The Rise of App Economy
According to a recent study by mobile app analytics firm App Annie, the total time spent in apps worldwide in 2016 reached 1.6 trillion hours, an increase of more than 50% year over year. Across mature markets, users on average are spending two hours per day – which equates to one month out of every year – in apps.
In India itself, which is rapidly moving into the mobile app age, the most active smartphone users spend more than four hours every day – the equivalent of half a standard workday – on mobile apps. India was among the top 5 markets in terms of total time spent on apps on Android phones in may 2017, said the App Annie study. India’s top 20% (the most active Android users) was close behind the top 20% in South Korea, mexico, brazil, and Japan, whose users spent about 5 hours. Even the least active users in India spent at least 1.5 hours. The median (those in the middle) spent close to 2.5 hours a day, it pointed out. “This indicates strong adoption of apps even for the least avid users in these countries, thanks to widespread adoption of apps such as WhatsApp and an emerging mobile-first lifestyle,” the report noted. App Annie looked at the ten biggest Android using countries for its study.
If we look at categories, shopping apps, travel, and games emerged as the top categories where people were spending most of their time. Indians were second in terms of average time spent per month per user on mobile shopping, with close to 90 minutes. South Korea was just ahead with more than 90 minutes. For finance apps, a user on an average spent 30 minutes per month in India, behind brazil (45 minutes) and South Korea (60 minutes). The rest of the users, including the ones in well established markets such as the US, UK, and France were spending less than 20 minutes
With mobile apps, consumers can interact with a large base of products and services in the simplest and easiest of ways. They can easily view products and services and access other relevant details on the go. “Companies can further utilize mobile applications to best market their products, adopting a focused and precise approach. Given the access to user demographic and behavioral data, platforms can better cater to user’s needs by preempting their next step. With apps, companies can offer notifications, alerts or updates whenever there is a new offer or any such development and stay ahead of the competition. In fact, in the view of the growing utility of ecommerce mobile apps, it is estimated that the sales will increase by 30 times in the next five years,”
As impressive as the current level of usage is, the app economy is nowhere near its peak. App Annie forecasts that time spent in apps will be more than double to 3.5 trillion hours in 2021. “App markets across the globe show no signs of slowing down, with even the most mature app economies just scratching the surface of their overall potential. This is particularly apparent for monetization, especially in-app advertising, which is poised for dramatic growth in the coming years. In addition, a huge number of new apps continue to be released each month, which will no doubt continue as nascent technologies and platforms unlock a diverse set of new use cases and business models. This potential was demonstrated by 2016’s smash hit Pokémon Go which capitalized not only on its beloved IP but also its ability to bring augmented reality (Ar) to the masses, bringing in nearly $1 billion in consumer spend by the end of 2016,” it observed.
There is a massive growth opportunity for mature and emerging app markets. “In a market’s early stages, downloads grow rapidly, fuelled by mobile device adoption. In this stage, people are experimenting with various apps and beginning to build their app collection. Over time, usage begins to take off as users form habits around the apps they regularly use. As engagement with these various go-to apps continues to expand, their value is realized, which then leads to revenue growth across all channels: store, advertising and commerce,” said matt miller, Industry Analysis manager at App Annie, who is the author of the report.
“This model not only explains the current state of the app economy, and how it got there, but it also points to the massive opportunity that still lies ahead. For example, in mature economies like Japan and the United States, downloads remain strong even as they transition to usage and revenue growth phases. In addition, these markets have plenty of runways for steady increases in the amount of time and money that users will spend in apps. Publisher and technological innovation will help fuel this trend by creating new use cases as well as enriching existing ones,” miller added in the report.
China, as per the study, is an interesting case that tells a tale of two markets. In its tier one cities, app activity outpaces nearly every other country. China’s lower tier cities resemble emerging countries that are at the earlier stages of smartphone adoption and app market maturity with plenty of room left to grow. Overall, China is poised for massive growth. App Annie forecasts that its combined app store and in-app advertising spend will grow at a 28% CAGr to exceed $114 billion in 2021.
Among emerging markets, the report noted that brazil, mexico and Turkey have stood out and driven growth on Google Play for more than two years. These markets still have tremendous upside that will be fueled by decreasing handset prices and increasing footprints for mobile networks. These factors will drive an influx of firsttime smartphone owners who will in turn generate further growth for the app economy
There is the next set of markets, such as India and Southeast Asian countries, which are still at the earliest stages of market maturity. India is particularly notable due to the stark contrast between its current size and potential for further expansion. In 2016, it surged past the US to become the largest country by Google Play downloads. Despite reaching that impressive milestone, its smartphone penetration is below 30% leaving room an astonishing amount of growth.
The study further noted that when an app market matures, app usage increases pave the way for monetization growth. This has already led worldwide mobile app store and in-app advertising combined spend to exceed $134 billion in 2016. Given that the app economy as a whole is still at the relatively early stages of maturity, these numbers are poised for explosive growth. App Annie forecasts that worldwide mobile app store and inapp advertising combined spend will grow at a 20% CAG to exceed $340 billion in 2021. In-app advertising spend, in particular, is expected to grow at a 23% CAG, outpacing mobile app store growth, to exceed $200 billion in 2021. This amount alone will be larger than the total combined spend for in-app advertising and mobile app store that the analytics firm predicts for 2017
“A number of factors will drive the enormous growth of in-app advertising spend. First, in-app advertising will continue to be an attractive business model to app publishers because ad revenue allows them to make their app available for free download, in turn broadening their app’s appeal and user base while creating ongoing revenue streams. Also, compared to other media channels, mobile has not received its proportionate share of advertising spend relative to the amount of consumer engagement it generates. This creates a massive opportunity in the future for in-app advertising as advertisers rationalize their spend across channels,” miller wrote in the report.
The report found that by the end of July 2017, the ioS App Store and Google Play had more than 2 million and more than 3.5 million apps available, respectively. between existing publishers continuing to create new games and services, traditional businesses making the transition to apps and new mobile-first companies bringing unique experiences to consumers, the number of apps continues to increase at an astonishing rate. During the month ending July 31, 2017, roughly 50,000 new apps launched on the ioS App Store and over 150,000 were added to Google Play.
Although it’s interesting to see how the app industry is growing despite some challenges, if we take it as a trend, a combination of innovation, business model transformation and increased access to mobile devices and networks is set to propel the app economy globally in the years to come. everything from payments, mobile wallets, virtual reality (VR) and connected homes and cars to new platforms not yet thought of will create productive ground for app publishers to deliver new user experiences. This will drive consumers’ engagement with mobile applications which in turn will further enhance the monetization opportunity for the entire app economy.