Apps have become a big business and increasingly an indispensable marketing tool.
User population: one billion strong and expanding. There were one billion app users in the world in 2012. Thirty percent of them lived in the Asia-Pacific region, 29 percent in Europe and 17 percent in North America. The population of app users is projected to swell to 1.6 billion in 2014 and 2.1 billion in 2016.
App usage varies among countries. An analysis of the world’s top-30 nations in app usage (Gordon 02/21/2013) identifies the United States plus seven others (Australia, Canada, Denmark, the Netherlands, Singapore, Sweden and the UK) as “mobile pioneers” – leaders in adopting mobile technology. Right behind them are the “connected Asia” – the hyper-connected Asian economies of South Korea, Taiwan and Hong Kong). China and Japan are quite unique in their pattern of app usage. Among the rest of the top-30 countries are several “slumbering giants” – those nations that are still low in app usage but very large in population (Russia, Brazil and India) or are small in population but can be quite influential (Israel and Switzerland).
Users have a healthy “app-etite”. Web browsing and TV viewing have peaked in the United States, at around 168 and 70 minutes a day in recent years. Meanwhile, app usage is on the rise, from 66 minutes a day in December 2010 to 127 minutes in December 2012 (Khalaf 12/05/2012). Worldwide, users made 45.6 billion downloads in 2012, of which 5 billion were paid downloads, generating $12 billion in revenues for the app stores. This revenue figure includes both the revenues from downloading apps and from purchases made by consumers using downloaded apps (in-app purchases, IAP). It does not include other revenue sources such as advertising using apps (in-app advertising, IAA), which do not flow through app stores. Advertising still holds a small share of total app revenues (23 percent in 2012), but that share appears to be on the rise (from 18 percent in 2011) (Farago, 2012). Apple took the lion’s share of app revenues – 50 percent in 2012; Android took 25 percent and other platforms the remaining 25 percent. Some of the download and revenue figures will nearly double in 2013: 81.4 billion downloads over all, including 8.1 billion paid downloads for a total revenue of $20.4 billion. By country, the United States is the largest app market in revenue term, followed by Japan, the UK and Australia (Spriensma 2012).
There is an app for that. With so many apps being available currently, there is an app for just about anything. By the number of apps, games make up the largest category (17 percent). Behind them are apps for education, entertainment, lifestyle, business, books, utilities and more in that descending order. Consumers spend 80 percent of their time on mobile devices using apps and the remaining 20 percent using web browsers. By the time spent on mobile devices, games still make up the largest category but become more dominant (43 percent). Social networking apps ranks second on the time spent (26 percent) although they barely amounts to 2 percent in number. Next are entertainment (10 percent), utilities, news, productivity and other app categories (Khalaf 04/03/2013).
Usage and retention matter as much as, if not more than, downloading. Downloading apps does not equate with using them. About one in four apps, once downloaded, is not used again after the first time, and the trend seems to get worse (Localytics 2011). Among tablet owners having downloaded just a few apps, 95 percent use them on a regular basis, those having downloaded 10 or more apps 37 percent, and those having downloaded 20 or more apps only 16 percent. App usage among iPhone owners shows a similar pattern – only 17 percent of users having downloaded 10 or more apps use them regularly (eMarketer, 09/22/2011). An analysis by Gordon (03/13/2013) offers some additional insights on this. It categorizes apps along two dimensions: the number of monthly users and the level of retention (percentage of users still using an app at least once after downloading it for one month) into the top, middle and bottom thirds. In term of users, the top-third apps in term of users have 32,000 users or more whereas the bottom third-apps have fewer than 8,000 users. In term of retention, the top-third apps reach a rate of 37 percent or higher whereas the bottom-third apps has a rate of 21 percent or less. Combining the two dimensions produces nine possible categories, four of which represent interesting situations.
- Superstars. They are in the top third along both dimensions – the number of users and the retention rate. About 15 percent of the apps attain this status.
- Black Holes. Quite the opposite to the superstars, black holes apps are in the bottom-third along both dimensions. Falling into this categories are 17 percent of the apps.
- Shooting Stars. The make up 6 percent of the apps. They attract lots of users (being in the top third) but fade away very quickly (poor retention).
- Red Dwarfs. They are the opposite of the shooting stars. They have small user base (being in the bottom third) but retain their users very well (in the top third). About 6 percent of the apps are in this category.
Users spend more time with superstar and red-dwarf apps (98 and 62 minutes per app-month, respectively) and less time with shooting-star and black-hole apps (50 and 29 minutes per app-month, respectively). Looking at that from a marketing viewpoint, better retention offers greater opportunities for advertising by having users to spend more time on an app.
It is a two-horse race. Two operating systems – Apple iOS and Google Android – have come to dominate the mobile device business and hence the mobile app business. iOS devices, particularly the iPhone, had been in the lead since its introduction in June 2007 and particularly since its 3G version and the opening of the App Store in July 2008. From 800 at the start, the number of apps on Apple App Store had risen quickly to about 900K in July 2013. Shipments of Android smartphones trailed iOS devices initially, but since 2012, have surpassed the latter and hence given Android apps a big boost lately. The number of apps on Google Play, the leading app store for Android devices, had reached 850K in April 2013. Meanwhile, Windows Phone and Blackberry lag far behind. In term of cumulative app downloads, the App Store passed the 50 billion mark in May 2013 while Google Play reached 48 billion.