and testing comes before publishing an app. The vast majority – around 90%
of developers – use some form of planning or testing technique before publishing their
apps, whether it is peer reviewing, beta testing or market research. In fact, developers
use two planning techniques on average, irrespective of their primary platform,
pointing to how planning is seen as essential for developers to compete within the
crowded applications marketplace.

By far the most popular planning and testing techniques before app launch are peer
reviewing with friends or colleagues and beta testing with customers. Both these
techniques are used on average by about 50% of developers. Use of market research has
significantly increased in the last year, and is most popular among developers who use
app stores as their primary channel to market.




Despite the importance of app planning, most developers still use rather
unsophisticated techniques, like peer reviewing, for establishing whether an application
is ready for launch. And it’s not a question of price; beyond the use of elaborate, costly
techniques, like running focus groups or using scenarios and personas, there are more
accessible planning alternatives that exist today that can help in the stages leading to
the launch of the app. For example, application analytics (e.g. Distimo, PositionApp)
can reveal important competitor intelligence about apps in the same region or genre,
while crowd-sourced beta testing (e.g. Mob4Hire, uTest) can offer crucial, unbiased
feedback to developers before app launch.

The unpopularity of sophisticated planning techniques is due to a lack of awareness
marketing and, in some cases, affordable pricing on the part of tools vendors. Some
poor planning also results from the ‘not invented here’ syndrome, a not uncommon


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                                                                                        33
phenomenon in which software developers                 “On Android and iPhone your app is
assume ultimate knowledge of their target               going to be buried almost instantly.
customer. Regardless, app developers’ lack of           But if you can go from 1,000 to
planning presents a ‘blue ocean’ opportunity            10,000 to 50,000 downloads very
for platform vendors and OEMs to                        quickly you get picked-up by the app
differentiate their developer programs by               store algorithm - which means you
offering subsidised access to app store                 immediately get calls from Nokia
analytics and crowd-sourced beta testing.               and Samsung who want you on their
                                                        platforms.”
In the case of branded apps, marketing                  Cross-platform app developer, UK
managers in industry verticals are used to very
sophisticated marketing techniques, spending
millions to better understand their customers. Getting to know the behaviour,
preferences and expectations of mobile users is becoming imperative in the case of
mobile apps, too. To improve targeting, brands are routinely measuring downloads,
frequency of use, patterns of feature use and time/day of use.

Post app launch blues
The biggest challenges for developers, post-app launch, are customer support, updating
apps in the field and developing incremental features, as voted by over 40% of
respondents. Managing negative user ratings is another important challenge,
particularly for developers who distribute via Apple, Google or Nokia app stores.

App promotion is another thorny issue for developers publishing their own
applications. Developers are clearly discontent with the lack of promotion options
across most app stores; there are very few off-the-shelf tools available to help
developers promote their apps. Four out of five developers do promote their apps, with




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                                                                                       34
the primary techniques being social networks (Facebook, Twitter, etc), followed by free
app demos, and – particularly amongst developers using app stores – blogs and forum
postings. Only one in 10 developers promote their apps using ad networks, with web
keyword search being the most popular, followed by mobile keyword search and mobile
ads. “Printed ads and web ads do not work well for apps. The user has to be one click
away from downloading the app” notes Olivier Milcent, Chief Marketing Officer for
Momac, a mobile app platform house.




Despite the challenges in application promotion, best practices are starting to emerge in
up-selling and cross-selling. A major games house sees a 20% conversion rate from free
to paid with an ad-supported, “full freemium” model. In other words, one in five users
who try a fully functional, ad-supported game, go on to buy the paid, ad-free version of
that game, or buy another game that is advertised. In contrast, ‘light’ or ‘demo’ versions
with limited features or levels result in lower conversion rates.

Given the long tail of hundreds of thousands of application developers, what the app
economy lacks is an out-of-the-box “SDK” for app marketing. Such a toolkit would
allow developers to invest in targeting the right users and increasing exposure. This
lack has prompted tens of startups to offer recommendation and promotion tools that
help connect the right app to the right user; examples include Appaware, Appboy,
Appolicious, Apprupt, Appsfire, FrenzApp, Flurry, Explorapp and Chorus. However,
such tools are still a long way from becoming mainstream, with promotional platforms
like Flurry’s App Circle being used by less than 4% of our respondents.



                             © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                        35
Show me the money
Money matters. But in the gold rush to the applications economy, not everyone is
making money. About a third of respondents make less than $1,000 USD per
application in total, which is loss-making given that an application takes months to
develop.

Moreover, not all platforms are born with equal revenue potential. Our research
revealed large discrepancies across platforms in terms of the revenues applications are
bringing to developers.

We compared per-application revenues reported by developers for different platforms.
Symbian scored lowest, so we assigned a base value of 1.0 to its reported per-app, then
rated other platforms relative to this “revenue index”.




iOS topped the chart, making 3.3 times more money per app than Symbian developers
followed by Java ME (2.7x) and BlackBerry (2.4x). Java should come as no surprise
here, given it is still the primary platform for developing games on feature phones
which often have higher price points than smartphone apps. Android (1.7x), mobile web
(1.6x) were the weakest performing platforms in terms of revenue per app and only
ahead of Symbian (1.0). The important insight here is that large device sales do not
translate into higher app monetisation for developers, as the case for Symbian shows.
Note that we excluded developers making more than $100K per app, and those who did
not know or could not indicate revenues.




                             © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                       36
The amount of revenue generated from an application on average is not just about
market reach. It’s a complex orchestration of techniques across the entire go-to-market
lifecycle of an application, including usability guidelines, quality control, application
discovery, and billing options. Even small details like the mix of revenue models make a
difference. For example, the Apple App Store does not allow trial versions of
applications, which motivates users to buy before they try, which indirectly increases
developer revenues. As a counter example, Windows Marketplace offers a trial version
for applications, which doesn’t help developers monetise from impulse purchases – a
naive differentiation move on the part of Microsoft.

There are more complexities around monetisation. For example, while Java ME offers




                             © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                       37
relatively high revenues per app, Java ME developers did not necessarily respond
positively when we asked about their level of satisfaction with revenues (i.e. whether
revenues were above or below expectations).

The previous graph is quite telling. The good news? One in three developers see the
level of revenues they expected. The bad news? On average, there are five times more
developers who are dissatisfied with their mobile application revenues than there are
satisfied developers. The platforms do add some colour to the picture; iOS developers
have more positive impressions than any other platform, whereas Java ME has the
most developers dissatisfied with revenues, since feature phone Java games downloads
are in decline.

Besides the revenues individual developers are seeing, how are revenues distributed
across app categories? Games dominate all other application categories bringing in a
total of 45% of revenues from paid downloads and in-app purchases in the Apple iOS
App Store in April 2011, according to analytics firm App Annie. The revenue breakdown
by category is based on a bottom-up statistical model drawn upon more than 40,000
apps, which use the App Annie sales analytics service.




How do developers make money?
Much like the web, the application economy is steadily shifting to corporate funding;
more and more developers are working for a salary or commission. Approximately 50%
of app developers in our survey make money through a salary or commission,
confirming that commissioned app development is becoming as an important part of
the app economy as making money directly through applications.

For developers making money directly, the top revenue model is pay-per-download,
followed by advertising and freemium (free download, then pay to upgrade). Despite
the hype surrounding newer revenue models, we found that subscriptions and in-app


                             © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                         38
purchases are three times less popular than the pay-per-download model, across all
major platforms.




The distribution of revenue models varies widely by platform. Among mobile web
developers, advertising was the most popular model, with many Android developers
also using this model. Pay-per-download was most popular among iOS developers.

App stores have radically enabled new revenue models. For example, use of pay-per-
download is three times higher for developers using an app store, as opposed to
developers who primarily distribute apps through their own website. Use of advertising
and in-app purchase is almost double for apps distributed via an app store.

Finally, a small percentage of developers (on average one in 10, irrespective of
platform), make money through brand extensions or service revenues. This revenue
model appears to be more popular than average amongst mobile web developers.

When it comes to brands and commercial organisations, generating direct revenues
from a mobile app is not often the top priority. Most brands introduce apps as a way to
increase accessibility and interaction with their target market. However, organisations
becoming savvier in extending their digital strategies into mobile, are seeking to
generate revenue as well. Our research highlighted three main mobile revenue streams
that brands are looking into: advertising, one-off or subscription-based app sales (if the


                             © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                        39
application adds genuine value, e.g. as a game, utility, business, travel, fitness, or other
app) and in-app purchases, especially in games, social networking, travel and sports
apps.



The role of mobile operators
In the last few years, mobile network operators (‘carriers’ if you live in North America)
have been unwillingly dragged into the software era – one dominated by economies of
demand that Apple and Google live by, not economies of production that operators
have been accustomed to.

As the innovation in mobile has shifted to software, so network operators have been
keen to re-establish themselves and take part in software-led innovation. As such, the
leading operators in Western, smartphone-populated markets – including Telefonica,
Vodafone, Orange, Telenor, AT&T and Verizon – have launched developer innovation
programs and network API platforms. Many have also launched their own app stores.
The Wholesale Applications Community (WAC) is essentially an operator-centric
initiative to help operators compete against Apple and Google, who dominate the
smartphone innovation and value chain. The WAC aims to help operators develop a
solution that encompasses an application runtime, app stores and APIs.

Traditionally, application developers have been cold and uncertain as to the role the
operators can play in a software world. While the majority of developers agree that the
role of operators is to delivery data access and voice, there is no consensus on the role
of operators in software. For example, developers don’t agree on whether operators
should be a payment gateway, an API platform, build the best mobile services, or just




                              © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                           40
leave developers alone.

However, marketing efforts on behalf of operators have been paying off. There is now
much more awareness amongst developers that the role of operators should be to offer
a platform of network APIs.

We are also now seeing important regional differences in how developers perceive
operators. For example in Asia, many more developers (14% above the global average)
see operators as a payment gateway or API platform, and not just a data or voice pipe.
In Europe and North America, developers are showing signs of discontent with
operator-owned services, with many more developers (20% above the global average)
suggesting that the role of operators is to deliver data and voice, and not to own services
or to offer a supermarket-like proposition.

Yet, operators still have a lot of ground to cover in capturing developer mindshare.

Business model polarity
A fundamental change that we believe operators need to undergo is to see developers
not as resellers of network APIs, but as benefactors or agents driving end users to the
network’s core business. Operators need to greet developers not with price-lists, which
are commonplace among network API programs, but with partner programs in which
developers get to share in the revenue generated when they drive users to the network.
They should let developers focus on finding new ways to innovate with apps that use
telco capacities, instead of worrying about whether their cash flow is adequate.

In other words, operators need to change their business model from a “developer pays”
model to a “developer gets paid” model. If developers create apps that use telco APIs,
they drive traffic or usage, which benefits both the user and the telco. It’s not the
developer that needs to pay – it’s the user. What needs to happen is a change in what
we call “business model polarity”.

Consider this scenario in the traditional developer-pays world: A developer builds an
SMS-to-Twitter service; the user sends a new tweet as a text to a short code. The reply,
an SMS back to the user, is then paid by the developer. The developer is penalised for
generating traffic to the network. This is the “developer pays” model and it doesn’t
work.

In the “developer gets paid” model, a single API allows the user to pay for both outgoing
and return SMSs in one shot, and the developer gets to use the API for free and even get
a revenue share kick-back in return. The developer can focus on building a viral service,
and won’t have to worry about success costs.




                             © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                           41
This is a fundamental polarity change. Instead of the developer paying for access to
network resources, the developer gets paid for driving increased voice or messaging
revenues.

Matchmaking developers to users
Besides tools or APIs, operators have an even more important role to play, by
connecting developers to users. We believe operators are sitting on a pile of gold: a pile
of untapped intelligence on who their customers are, their interests, where they are
going, and who are they influencing and being influenced by.

Before we conjure any images of Big Brother here, let’s view this customer intelligence
in a different light. Namely, as helping users find the right applications. We
fundamentally believe that operators can leverage the mountain of customer
intelligence to support developers in solving the discovery problem - which still plagues
the app economy - by helping users find apps relevant to their location, social circle,
and buying habits. In other words, operators can become the best matchmakers
between developers and users, between the right app and the right user.




                             © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                         42
© VisionMobile 2011 | www.DeveloperEconomics.com
                                                   43
HOW DO PLATFORM CHARACTERISTICS STACK UP ?



3. The building blocks of mobile apps

Getting to grips with mobile
Not all platforms are designed equal – and getting to grips with mobile development
can be a major investment of time and effort, depending on which platform you choose
to learn.

Android and Qt are by far the easiest platforms to learn, with respondents requiring an
average of under six months to master. In contrast, Java ME and Symbian are the
hardest platforms to get to grips with, taking over 10 months to master.

Contrary to popular perception, mobile web isn’t such an easy platform to learn,
ranking sixth in terms of learning curve. This is not due to the complexity of any one
language like HTML or JavaScript, but due to the need for web developers to learn a
complex stack of languages and technology frameworks across client and server
environments, in addition to having to battle with the challenges of cross-browser
portability.

The next chart illustrates the relative learning curve per platform, and how not all
platforms are born equal.




                             © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                         44
Measuring fragmentation
                                                            “Commercial and UX considerations
Fragmentation is as old as software itself.                 aside, 97% of the application code
Fragmentation challenges have been a key topic of           across iPhone and iPad is usually
discussion in mobile industry circles since Java            the same.”
ME started proliferating in 2004-5. No matter the
                                                            Alex Curylo
platform advances, fragmentation remains an                 Winner of "Most Innovative Product",
unsolved problem – both for developers targeting            Apple Design Awards
multiple platforms, but also for the likes of Apple,
Google and Microsoft, for whom fragmentation
can break the ‘platform story’.

Moreover, fragmentation is a challenge for brands and commercial organisations going
mobile, as it adds a completely new dimension of complexity. For brands, extending
presence to the web is a straightforward process involving developing a website and
testing it across the two or three mainstream browsers found on 80% of devices. Going
mobile complicates things much further, as developing across the top three or four
mobile platforms (iOS, Android, Symbian and BlackBerry) reaches just over 20% of the
devices sold on average, and represents a much more resource-intensive operation as
there is very little code reuse across these platforms. Extending user reach beyond this
20% presents formidable challenges which can only be addressed only with a lowest
common denominator approach.

To quantify platform fragmentation we asked developers how many versions (also
referred to as SKUs - stock-keeping units) of their apps they need to develop.




                             © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                       45
We were able to quantify that indeed Apple’s iOS
is the platform with the least fragmentation (on          “Anyone who states Android is
average four versions per app), as has been               fragmented must have no
widely noted from empirical evidence in the               experience developing on
past. Apple manages fragmentation through two             BlackBerry or Nokia platforms. Even
primary means: first, it has standardised the             iOS has a six different devices of
screen size and resolution for its handsets and           varied capability now.”
tablets; and second, as an OEM and platform
                                                          Brian LeRoux
vendor, it has commercially streamlined the               Nitobi Software
means by which most iPhone or iPad users are
upgraded to the latest OS version.

In contrast, our research indicates that Android developers must create six versions of
their apps on average, which is on par with mobile web apps.

The stark difference in fragmentation across Apple and Android devices is also evident
amongst the different platform versions in the installed base of devices. According to
Google data released on May 2011, 25% of active Android handsets run on platform
versions more than 18 months out of date. Meanwhile, according to app analytics firm
Localytics, only 20% of existing Apple 3GS devices had not yet been upgraded, just two
months after the introduction of iOS4. In other words, Apple devices have the youngest
runtime age in the mobile industry.

The intensity of Android fragmentation has been widely discussed, and is often cited as
the biggest sore point for the platform. We analyse Android fragmentation into five
dimensions:

1. Release speed: Android’s unprecedented speed of innovation (three major versions
released between Q2 2010 and Q2 2011) means the core platform itself is changing too
often for developers to keep up.

2. Complex incentives: Unlike Apple, Google doesn’t make its own hardware –
meaning Android phone OEMs lack commercial incentive to keep updating handsets
that have already been sold. Instead, they have an incentive to push users to shorten
their device replacement cycles. The commercial update process is especially entangled
when handsets have been produced for a particular mobile operator. Note that Google
recently unveiled a compliance program that will force handset manufacturers to
update their platform for the first 18 months since handset launch.

3. OEM fragmentation: Many handset OEMs differentiate by customising Android
with user interface changes, and their own applications and features. For example,
HTC’s Sense UI differs from Sony Ericsson’s Rachel, Motorola’s MotoBLUR, Samsung’s
TouchWiz and LG’s S-Class user interface. All OEM additions – whether UI layers,
features or even bug fixes –create traces of fragmentation for developers.

4. Screen fragmentation: As Android is being used for multiple screen resolutions
and form factors, from smartphones and feature phones to DECT handsets, set-top
boxes and cars, there will inevitably be the need to adopt an application for different
screen sizes – not to mention adapting the Android codebase to run on a different type
of ‘screen’ than Google designed it for. For example, the Android Honeycomb platform




                             © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                          46
for tablets and TVs is very different than the Android Gingerbread platform for
smartphones, in addition to differences across tablet screen sizes.

5. Codebase forking. China Mobile’s Ophone and China Unicom’s Wophone are
‘forked’ (branched) versions of Android for the China market. Other forks include
Cyanogen and MiuiAndroid, which are unofficial, customised versions of Android
targeted at tech enthusiasts.

Our research confirmed that, contrary to popular perception, Android is still relatively
unfragmented. Rather, it is Java and Symbian that are amongst the most problematic
platforms in terms of fragmentation, with developers needing to create on average
about twice the number of app versions for these platforms, compared to Android.
Moreover, BlackBerry – alongside Java ME – is one of the platforms with the greatest
amount of fragmentation. This should come as no surprise, given the diversity across
BlackBerry device capabilities, input mechanisms and screen resolutions. As of March
2011, close to 40% of installed base of BlackBerry devices run versions of the OS that
are older than version 5. Note that only devices running version 5 and above are
capable to support the BlackBerry App World application store.

On the flipside of fragmentation challenges is opportunity. A number of companies
have emerged to offer porting tools aimed at bridging the gap across platforms. These
companies include Appcelerator, Ansca, Didmo, DragonRAD, iFactr, Innaworks,
Metismo, Mobile Distillery, MonoTouch, MoSync, Open-Plug, Recursion software,
Rhomobile, RunRev, Sencha, StackMob and TapLynx.




Source: VisionMobile Mobile Industry Atlas, www.visionmobile.com/maps


Going global: Localisation issues
With close to one billion apps available, and over 800 million smartphones shipped to
date, apps are a global phenomenon. But, in going global, many developers are having
to deal with localisation, i.e. translating their application to local languages.

Localisation is not yet a mainstream issue: nearly 70% of our respondents either have
not tried localizing their apps or have never had any issues with it. But localisation will
soon become a fundamental issue for mobile developers, as it becomes easier to
distribute apps globally and to develop regionally-sensitive apps and content like news,



                              © VisionMobile 2011 | www.DeveloperEconomics.com
                                                                                           47
Developer Economics 2011
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Developer Economics 2011

  • 1. © VisionMobile 2011 | www.DeveloperEconomics.com 1
  • 2. About VisionMobile Contents Key takeaways 3 VisionMobile is a leading market analysis and strategy firm, for all the things connected. We offer competitive analysis, Chapter 1: market due diligence, industry maps, executive training and Developer Mindshare: strategy, ranging from the industry's hottest trends to under winners and losers in the platform race 11 the radar market sectors. Our mantra: distilling market noise into market sense. Chapter 2: VisionMobile Ltd. Taking applications to market 26 90 Long Acre, Covent Garden, London WC2E 9RZ Chapter 3: +44 845 003 8742 The building blocks of mobile apps 43 www.visionmobile.com/blog Chapter 4: Follow us: @visionmobile Brands go mobile 51 About BlueVia BlueVia is the new global developer platform from Telefonica that helps developers take apps, web services, and ideas to market. BlueVia is built on four Founding principles: Scale, Tools, Business Models, and Path to Market. BlueVia offers ground breaking, zero risk, business models for developers, along with 'mix & match' models to create multiple revenue streams. License Also by VisionMobile Licensed under a Creative Commons Mobile Industry Atlas | 4th Edition Attribution 3.0 License. The complete map of the mobile industry Any reuse or remixing of the work should be landscape, mapping 1,350+ companies attributed to the Developer Economics 2011 across 85+ market sectors. report. Copyright © VisionMobile 2011 Available in wallchart and PDF format. www.visionmobile.com/maps Disclaimer VisionMobile believes the statements contained in this publication to be based upon information that we consider reliable, but we do not represent that it is accurate or complete and it should not be relied upon as such. Opinions expressed are current opinions as of the date appearing on this publication only and the information, including the opinions contained herein, are subject to change without notice. Use of this publication by any third party for whatever purpose should not and does not absolve such third party from using due diligence in verifying the publication’s contents. VisionMobile disclaims all implied warranties, including, without limitation, warranties of merchantability or fitness for a particular purpose. VisionMobile, its affiliates and representatives shall have no liability for any direct, incidental, special, or consequential damages or lost profits, if any, suffered by any third party as a result of decisions made, or not made, or actions taken, or not taken, based on this publication. © VisionMobile 2011 | www.DeveloperEconomics.com 2
  • 3. Key messages The race for developer mindshare Use of mobile web accelerates. The last year has seen many twists and turns in the race of mobile platforms to capture developer mindshare. Mobile web as a platform has seen an impressive upturn in usage, and is now in third position in our Developer Mindshare Index. Android and iOS continue to lead with 67% of developers currently using Android and 59% using iOS. Windows is not yet the third horse in the three-horse mobile race. Use of Windows Mobile has dropped among developers in the last year, while Windows Phone is not yet seen by developers as a commercially viable platform. Yet Windows Phone 7 has managed to establish itself in the number two spot after Android in our Developer Intentshare Index, among platforms where developers plan to invest. Microsoft’s advantage comes from the influx of PC and Xbox developers, Microsoft’s best-in-class tools and the promise of a substantial user base with the Nokia deal. Symbian, Java abandoned. Symbian and Java ME are the two platforms with the highest developer abandonment rates; nearly 40% of developers currently using Symbian and 35% of developers currently using Java ME are planning to drop the platforms. Java ME is suffering from negative hype despite having been embedded on more than three billion handsets. Symbian is now officially a platform with an expiry date, with the Nokia Symbian handset line-up set to be discontinued. Experimentation on the rise. Developers are increasingly experimenting with more and more platforms and transitioning to new ones. Developers use on average 3.2 platforms concurrently based on our sample of 850+ online respondents, representing a 15% increase from last year’s figure. Show me the money Money can't buy you love, but users can! Large market penetration (the ability to reach users) is the most crucial factor for platform selection, important for nearly half of the respondents across all platforms. Meanwhile, the ability to make money was deemed important in platform selection by just a quarter of respondents, alongside the low cost development tools and the ability to quickly code and prototype. Losing money. In the gold rush to the applications economy, not everyone is making money. About a third of respondents make less than $1,000 USD per application in total, which is loss-making given that an application often takes months to develop. Commissioned vs. direct monetisation. Approximately 50% of app developers in our survey make money through a salary or commission, confirming that corporate monetisation is becoming as important as making money directly through applications. For developers making money directly, the top revenue model is pay-per-download, followed by advertising and freemium (free download, then pay to upgrade). Platform revenue potential. Not all platforms are born with equal revenue potential. Our research revealed large discrepancies across platforms in terms of the revenues applications are bringing to developers. iOS topped the chart, making 3.3x © VisionMobile 2011 | www.DeveloperEconomics.com 3
  • 4. more money per app than Symbian developers followed by Java ME (2.7x) and BlackBerry (2.4x). Android (1.7x), mobile web (1.6x) were the weakest performing platforms in terms of revenue per app and only ahead of Symbian (1.0). Role of operators. Traditionally, application developers have been cold and uncertain as to the role the operators can play in a software world. While the majority of developers agree that the role of operators is to delivery data access (61%) and voice (43%), there is no consensus on the role of operators in software. Developers across regions disagree on whether operators should be a payment gateway, an API platform, build the best mobile services, or just leave developers alone. App stores deliver fragmented reach App stores are a one-way street. App stores have irreversibly changed the landscape of mobile app distribution. Today, app stores are the primary go-to-market channel for 45% of mobile app developers across the eight major platforms. Use of other application distribution channels has consistently declined across the board. Moreover, operator portals, whose ‘walled gardens’ once dominated content distribution, are now paling in significance compared to app stores. App stores deliver reach. Reach is by far the most important reason behind developers’ preference for app stores as a distribution channel. More than 50% of developers distributing through Apple, Google, Nokia or BlackBerry app stores cite the ability to sell to more users as the primary reason for app store selection. App store fragmentation is an under-hyped challenge for developers. Each of the fifty-plus app stores available has its own developer sign-up, app submission process, artwork and paperwork requirements, app certification and approval criteria, revenue model options, payment terms, taxation and settlement terms. The marginal cost of distributing an application through one more app store is significant, contrary to popular perception. One size doesn’t fit all Developer segmentation is as sophisticated as consumer segmentation. But in whatever metric or measure is used, one needs to acknowledge that there are several types of “developers” out there, from hobbyists and students, to start-ups, self-financed professionals, commissioned developers, digital agencies, system integrators, as well as developers working within established businesses developing B2B or B2C apps – all having different incentives, aspirations, priorities, needs and wants. Attracting talent. Developers who are experienced with PC/Internet software development are jumping into mobile. However, our research shows that aside from Apple and Microsoft, platform vendors are not attracting enough developers with experience in mobile or PC/Internet development. Developer-market balance. Android is the one and only platform that is tri- laterally adopted by developers across all three major continents active in application development - Europe, North America and Asia. On all other platforms, there is an imbalance of developer supply and market demand across the globe. iOS is lagging in developer mindshare in Asia while BlackBerry developers are almost completely lacking © VisionMobile 2011 | www.DeveloperEconomics.com 4
  • 5. in Europe. The traditional sweet spot for Java developers has moved out of Europe to emerging markets, with 42% more respondents coming from Asia, Africa and South America. Flash Lite has weak supply in South East Asia where the platform can deliver best-in-class experiences on mass-market phones. Building mobile apps Learning curve. Contrary to popular perception, mobile web isn’t such an easy platform to learn, ranking sixth in terms of learning curve. This is due to the need for web developers to learn a complex stack of languages and technology frameworks across client and server environments, in addition to having to battle with the challenges of cross-browser portability. Fragmentation. Despite the bad press, Google is managing to contain Android fragmentation relatively well. On the contrary, it’s BlackBerry and Java ME that exhibit the greatest amount of fragmentation, with BB and Java developers needing to produce almost twice the number of app versions compared to Android developers. Localisation. Localisation will soon become a fundamental issue for mobile developers, as it becomes easier to distribute apps globally, and to develop regionally- sensitive apps and content like news, music and social networks. Developers who are accustomed to creating apps for global distribution (for example Java ME developers) in their majority are reporting localisation issues. Cloud APIs. Cloud connectivity is not just a fad among developers; it’s also where a lot of the innovation is taking place. We found that iOS, Android and mobile web developers are the most active users of cloud APIs, while BlackBerry and Java developers were the late adopters of the ‘cloud’. Multi-screen future. The developer ecosystem is gearing up for a multi-screen future. In our research, almost 50% of respondents who develop for smartphones also develop for mid-range (messaging and Internet capable) phones. Nearly 25% of Android, iOS, Java, mobile web and Qt respondents are planning to target TV and set- top boxes in the future. Moreover, our research confirmed that mobile web is also the most versatile platform, with mobile web developers currently targeting on average 2.5 different screen types. Brands drive mobile Brands go mobile Where there is a company website or a corporate intranet today, there will be a mobile app tomorrow. Such is the momentum behind consumer brands and virtually every self-respecting company out there, whether it’s B2C apps for enhancing the core business, or B2B for mobilising the corporate intranet. More importantly, while app stores kick-started the mobile app economy, it is brands that are now fuelling it. Brand journey through mobile. Despite the diversity across verticals and regions, we found that all companies go through a three-stage journey as they extend their digital strategies into mobile. In their first steps in going mobile, “newbie” brands think of an app as a way to ‘advertise’ whatever product or service they are providing. As they get Street Smart, brands ask, “How can we use apps to drive our core business?” And © VisionMobile 2011 | www.DeveloperEconomics.com 5
  • 6. finally as Connoisseurs, the question becomes “Can we turn apps into a new, revenue generating business?” The platform conundrum. For brands, extending their presence to mobile is a very different beast, compared to any other digital medium. Whereas on the web one needs compatibility with two or three mainstream browsers to reach 80% of users, going mobile means using the top three or four mainstream native platforms (iOS, Android, Symbian and BlackBerry) to reach just over 20% of the devices sold, on average. Platform priorities For companies going mobile, platform priorities are mixed, but the core challenge is common – market penetration and reach across the customer base. Organisations developing B2C apps (targeted at consumers) are extending their offering first Apple and then to Android, to mobile web, to BlackBerry and finally to Windows Phone 7. For B2B apps (applications paid by the corporate IT manager or CIO), HTML is already the platform of choice- not just for deployment on mobile web browsers, but also by converting HTML and JavaScript into native iPhone and Android apps using tools from companies such as Appcelerator, PhoneGap, RhoMobile and Sencha. © VisionMobile 2011 | www.DeveloperEconomics.com 6
  • 7. About Developer Economics Welcome to Developer Economics 2011, the quintessential mobile developer research report. In this second annual report, we explore both what drives developer mindshare, and how brands are fast-forwarding into the world of mobile. Developer Economics 2011 takes the reader across the entire developer journey, from the shift of mindshare and why “users can buy you love,” to how money is made in mobile. It covers the hottest issues, from app design and promotion to monetisation and user support. In this year’s research, we have delved into the world of brands that are going mobile, to understand what makes them tick, and how they are planning to conquer the mobile world. While app stores initially kick-started the mobile app economy, it is brands that are now fuelling it. We spent the last few months quizzing developers and industry executives about the future of mobile. Our research included 20+ industry executives, along with 900+ developers from 75+ countries working on 8+ major platforms. We believe our work has yielded important insights about the future of mobile development and hope you enjoy reading this report as much we enjoyed writing it! Matos, Elizabetta, Andreas, Michael, Anne and Vanessa at VisionMobile. @visionmobile www.visionmobile.com/blog Thank you! We‘d like to thank the executives and developers who helped make this report a reality – those who spent the time on the phone or online to offer a glimpse of the world through their eyes, with its ups and downs. You know who you are. We’d also like to thank the many companies who helped us reach out to developers – Distimo, Enough Software, Flurry, Funambol, GetJar, LiMo Foundation, MEX, Microsoft, Mobile Monday London, Nokia, Oracle, Qualcomm, RIM, WAC, WIP – without which we would not have been able to reach such a diverse spectrum of developers. And of course – a huge thank you to James Parton and the team at Telefonica, without whose financial support this research would simply not have been possible. © VisionMobile 2011 | www.DeveloperEconomics.com 7
  • 8. Welcome to Developer Economics 2011 How quickly time flies! Last year we, like VisionMobile, felt there was a real gap in the market for a piece of research that credibly identified the issues facing developers in the mobile space. Based on the response to 2010’s inaugural report, it seems you agreed with us. The success of the publication really surpassed our expectations. The report was downloaded over 10 thousand times, while TechCrunch called it “one of the most profound [reports on mobile development]…to date”. We’re delighted to be supporting the project once again in 2011, as this allows the research to be made freely available for download. Telefonica remains steadfastly committed to understanding the needs of developers, in order to help shape the BlueVia roadmap, and 2010’s Developer Economics findings were a key input into the thinking that produced the initial release of BlueVia. This year’s edition delves into the hottest issues in mobile apps: which platforms gained and lost developer mindshare, what are the most popular revenue models, which go-to- market channels are the fastest to pay, how apps in smartphones vs. tablets vs. TVs will play a role in the future, and more. We have more than doubled the number of respondents, compared to 2010’s research, with developers now representing 75 countries. For the first time, we have added insight into digital strategies from over 50 leading international and regional brands, through 20 one-to-one interviews with digital agencies, media, retail and Internet companies. I hope you enjoy reading the report as much as we have enjoyed working with VisionMobile to deliver it. James Parton, Head of BlueVia Marketing @jamesparton www.bluevia.com © VisionMobile 2011 | www.DeveloperEconomics.com 8
  • 9. Research methodology The Developer Economics 2011 research was conducted between January and April 2011. The research is based on a large-scale online developer survey, developer interviews, and interviews with industry executives working in commercial organisations and digital agencies. Among the 900+ participating developers, 850+ took our online survey. These developers represented 75 countries, across eight major platforms: Android, iOS, Windows Phone, Symbian, Java ME, MeeGo, mobile web (HTML and JavaScript) and Qt. Each platform was represented by at least 50 developers who reported spending the majority of their time on that platform. To remove platform bias, we averaged all results presented in this research across these eight major platforms. The developers that took part in our online survey came in their majority (90%) from Europe, North America and Asia while another 10% came from South America, Africa and Oceania. Respondents included both novice and seasoned developers, with an average of three years mobile experience, and six years PC development experience. © VisionMobile 2011 | www.DeveloperEconomics.com 9
  • 10. Developers had a mix of roles, with 50% involved in a technical role, another 25% employed in a commercial role, and 20% being hobbyists. Note that many respondents were winners and runner-ups of developer awards, including Nokia’s Calling All Innovators and the Android Challenge. Respondents also included five Microsoft MVPs, and 16 Forum Nokia Champions. In addition to the online survey, one-to-one interviews were carried out with over 40 developers. This group ranged from hobbyists to CEOs of games companies, and from one-person startups to technology giants. Moreover, 21 one-to-one interviews were carried out with senior executives from a wide spectrum of commercial organisations and digital agencies. All the executives we talked to had decision-making authority, and the majority worked within or with marketing and strategy departments. Sectors covered directly or indirectly included digital agencies, media, retail, pure Internet, telecoms, FMCGs (fast-moving consumer goods), sports, banking & financial, marketing & communication, health, automotive, travel, leisure, and music. © VisionMobile 2011 | www.DeveloperEconomics.com 10
  • 11. © VisionMobile 2011 | www.DeveloperEconomics.com 11
  • 12. WHO IS WINNING THE RACE? 1. Developer Mindshare: winners and losers in the platform race The impact of apps and software ecosystems in the mobile industry has been nothing short of astonishing. Apps have turned the handset manufacturer business upside down in the last two years, as players with strong software ecosystems like Apple and Google replaced the weakest of the 'old guard’ in the leaderboard of top-five handset vendors by unit sales. Nokia had clung for too long to the 10-year-old Symbian platform – and at the last minute it had to “jump off a burning platform” by partnering with the lesser of two evils (Microsoft rather than Google) to salvage its smartphone line. Sony Ericsson and Motorola failed to recapture the glory of the RAZR and Cybershot days, and are dropping off the top-ten chart. © VisionMobile 2011 | www.DeveloperEconomics.com 12
  • 13. The total market share captured by the top-five handset OEM leader-board has shrunk from 80% to under 60% in less that two years, as Apple stormed the high-end smartphone market and modular platforms from Google and MediaTek made it possible for tens of low-margin assemblers to take up around 30% of global handset sales. The number two and three handset OEMs Samsung and LG are the only ones who managed to survive with only minor scratch wounds, maintaining their sales ranking by aggressively responding to mobile operators’ demand for smartphones with numerous Android phone and tablet models. Software has also disrupted the network operator world in many ways. Today, software innovation outpaces network innovation by at least a factor of five: application developers often reach market in only three to six months, while operators take 18-24 months to launch a new service. In other words, it has become impossible to innovate outside software. Any such innovation will be outrun and marginalised by more agile, more nimble software-led players. More importantly, software-led players like Apple and Google have benefited at the expense of the very network operators who funded their entry into mobile; the vast majority of Android handset models produced in 2008-2010 have been sponsored by operators in order to attract new subscribers, while the majority of iPhones have been subsidised as part of a 12-24 month telco contract. It is these same software-led players that are now competing with operator services and challenging their established control points, including location look-ups, billing, service discovery, authentication. Software- led players are even questioning the operator hold on mobile termination (see Google C2DM) and subscriber activation (see soft SIMs). As telecoms players are dragged to the software era, network operators and handset OEMs need to become ‘platforms’ (enablers) for developer innovation. They also need to rebuild their strategies on the game rules of software economics, as we shall see next. The impact of software economics The single biggest surprise that software has brought to the mobile industry has been the change of economics – from supply-side economies of scale to demand-side economies of scale. The mobile industry has been built from the ground-up on supply side economies of scale; billion-dollar investments behind handset vendors have created production powerhouses where the few are able to dramatically drop supply and manufacturing costs. This is why Nokia has been able to buy handset components in far higher volumes and at far lower prices than everyone else, allowing Nokia to dominate emerging markets in terms of price points. Supply-side economics of scale are common sense: the bigger the company, the lower the costs; the lower the prices, the bigger the sales. What software introduced was demand-side economies of scale. Also known as “network effects,” these economies are driven by demand, i.e., the number of users or developers of a software platform. A classic case of network effects is a telephone network: the utility of a network increases with the size of the network. The more users, the more valuable the network is to those users. Software platforms like Windows, Android and iOS operate based on network effects: the more users, the more devices © VisionMobile 2011 | www.DeveloperEconomics.com 13
  • 14. are sold, the more developers are attracted to the platform, the more apps are developed, the more users, etc. The next diagram illustrates network effects in the case of Google’s Android platform. The textbook ‘worst practice’ here is Nokia: the Finnish OEM has been excelling at creating supply-side economies of scale. With over 400 million devices shipped in 2010, Nokia can demand unbeatable pricing from its suppliers, and thus has an inherent advantage in cost-sensitive emerging markets. At the same time, Nokia – like most of the traditional top-five OEMs including Motorola and Sony Ericsson - failed to understand the demand-side economies of scale practiced by Google and Apple. For too long, developers were a second priority for Nokia’s Symbian and Java platforms. Lacking in the attractiveness of both its route to market (Ovi) and its platforms, Nokia quickly saw developer mindshare migrate to iOS and Android. Both these competing platforms managed to build self-sustaining network effects of unprecedented scale; for example, Apple reached 10 billion app downloads in the space of 30 months. Eventually, Nokia had to backtrack against 20 years of corporate strategy and outsource its smartphone platform to a coopetitor – Microsoft – whose Windows business has flourished due to network effects. Winners and losers in the platform race Since the beginnings of the smartphone era, the platform race has never been so fast moving. In the space of two years, Apple’s iOS and Google’s Android have captivated © VisionMobile 2011 | www.DeveloperEconomics.com 14
  • 15. the attention of users, industry brands and mobile developers alike. Nokia’s Symbian – once the unquestioned king of mobile platforms, having been deployed in over 500 million devices as of Q1, 2011 – is now officially being phased out, while Nokia’s quarterly smartphone sales volumes have for the first time fallen behind Android. Microsoft’s Windows Phone 7 is making a strong comeback thanks to best-in-class user experience and developer tools. However, Microsoft has a challenging year ahead as it tries to stand on the shoulders of Nokia to compete in terms of user base with Apple and Google. Mobile web (the platform for apps written in HTML or JavaScript) is continually increasing in terms of developer attention and media hype. At the same time, HTML apps can’t compete on equal grounds with native platforms, in terms of user experience or depth of API reach. Meanwhile Java, with its broken promise of write-once-run- anywhere, is fast being eclipsed out of the smartphone-centric mobile developer agenda, with Java’s advantages in the feature phone market largely being ignored by developers. All in all, the platform race has not only intensified, but also sped up. Yet, amidst all the industry hype, there is no accurate metric of how mobile platforms are falling in or out of favour with developers. Our Developer Mindshare Index does exactly that, by tracking which mobile platforms are mostly used among developers. The next chart shows the top eight mobile platforms, and how the Developer Mindshare Index has changed in the last year. © VisionMobile 2011 | www.DeveloperEconomics.com 15
  • 16. The past year has seen many twists and turns in the mobile platforms used most by mobile developers. Developers are increasingly experimenting with more and more platforms. Developers use on average 3.2 platforms concurrently based on our sample of 850+ online respondents. This represents a 15% increase from last year’s figure, indicating how developers are more willing to experiment with new platforms and actively transitioning to new ones. In parallel, more experienced developers are entering the mobile app economy, which helps boost the average platform numbers. Android and iOS have further solidified their top two positions in the Mindshare Index, and are now established in a league of their own in terms of both developer ecosystem and user base. Apple’s iOS stands at over 350,000 apps and 110 million devices sold, while Android stands at over 200,000 apps and 110 million devices sold, as of Q1 2011. Mobile web as a platform has seen an impressive upturn in usage over the last year, and is now in third position in the Developer Mindshare Index. The popularity of mobile web as a platform is driven by four factors: 1. Mobile web is the primary choice for cross-platform development and for addressing the long tail of device models beyond iPhone and Android. 2. Segments of web developers familiar with HTML and JavaScript development are being attracted to develop for mobile devices. Moreover, web developers deal with fragmentation (resolution, aspect ratio, input methods) as part of their day-to-day work and so are well equipped to deal with the multi-platform nature of mobile. 3. Companies across industry verticals – from brands to banks – who are extending their digital strategies into mobile apps are using the mobile web as a low-cost, mass- reach platform across devices globally. Similarly, corporate IT departments that need to © VisionMobile 2011 | www.DeveloperEconomics.com 16
  • 17. take their legacy intranets to mobile devices are choosing mobile web as the default platform. 4. A host of HTML-to-native development tools are helping HTML/JavaScript developers target smartphone native app markets, as well as the long tail of mass- market phone browsers. Examples include Appcelerator, PhoneGap, RhoMobile, Sencha and The M Project. Moreover, native apps can be designed to encapsulate functionality in the form of web content, which eases cross-platform development. Windows is not yet the third horse in the three-horse mobile race. Use of Windows Mobile has dropped among developers in the last year, due to two reasons. First, the older Windows Mobile has been dying a slow death in the last two years, with Microsoft unable to match Apple or Google in terms of device sales or developer hype. A large number of Windows Mobile MVPs (most valuable professionals - the acknowledged community opinion leaders) have been attracted by the strength of Apple’s consumer apps proposition and switched to developing iPhone apps. Second, the newer Windows Phone is suffering from lacklustre sales, estimated at just over three million handsets sold by the end of Q1, 2011, according to Gartner and IDC figures. Java ME and Symbian platforms show a steady mindshare decline. Java ME is suffering from negative hype despite having been embedded on more than three billion handsets. Symbian is now officially a platform with an expiry date, with the Nokia Symbian handset line-up set to be discontinued. Across mobile platforms, Android is not just the king of developer mindshare, it’s also the easiest platform for developers to experiment with. This is for several reasons: 1. Android has fewer restrictions on ‘deep’ APIs like access to the home screen, multimedia codecs, SMS texting, telephony and streaming functions when compared to the iPhone. 2. Android Market offers instant publishing, versus Apple’s ‘undocumented’ app approval policy. That allows developers to iterate quickly on Android applications, versus waiting for Apple’s approval process to complete. 3. Applications on the Android are easy to sideload (i.e., to install from a connected PC, rather than from an official app store). This facilitates beta testing among peers, without having to meet quality standards needed for publishing an app to the Apple App Store. What’s even more telling of the future of the platform race? Our Developer Intentshare Index, tracking the top-eight mobile platforms developers are planning to use. Combined an indication of which platforms developers are abandoning, it shows the ebb end flow of developer interest across mobile platforms. Despite being a young, six-month old platform, Windows Phone 7 has managed to establish itself in the number two spot, claiming nearly 35% in the Developer Intentshare Index. Microsoft’s advantage comes from the strength of the XNA and Silverlight developer tools and the promise of a substantial user base with the Nokia deal. Microsoft has also cleverly targeted its Windows Phone platform - not to existing Windows Mobile developers who are disillusioned with the legacy platform, but to © VisionMobile 2011 | www.DeveloperEconomics.com 17
  • 18. previously untapped segments of desktop and games (Xbox) developers, which are new to mobile. Google’s Chrome OS ranks highly with the promise to follow Android’s market penetration with nearly one in four developer stating they plan to use - Google’s Chrome OS ranks highly with the promise to follow Android’s market penetration with nearly one in four developer stating they plan to use the platform. MeeGo and Qt still garner developer optimism. Nokia has left developers with no guidance as to the future of MeeGo and Qt, and yet developers show more interest in these two platforms than BlackBerry, on which RIM is spending hundreds of millions in acquisitions. As the platform abandonment chart shows, Symbian and Java ME are the two platforms with the highest developer abandonment rates; nearly 40% of developers currently using Symbian and 35% of developers currently using Java ME are planning to drop the platforms. The Java ME abandonment comes as no “Windows Phone development tools surprise: neither Oracle nor Sun have spent any are first class - for example both marketing dollars visibly promoting the Java designers and developers can work mobile platform. Moreover, what’s been missing collaboratively on the same project. in Java ME is the direct-to-consumer This level of sophistication isn’t distribution channel (a.k.a. app store), which available on either iOS or Android.” Sun did not have the vision or commitment to Andreas Tsouchlaris introduce. In the case of Symbian, Nokia dealt R&D Manager an epic public relations blow to its own platform, Binary Logic announcing on February 11 it would put all its smartphone eggs in the Microsoft basket. © VisionMobile 2011 | www.DeveloperEconomics.com 18
  • 19. The Palm OS and WebOS mindshare decline is also to be expected, given that HP has managed to convince neither the mainstream media nor developers that it can compete as a platform vendor in a game where the rules are defined by Apple and Google. Qualcomm’s BREW is perhaps the biggest surprise amidst platforms being abandoned. With the latest BREW MP platform, Qualcomm made a platform investment of hundreds of millions of dollars, including a development team of over three hundred people. And, it managed a major feat, in closing deals for AT&T and Verizon feature phone devices. Yet, with BREW remaining an aging development environment, Qualcomm has not managed to retain developer mindshare and compete in the new rules of the game, where apps and APIs matter over and above devices and carrier deals. Already 25% of respondents using BREW are planning to abandon the platform. Before WAC has managed to ship its first device (see our case study on Smart’s Netphone), developers are already abandoning the widget-based, operator-backed platform. This comes as little surprise given the poor track record of operator-driven software platforms, including SavaJe, the i-mode alliance, LiMo Foundation, and now WAC. Creating a developer ecosystem requires very different culture and organisational DNA than what’s needed to build a telecoms network. Flash is another platform that appears to be losing the battle for mobile developer mindshare. While overall mindshare for the Flash platform increased in 2011, we believe this is due to new segments of ActionScript developers and Flash designers who are starting to develop for mobile. In parallel, Flash runs sixth among platforms developers plan to abandon. The root cause is nothing else other than Adobe’s own mobile strategy, who much like Sun failed to materialise the vision of a write-once-run- © VisionMobile 2011 | www.DeveloperEconomics.com 19
  • 20. everywhere platform. We argue that the “Flash Lite is in decline and many failings of Adobe’s strategy can be traced to development houses have closed three reasons: shop. We ‘re one of the few Flash Lite companies still running because a. Reach over consistency. Adobe over- we have been able to keep ourselves prioritised reach over consistency in deploying small.” its Flash Lite across mobile platforms. Despite having Flash Lite deployed across more than Stefan Wessels Co-founder one billion handsets, the platform ended up Breakdesign being fragmented, inaccessible to developers and with an aging platform installed base. As such Adobe had to scrap Flash Lite and start from scratch with Flash on mobile. b. Old-school culture. Adobe has traditionally had a US-centric, media-conglomerate culture, contrary to Macromedia whose Flash Lite platform Adobe acquired. By being US-centric, Adobe has been unable to realise the opportunities in developing regions such as Asia. Moreover, by focusing on large business partners, it has been unable to cultivate momentum among developers in the long-tail. Last but not least, Adobe has not been playing fair with their developers, for example closing APIs in favour of exclusive commercial deals around those APIs or shutting down products like Flash Cast, completely. As a an old-timer Flash Lite developer notes, “you can never rely on Adobe to put developers ahead of its commercial interests.” c. Platform complexity. Adobe’ introduced a complex platform (ActionScript 3) which alienated their designer, non-programmer developer audience who has since been moving to native platform alternatives like iPhone and Android. At the other end of the application economy, brands and companies across verticals have had a slower, less refined approach to platform selection. Apple and, to a certain extent, Android are the preferred entry point for brands and publishers who want to extend their digital strategies to mobile with a ‘premium’ experience. Moreover, as brands and organisations increase their understanding of mobile, so their digital strategies demand reach into the mass-market. This demand for reach is usually served through three means: mobile websites (developed internally or outsourced), and in some cases use of mobile app publishing platforms (e.g. Communology, Conmio, Mobiletech) or magazine-style publishing platforms like Flipboard, Taptu and Zite. Users can buy you love Developer mindshare has indeed shifted greatly within the last of 12 months. But what are the drivers of platform selection? In other words, what makes developers invest time and effort in this or that platform? Is it a question of money, features, fun or reach? We found that developers have become even more business-savvy in the last year. Among the top five reasons for selecting a platform, there is just one technical reason and four commercial ones, as shown in the next graph. Money can't buy you love, but users can! Large market penetration (the ability to reach users) was the most crucial factor for platform selection: half of the respondents across © VisionMobile 2011 | www.DeveloperEconomics.com 20
  • 21. all platforms thought that market penetration was the top reason for platform selection. Meanwhile, the ability to make money was deemed relevant by just a quarter of respondents. In fact, the ability to make money, on average, is no more important than the ability to code and prototype quickly. Interestingly, the scoring of platform criteria doesn’t change significantly across developers with a technical role, compared to those working in a commercial role within a development house. The only notable difference was that revenue potential as a reason for platform selection was, understandably, twice as important for developers with a commercial role than for hobbyists. Platform selection criteria do not vary significantly by company size, either. The only notable insight is that as companies grow, platform selection criteria shift away from market penetration and into prioritising the platform the client has requested. However, before platform vendors go out and start adapting their marketing messages to emphasize user reach, there is some very important small print here: platform selection criteria differ considerably across developers using different platforms. For example, platform selection for iOS developers is heavily skewed towards “Low cost of entry is critical for a commercial criteria. On the contrary, for new platform. For a small company, Windows Phone developers the selection is the main considerations in adopting heavily skewed towards technical criteria, an a new platform are the cost of indication that Microsoft does not yet have a porting and hitting the max amount commercially appealing platform. The next of users with a single version.” chart shows the importance of the top two Roger Nolan commercial and top two technical criteria CTO at Ambient Industries, for platform developers, relative to the producer of the Flook location browser. average, across the top-eight platforms. © VisionMobile 2011 | www.DeveloperEconomics.com 21
  • 22. Preparing for a multi-screen future It’s no secret the vast majority of mobile developers are targeting smartphones. Most of the news buzz these days is focused on Android and iOS. But beneath the veneer of ‘smart’ devices, the developer ecosystem is gearing up for the multi-screen future where smartphones are no longer the ‘cream of the crop’ amongst the digital channels to consumers. In our research, almost 50% of respondents who develop for smartphones also develop for mid-range (messaging and Internet capable) phones. Moreover, we saw a four-fold increase in the number of developers planning to develop apps for TV or set-top boxes, indicating that the market for living room apps is developing momentum. Nearly a quarter of Android, iOS, Java, mobile web and Qt respondents are planning to target TV and set-top boxes in the future. It is widely accepted that mobile web is the “Programming and UI metaphors prevalent choice for multi-screen app are very different on all platforms development. Our research confirmed that (iOS, Android, WP7).. in practice the mobile web is also the most versatile code reuse is minimal between the platform. Mobile web developers currently platforms. We ‘re actively looking at target on average 2.5 different screen types, HTML5 for multi-platform ahead of Android and Qt developers, each of development.” whom targets 1.8 screen types on average. Mobile software developer, working for a leading UK news publisher Besides the mobile web, there is no other mainstream platform today designed for © VisionMobile 2011 | www.DeveloperEconomics.com 22
  • 23. cross-screen development. “Programming and UI metaphors are very different on all platforms (iOS, Android, WP7).. in practice the code reuse is minimal between the platforms. We ‘re actively looking at HTML5 for multi-platform development.” notes a mobile software developer working for a leading news publisher in the UK. Java, the king of cross-platform apps, has lost its allure. Java developers come third in planning to target multiple screens. Moreover, Java developers show a very strong intent in transitioning from mid-range to smartphones, away from the stronghold of the Java platform. The next graph shows the developers currently targeting different screen types. Currently iOS developers show strongest preference for targeting smartphones, whereas Java developers show strongest preference for targeting mid-range phones. But future intent is very different; iOS and Blackberry developers show least interest in a multi-screen future, whereas Qt and Android developers show most interest towards coding for multiple screens. Mobile developers: one size doesn’t fit all We know by now that not all developers wear a ponytail, khaki shorts or propeller beanies. Such misconceptions date from the days when software engineers were perceived as unsociable geeks sitting in a back room, and never talking to their customers. Most network operators, handset OEMs or consumer brands often use the word “developer” to attach a label to anyone developing mobile applications, whether a hobbyist or a programmer within a Fortune-500 company. However, in today’s world, where developers are the foremost mobile innovators, we need to become more savvy in understanding who exactly these “developers” are. There are many ways to segment “developers”: by geographical region, platform used, level of experience, criteria for platform selection, by the category of applications they are developing or by industry verticals they are catering to. Developer segmentation is as sophisticated as consumer segmentation. But in whatever metric or measure is used, © VisionMobile 2011 | www.DeveloperEconomics.com 23
  • 24. one needs to acknowledge that there are several types of “developers” out there, from hobbyists and students, to startups, self-financed professionals, commissioned developers, digital agencies, system integrators, as well as developers working within established businesses developing B2B or B2C apps – all having different incentives, aspirations, priorities, needs and wants. We next look at some of the ways developers differ based on app categories, level of experience and geographical location. Application categories matter Developers focus on different app categories based on their primary platform. We found that business apps are particularly popular among Windows Phone developers, but equally unpopular among Android developers. Entertainment apps are popular among iOS and Qt developers. Games are popular among Qt and Java developers, but rare among mobile web and Windows Phone developers. This implies that platform vendors need to cover their soft spots, in terms of app categories that developers are less active in. Operators, meanwhile, need to tap into the right developers to address their service portfolio. Finally, for developers, genre gaps on specific platforms may provide opportunities to stand out. Experience matters Every self-respecting software platform today needs to have a fast learning curve (more on that in Chapter 3). At the same time, there’s no substitute for experience – and the distribution of development experience is anything but balanced across the developer ecosystem. We see platform vendors lacking sophistication in their targeting of the developer ecosystem as we discuss next. With the shift away from Symbian, Nokia is bleeding high-calibre mobile developers. Symbian developers are on average the most experienced in mobile software, with these developers being 15% more likely to have seven-plus years of mobile experience. We can also quantify the signs of Apple’s allure towards experienced PC and Internet developers, since the iOS platform attracts significantly more developers with seven- plus years PC/Internet experience, compared to other platforms. This confirms that experienced software developers are moving into mobile, using iOS as an entry platform, in what we believe is driven by the sudden rise in demand for developer talent, especially in North America. Since launching in late 2010, Windows Phone 7 has done pretty well in attracting seasoned developers. We see experienced mobile developers coming to Windows Phone, with a significant bias of current Windows Phone developers having between three and six years of mobile experience - an indication that Microsoft’s strategy to tap into PC and Xbox developer segments is paying off. © VisionMobile 2011 | www.DeveloperEconomics.com 24
  • 25. In conclusion, developers who are “Entry to Android is very very easy. experienced with PC/Internet software There will be a stampede of developers development are jumping into mobile. on Android.” However, our research shows that aside Kishore Karanala from Apple and Microsoft, platform Experienced Symbian developer vendors are not attracting enough Teleca India developers with experience in mobile or PC/Internet development. The developer-market mismatch We firmly believe software innovation will not just be global; like news and music, we believe that mobile apps will follow a regional route. That is, most popular mobile apps will be local (or locally adapted) apps. As such, it is important for platform vendors and OEMs to cultivate and capture local developer talent and mindshare. Yet, we are seeing many regional gaps across the mobile developer ecosystem where developer supply doesn’t match market demand, especially on BlackBerry, Java and Flash Lite platforms. BlackBerry developers are naturally concentrated in North America, with 16% more respondents from that region; but in addition, they are almost completely lacking in Europe. This reveals a major gap in RIM’s developer marketing efforts. The traditional sweet spot for Java developers has moved out of Europe to emerging markets: Asia, Africa and South America, with 42% more respondents from these regions. This is due to low penetration of iOS and Android in Asia, Africa, and South America, and also to Java having suffered from negative hype in the traditional development hubs of Europe and North America. Flash Lite is another platform that exhibits a huge gap between markets (demand) and developers (supply). The sweet spot for Flash Lite is in emerging markets where the platform delivers best-in-class experiences on mass-market Nokia Series 40 handsets - and not on the iPhone or Android platform where Flash can’t compete with native apps in terms of user experience. Yet there are very few Flash developers targeting such emerging markets. “We are one of very few developers for Nokia handsets in the South East Asia region. The Flash Lite theme market for low-end phones is a blue ocean,” notes Stefan Wessels, co-founder of Breakdesign, a company with more than 7 million app downloads. Android is the one and only platform that is tri-laterally adopted by developers across all three major continents active in application development: Europe, North America and Asia. “Entry to Android is very very easy. There will be a stampede of developers on Android” notes Kishore Karanala, a seasoned Symbian developer with 5+ years of mobile app experience working for Teleca India. In contrast, iOS is lagging in developer mindshare in Asia, due to the relatively low penetration of Apple devices in Asian countries. © VisionMobile 2011 | www.DeveloperEconomics.com 25
  • 26. © VisionMobile 2011 | www.DeveloperEconomics.com 26
  • 27. WHERE IS THE MONEY? 2. Taking Applications to Market The developer journey The life of a mobile developer is a complex one. It’s not just a two-step, idea-to-app process. In today’s global application market, there are tens of steps in taking an idea to market – including planning, developing, debugging, support forums, test frameworks, packaging, pricing, publishing, billing, marketing, sales tracking, user support and application updates, to name just a few. To illustrate the intricacies of app development, we’ve put together the Developer Journey, a chart showing the tens of touch points in the life of a mobile developer. The Developer Journey is an important tool, not just for appreciating the complexity of mobile development, but also for helping platform vendors map the competitive landscape of supply and demand, and understand how to differentiate. The Developer Journey consists of the following six stages. Note that the Developer Journey presents a comprehensive model covering every possible touch point – which implies that most developers will selectively touch on some of the stages below, but not all. © VisionMobile 2011 | www.DeveloperEconomics.com 27
  • 28. 1. Application planning is the stage where a developer takes a concept through the initial stages of feature design, prototyping, selecting the right platform, and designing for the right users. 2. Develop & debug, is where the hard work takes place: coding the application, designing the UI, testing and porting. This stage is where the vast majority of developer programs are focused today. 3. Market readiness, an often under-hyped part of the developer journey where the application is readied for publishing to the market – including localisation, packaging, variant management, certification and submission. 4. Distribution & monetisation is the stage addressed by app stores. It involves publishing the application, establishing billing and distribution agreements and making money from application sales, ads or other monetisation means. 5. Retailing & discovery is the stage where an application needs to be promoted through as many channels as possible, so as to grab user attention. Retailing is the stage facing the most challenges today, due to the over-supply of applications and the bottleneck of discovery. 6. In-life use is the final stage, in which developers need to track sales and usage analytics, support users and manage ratings, as well as update the application with bug fixes and features. Chapter 1 in this report has looked at the application planning stage. Chapter 3 will look at the develop & debug stage. The rest of this chapter will examine the last four stages of the developer journey, i.e., the challenges and opportunities in taking applications to market. The application store duopoly In 2011, app stores are a fact of life and they are here to stay. Our research found that use of app stores as a primary distribution channel has surged by over 30% compared to 2010. Today, app stores are the primary go-to-market channel for 45% of mobile app developers across the eight major platforms. App stores have irreversibly changed the landscape of mobile application distribution today. In the last year, use of other application distribution channels has consistently declined across the board; most notable are the year-on-year 20-30% declines in app distribution via third party aggregators, on-device preloads, and via developers’ website. Operator portals, whose ‘walled gardens’ once dominated content distribution, are paling in significance compared to app stores. “Downloads through operator portals are still less than one million per month on average per operator,” notes an executive at one mobile app development house and continues, “Compare that to one billion per-month downloads from the Apple App Store”. © VisionMobile 2011 | www.DeveloperEconomics.com 28
  • 29. It’s no wonder operator portals have lost their shine. Telcos have typically outsourced their portal operations and development to major IT suppliers who have lacked the culture and incentives to evolve with the times. “The same people who failed in WAP portals are doing operator app stores now,” points out the CEO of a leading mobile app agency in Germany. Moreover, the discovery and purchase process through an operator portal has major drawbacks to modern app stores. “It’s more complex to download a game through an operator portal than to open a bank account,” notes Christopher Kassulke, CEO “What T-Mobile does in one at Handygames, a major app development house. year in terms of downloads, And still, in 2011 – in the era dominated by app we do in one week.” stores and long-tail innovation – there are tier-one telcos who require developers to sign 20-page Manager Top-ten games developer contracts before they can discuss a deal. Use of each channel to market also varies significantly per platform. App stores are used primarily by iOS (77%) and Android (54%) developers. In contrast, mobile web and Java ME developers distribute apps primarily through their own websites and portals, due to the lack of app stores with sufficient reach and discoverability. Reach is by far the most important reason behind developers’ preference for app stores as a distribution channel. More than 50% of developers distributing through Apple, Google, Nokia or BlackBerry app stores cite the ability to sell to more users as the primary reason for app store selection. Exclusivity is not a critical reason for app store selection, either; only one in five Android and Blackberry developers choose an app store because it was the only distribution channel available. Moreover, neither the revenue share split nor the speed of payment are cited as important reasons for distributing via an app store. Support for marketing and promotions is the third most important reason for using app stores as a distribution medium; we expect marketing support to increase in importance as app stores develop more sophisticated targeting and promotional programs. © VisionMobile 2011 | www.DeveloperEconomics.com 29
  • 30. All in all, app stores dominate over every other distribution channel because of reach, not exclusivity or payment terms. App stores are relatively quick to pay, too. Just over 60% of respondents using app stores get paid within one month from submission. The only distribution channel that’s faster to pay is when developers are using their own website, where 75% of respondents get paid within a month of the purchase. Drilling down into the ins and outs of the four main app stores, our research reveals significant differences across Android Market, Apple App Store, BlackBerry App World and the Nokia Ovi Store – as the next chart reveals. Apple’s App Store has a notoriously unpredictable quality control and curation process during app submission, which causes some dissatisfaction across developers. The mainstream press is peppered with stories of apps whose approval was inexplicably delayed or even rejected when the apps conflicted with Apple’s own agenda. Android, on the other hand, places priority on developers with an automatic submission process with no QA or curation, resulting of course in an increase in ‘noise’ from low-quality and even copyright-infringing or malicious applications in the Android Market. “The problem with Android Market is that you cannot tell if an application is an official app or a look-alike” notes an application developer who’s been developing on Symbian and Bada platforms. “Something needs to change in Android Market to get the quality of apps up to the same level as the Apple App Store” says Roger Nolan, CTO at Ambient Industries, producer of the Flook location browser. The application quality review process is straightforward in the case of Android, but not so for Nokia’s Ovi Store. Developers that we spoke to report that the Ovi Store submission process is cumbersome and unnecessarily restrictive. Due to tough approval criteria, an application typically takes five or more review cycles before it can © VisionMobile 2011 | www.DeveloperEconomics.com 30
  • 31. appear on the shelf. Given that the turnaround time for each review cycle is 7-10 days (compared to just 24 hours for the GetJar store), that means that the time-to-market for Ovi Store apps is often 1.5-2 months. Moreover, Ovi Store content needs to be approved on a country-by-country basis. To make things worse, the review cycle isn’t streamlined, which means that each cycle is handled by a different reviewer within Nokia. Another important issue is that the root certificates have not been installed on some S40 handsets (esp. in India), which means that even if an application is approved, it can’t install on the handset. “The only reason we persevere with Ovi is that once we get the app approved, the downloads are quite substantial” notes an application developer who uses a multi-channel distribution strategy. Ovi is not alone in being criticised for its problematic “Typically it takes 1-2 days to have application submission process. “It’s difficult to get a an app published on GetJar and 2- sign-off for Bada apps. Every week we have a new 4 weeks on the Nokia Ovi Store.” problem with the Samsung App Store, including poor documentation, language barriers and Mark Shoebridge Binu unreasonable control from Samsung, even on Sydney, Australia application design issues” notes a developer in the UK who has already published four Bada apps. The fragmented app store landscape Besides the four main native app stores – Android Market, Apple App Store, BlackBerry App World, and Nokia Ovi Store – there are hundreds of distribution channels to market. There are over fifty different app stores, and many more if one includes the many operator portals globally. Furthermore, the selection of app stores available varies by region, operator or manufacturer deals. © VisionMobile 2011 | www.DeveloperEconomics.com 31
  • 32. App store fragmentation is an under-hyped “Eventually apps will evolve to a challenge for developers. Each of these fifty-plus consolidation of submission and app stores has its own developer sign-up process, payment mechanisms but a app submission process, artwork and paperwork multitude of discovery options. In requirements, app certification and approval the world of scarcity you can win a criteria, revenue model options, payment terms, lottery ticket. In the world of taxation and settlement terms. This implies that abundance, the competition is for the marginal cost of distributing an application attention.” through one more app store is significant, contrary Jai Jaisimha to popular perception. CEO Open Mobile Solutions Therefore, while the native app store is used by 40-80% of developers (depending on the platform), there is a significant opportunity – and associated cost – in using a multi- channel strategy in app distribution. In platforms like Android, where tens of app stores compete for user attention, the picture is quite complicated. Unfortunately, the vast majority of developers do not have the resources to distribute their apps through more than one or two app stores. At the other end of the spectrum, only a dozen or so software houses can deliver apps to the majority of app stores, with that number typically ranging to 70+ app stores. We believe that the app economy needs a single entry point for application submission (one per platform), along with a million distribution channels: - one app submission process, i.e., a single website, single contract, single approval process, single billing & settlement and a single mix of business models per platform - a million distribution channels, i.e., a million different channels through which to retail and sell apps to consumers with a variety of prices, promos, bundles, and regional access that help developers more effectively market their applications. An early role model for this single-in, many-out distribution model is perhaps Amazon. Amazon’s app store addresses many of the challenges of Android Market, including quality control and curation, relevance and recommendations, as well as device compatibility, showing only those apps that are compatible with each handset model. Amazon further leverages its retailing expertise and consumer insights to set the price for each application, between 70% of the sale price and 20% of the list price. More importantly, Amazon offers a wealth of cross-selling opportunities for applications, by listing an application next to relevant digital or physical goods, based on the click-stream of each user and their preferences. Amazon is playing the “doorkeeper” role that operators used to play in the past, but more importantly, is allowing developers to reach out to more users through cross-selling and recommendations mechanisms. We believe that app store fragmentation offers two opportunities. First, for app store brokers with a develop-once-publish-many model, who can take an application and publish it across multiple app stores. Second, for app stores that offer sophisticated marketing and promotional channels that can optimise app pricing based on the user, region or bundle the app appears with. © VisionMobile 2011 | www.DeveloperEconomics.com 32
  • 33. Getting ready for launch Planning and testing comes before publishing an app. The vast majority – around 90% of developers – use some form of planning or testing technique before publishing their apps, whether it is peer reviewing, beta testing or market research. In fact, developers use two planning techniques on average, irrespective of their primary platform, pointing to how planning is seen as essential for developers to compete within the crowded applications marketplace. By far the most popular planning and testing techniques before app launch are peer reviewing with friends or colleagues and beta testing with customers. Both these techniques are used on average by about 50% of developers. Use of market research has significantly increased in the last year, and is most popular among developers who use app stores as their primary channel to market. Despite the importance of app planning, most developers still use rather unsophisticated techniques, like peer reviewing, for establishing whether an application is ready for launch. And it’s not a question of price; beyond the use of elaborate, costly techniques, like running focus groups or using scenarios and personas, there are more accessible planning alternatives that exist today that can help in the stages leading to the launch of the app. For example, application analytics (e.g. Distimo, PositionApp) can reveal important competitor intelligence about apps in the same region or genre, while crowd-sourced beta testing (e.g. Mob4Hire, uTest) can offer crucial, unbiased feedback to developers before app launch. The unpopularity of sophisticated planning techniques is due to a lack of awareness marketing and, in some cases, affordable pricing on the part of tools vendors. Some poor planning also results from the ‘not invented here’ syndrome, a not uncommon © VisionMobile 2011 | www.DeveloperEconomics.com 33
  • 34. phenomenon in which software developers “On Android and iPhone your app is assume ultimate knowledge of their target going to be buried almost instantly. customer. Regardless, app developers’ lack of But if you can go from 1,000 to planning presents a ‘blue ocean’ opportunity 10,000 to 50,000 downloads very for platform vendors and OEMs to quickly you get picked-up by the app differentiate their developer programs by store algorithm - which means you offering subsidised access to app store immediately get calls from Nokia analytics and crowd-sourced beta testing. and Samsung who want you on their platforms.” In the case of branded apps, marketing Cross-platform app developer, UK managers in industry verticals are used to very sophisticated marketing techniques, spending millions to better understand their customers. Getting to know the behaviour, preferences and expectations of mobile users is becoming imperative in the case of mobile apps, too. To improve targeting, brands are routinely measuring downloads, frequency of use, patterns of feature use and time/day of use. Post app launch blues The biggest challenges for developers, post-app launch, are customer support, updating apps in the field and developing incremental features, as voted by over 40% of respondents. Managing negative user ratings is another important challenge, particularly for developers who distribute via Apple, Google or Nokia app stores. App promotion is another thorny issue for developers publishing their own applications. Developers are clearly discontent with the lack of promotion options across most app stores; there are very few off-the-shelf tools available to help developers promote their apps. Four out of five developers do promote their apps, with © VisionMobile 2011 | www.DeveloperEconomics.com 34
  • 35. the primary techniques being social networks (Facebook, Twitter, etc), followed by free app demos, and – particularly amongst developers using app stores – blogs and forum postings. Only one in 10 developers promote their apps using ad networks, with web keyword search being the most popular, followed by mobile keyword search and mobile ads. “Printed ads and web ads do not work well for apps. The user has to be one click away from downloading the app” notes Olivier Milcent, Chief Marketing Officer for Momac, a mobile app platform house. Despite the challenges in application promotion, best practices are starting to emerge in up-selling and cross-selling. A major games house sees a 20% conversion rate from free to paid with an ad-supported, “full freemium” model. In other words, one in five users who try a fully functional, ad-supported game, go on to buy the paid, ad-free version of that game, or buy another game that is advertised. In contrast, ‘light’ or ‘demo’ versions with limited features or levels result in lower conversion rates. Given the long tail of hundreds of thousands of application developers, what the app economy lacks is an out-of-the-box “SDK” for app marketing. Such a toolkit would allow developers to invest in targeting the right users and increasing exposure. This lack has prompted tens of startups to offer recommendation and promotion tools that help connect the right app to the right user; examples include Appaware, Appboy, Appolicious, Apprupt, Appsfire, FrenzApp, Flurry, Explorapp and Chorus. However, such tools are still a long way from becoming mainstream, with promotional platforms like Flurry’s App Circle being used by less than 4% of our respondents. © VisionMobile 2011 | www.DeveloperEconomics.com 35
  • 36. Show me the money Money matters. But in the gold rush to the applications economy, not everyone is making money. About a third of respondents make less than $1,000 USD per application in total, which is loss-making given that an application takes months to develop. Moreover, not all platforms are born with equal revenue potential. Our research revealed large discrepancies across platforms in terms of the revenues applications are bringing to developers. We compared per-application revenues reported by developers for different platforms. Symbian scored lowest, so we assigned a base value of 1.0 to its reported per-app, then rated other platforms relative to this “revenue index”. iOS topped the chart, making 3.3 times more money per app than Symbian developers followed by Java ME (2.7x) and BlackBerry (2.4x). Java should come as no surprise here, given it is still the primary platform for developing games on feature phones which often have higher price points than smartphone apps. Android (1.7x), mobile web (1.6x) were the weakest performing platforms in terms of revenue per app and only ahead of Symbian (1.0). The important insight here is that large device sales do not translate into higher app monetisation for developers, as the case for Symbian shows. Note that we excluded developers making more than $100K per app, and those who did not know or could not indicate revenues. © VisionMobile 2011 | www.DeveloperEconomics.com 36
  • 37. The amount of revenue generated from an application on average is not just about market reach. It’s a complex orchestration of techniques across the entire go-to-market lifecycle of an application, including usability guidelines, quality control, application discovery, and billing options. Even small details like the mix of revenue models make a difference. For example, the Apple App Store does not allow trial versions of applications, which motivates users to buy before they try, which indirectly increases developer revenues. As a counter example, Windows Marketplace offers a trial version for applications, which doesn’t help developers monetise from impulse purchases – a naive differentiation move on the part of Microsoft. There are more complexities around monetisation. For example, while Java ME offers © VisionMobile 2011 | www.DeveloperEconomics.com 37
  • 38. relatively high revenues per app, Java ME developers did not necessarily respond positively when we asked about their level of satisfaction with revenues (i.e. whether revenues were above or below expectations). The previous graph is quite telling. The good news? One in three developers see the level of revenues they expected. The bad news? On average, there are five times more developers who are dissatisfied with their mobile application revenues than there are satisfied developers. The platforms do add some colour to the picture; iOS developers have more positive impressions than any other platform, whereas Java ME has the most developers dissatisfied with revenues, since feature phone Java games downloads are in decline. Besides the revenues individual developers are seeing, how are revenues distributed across app categories? Games dominate all other application categories bringing in a total of 45% of revenues from paid downloads and in-app purchases in the Apple iOS App Store in April 2011, according to analytics firm App Annie. The revenue breakdown by category is based on a bottom-up statistical model drawn upon more than 40,000 apps, which use the App Annie sales analytics service. How do developers make money? Much like the web, the application economy is steadily shifting to corporate funding; more and more developers are working for a salary or commission. Approximately 50% of app developers in our survey make money through a salary or commission, confirming that commissioned app development is becoming as an important part of the app economy as making money directly through applications. For developers making money directly, the top revenue model is pay-per-download, followed by advertising and freemium (free download, then pay to upgrade). Despite the hype surrounding newer revenue models, we found that subscriptions and in-app © VisionMobile 2011 | www.DeveloperEconomics.com 38
  • 39. purchases are three times less popular than the pay-per-download model, across all major platforms. The distribution of revenue models varies widely by platform. Among mobile web developers, advertising was the most popular model, with many Android developers also using this model. Pay-per-download was most popular among iOS developers. App stores have radically enabled new revenue models. For example, use of pay-per- download is three times higher for developers using an app store, as opposed to developers who primarily distribute apps through their own website. Use of advertising and in-app purchase is almost double for apps distributed via an app store. Finally, a small percentage of developers (on average one in 10, irrespective of platform), make money through brand extensions or service revenues. This revenue model appears to be more popular than average amongst mobile web developers. When it comes to brands and commercial organisations, generating direct revenues from a mobile app is not often the top priority. Most brands introduce apps as a way to increase accessibility and interaction with their target market. However, organisations becoming savvier in extending their digital strategies into mobile, are seeking to generate revenue as well. Our research highlighted three main mobile revenue streams that brands are looking into: advertising, one-off or subscription-based app sales (if the © VisionMobile 2011 | www.DeveloperEconomics.com 39
  • 40. application adds genuine value, e.g. as a game, utility, business, travel, fitness, or other app) and in-app purchases, especially in games, social networking, travel and sports apps. The role of mobile operators In the last few years, mobile network operators (‘carriers’ if you live in North America) have been unwillingly dragged into the software era – one dominated by economies of demand that Apple and Google live by, not economies of production that operators have been accustomed to. As the innovation in mobile has shifted to software, so network operators have been keen to re-establish themselves and take part in software-led innovation. As such, the leading operators in Western, smartphone-populated markets – including Telefonica, Vodafone, Orange, Telenor, AT&T and Verizon – have launched developer innovation programs and network API platforms. Many have also launched their own app stores. The Wholesale Applications Community (WAC) is essentially an operator-centric initiative to help operators compete against Apple and Google, who dominate the smartphone innovation and value chain. The WAC aims to help operators develop a solution that encompasses an application runtime, app stores and APIs. Traditionally, application developers have been cold and uncertain as to the role the operators can play in a software world. While the majority of developers agree that the role of operators is to delivery data access and voice, there is no consensus on the role of operators in software. For example, developers don’t agree on whether operators should be a payment gateway, an API platform, build the best mobile services, or just © VisionMobile 2011 | www.DeveloperEconomics.com 40
  • 41. leave developers alone. However, marketing efforts on behalf of operators have been paying off. There is now much more awareness amongst developers that the role of operators should be to offer a platform of network APIs. We are also now seeing important regional differences in how developers perceive operators. For example in Asia, many more developers (14% above the global average) see operators as a payment gateway or API platform, and not just a data or voice pipe. In Europe and North America, developers are showing signs of discontent with operator-owned services, with many more developers (20% above the global average) suggesting that the role of operators is to deliver data and voice, and not to own services or to offer a supermarket-like proposition. Yet, operators still have a lot of ground to cover in capturing developer mindshare. Business model polarity A fundamental change that we believe operators need to undergo is to see developers not as resellers of network APIs, but as benefactors or agents driving end users to the network’s core business. Operators need to greet developers not with price-lists, which are commonplace among network API programs, but with partner programs in which developers get to share in the revenue generated when they drive users to the network. They should let developers focus on finding new ways to innovate with apps that use telco capacities, instead of worrying about whether their cash flow is adequate. In other words, operators need to change their business model from a “developer pays” model to a “developer gets paid” model. If developers create apps that use telco APIs, they drive traffic or usage, which benefits both the user and the telco. It’s not the developer that needs to pay – it’s the user. What needs to happen is a change in what we call “business model polarity”. Consider this scenario in the traditional developer-pays world: A developer builds an SMS-to-Twitter service; the user sends a new tweet as a text to a short code. The reply, an SMS back to the user, is then paid by the developer. The developer is penalised for generating traffic to the network. This is the “developer pays” model and it doesn’t work. In the “developer gets paid” model, a single API allows the user to pay for both outgoing and return SMSs in one shot, and the developer gets to use the API for free and even get a revenue share kick-back in return. The developer can focus on building a viral service, and won’t have to worry about success costs. © VisionMobile 2011 | www.DeveloperEconomics.com 41
  • 42. This is a fundamental polarity change. Instead of the developer paying for access to network resources, the developer gets paid for driving increased voice or messaging revenues. Matchmaking developers to users Besides tools or APIs, operators have an even more important role to play, by connecting developers to users. We believe operators are sitting on a pile of gold: a pile of untapped intelligence on who their customers are, their interests, where they are going, and who are they influencing and being influenced by. Before we conjure any images of Big Brother here, let’s view this customer intelligence in a different light. Namely, as helping users find the right applications. We fundamentally believe that operators can leverage the mountain of customer intelligence to support developers in solving the discovery problem - which still plagues the app economy - by helping users find apps relevant to their location, social circle, and buying habits. In other words, operators can become the best matchmakers between developers and users, between the right app and the right user. © VisionMobile 2011 | www.DeveloperEconomics.com 42
  • 43. © VisionMobile 2011 | www.DeveloperEconomics.com 43
  • 44. HOW DO PLATFORM CHARACTERISTICS STACK UP ? 3. The building blocks of mobile apps Getting to grips with mobile Not all platforms are designed equal – and getting to grips with mobile development can be a major investment of time and effort, depending on which platform you choose to learn. Android and Qt are by far the easiest platforms to learn, with respondents requiring an average of under six months to master. In contrast, Java ME and Symbian are the hardest platforms to get to grips with, taking over 10 months to master. Contrary to popular perception, mobile web isn’t such an easy platform to learn, ranking sixth in terms of learning curve. This is not due to the complexity of any one language like HTML or JavaScript, but due to the need for web developers to learn a complex stack of languages and technology frameworks across client and server environments, in addition to having to battle with the challenges of cross-browser portability. The next chart illustrates the relative learning curve per platform, and how not all platforms are born equal. © VisionMobile 2011 | www.DeveloperEconomics.com 44
  • 45. Measuring fragmentation “Commercial and UX considerations Fragmentation is as old as software itself. aside, 97% of the application code Fragmentation challenges have been a key topic of across iPhone and iPad is usually discussion in mobile industry circles since Java the same.” ME started proliferating in 2004-5. No matter the Alex Curylo platform advances, fragmentation remains an Winner of "Most Innovative Product", unsolved problem – both for developers targeting Apple Design Awards multiple platforms, but also for the likes of Apple, Google and Microsoft, for whom fragmentation can break the ‘platform story’. Moreover, fragmentation is a challenge for brands and commercial organisations going mobile, as it adds a completely new dimension of complexity. For brands, extending presence to the web is a straightforward process involving developing a website and testing it across the two or three mainstream browsers found on 80% of devices. Going mobile complicates things much further, as developing across the top three or four mobile platforms (iOS, Android, Symbian and BlackBerry) reaches just over 20% of the devices sold on average, and represents a much more resource-intensive operation as there is very little code reuse across these platforms. Extending user reach beyond this 20% presents formidable challenges which can only be addressed only with a lowest common denominator approach. To quantify platform fragmentation we asked developers how many versions (also referred to as SKUs - stock-keeping units) of their apps they need to develop. © VisionMobile 2011 | www.DeveloperEconomics.com 45
  • 46. We were able to quantify that indeed Apple’s iOS is the platform with the least fragmentation (on “Anyone who states Android is average four versions per app), as has been fragmented must have no widely noted from empirical evidence in the experience developing on past. Apple manages fragmentation through two BlackBerry or Nokia platforms. Even primary means: first, it has standardised the iOS has a six different devices of screen size and resolution for its handsets and varied capability now.” tablets; and second, as an OEM and platform Brian LeRoux vendor, it has commercially streamlined the Nitobi Software means by which most iPhone or iPad users are upgraded to the latest OS version. In contrast, our research indicates that Android developers must create six versions of their apps on average, which is on par with mobile web apps. The stark difference in fragmentation across Apple and Android devices is also evident amongst the different platform versions in the installed base of devices. According to Google data released on May 2011, 25% of active Android handsets run on platform versions more than 18 months out of date. Meanwhile, according to app analytics firm Localytics, only 20% of existing Apple 3GS devices had not yet been upgraded, just two months after the introduction of iOS4. In other words, Apple devices have the youngest runtime age in the mobile industry. The intensity of Android fragmentation has been widely discussed, and is often cited as the biggest sore point for the platform. We analyse Android fragmentation into five dimensions: 1. Release speed: Android’s unprecedented speed of innovation (three major versions released between Q2 2010 and Q2 2011) means the core platform itself is changing too often for developers to keep up. 2. Complex incentives: Unlike Apple, Google doesn’t make its own hardware – meaning Android phone OEMs lack commercial incentive to keep updating handsets that have already been sold. Instead, they have an incentive to push users to shorten their device replacement cycles. The commercial update process is especially entangled when handsets have been produced for a particular mobile operator. Note that Google recently unveiled a compliance program that will force handset manufacturers to update their platform for the first 18 months since handset launch. 3. OEM fragmentation: Many handset OEMs differentiate by customising Android with user interface changes, and their own applications and features. For example, HTC’s Sense UI differs from Sony Ericsson’s Rachel, Motorola’s MotoBLUR, Samsung’s TouchWiz and LG’s S-Class user interface. All OEM additions – whether UI layers, features or even bug fixes –create traces of fragmentation for developers. 4. Screen fragmentation: As Android is being used for multiple screen resolutions and form factors, from smartphones and feature phones to DECT handsets, set-top boxes and cars, there will inevitably be the need to adopt an application for different screen sizes – not to mention adapting the Android codebase to run on a different type of ‘screen’ than Google designed it for. For example, the Android Honeycomb platform © VisionMobile 2011 | www.DeveloperEconomics.com 46
  • 47. for tablets and TVs is very different than the Android Gingerbread platform for smartphones, in addition to differences across tablet screen sizes. 5. Codebase forking. China Mobile’s Ophone and China Unicom’s Wophone are ‘forked’ (branched) versions of Android for the China market. Other forks include Cyanogen and MiuiAndroid, which are unofficial, customised versions of Android targeted at tech enthusiasts. Our research confirmed that, contrary to popular perception, Android is still relatively unfragmented. Rather, it is Java and Symbian that are amongst the most problematic platforms in terms of fragmentation, with developers needing to create on average about twice the number of app versions for these platforms, compared to Android. Moreover, BlackBerry – alongside Java ME – is one of the platforms with the greatest amount of fragmentation. This should come as no surprise, given the diversity across BlackBerry device capabilities, input mechanisms and screen resolutions. As of March 2011, close to 40% of installed base of BlackBerry devices run versions of the OS that are older than version 5. Note that only devices running version 5 and above are capable to support the BlackBerry App World application store. On the flipside of fragmentation challenges is opportunity. A number of companies have emerged to offer porting tools aimed at bridging the gap across platforms. These companies include Appcelerator, Ansca, Didmo, DragonRAD, iFactr, Innaworks, Metismo, Mobile Distillery, MonoTouch, MoSync, Open-Plug, Recursion software, Rhomobile, RunRev, Sencha, StackMob and TapLynx. Source: VisionMobile Mobile Industry Atlas, www.visionmobile.com/maps Going global: Localisation issues With close to one billion apps available, and over 800 million smartphones shipped to date, apps are a global phenomenon. But, in going global, many developers are having to deal with localisation, i.e. translating their application to local languages. Localisation is not yet a mainstream issue: nearly 70% of our respondents either have not tried localizing their apps or have never had any issues with it. But localisation will soon become a fundamental issue for mobile developers, as it becomes easier to distribute apps globally and to develop regionally-sensitive apps and content like news, © VisionMobile 2011 | www.DeveloperEconomics.com 47