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Writer's pictureFahad H

Report: Established App Markets Transitioning Away From Download Revenue And Toward Usage


App Annie, herself (from the website)

App Annie, herself (from the website)


The first forecast report from app analytics firm App Annie finds that app store revenue from downloads is moving into the rearview mirror for mature markets like the US.

According to App Annie’s “Mobile App Forecast: The Path to $100 Billion,” released today, the US and other developed markets will see revenue from usage exceeding revenue from downloads in the next few years.

In this “App Market Maturity Model,” the report describes the initial adoption of mobile devices as “the golden age of app store downloads,” during which users have not yet established app usage patterns. The cycle began in developed markets more or less when app stores did, about 2008.

AppAnnie_Maturity_1200

After a while, “app habits” develop as users focus on a few of their downloaded apps and begin to spend money on in-app premium features, like virtual goods or subscriptions.

In other words, falling app downloads should be accompanied by increases in revenues from usage, advertising and services. One indicator in the report of growing app usage is the jump of nearly 60 percent in time spent on apps in Android smartphones in the last year alone.

From the report:

“Mature markets like the US are close to the vertical line in the maturity model, with download growth slowing, but with growing usage and revenue. Emerging markets like India are typically far to the left side of the vertical line, with rapidly growing downloads, more modest yet increasing usage and low revenue. We note that our model projects a slowing of download growth, but no country is forecast to see contraction of mobile app downloads through 2020.”

The driver of all this is, of course, smartphone ownership, which is approaching saturation in mature markets, but sales are still booming in emerging ones. The report envisions that the total global installed base for smartphones and tablets will more than double in the five-year period from last year to 2020, from 2.6 billion to 6.2 billion.

Hugh Delgado, App Annie’s director of industry analysis, told me via email that this shift in established markets toward app usage is one of several key takeaways. Others include:

  1. The growth of total app store revenue from about $41 billion last year to $51 billion this year — an increase of 24 percent — and then jumping to $100 billion by 2020.

  2. Apple’s App Store will still remain tops in gross revenue over this period, but Google Play and third-party Android app stores will grow faster because of a wider range of devices.

  3. By 2020, non-game app revenue will grow to four times the 2015 levels, but games will continue to make up about three-quarters of gross revenue for apps.

Delgado pointed out that games still have a lot of headroom for growth. And the findings indicate that there is enough room in various verticals for more than one or two leading apps, particularly because the money-making opportunities are now moving into usage. A number of travel apps, for instance, might offer services or discounts different enough to keep them all popular — similar to websites, but unlike some kinds of software.

Outside of app stores, the report projects “explosive growth” in mobile app-based commerce, as well as in services, such as music or dating, and in advertising revenue.

Services also include premium levels for apps on wearables, smart TVs, and in virtual reality/augmented devices, although none of those new app platforms are included in this forecast.

App Annie said the Forecast report, which it intends to update every quarter, draws on more than 10,000 separate sources of data. Previous reports from the San Francisco-based firm have focused on historical app data.

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