Just days into the Chinese New Year (Year of the “Snake” for anyone keeping track), China has passed the U.S. to become the world’s top country for active Android and iOS smartphones and tablets. This historic milestone takes place a year after Flurry first reported that China had become the world’s fastest growing smart device market. Since then, it took China’s rapidly growing middle class just twelve months to close the gap on the U.S.
For this report, Flurry uses its entire data set, tracking more than 2.4 billion anonymous, aggregated application sessions per day across more than 275,000 applications around the world. Flurry estimates that it reliably measures activity across more than 90% of the world’s smart devices.
Reviewing the chart shows that China and the U.S. had roughly the same active smart device installed base in January 2013, 222 million in the U.S. versus 221 million in China. We use a model to project the final February 2013 installed base for each country based on historical growth trends as well as the number detected devices per country through the first half of February. Flurry estimates that by the end of February 2013, China will have 246 million devices compared to 230 million in the U.S.
We also conclude that the U.S. will not take back the lead from China, given the vast difference in population per country. China has over 1.3 billion people while the U.S. has just over 310 million. Considering that the U.S. has the world's 3rd largest population, the only other country that could feasibly overtake China sometime in the future is India, with a population of just over 1.2 billion. However, with only 19 million active smart devices in India, China will not likely see competition from India for many years. Below, we show the top 12 countries by active iOS and Android installed base through the end of January 2013.
The chart shows that the U.S. and China each have more than five times the active installed base than that of the U.K., the world’s third largest market. Additionally, both China and the U.S. continue to see rapid device adoption. Year-over-year, compared to January 2012, the U.S. added 55 million new devices. However, in that same time, China added a staggering 150 million new devices. With its growth rate, China would have passed the U.S. earlier, except for the U.S.’s massive holiday season, which enabled the U.S. to hold off China for an additional two months.
The final chart in our analysis shows growth in the number of active smart devices per country, between January 2012 and January 2013. While China no longer leads the world in growth, it still commanded an impressive 209% rate of growth on top of a base of 71 million devices from January 2012. For this chart, Flurry selected countries that had a minimum of half a million devices as of January 2012. Countries that grew faster than China over the last year were Colombia, Vietnam, Turkey, Ukraine and Egypt. While the four BRIC countries are not all among the top 12 countries in terms of percentage growth (specifically, Brazil and Russia are not top 12 "growers"), all four are among the top 12 when calculating the number of net active devices added per market (i.e., Brazil +11.5 million, Russia +12.0 million, India +12.4 million, China +149.5 million).
In this new era of mobile computing, sparked by a confluence of powerful innovation across microprocessors, cloud storage and network speeds, Apple and Google have helped create the fastest adopted technology revolution in history, 10X faster than that of the PC Revolution and 3X that of the Internet Boom. And now, as the largest and fastest modernizing country in the world, Chinese consumers lead that revolution.
Today as those in relationships rush to stores to pick up Valentine cards and gifts for their significant others, single women looking for relationships may want to pick up their smartphones. Just in time for Valentine’s Day, Flurry explored user composition and behavior in a sample of smartphone dating apps. We found that in dating apps targeting both genders, there are typically almost twice as many active male users as active female users. For this analysis, we examined 20 top dating apps whose combined 17 million active users delivered more than 2.1 billion sessions in January 2013.
Women wishing to further stack the odds in their favor may wish to download an Android dating app. When we compared the user composition for a sample of dating apps available on both iOS and Android phones, we found that active users of Android dating apps skew even more male.
Young adults in search of a Valentine (or those in search of a young adult Valentine) also may want to download a dating app on an Android device. In looking at the sample of dating apps available on both iOS and Android, we found that adult users of Android dating apps are more likely to be under 25 than adult users of iOS dating apps.
The millions of people who use dating apps do so regularly. They typically open their dating apps eight times a week and use them for seventy-one seconds at a time. Users of dating apps for gay men are even more active. They typically use them twenty-two times a week for ninety-six seconds at a time.
Retail is among the world’s largest industries. The top 10 global retailers are made up of 5 from the U.S. and 5 from Europe, collectively driving annual revenue in excess of $1.1 trillion. The U.S. Commerce Department estimates that U.S. domestic revenue exceeded $4.7 trillion in 2011 and is growing. Two thirds of the U.S. GDP, the world’s leading economy, comes from retail consumption.
Now, the retail industry is colliding with the mobile app economy. Just consider that, according to a recent IBM report, more than 18% of shoppers used a smartphone or tablet to access a retailer's website on Cyber Monday in 2012, an increase of 70% over 2011. Mobile made up 13% of total web-based purchases. The App & Mortar economy has arrived.
In this report, Flurry explores the shopping app category. For our analysis, we measured time spent by consumers across more than 1,800 iOS and Android shopping apps from December 2011 to December 2012. Shopping apps were found predominately within the Shopping category on Google Play, and within the Lifestyle and Food & Drink categories in the Apple App Store. From there, we broke down “Shopping” into five sub-categories: Retailer Apps, Price Comparison, Purchase Assistant, Online Marketplace and Daily Deals. Let’s take a look at how time spent in shopping apps is growing.
The chart above shows growth in time spent by consumers across the top five shopping sub-categories. For reference, indicated by the dotted light-blue lines, we overlay growth rates for All Shopping Apps and for All Apps that Flurry measures (over 270,000). Starting on the left, we see that consumer time spent in Retailer Apps has skyrocketed by 525% from December 2011 to December 2012. This growth far exceeds total shopping app growth of 274%, as well as overall app growth 132%, represented again by the light-blue dotted lines. Time spent in Price Comparison and Purchase Assistant apps have also grown significantly, by 247% and 228%, respectively. Finally, still growing, but not as quickly as other shopping categories are Online Marketplace and Daily Deals apps at 178% and 126%, respectively.
For reference, below are examples of the kind of apps across shopping sub-categories in this analysis. Please note that example apps may not be Flurry customers.
- Retailer Apps: Walmart, Target, Macy’s, Victoria’s Secret, Gap, Saks 5th Avenue
- Price Comparison: RedLaser, Grocery iQ
- Purchase Assistant: ShopSavvy, ShopAdvisor
- Online Marketplace: eBay, Amazon
- Daily Deals: Groupon, Living Social
In the chart above, we next look at the shift in time spent across shopping sub-categories. Retailers, represented by the dark blue wedge, saw the greatest increase in time spent, from a share of 15% of time spent by consumers in shopping apps in 2011 to 27% in 2012. The enormous growth in retailer app share has come largely at the expense of Daily Deals, down in share from 20% in 2011 to 13% in 2012, and Online Marketplace apps, which contracted from 25% in 2011 to 20% in 2012. This suggests that retailers are beginning to better respond to the tectonic shift created by the collision of online- meeting offline-shopping through mobile apps.
Incoming! App & Mortar Fire
The opportunity for retailers to extend their relationship with consumers outside the store has never been greater, or more mission critical. Gone are the days when retailers should focus the majority of their marketing effort attracting consumers into stores, where 95% of all purchases take place. In the new mobile app economy, devices are always with you, always on and always connected. Consumers can be intercepted in store aisles and even on their way to the cash register. There are apps to scan an item, select size and color, and then have it shipped to your home - conveniently, quickly from the phone you have in your pocket right now. Apps are connected to credit cards and can have shipping info on file. In the new App & Mortar economy, they serve as virtual, portable show rooms that consumers can use to shop anytime, anywhere.
To keep dollars flowing through their cash registers, retailers need to re-examine the consumer relationship from the ground up and through the lens of mobile-first. In the App & Mortar economy, the battle for deeper consumer relationships is beginning. And there are already thousands of apps for that.
The most important week of the year for app makers is the final week of the year, between Christmas and New Year's Day. Starting with Christmas Day, the largest single device activation day of the year, the week between Christmas and New Year’s Day is marked by significantly elevated device activations and app downloads. This is the primary reason why companies jockey to rank well leading up to Christmas Day itself. This report reveals that the last week of 2012 was the largest week for both new device activations and app downloads in iOS and Android history.
For this report, Flurry leverages its data-set from over 260,000 apps running on the significant majority of iOS and Android devices. With its application penetration, Flurry can detect over 90% of all new devices activated each day. Additionally, with its analytics service in more than 25% of all applications downloaded on a given day from the App Store and Google Play, Flurry can reliably estimate total iOS and Android downloads. To benchmark against the market, Flurry regularly triangulates its device and download figures with data released publicly by Google and Apple.
In its most recent report, Flurry estimated that a record-breaking 17.4 million iOS and Android devices were activated on Christmas Day, along with an equally record-breaking 328 million application downloads. Studying the data from December 25 – December 31, additional records were set, now for the highest number of device activations and app downloads of any week in history. Over the holiday week, Flurry estimates that over 50 million iOS and Android devices were activated, and 1.76 billion applications were downloaded. Let’s take a closer look at downloads.
The columns in the chart compare the number of app downloads during Christmas through New Year’s Day (on the right) versus the average of the first two equivalent weeks of December (on the left). The seven days from December 25 – December 31 spanned from a Tuesday to a Monday. As such, we take the average of the first Tuesday-to-Monday weeks in December to establish a baseline. The average downloads over these weeks were surprisingly even. The final week of the year, between Christmas and New Year’s Day, grew by 65% over the early-December baseline, historically breaking through the largest single week record previously set during the same week of 2011. While several weeks since late November delivered billion+ week download levels, the holiday week delivered a record-shattering 1.7 billion downloads.
This second chart shows the top twenty countries across which the record 1.76 billion downloads were distributed. Starting from the left, the U.S. took the lion’s share with 604 million downloads, or 34.3%. Referencing an earlier report, wherein Flurry sized the installed base of top countries, it’s not surprising that the U.S. continues to lead the rest of the world, especially since the fast-closing second place China does not celebrate Christmas (only 3% of China’s population is Christian). Just before the holidays, Flurry estimated that there were 181 million active iOS and Android devices in the U.S. market, compared to 167 million in China.
Following the trend that Western countries more widely celebrate Christmas – note the higher positions of countries like Canada, Germany, France, Australia, Italy and Mexico in the chart – these countries over-indexed against largely non-Christian countries of China, South Korea and Japan. For example, while Japan and South Korea have the 4th and 5th largest smart device installed bases of all countries, they ranked 14th and 10th, respectively, for downloads over the record week. Christmas is not recognized as a national holiday in Japan, and in South Korea, roughly half the population self-identifies as non-religious. Countries that significantly over-indexed during the holiday include Russia, Italy and Mexico which drove the top 7th, 8th and 9th most downloads despite the fact that their installed bases are ranked 13th, 14th and 15th, respectively.
Looking forward to 2013, Flurry expects the trend of one-billion-download weeks to become the norm, and that the industry will surpass the two-billion download week during Q4. Following a year where Google and Apple drove unprecedented adoption of mobile devices, Facebook declared itself a “mobile” company, and Amazon and Microsoft both made significant investments into mobile computing, we look forward to continued record-breaking adoption of smart devices and applications. Happy New Year from everyone at Flurry.
During the month of November, Flurry reached a major milestone, measuring more than a trillion unique events completed inside of mobile apps by consumers. The magnitude of this number, and what it means to an industry barely over four years old, that has already generated tens of billions of dollars, is unprecedented. An industry has shot up around Flurry in a way that no one, anywhere, could have imagined.
So it was against this backdrop that I began reading a series of differing investment theses written by Fred Wilson of Union Square Ventures (What Has Changed), Dave McClure of 500 Startups (What Hasn’t Changed) and Chris Dixon of Andreessen Horowitz (The Product Lens). The gist was about the cyclical nature of investing between consumer internet and enterprise companies, with another suggestion to focus on product over finances. The debate is entertaining, and not surprising. It validates a theory I’ve held since the mid-nineties about the fundamental difference between entrepreneurs and investors. Simply put, entrepreneurs focus on opportunity while investors focus on risk.
The venture industry wants familiarity, so it talks about consumer versus enterprise. The web comes with an understood set of metrics like page views, visits, unique users, returning visitors and bounce rates, to name a few. And there’s still a standard way of buying traffic (SEM) and getting traffic organically (SEO). There’s a clear index and path to the web, called Google, and most VCs understand Google economics. They understand the lifetime value vs. cost per acquisition equation. They can value businesses accordingly.
What the venture industry doesn’t yet understand is mobile and apps. Traffic acquisition is still an art more than a measurable science. No one has defined a set of metrics that the venture industry can use to universally compare the value of one app property to another, and business models on mobile are still new. On Sand Hill Road, the best line I hear is that “99 cents is the new free,” referring to the freemium model, but few truly understand what it means.
Mobile and apps are gobbling up the web and consumer Internet, and that’s where the opportunity is. And the opportunity has never been bigger. All around me, I see entrepreneurs living it, loving it and collecting it “99 cents” at a time. Meanwhile, the VCs are debating it.
Mobile App Growth: Measured by Flurry
In the month of November, we measured over a trillion events from over 250,000 applications created by more than 85,000 developers. Events are actions completed by consumers inside apps such as completing a game level, making a restaurant reservation or tagging a song. In November, we also measured over 60 billion sessions, which is the start and a stop of an application on a mobile smart device. The chart below shows the growth in events tracked since May of 2008, when we first made our analytics service available to developers. This growth reflects the growth of the app economy.
Mobile Apps: Dominating the Web and Challenging Television
The chart below updates Flurry’s analysis comparing time spent in mobile apps on smartphones and tablets to time spent on the web using a browser. For web usage on desktops, laptops and smart devices, we build a model using publicly available data from comScore and Alexa. For mobile applications, we use Flurry Analytics data, now gathering data from over 250,000 applications. This time around, we add time spent on television using data released by the United States Bureau of Labor Statistics for 2010 and 2011. Note that the bureau hasn’t yet released their 2012 numbers, but given the maturity of the TV market, we assume that time spent on TV is flat year-over-year.
Between December 2011 and December 2012, the average time spent inside mobile apps by a U.S. consumer grew 35%, from 94 minutes to 127 minutes. By comparison, the average time spent on the web declined 2.4%, from 72 minutes to 70 minutes. By our measurement, U.S. consumers are spending 1.8 times more time in apps than on the web.
The chart also shows that time spent in apps already totals 76% of time spent on television. With new content released via thousands of new apps each day, we expect this trend to continue. In fact, we ultimately expect apps on tablets and smartphones to challenge broadcast television as the dominant channel for media consumption. Compared to the 60-year-old television industry, apps are just over 4 years old. In particular, tablets will drive growth in app consumption in 2013 as TV-style content and major programming moves to the tablet. Most TV Networks have already adjusted to a dual screen world and are synchronizing their TV content with their tablet app content. We believe that, with the introduction of connected TVs, TV shows will behave like apps.
Media, Games and Entertainment: The 80/20 Rule
Finally, we measured the time spent using mobile apps per app category across iOS and Android smart devices. For this comparison, we use Flurry data over the month of November 2012 as a baseline, and then adjust based on Flurry’s penetration per category. The chart below shows that 80% of the total time spent is across gaming, social networking and entertainment categories.
The stats on gaming are particularly interesting. Returning to the Bureau of Labor Statistics survey data, the average U.S. consumer spent 1.2 hours (72 minutes) per day playing a game, on any platform. Our data shows that 43% of time spent in mobile apps, 55 minutes, is spent in games. This means that mobile gaming on tablets and smartphones has absorbed 76% (55 of the 72 minutes) of the total time consumers spend on gaming, anywhere. Now, that's disruptive.
In just 4 years, mobile apps have overtaken the web and are beginning to challenge television, the top media channel. As we enter 2013, the app industry shows no signs of slowing. On the contrary, we continue to see a strong flow of new devices and new apps activated in our network. While VCs debate what part of the investment cycle we’re in and how to manage risk, all entrepreneurs need to know - from one entrepreuneur to another - is that you're witnessing the opportunity of a lifetime.
Marshall McLuhan popularized the idea of the “global village” in the 1960s through his books The Gutenberg Galaxy: The Making of the Typographic Man and Understanding Media. McLuhan, who is credited with predicting the concept of the Internet decades before it actually existed, described the instantaneous movement of information from every quarter to every point at the same time, enabled by electric technology. The result is that the globe contracts into a village.
Post-Internet, the explosive adoption of iOS and Android smart devices best extends his theory. Enabled by this new computer-mediated platform is the distribution of apps, from every quarter to every point, at the same time. Consider that in the United States today, right now, teams from Finland, Japan, Israel and the UK share top grossing positions alongside U.S. teams in the iTunes App Store and Google Play. Today, in the top Chinese app stores, one can find American, French and Japanese companies alongside Chinese companies for a top share of revenue. And in the top UK app stores, companies from Serbia, Finland, Japan, China and the U.S. are counted among local UK companies as top revenue generators.
Welcome to the new global village built on a foundation, per Flurry’s count, of three quarters of a billion active iOS and Android smart devices, simultaneously running across more than 220 countries and territories that will generate revenue approaching $10 billion in 2012. This report focuses on the further shrinking of the global village, driven by the prolific spread of global smart devices over the last 12 months. We show which countries have the largest active smart device installed bases, are experiencing the fastest growth and how the distribution of app usage is shifting to become increasingly international. For its analysis, Flurry uses data from more than 250,000 applications that it tracks, running on more than 750 million devices worldwide. With its application coverage, Flurry estimates that it can reliably detect over 90% of all iOS and Android devices active in the world during a given month.
Let’s start by looking at which countries make up the world’s largest app markets.
The chart above shows the top markets by their active iOS and Android user bases during October 2012. The US and China tower over the next group of top markets by at least five times. And while the U.S. has added a whopping 55 million net active devices since October 2011, China has added a dizzying 125 million, a figure that totals the sum of the UK, Japan and South Korea’s combined, current active user base. Flurry predicts that China will surpass the U.S. in total installed base by the end of Q1 2013, delayed only by the upcoming massive holiday season that will spike the U.S. installed base.
The chart above shows the growth in active devices per country between October 2011 and October 2012. China leads the world with an impressive 293% year-over-year growth rate, spurred by the potent combination of its vast population and rapidly growing middle class. For this chart, Flurry selected countries that had a minimum of a half a million active devices as of October 2011. Compared to prior Flurry international growth studies, we note that a new set of fast-growers has now entered the top 10 including Colombia, Ukraine, Venezuela and the Philippines, further demonstrating the shrinking global village.
Lastly, we look at the volume of application usage across the globe tracked by Flurry, which we estimate comprise of approximately one fifth of all worldwide app sessions on iOS and Android, the world’s largest cross-platform sample. Year-over-year app sessions in the U.S. declined as a proportion of WW sessions between October 2011 and October 2012, from 48% to 29%. The balance of the top 10 (ranks 2 -9) grew from 27% in October 2011 to 39% in October 2012. The rest of the world also made gains from 25% in October 2011 to 32% in October 2012. In total, 71% of all app sessions now take place outside the U.S.
Over the last century, the distribution of the world’s information has migrated from print (e.g., books and newspapers) to mass media (e.g., radio and television) to computer-mediated media (i.e., the Internet). Over just the last five years, however, we’ve taken the most significant step forward in the evolution of media distribution with the unprecedented adoption of smartphones and tablets: portable, broadband-connected super computers connected to The Cloud. Applying McLuhan’s point of view that “the message is the media,” apps are the new message.
Regardless of a company’s earlier success, thriving in the new mobile app economy depends on engagement and retention. After acquiring users, the real battle to keep and ultimately monetize consumers begins. In the brave new world of “mobile first,” engagement is the new battleground.
This research is a redux to one of Flurry’s most popular reports, entitled Mobile Apps: Money, Models and Loyalty. Released three years ago, the initial report organized app category usage into a loyalty matrix. We do the same again now, while also acknowledging that a lot has changed in the app economy since then. To start, there is an order of magnitude more available apps in the App Store, now brimming with over 700,000 app choices for consumers. We are three generations beyond the then-new iPhone 3GS. We have since met the iPad, and perhaps tomorrow will meet the iPad Mini.
Combined, smart devices – iOS and Android smartphones and tablets – are the fastest adopted technology in history; adopted faster than electricity, televisions, microwaves, personal computers, cell phones, the Internet, dishwashers, stoves, and a whole lot more. Last month, Mark Zuckerberg, CEO of Facebook – the number two most visited website on the web – declared “we are now a mobile company” explaining that “you just could do so much better by doing native [application] work” versus using languages like HTML5 on top of browsers. Each month, approximately 600 million of Facebook’s 1 billion monthly active users already accesses Facebook via mobile.
Each app category has different user engagement and loyalty characteristics. Understanding a given app audience based on the category to which it belongs can inform a company’s app acquisition, retention and monetization strategies. For this analysis, we use a sample of apps used more than 1.7 billion times each week. In total, more than 80,000 companies use Flurry Analytics across more than 230,000 apps to understand consumer behavior and improve their apps.
The above matrix plots application categories by how often they’re used compared to how long consumers continue to use them over time. Specifically, we plot the 90-day retention rate of app categories on the x-axis against the frequency of use per week on the y-axis. We lay the “scatterplot” out in a Cartesian coordinate system with four quadrants. For our categories, we started by taking the application categories defined by Apple in the App Store. In cases where a cluster of applications within a parent category showed meaningful usage differences, we created a sub-category. For example, Flurry divides games into Social Games and Single Player Games given how differently consumers use these sub-categories.
Quadrant I includes apps that are used intensively and to which consumers are loyal over time. News and Communication apps are the two categories that appear in this category. On average, because these apps tend to have stable, growing audiences, they are best positioned to generate advertising revenue or charge a subscription. Consumers perceive these apps to deliver enduring value over time.
Quadrant II is comprised of apps that are used intensively, but for finite periods of time. They are perceived by consumers to deliver value in bursts. Streaming Music, Dating and Social Games best typify this quadrant. Consider for a moment why Dating is a category that appears in this quadrant. For most people, we can assume that finding a long-term “significant other” is the ultimate goal of dating. As a result, the app maker should expect customer churn. While usage may be high during the time when a consumer looks for a suitable partner, once that person is found, usage stops. An implication could be that to maintain a growing audience, apps in this category require heavy, constant acquisition to find consumers who are “in the market” for dating. Ironically, the better the app is at match making, the more churn it should expect.
Quadrant III contains apps that are used infrequently and have high churn. They contain the most “one-and-dones.” Personalization is an example that makes sense for this quadrant, since a consumer uses this app to change her screen saver or select a theme for her operating system. Once this set-up is complete, it’s unlikely that the user will need to re-use this application. Since the app’s value is diminished almost immediately, applications with this kind of usage pattern are best served with premium pricing models; that is, charging the consumer before providing access to the content.
Quadrant IV is made up of apps that are used infrequently but deliver very high value when used. Even though they’re used only occasionally, these apps can remain on a consumer's handset almost indefinitely. For example, consider how useful an airline, hotel or rental car-booking app is to a business traveler. While the app remains unused between business trips, its value spikes as soon as the next business trip needs to be scheduled.
Which Pill to Take
The quadrant an app falls into can help the content creator decide what business model is best. On average, Quadrants I and IV (the right-hand side) are better suited to subscription and advertising-supported models. The main reason is that these apps have perceived enduring value by consumers over a long period of time, and therefore more successfully retain their user bases. For ad-supported apps, high repeat usage translates into more ad impressions served. Categories on the left-hand side, Quadrants II and III, are better suited for one-time download fees. Additionally, quadrants II and IV (top left and bottom right) are likely best for in-app purchase models. For Quadrant II, the intense usage means that consumers find very high value during a short window. This creates the opportunity to offer new content or functionality during “binge” usage. Adroit social game makers are masters at driving in-app purchases during a consumer’s greatest moment of engagement. For Quadrant IV, because the user will return again and again, there also exists the possibility to find new ways of increasing value, which includes offering add-on functionality or content for a fee.
For more data, the table below provides 30, 60 and 90-day retention rates as well as weekly frequency of use numbers. Note that some of the categories included in the table below are not included in the matrix chart above.
Compared to Flurry’s 2009 analysis, 90-day retention rates have increased from 25% to 35%. Additionally, frequency of use has decreased from 6.7 in 2009 to an average of 3.7 now. We attribute increased retention rates to increased quality in the market, driven by more competition. With tens of thousands of more companies building apps and hundreds of thousands of more available apps, the quality of apps has risen dramatically. Simply put, app makers are getting better at holding a consumer's attention longer. Additionally, we believe usage rates are lower because consumers have more choice than ever and are splitting their time across more applications. While Flurry included 19 categories in its 2009 report, we now include 30 distinct categories as the industry has matured and more distinct verticals have appeared.
Brave New World
With more than a billion smartphones and tablets now in use, as well as the eventual move of apps into the living room through connected TV efforts by the likes of Apple and Google, digital distribution is changing the way the world does business. No matter what category your app belongs to, understanding and improving user engagement is the new currency of doing business in the new digital world.
The rate of iOS and Android device adoption has surpassed that of any consumer technology in history. Compared to recent technologies, smart device adoption is being adopted 10X faster than that of the 80s PC revolution, 2X faster than that of 90s Internet Boom and 3X faster than that of recent social network adoption. Five years into the smart device growth curve, expansion of this new technology is rapidly expanding beyond early adopter markets such as such as North America and Western Europe, creating a true worldwide addressable market. Overall, Flurry estimates that there were over 640 million iOS and Android devices in use during the month of July 2012.
This report reveals which countries have the largest active smart device installed bases, are experiencing the fastest growth and are most penetrated. We also show how the distribution of app usage is shifting to become increasingly international. For this report, Flurry uses data from more than 200,000 applications that it tracks, running on more than 640 million devices worldwide. With its application coverage, Flurry estimates that it can reliably detect over 90% of all iOS and Android devices active in the world during a given month. Let’s start by looking at which countries make up the world’s largest app markets.
Compared to July 2011, the United States and China continue controlling the top two spots, with China dramatically closing the gap on the United States. Year-over-year, Flurry calculates that net active devices in the U.S. grew by approximately 30 million, while China saw more than 100 million new active devices enter the market. At this rate, China’s active installed base could overtake the United States as early as the 2012 Holiday season. Please note that Flurry detects actual active devices upon which apps are running, and that these numbers will differ than reported hardware sales by OEMs. Compared to last year, 9 of the top 10 countries remain unchanged, excepting Brazil, which pushes Australia just out of the top 10, into the 11th position.
The chart above shows the growth in active devices per country between July 2011 and July 2012. China leads the world with an astounding 401% year-over-year growth, demonstrating the power of the country’s vast population coupled with its rapidly growing middle class. Notably, all four BRIC countries (Brazil, Russia, India and China) are represented in the top 10-ten growth countries for smart devices, reinforcing their new stage of advanced economic development. For this chart, Flurry selected countries that had a minimum of a half a million active devices as of July 2011.
In addition to the fastest growing countries, Flurry also measured which markets are mostly rapidly nearing saturation. Specifically, we compared the number of active devices in each country relative to its adult population, between ages 15 and 64 years old. While Singapore, Hong Kong and Sweden form the top three countries in terms of smart device penetration, indicating their strong consumer technology economies, each country has a relatively small total population, ranging between 5 to 10 million. By comparison, the United States, the fifth most penetrated country with 78% of its adult population using smart devices, has a total population of more than 310 million. South Korea and the United Kingdom have the 2nd and 3rd largest populations among the top 10 penetrated markets, with roughly 50 million and 60 million respectively.
Finally, we look at look at the volume of application usage across the globe tracked by Flurry, which we estimate comprise of approximately one fifth of all worldwide app sessions on iOS and Android, the world’s largest cross-platform sample. Year-over-year app sessions in the U.S. declined as a proportion of WW sessions between July 2011 and July 2012, from roughly one-half to a little over one-third. The balance of the top 10 (ranks 2 -9) grew from 27% in July 2011 to 36% in July 2012. The rest of the world also made gains from 21% in 2011 to 28% in 2012. In total, 64% of all app sessions now take place outside the U.S.
Enabled by digital distribution across the unprecedented growing base of iOS and Android smart devices, global software distribution has never been so frictionless. After building an application, a development team can distribute its app on Android instantaneously and, after review by Apple, can be in the App Store within roughly one week. With international growth accelerating, there has never been a better time, in the history of technology, to be a software developer.
The iTunes App Store and Google Play now offer more than 600,000 apps each. And Apple’s most recent earnings call revealed that the company has paid out more than $5.5 billion to developers since the launch of the App Store. With unprecedented consumer adoption of iOS and Android devices, low barriers to entry for developers and throngs of paying customers, Apple and Google have created massive economic opportunities for developers.
In particular, iOS and Android have made it possible for independent developers and mobile app start-ups to thrive. As industries mature, however, we expect established players and brands to invade from other platforms, depressing opportunities for many early entrants. Along with this, we expect to see market revenue concentrate among fewer larger players. For this report, with these typical patterns in mind, Flurry modeled worldwide mobile app revenue, revenue sources and revenue concentration among top-ranked mobile apps on iOS and Android. For this report, we used data from over 200,000 mobile applications in the Flurry Analytics data set. Let’s start with market growth.
The chart above compares worldwide revenue generated by iOS and Android apps in 2011 vs. 2012. For 2012, we modeled the first half of the year based on actual data, and then applied growth rates to estimate the rest of the year based on the proportion of revenue observed in 2011 between the first and second half of that year. In 2011, Flurry calculates that iOS and Android applications generated a total of $5.4 billion across premium, in-app purchase and advertising revenue. Advertising made up 18% of the revenue. In 2012, Flurry forecasts that revenue will grow by 60% over the previous year, reaching $8.7 billion. Advertising is the fastest growing revenue category with growth forecasted at more than 100%, from $980 million in 2011 to $2 billion in 2012, delivering 23% of 2012 total revenue. Likewise, premium and in-app purchase revenue is also increasing at a rate of 50%, from $4.5 billion in 2011 to $6.7 billion in 2012.
Next, we look at the concentration of revenue among top ranked apps from 2010 to 2012. Please note that for this analysis, we focus on premium and in-app revenue only, excluding ad revenue. Comparing these two years shows how dramatically the distribution of revenue is shifting across the long tail. Starting on the left, in 2010, the green part of the column shows that 28% of revenue was generated by the Top 25 ranked titles on iOS and Android. In 2012, we estimate that the Top 25 will drop to commanding about half of total revenue, or 15%. Likewise, comparing the grey sections of each column, the rest of the Top 100 apps will drop from earning 27% of revenue in 2010 to 17% of revenue in 2012. Conversely, revenue generated by the long tail significantly grows from 2010 to 2012. Comparing the blue sections, any apps ranked beyond the top 100, we observe that long tail revenue explodes from earning under half of all premium and in-app purchase revenue in 2010 to over two-thirds in 2012.
Finally, we rank the revenue generated by each of the top 100 positions across the iTunes App Store and Google Play. For each year, we set the revenue generated by the top spot at 100%. Then, relative to the top spot, we take the percent each position generates from the 2nd rank all the way through the 100th. By normalizing each curve in this way, we can compare the relative revenue generated per ranked position in the top 100 per year. For example, we can see whether ranking number 50 generates more relative revenue in 2012 versus 2010. Most interestingly, this kind of analysis shows whether the developer “middle class” is better off today than its “parents’” generation.
Now that we have relative earning power mapped per ranked position, we can study the heights and shapes of the curves. Comparing 2010, the green curve, to 2012, the blue curve, we notice that two things are happening simultaneously. First, each position in the top 100 is more valuable now, which makes sense because the market has grown overall. Second, the blue 2012 curve is flatter. Unlike the green 2010 curve, which steeply drops during the top 10 ranked positions, indicating the wealth is more concentrated at the top, the blue 2012 curve stabilizes shortly after the top 5 positions and then maintains a high, gently sloping plateau all the way through the 80th position, where it then settles just above the green curve, ostensibly continuing to “fly” at an altitude higher than that of the green curve out across the long tail. In short, this means that the middle class has more earning power, taking a substantial share of total wealth in the economy.
With the app economy booming, companies like Facebook, Twitter and Zynga are under tremendous pressure from investors to seize the opportunity presented by this new platform. However, with software delivered in the form of downloadable applications, unguaranteed network connectivity, different consumer behavior and control exerted by platform providers such as Apple and Google, the mobile app landscape creates different, meaningful challenges for companies attempting to enter the app space from other platforms. Combined with a marketplace that reduces the power of brand recognition (e.g., apps are free for consumers to try risk free), market wealth unexpectedly continues to shift to the long tail, funding continued R&D, advertising budgets and other activities that increase their competitive strength. The age of middle-class app developer has arrived. In this economy not only are the rich getting richer, but so too are the poor, and gaining on the rich.
This week, wedged between Apple’s WWDC and Google I/O is Microsoft’s Windows Phone Summit in San Francisco on Wednesday, June 20. Additionally, Microsoft is holding a last-minute press conference that “you don’t want to miss” tonight in Los Angeles. Barnes & Noble claims they are not part of the announcement, and others speculate that Xbox Live streaming will be part of the offering. Given the popularity of gaming on smartphones and tablets, and the strength of the Xbox platform, this would be a strong move for Microsoft. Because the development community is strongly made up of gaming studios, a move such as this could help galvanize the 3rd-party development community. Over the last couple of years, there has been an all-out war among Apple, Google, Microsoft, RIM and others to win the hearts and minds of developers. It appears that Microsoft is now making its move.
This report follows up on another released by Flurry earlier this month, showing that Apple continues to hold a strong lead over Google’s Android for developer support. Looking beyond the top two platforms supported by developers, Flurry evaluates the possibility for a 3rd legitimate platform provider to emerge at this stage of the game. At Flurry, we track developer support across the platforms that compete for their commitment. When companies create new projects in Flurry Analytics, they download platform-specific SDKs for their apps. Since resources are limited, choices developers make to support a specific platform signal confidence, as they invest their R&D budget where they expect the greatest return. Flurry Analytics has been adopted by more than 70,000 companies across more than 190,000 applications. Let’s start with a comparison of the Research in Motion (RIM) versus Microsoft.
Microsoft Blows by Beleaguered RIM
The chart above shows the percent of new project starts represented by Microsoft and RIM among all platforms Flurry supports (e.g., iOS, Android, BlackBerry, Windows Phone, etc.). A new project start in the Flurry system is when a developer sets up an application for analytics tracking prior to the launch of that app. Over the past 12 months, Project starts for Windows Phone have grown by more than 600%, now accounting for 6% of all new project starts in the Flurry system during June 2012. As a percent of new project starts, RIM has remained flat. Overall, on an absolute basis, total new project starts within Flurry have grown by approximately 50%.
Microsoft Sets Its Sights on Android
We next combine all new projects across the top 4 platforms within the Flurry system, comparing Q2 2011 versus Q2 2012.
The chart above compares the percent of new projects built by developers per platform within Flurry. For this snapshot, we compare Q2 2011 versus Q2 2012. Year-over-year, developer support has shifted, with Microsoft’s dent becoming more visible, now representing 4% during Q2 2012. iOS and Android share continue to oscillate mildly now clocking in 67% for iOS and 28% for Android. BlackBerry remains flat. What is important to note is that all four platforms are growing, just at different rates. Specifically, growth rates per platform for year-over-year growth are: iOS 66%, Android 82%, Windows Phone 521%, BlackBerry 13%. Viewing the relative growth rates show just how much Microsoft is gaining against the market.
Considering the first chart in this report, Microsoft growth has been accelerating within Q2. If we look at just Android and Microsoft in the month of June, for every Windows Phone new project started, 4 have been started for Android. Considering the much smaller Windows Phone installed based compared to Android, Microsoft is currently over-indexing. From Google’s point-of-view, this must elevate Microsoft from an “also-ran” to a potential competitive threat with the resources and know-how to kick-start momentum and mount a campaign to reel in the second place player.
Generally, Windows Phone could be gaining against the entire market as a result of developer frustration for Android fragmentation, concern for increasing competition on iOS and a lack of faith in BlackBerry. Whatever the reason, it’s clear that Microsoft still knows how to attract third party developer support. With its Nokia-partnership and high anticipation around today’s Microsoft Tablet announcement, Flurry expects Microsoft to make continued headway over the course of 2012.