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Madison Avenue and the Land of Make Believe

  
  
  

Mass market consumer adoption of Apple iOS and Google Android mobile devices has attracted an unprecedented volume of content, delivered through applications.   Because the majority of these applications downloaded are also free, many ecosystem players have assumed that advertising revenue models will dominate how these apps are monetized.

However, new analysis by Flurry reveals that the sale of virtual goods is overtaking advertising in top categories on the iOS platform.  Note that because Google’s Android Market does not yet support in-app purchases (micro-transactions), this model is not yet viable for Android apps.  This study was conducted using data collected from a sample of leading iOS social networking and social gaming applications, with a combined reach of 2.2 million daily active users. 

Flurry AdvertisingRevenueShift VGs resized 600

Reviewing the chart above, the majority of revenue generated from advertising occurs during the 2009 holiday period.  During 2010, however, revenue increasingly shifts from advertising to virtual goods sales until reaching a proportion of more than 80% from virtual goods.  Admittedly, the idea that consumers acquiring virtual swords, gold coins and respect points can outperform advertising seems counter-intuitive; however, this phenomenon is neither new nor unique to the iOS platform.

In fact, virtual goods sales already represent the primary source of revenue for social gaming on Facebook.  Michael Pachter, Wedbush Morgan Securities video game analyst, reports that social gaming has grown from approximately $600 million in 2008 to $1 billion in 2009.   Further, he forecasts that social gaming will generate nearly $1.6 billion this year, and grow to more than $4 billion by 2013.

One factor responsible for low advertising levels may be advertising agencies’ slow acceptance of mobile as a media platform, with skepticism about the viability of social games and social mobile media as a channel for advertisement.  With these agencies representing and guiding the biggest brands, they appear to be missing a meaningful opportunity to reach a mass market of consumers who have adopted new platforms and forms of content.

As social games continue to expand their consumer reach, demonstrating their ability to attract an audience beyond teenagers using iPod touches, their relevance will increase.  In fact, with mobile social game critical mass now rivaling TV prime time viewership, Flurry anticipates a stronger ad revenue generation through mobile social networking and games in 2011.  Over the next 18 to 24 months, Flurry predicts strong revenue growth from both virtual goods and advertising revenue from social gaming.  We say play on!

Is iPhone the next American Idol?

  
  
  

On October 5, 2009, CBS canceled "Guiding Light," the longest running television drama in history, which began in 1952. Last month, CBS aired the last episode of "As the World Turns," the Proctor & Gamble production that has been running for more than 50 years.  Ad dollars allocated to soaps fell nearly 30 percent from 2005 to 2009, and then fell another 20 percent in the first half of 2010.

Since the 90s, the television industry has been reeling from the disruptive forces of the Internet and DVRs.  No longer could the industry depend on a captive audience to which it had grown so accustomed.   While the industry has adapted its programming with a glut of cheaper, but profitable competition reality shows and edgier dramas to reclaim a loyal audience, a new entertainment force is once again driving disruption: the iPhone.  The chart below illustrates how iOS social games, a popular form of gaming mixed with social networking, stack up against primetime TV viewership.


Flurry iOSsocialGames vs PrimeTimeTV resized 600
Social games on iPhone, iPad and iPod touch devices are competing for television viewers.  In fact, these apps, tracked on the Flurry network alone, comprise of a daily audience of more than 19 million who spend over 22 minutes per day using these apps.  Treated as a consumer audience, its size and reach rank somewhere between NBC’s Sunday Night Football and ABC’s Dancing with the Stars, and only 4 million viewers shy from beating the number one prime-time show on television, FOX’s American Idol. 

However, Flurry is only seeing part of the picture.  With Flurry integrated into more than 50,000 apps, out of Apple’s stated total of 250,000 apps, Flurry has about 20% penetration.  Additionally, since this analysis focuses on only two categories of applications, social games and social networking apps, it’s clear that iOS devices are already ahead of prime time television’s hottest shows.

Given that the app store only launched in July 2008, these figures are staggering.  Mass consumption of applications on mobile devices has exploded in record time.   Also noteworthy is that the enormous audience these applications reach takes place every day, 365 days a year.  Compared to a top television series, which airs 22 episodes a season, advertisers can reach a larger consumer audience through applications 15 times more frequently.

There are a lot of conclusions that can be drawn from this phenomenal shift in audience behavior. The most obvious is the impact on the advertisement industry, which has relied on the reach generated by its prime time television slot for years.  This season, while Americon Idol is busy shuffling judges, the people have voted: iOS social games are as prime time as prime time television.  Enjoy the show!

On October 5, 2009, CBS canceled “Guiding Light,” the longest running television drama in history, which began in 1952.  Last month, CBS aired the last episode of “As the World Turns,” the Proctor & Gamble production that has been running for more than 50 years.  Ad dollars allocated to soaps fell nearly 30 percent from 2005 to 2009, and then fell another 20 percent in the first half of 2010.

Since the 90s, the television industry has been reeling from the disruptive forces of the Internet and DVRs.  No longer could the industry depend on a captive audience to which it had grown so accustomed.   While the industry has adapted its programming with a glut of cheaper, but profitable competition reality shows and edgier dramas to reclaim a loyal audience, a new entertainment force is once again driving disruption: the iPhone.  The chart below illustrates how iOS social games, a popular form of gaming mixed with social networking, stack up against primetime TV viewership.

Is iPhone the next American Idol?

Apple iPhone and iPod touch Capture U.S. Video Game Market Share

  
  
  

More than 30,000 games have been released in the iPhone App Store since its launch in July 2008. With titles that consistently dominate the Top Paid and Top Grossing lists, there is no question that the games category is the most lucrative category in the App Store. This report focuses on how Apple has affected the market share of U.S. video game and portable game revenue since the introduction of games sold through the App Store for iPhone and iPod touch.

Using publicly available market data, provided by NPD (mostly through Gamasutra's Behind the Numbers series), Flurry calculated U.S. console and portable game software sales for 2008 and 2009. We also estimated Nintendo DS and Sony PlayStation Portable game software sales, which make up the significant majority of the portable category, in order to compare these to iPhone game sales. We estimate iPhone game sales using a combination of data made available by Apple and using ratios and calculations from an aggregated set of data that we track through our analytics service.

We begin with a look at the U.S. gaming market, which NPD defines primarily as console and handheld. PC gaming, which has been declining over the last decade, and is currently approximately 5% of the total U.S. market, is not included. Also, for this analysis, we ignore online gaming revenue (e.g., virtual goods and subscription fees from social networking games and massively multi-player online games).

Below is our estimation of market share by platform among console, portable and iPhone platforms for 2008 and 2009.

iPhone_US_VideoGame_MarketShare_2009

 

NPD Group shows that combined U.S. console and portable software revenue was approximately $11 billion and $9.9 billion in 2008 and 2009, respectively. After estimating portable sales, we were able to back into console revenues. We then added our own estimates for iPhone game revenue, which total $115 million and $500 million for 2008 and 2009, respectively.

With these figures, our main finding is that iPhone (and iPod touch) is a gaming platform to be reckoned with. Controlling 5% revenue of a $10 billion industry in just a year and a half is significant. From a market share perspective, console games lost ground to portable platforms and iPhone. While the downturn in the economy may have dampened sales of the more expensive console games category, there is no denying that iPhone has generated substantial revenue and entered strongly into a mature industry.

More interesting to us than iPhone's impact on U.S. gaming was its impact on the portable category, which we estimate totaled $2.25 billion and $2.55 billion in 2008 and 2009, respectively. Michael Pachter, managing director at Wedbush Morgan Securities and a prominent video game analyst, suggests "iPod touch is the most dangerous thing that ever happened" to game publishers. As prices come down for the iPod Touch, and games sold through the App Store continue to have lower price points, more of the young gaming generation may switch to Apple devices over Sony PSP and Nintendo DS for gaming. Further, Apple has squarely positioned the iPod Touch as a gaming machine. Check out a TV spot here to get an idea.

From what we calculate, consumers are downloading iPhone games in droves. Comparing iPhone against Sony and Nintendo games sales shows that Apple has taken nearly one fifth of the portable market in 2009, largely at the expense of Sony PSP. With Sony PSP Go, Sony's latest effort to revive its portable sales, having fallen short of expectations, Sony finds itself now challenged by two competitors in this segment.

Flurry_iPhone_USportableGames_MarketShare_2009Looking forward, with the iPad set for an April release, the traditional gaming giants may yet again be disrupted by Apple. With companies like Electronic Arts and Gameloft joining Apple on stage during its January unveiling of the iPad, the tablet device will enjoy elite game publisher support on day one. Further considering data that Flurry released in its latest Smartphone Industry Pulse report, where we determined that more than one third of iPhone game developers come from the traditional gaming industry, Apple has already established broad third-party game publisher support. With the iPad featuring a larger screen and more processing power, games on the tablet take a step closer to PC and console gaming. Unless the other major video game platform providers (i.e., Sony, Nintendo and Microsoft) respond accordingly, Apple could continue to roll up video game market share.

 

Day 74 Sales: Apple iPhone vs. Google Nexus One vs. Motorola Droid

  
  
  

Through applications using Flurry for analytics reporting, Flurry can detect and count unique devices in the market such as Google Nexus One and Motorola Droids. Because applications embedded with Flurry have been downloaded to over 80% of all iPhone OS and Android devices, Flurry is able to make reliable estimates about total handset sales.

Earlier this year, Flurry estimated both first week and first month sales of Nexus One Sales compared to Motorola Droid and the first generation iPhone, among others. Despite the fact that the Google Nexus One is the most advanced Android handset to date, and enjoyed substantial buzz leading up to its release, the launch has been overshadowed by lower than expected sales. In our previous reports we offered several possible reasons including unconventional choices in marketing, pricing and distribution.

So, why 74? Simply put, according to Apple, the original iPhone reached 1 million units sold in that many days. And since the Nexus One launched on January 5, we've had Friday, March 19 (aka day 74) circled on our calendars. The comparison is interesting because the iPhone and Nexus One each represent Apple and Google's first fully branded handsets, respectively. We add the Motorola Droid as a point of comparison, and because it's the fastest selling Android phone to date.

The chart below compares the sales results through each of their respective first 74 days. The launch dates were: iPhone, June 29, 2007; Droid, November 5, 2009; and, Nexus One, January 5, 2010.  Please note that we forecasted the last few days of Nexus One's first 74 days sales based sales of the first 70 days we tracked at the time of writing this report.

Sales Nexus One, Droid, iPhone

Inspecting the graph, it's immediately clear that Nexus One sales continue to pale in comparison to iPhone 1G and Motorola Droid, with each besting Nexus One sales by roughly 8 times over the same time period.

At the same time, an interesting side-story is that the Motorola Droid edged out iPhone 1G over the first 74 days, coming in at just over one million sold through, by our calculations. This was surprising enough that we re-ran our estimates several times and still came up with the same results. Thinking about the differences associated with each launch (operator, year, etc.), we believe there are three underlying drivers of Droid worth keeping in mind compared to the other two handsets:

1. Consumer Perception & Demand: Motorola Droid launched over 2.5 years after the iPhone 1G. (Nov 2009 vs. July 2007). When the iPhone launched, consumers' concept of a mobile computing device as we now understand it, was very different. Since then, Apple has spent millions of dollars training and educating consumers about capabilities of such a device, which was no small feat especially after its first foray into the handset business (Motorola ROKR E1 in 2005). Until the iPhone was introduced, most consumers, especially in the U.S. had thought of their phones as, well, just phones.  Finally, it's worth noting that the Motorola Droid could be considered Android's "third generation" handset, which benefited from generated awareness by preceding G1 and MyTouch 3G handsets. 

2. Relative Subscriber Bases: Droid launched on Verizon, a larger network with more subscribers than AT&T, especially when considering AT&T's 2007 size (63.7 million at the time of iPhone launch) versus Verizon's 2009 size (89 million at the end of Q3). Additionally, there was pent up demand among the Verizon subscriber base for an iPhone killer, which is exactly how Verizon positioned the Droid. Finally, Verizon backed the launch with advertising support of at least $100 million.

3. Holiday Season Sales: Droid benefited from launching on Nov 5 and having its first 74 days lifted by the holiday season, which is the highest selling period of the year for handsets. Neither iPhone 1G nor Nexus One's first 74 days spanned a holiday period.

As Google and Apple continue to battle for the mobile marketplace, Google Nexus One may go down as a grand, failed experiment or one that ultimately helped Google learn something that will prove important in years to come. Apple's more vertically integrated strategy vs. Google's more open Android platform approach offer strengths and weaknesses that remind us of PC vs. Mac from the 1980's. A key difference this time around is that Apple is enjoying much more 3rd party developer support, whose innovative applications push the limits of what the hardware can do. Ultimately, however, developers support hardware with the largest installed base first. For Android to make progress faster, from a sales perspective, it needs more Droids and fewer Nexus Ones going forward.

Flurry Smartphone Industry Pulse, February 2010

  
  
  

Each month, Flurry leverages its data set collected from iPhone, Android, BlackBerry and J2ME applications to identify, study and share industry trends. Flurry tracks over 20,000 live applications and over 2 billion user sessions each month. Applications that include Flurry Analytics have been downloaded to more than 80% of all iPhone, iPod Touch and Android devices. Additionally, each day, approximately one of out every five downloaded applications from the App Store and Android Market include Flurry Analytics. The Pulse report is generated in the first half of each month, looking back at data up through the previous month. Different than other reports that provide updates to the same set of statistics each month, Flurry explores different business themes and topical issues relevant to mobile developers and other industry players.

I. Money Talks: App Store vs. Facebook Platform

Since the App Store launched in July 2008, 35,000 unique companies have released applications, which translates to 58 new companies launching apps each day. This appears to be the largest amassing of 3rd party developer support by any development platform in such a compressed timeframe. For example, comparing the number of applications created for the Facebook platform to the App Store over their respective first 9 months, Apple boasted 25,000 apps to Facebook's 14,000. Comparing respective growth in apps after 14 months, Apple had widened its gap to 85,000 apps over Facebook's 33,000. At the App Store's 18 month mark, reached this January, the number of iPhone apps was reported to have exceeded 140,000 compared to the 60,000 we estimate Facebook had reached over its first 18 months. We believe the difference in growth rates can be attributed to the App Store providing better monetization possibilities for application developers than Facebook did through its first 18 months. Developers, like all rational companies, pursue markets where the path to revenue generation is clear. 

 iPhone App Store vs. Facebook Platform

II. iPhone Developer DNA: O Brother, Where Art Thou (from)

Thinking about the sheer number of developers with applications in the App Store, we had the practical question: where'd they all come from? It's as if they've appeared over night. Has Apple created a magical new economy for application development start-ups, attracted existing content creators and brands from other platforms, or both? In this report, Flurry examines the genealogy of iPhone application content; that is, their platforms of origin. This sheds light on the mix of skills, motivations and frames of reference different content providers bring to the App Store economy, and which are winning.

To generate a sample that allowed us to compare across categories and pricing models (paid, ad supported, micro-transactions, etc.), Flurry created an index that took into account application rankings across both top 100 paid and top 100 free categories, additionally adjusting for frequency of use and user retention over time. Doing so enabled us to evaluate a free application's ability to retain a user base, important for generating advertising revenue past the download. Based on this index, we generated a list of 200 applications and identified six distinct "heritage" categories:

1. Native iPhone: Companies founded to create applications for iPhone (e.g., ngmoco, PageOnce)
2. Traditional Media: Companies established on Film, TV, Print and Radio (e.g., Disney, TBS, NYT)
3. Mobile: Companies having started on J2ME, BREW, BlackBerry, etc. (e.g., Digital Chocolate, eBuddy)
4. Retail & CPG: Brick-and-mortar companies or ones that manufacture goods (e.g., The Gap, DKNY, Kraft)
5. Online: Companies who began on the web including e-Commerce, social networks, online gaming, streaming music, etc. (e.g., Google, eBay, Facebook, Pandora, PopCap, Zynga)
6. Traditional Gaming: Video game companies from console, portable or PC (e.g., EA, Activision).

The pie chart below shows a breakdown of developers making top applications based on their heritage:

App Developers Platform of Origin

On any new media platform (or channel), entrepreneurial companies enter early in an attempt to establish themselves before a wave of large brands enters the space. At the same time, bigger companies typically take a wait-and-see approach when evaluating new channels and only invest after the ROI for the channel is proven. This combination of small and big company behavior, when evaluating new platforms/channels, creates the window for entrepreneurs to enter early and potentially disrupt big companies before they arrive. The iPhone platform is no exception.

Despite the fact that the App Store is now maturing, reaching its two year anniversary this summer, we are encouraged that native iPhone application developers are still relevant, representing 20% of the heritage pie, the second largest category. This means that the barrier to entry is still low enough for start-ups to enter and innovation to flourish. However, those days may be numbered as "discoverability" has become a significant issue, and now "marketing muscle" is starting to count more in the App Store. This favors brands and larger companies with resources to spend their way in. We are seeing signs that big brands are becoming more active, now perceiving that the iPhone has reached critical mass. With iPhone and iPod Touch now exceeding 70 million units world-wide, we expect 2010 to be the year of brands entering the iPhone. Going forward, we will especially see more movement by established brands from media, retail and CPG. In particular, traditional media (News, Books, TV, Film, Music, etc.) growth will accelerate aggressively with the introduction of the iPad.

The first and third largest heritage categories, Online and Traditional gaming, will likely see little change, or perhaps even a decline in "heritage share," since they were early iPhone entrants and their properties have largely already discovered.

Taking a deeper look at gaming, the iPhone's largest revenue generating category, shows the following distribution of developers based on heritage:

App Store Game Developer Platforms of Origin

Given the specialized skill-set required to build a compelling game, it's no surprise that traditional game companies lead this category, including companies such as Electronic Arts and Activision. At the same time, native iPhone developers (i.e., brand new gaming start-ups) command the second largest category. The success of new iPhone game developers makes sense given the fact that the traditional gaming industry has long had pent up demand from garage and independent developers looking for new platforms where development and distribution costs allow them to compete. We've seen innovation from companies such as Tapulous, Backflip Studios, ngmoco and others. Online, the third largest segment, includes companies such as PopCap, Playfish and Zynga who have naturally expanded distribution to iPhone given its similar characteristics of being "casual gaming" friendly. Tied for third with Online, Traditional Media (e.g., licensed properties like SpongeBob and Disney Fairies) have long held a place in gaming since brands seek to use the gaming channel to promote their core properties (e.g., upcoming movies) and earn incremental revenue. The most surprising category is mobile gaming which only commands a 12% share. However, investigating more deeply reveals that most successful companies on mobile, prior to the iPhone, did not originally start on mobile. Rather they came from traditional gaming, online and traditional media platforms. Simply put, few pure-play mobile gaming start-ups exist. Some exceptions include Gameloft, Glu Mobile and Digital Chocolate.

Finally, we examine the News Category more closely:

App Store News Developers Platforms of Origin

Like gaming, the creation of compelling content in News is a specialized and costly operation. To source and report quality news, companies often have to span various media such as TV broadcast, radio and print, which further increases cost. It's therefore no surprise that Traditional Media dominates the News category, controlling nearly two thirds. For traditional media (e.g., New York Times, ABC News, NPR, etc.), the iPhone represents a large channel through which to distribute their existing content. The small incremental cost of expanding the distribution of Traditional Media's core content, and the attractiveness of reaching an educated, affluent and tech-savvy audience, makes iPhone the perfect platform through which to serve news. Looking forward, the iPad creates an even greater opportunity to increase reach because its larger screen size works better works for newspaper and magazine layouts, as well as TV broadcast.

Native applications represent the second largest category, due to innovation from native iPhone applications that allow personalized filtering, automatically work around gaps in connectivity to pull new content more seamlessly or aggregate and optimize new reading on the iPhone (e.g., Stitcher Radio, Byline, Conserva, etc.). Online, which represents a large share of news consumption in its own right, makes up the third largest category of news on the iPhone.

Finally, while Online is currently in 3rd, we believe the iPad's form factor will deliver a more familiar browsing experience. With ever-increasing wifi coverage, online media players will continue to increase their share just as the Internet cannibalized Print media in the 1990's and 2000's.

III. iPad Anticipation Continues to Stoke Developer Activity

After measuring that developers integrating Flurry analytics into iPhone OS applications in January increased by nearly three times over December, we were eager to follow up on this trend after February data rolled in. The January spike represented the single largest spike in Flurry history. Since iPad runs on a version of iPhone OS, Flurry automatically supports iPad applications (and we've done further testing on the SDK to verify this). This is also how Flurry was able to see application activity on the iPad since last October.

Now, over six weeks since Apple announced the iPad, Flurry continues to measure a significant increase in iPhone OS new application starts within its system. To measure, we took a "before vs. after" snapshot of monthly iPhone OS project starts in our system (iPad runs on iPhone OS 3.2).  For the "before" we averaged August - December, 2009 monthly new iPhone app starts within Flurry, and for the "after" we did the same for January - February, 2010.

Historically, we've seen development spikes around new hardware announcements and releases including Motorola Droid for Android development and iPhone 3GS for iPhone OS development.  iPad appears to be having a similar, albeit amplified effect, which we attribute to the excitement generated by the impending launch of of the device, now set for April 3 in the U.S. A large proportion of the applications we are seeing are custom ports of existing applications tailored for the iPad. With over 140,000 applications in the App Store, developers who modify, or build from the ground up, their applications early on for the iPad may have the opportunity to establish an early presence on this new device and drive more downloads. To wit, Apple announced today that it will include a dedicated "iPad" app category in the App Store. 

Flurry iPad Increase in Developer New Apps


Flurry Smartphone Industry Pulse, January 2010

  
  
  

Each month, Flurry leverages its data set collected from iPhone, Android, BlackBerry and J2ME applications to identify, study and share industry trends. Flurry tracks over 20,000 live applications and over 2 billion user sessions each month. Applications that include Flurry Analytics have been downloaded to more than 80% of all iPhone, iPod Touch and Android devices. Additionally, each day, approximately one of out every five downloaded applications from the App Store and Android Market include Flurry Analytics. The Pulse report is generated in the first half of each month, looking back at data up through the previous month. Different than other reports that provide updates to the same set of statistics each month, Flurry explores different business themes and topical issues relevant to mobile developers and other industry players.

I. For iPhone and Android, Content is King

Applications are becoming the dominant delivery mechanism for content, entertainment and tools on smartphones. Last fall, Flurry released a study on user retention across all application categories, shedding light on application pricing and business models. In this report, Flurry takes a deeper look at consumer loyalty and engagement metrics across the largest application categories, comparing application user behavior on iPhone and Android platforms.

For this study, Flurry identified the top applications among a set of the largest categories across the App Store and Android Market: Games, Entertainment, Social Networking, News and Lifestyle. In total, approximately 100 applications were evaluated over a six month period, totaling more than 800 million user sessions.

Flurry studied (1) user retention (2) user session frequency and (3) user session lengths over a six month period. The chart below shows the average retention by month, over a six month period, for all sampled iPhone versus Android applications.


iPhone vs Android App Retention

Retention curves between aggregated iPhone and Android applications were nearly identical. We believe underlying reasons include the fact that Android handsets are capturing a more mainstream audience similar to the iPhone and that Android handsets have improved relative to the iPhone handset (e.g., featuring advanced, large touch screen interfaces with ample processing power). Finally, we observe that more developers are creating both Android and iPhone versions for the same application. For this analysis, roughly 20% of the sample we pulled included versions of the same application on each platform.

The next two charts compare session lengths and frequency of use per category, and per platform:

iPhone vs Android App Frequency of Use

iPhone vs Android App Session Length

Reviewing consumer engagement metrics of session frequency and session length across key categories on iPhone and Android, Flurry again found little variance. We conclude that mobile applications have reached a new stage of maturity, where apps perform similarly across platforms. Our ultimate conclusion is that the content trumps the platform. Just like the brand of flat screen T.V. doesn't affect how much one enjoys a movie she is watching, the new class of touch screen smartphones doesn't impact how well the user enjoys a game, social networking or other kind of application.


II. The iPad Effect: Developer Support Explodes

Developers integrating Flurry analytics into iPhone OS applications in January increased by nearly three times over December. This represents the single largest spike in Flurry history, with over 1,600 new iPhone OS application starts for January. Historically, Flurry has measured surges in new application starts within its system in anticipation of new device launches, including for the Motorola Droid and iPhone 3GS. As such, we hypothesize that excitement generated by Apple's iPad event in January is driving this growth. For developers who get a jump on customizing their applications for the iPad, there may be an opportunity to stand out early on, and earn more downloads.


Flurry iPhone App Starts
Android new application starts are also growing, showing a steady ramp for the second half of 2009 and for January 2010. Over this time period, month-over-month growth has averaged approximately 25%.

Flurry Android New App Starts

Flurry measures the relative support developers dedicate to iPhone versus Android platforms by tracking new application starts within its system. While Android's steady new application growth over the second half of 2009 closed the gap against the iPhone, reaching as many as one out of every three new applications starts within Flurry for December, the recent spike in Apple iPad support has swung the pendulum back in Apple's favor to a level not seen at Flurry in six months. The unprecedented surge in support for iPad is a positive early indicator for its commercial potential.

Flurry iPhone vs Android New App Starts


Flurry Holiday 2009 Report: App Store, iPod Touch Shatter Records

  
  
  

Flurry evaluated download growth driven by Christmas across the leading Apple and Android devices, as well as their respective app stores, pulling a sample that represents approximately 10% of all download volume in the App Store and Android Market.

iPod Touch Downloads Explode on Christmas Day, Surpassing iPhone for the First Time

Flurry revealed the significance of iPod Touch to Apple's future plans in its November Pulse report. Out of the estimated 58 million iPhone and iPod Touch devices in the market at the time, Flurry estimated roughly 40% of those, or 24 million, were iPod Touch devices. It appears that an influx of new iPod Touch devices has flooded the market over Christmas, and that users of the handset, primarily pre-teen and teen audiences, are voracious downloaders. Here are some stats:

  • App downloads on iPod Touch soared past iPhone for the first time, eclipsing iPhone downloads by 172%.
  • iPod Touch 3G downloads increased by more than 900% on Christmas Day, compared to the average of all previous Fridays in December.
  • Total iPod Touch downloads (all generations) jumped by over 1000% on Christmas Day, indicating that in addition to new iPod Touch 3Gs coming into the market, iTunes gift card giving may have driven downloads to older generation iPod Touch devices.

The chart below sets iPhone download volume at "1" for iPhone on Christmas day to allow relative comparisons. All other dates for iPhone and iPod Touch are normalized against this figure. Compared to iPhone app download volumes on Christmas, the iPod Touch exceeded iPhone app downloads by 172%. iPod Touch download volumes increased by nearly 1,000% on Christmas day (which fell on a Friday) compared to the average of all previous Fridays in December. On December 26, iPod Touch download volumes continued to exceed that of iPhone by 104%.

 Christmas 2009 iPhone vs. iPod Touch App Store Downloads

December Shatters App Store Download Records

A month ago, November had set previous download volume records, growing by 15% over October. Toward the end of November, Flurry forecasted that December download volumes in the App Store would exceed November by more than 20%. With the figures in, Flurry underestimated growth by more than half.

  • App Store download growth increased by more than 50% in December* over November.
  • Android Market Growth increased by over 20% in December* over November.
*Flurry used December actual tracked downloads through 12/26, and completed the month by using an average daily download figure to estimate 12/27 - 12/31.

 

iPhone App Store vs. Android Market Downloads


Droid Leads Android Downloads for Christmas, but Android Market Trailing App Store

Android devices also showed growth during the Holiday season, led by the Motorola Droid.

  • Droid application downloads increased by 93% over previous Fridays in December.
  • Droid accounted for 48% of download volume across the leading Android handsets (Droid, myTouch 3G, G1 and HTC Hero).
  • App Store download volume is more than 13 times greater than Android Market.
Droid Leads Android Downloads on ChristmasAndroid App Download Share

Move over Black Friday and Cyber Monday: the App Store is Here

  
  
  

Consumer spending during the holiday retail season, beginning with Black Friday, is among the most important predictors of U.S. economic health. Since the late 90s, tracking online sales of websites like amazon.com on the first Monday after Thanksgiving, Cyber Monday, has become a second important barometer. The National Retail Federation, the world's leading retail trade group, extrapolated that total spending for this year's Black Friday "weekend," Thursday-to-Sunday, was up 0.5% from a year ago. Additionally, Lazard Capital reported Cyber Monday sales were up strongly over last year, by 35%.

As we enter the holiday season, downloads in the iPhone App Store can also serve as an indicator of consumer spending. While App Store sales are small relative to online and retail, Apple's September announcement that the App Store surpassed two billion downloads demonstrates how quickly this digital market is growing, having doubled in just the last four months. Further, according to Admob, the App Store is already generating over one billion USD in annual sales. Finally, the iPhone OS installed base, which sold more than 12 million units world-wide for the quarter ending September 2009, is reaching meaningful critical mass. Flurry estimates that, life-to-date, more than 34 million iPhone and iPod Touch devices have been sold in the U.S. through the end of September 2009. This equates to roughly 10% of the U.S. population.

Monitoring application downloads tracked by Flurry over the last six months, we observe strong patterns of seasonality and an aggressive ramp toward the holiday season. Note that because the iPhone installed base grew so dramatically between last year and this year, we have selected a time series trend analysis versus a year-over-year comparison. The chart below reveals three phases: first, strong summer downloads; second, a dip in September Flurry attributes to back-to-school; and third, strong growth over October and November leading up to the holidays. Specifically, October downloads exceeded September by 30%, and November further grew over October by an additional 16%.

Flurry_AppStore_Holiday_UsageHistorically, the week after Christmas has been the strongest for data downloads to mobile phones, since consumers load up after receiving new handsets as holiday gifts. With download growth at its current rate, Flurry predicts that December downloads will exceed November by at least 20%, making it a strong season for Apple.

Flurry Smartphone Industry Pulse, November 2009

  
  
  

The data in this report is computed from a sample size of over 3,000 applications, 45 million consumers and 4 platforms: Apple (iPhone and iPod Touch), Blackberry, JavaME and Google Android. Each day, Flurry tracks over 15 million end user sessions across apps that have included its analytics solution.

Apple's Weapon of Mass Consumption: iPod Touch

The highly publicized launch of Droid last month marked a major effort by Google, Verizon and Motorola to slow the iPhone's growing power in the marketplace. And while the Android platform is the most legitimate challenger to iPhone smartphone dominance, it's important to remember that the iPhone's flank is protected by an often overlooked, powerful fighting brand: iPod Touch. According to Apple, 58 million iPhone OS devices have been sold worldwide through September 2009. Of those, Flurry estimates that just over 40%, around 24 million are iPod Touch devices.

While it is clear that the iPhone has significant short-term revenue value for Apple, Flurry believes that the iPod Touch holds more long-term strategic value for Steve Jobs and team. As all industry eyes look to the iPhone, the iPod Touch is quietly building a loyal base among the next generation of iPhone users, positioning Apple to corner the smartphone market not only today, but also tomorrow. In terms of Life Stage Marketing, the practice of appealing to different age-based segments, Apple is using the iPod Touch to build loyalty with pre-teens and teens, even before they have their own phones (think: McDonalds' Happy Meal marketing strategy). When today's young iPod Touch users age by five years, they will already have iTunes accounts, saved personal contacts to their iPod Touch devices, purchased hundreds of apps and songs, and mastered the iPhone OS user interface. This translates into loyalty and switching costs, allowing Apple to seamlessly "graduate" young users from the iPod Touch to the iPhone. For OEMs hoping to challenge Apple, we believe an even greater sense of urgency must be adopted.

The chart below shows Flurry user sessions tracked across iPhone, iPod Touch and Android for the last six months. Over this period of time, the iPod Touch has gained four points, despite its already large installed base. While iPhone continues to grow in user sessions, its share of sessions has dropped, while iPod Touch and Android have increased as a percentage.

Flurry_iPodTouch_UserSessions

Even more powerful for Apple are the consumption patterns Flurry is detecting among the iPod Touch demographic, demonstrating this segment's power as a word-of-mouth promotional army. Anecdotally, we know the "iPod Touch Generation" is made up of heavy MySpace, Facebook and SMS users, who voraciously share their lives with, and influence their ever-expanding social graph. Importantly, this also includes promoting products they like. Empirically, Flurry compared how iPod Touch session usage has changed over the last six months across key application categories important to this demographic; namely, Social Networking and Games. While Social Networking's viral nature is understood, iPhone Games have become increasingly social with the inclusion of features like friends lists, leaderboards and remote multi-player modes. Together, Social Networking and Games category usage reflects the strength of the iPod Touch Generation's influence among its peers. As this segment increasingly migrates its social habits to smartphones, Flurry data shows that the iPod Touch is the largest beneficiary. The graphs below illustrate how total session growth on iPod Touch for Social Networking and Games categories is outpacing that of iPhone and Android.

Flurry_iPodTouch_SocialNetworkingFlurry_iPodTouch_Games

Manga Stomps on to iPhone Faster than You Can Say "Godzilla"

The origin of Manga, Japanese comic books, is commonly traced back to the 18th century in Japan. Since then, the Japanese comic book industry has become not only an integral part of Japanese culture, but also a $3.6 billion industry. Visiting Japan today, one can observe people of all ages reading Manga in subways, cafes and other public venues. The export of Manga to other parts of the world first began around World War II, and then accelerated in the 1970s. Among the most recognized figures in Japanese popular culture, Godzilla has also starred in several of his own Manga books.

The iPhone, which debuted in Japan during July of 2008, initially sold poorly for many reasons described by Wired in "Why the Japanese Hate the iPhone" With the release of iPhone 3GS in June 2009, however, Apple has gained hard-fought ground in a market that boasts many of the world's most advanced smartphones. According to StrategyEye, the iPhone 3GS became the top-selling device in Japan during its first week. Over its first three months, Analysts estimate that well over 1 million iPhone 3GS units were sold in Japan. The result is that the iPhone platform is attracting a wave of support from Japanese developers.

Studying content distribution on the iPhone, Flurry is detecting the rapid infiltration of Manga on the platform. Flurry first described the phenomenon of iPhone as an eReader in an article entitled "After Playing Games, iPhone Gets Serious about Books" in its October 2009 Smartphone Industry Pulse report. Because comic books like Manga lend themselves more to brief sessions of reading than traditional books, especially with their rich graphical treatments, it makes sense that Manga is expanding aggressively to the iPhone.

The graph below shows the number of books released by a major Japanese Manga publisher to the iPhone App Store since July 2009. Note that the rapid release schedule comes just after the successful June 2009 launch of iPhone 3GS in Japan. With an aggressive ramp, this single publisher is already releasing more than five Manga books per day. We can expect this kind of content, well suited for the iPhone to continue to expand faster than Godzilla stormed Tokyo.

 

Flurry_Manga_BookReleases

Droid Does Deliver: Flurry Uses its Analytics to Measure Week 1 Sales

  
  
  

There is a lot riding on the Motorola Droid. Verizon is looking for an answer to the iPhone, which has driven enviable data ARPU growth for AT&T. According to Rita Chang of Ad Age, the Droid is supported by a $100 million integrated marketing campaign, the largest in Verizon history, running through the end of 2009. Google's long-term bet on mobile, underscored by its recent $750 million offer to purchase Admob, demands that the Android OS propagate. Meanwhile, HTC enjoys an early mover advantage with its G1 and 1.5 generation of Android handsets. Finally, several more leading OEM's have pledged to support Android, with as many as 100 handsets scheduled to ship in 2010. In short, the once dominant, now reinvented Motorola has little room for error.

Through its analytics service, Flurry monitors usage of over 10,000 developers' applications on iPhone and Android. In total, Flurry tracks applications on approximately two out of every three unique iPhone and Android handsets in the market, including over 15,000 million user sessions per day. To estimate first week sales totals for the myTouch 3G, Droid and iPhone 3GS, Flurry detected new handsets within its system, and then made adjustments to account for varying levels of Flurry application penetration by handset. Flurry additionally cross-checked its estimates against Apple actual sales, released for the iPhone 3GS, which totaled one million units sold over the three days of sales, Jun 19 - 21. Flurry first week sales estimates can be found in the table below.

Flurry_Analytics_Droid_iPhone_MyTouch3G_Sales

While Flurry estimates Apple sold approximately 1.6 million 3GS units over its first week of sales, it is important to note that Apple simultaneously launched its device across eight countries (U.S., Canada and six European countries), while the Droid launched only in the U.S. Additionally, the iPhone commanded a strong installed base of over 25 million at the time the 3GS launched. Of those, over 6 million were first generation iPhone users who were expected to upgrade to the 3GS. Taken in this context, Droid sales of 250,000 units during its first week from a standing start and in just one country, is a strong result for Motorola and Verizon. Also, by Flurry's measurement Android does have an edge over iPhone app usage, with the average Android session length at four minutes vs. two minutes for iPhone apps.

With its first week showing, the Droid is the fastest-selling Android phone to date. Compared to the myTouch 3G on T-Mobile, Droid outsold it by more than four times. Of course, Verizon has nearly 90 million subscribers to T-Mobile's 34 million and Verizon has shown a willingness to outspend previous carriers with its $100 million campaign. With Motorola forecasting its own Droid sales at one million through the end of the year, that equates to a cost per acquisition of $100 per handset sold. Verizon's aggressive campaign coupled with its 3G network advantage in key, populous regions of the country like the Northeast positions the Droid as a legitimate challenger to the iPhone.

While iPhone continues to dominate the Smartphone market overall, each subsequent Android handset launch increases competition for Apple. Furthermore, Flurry has monitored a sharp increase in new Android project starts by application developers within its system, a 94% jump in October compared to September. The launch of Droid signals the beginning of a viable platform alternative to the iPhone as Android builds critical mass. As major companies continue to vie for a piece of the exploding Smartphone market, the consumer has never had more choice and innovation in the mobile industry. With Droid, Motorola has raised the bar for Android handsets, contributing to an ever-growing base of Android handsets upon which applications developers can build a business.

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Flurry is the leading mobile measurement and advertising platform that is optimizing mobile experiences for people everywhere. Flurry's industry-leading Analytics software sees activity in over 400,000 apps on more than 1.3 billion mobile devices worldwide, giving Flurry the deepest understanding of mobile consumer behavior. Flurry turns this insight into accelerated revenue and growth opportunities for app developers, and more effective mobile advertising solutions for brands and marketers. The company is venture backed and headquartered in San Francisco with offices in New York, London, Chicago and Mumbai. 

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