In October of 2013, Softbank Capital made a $1.5B USD investment in Supercell, the maker of two successful mobile games, giving Softbank a 51% ownership of the game maker. This investment caught the world’s attention. It wasn’t just the rich $3B USD valuation Softbank placed on Supercell that intrigued onlookers, but more the speculation that Softbank and its CEO Masayoshi Son were onto a bigger trend. Mr. Son has a solid track record in anticipating big shifts in worldwide markets in general and the tech industry in particular. In the mid-nineties Softbank was a publishing powerhouse. By the mid 2000s the company became an Internet powerhouse. Today, Softbank is the third largest wireless carrier in the world. So what does this investment signal about the big shift that Mr. Son is anticipating? At Flurry we believe he is placing bets on the Mobile Content Explosion that is taking place around us.
Early Indicators Signal the Content Explosion
At Flurry, we have always looked at the applications being started on our platform as a leading indicator of the app economy’s health. This is very similar to how U.S. economists treat housing starts as a leading indicator for the national economy. Typically, developers engage with Flurry and start applications on our platform a couple of months before they list them on App Stores. So if the activity on Flurry increases, it signals that more apps (and content) will be available on the stores within a couple of months.
Looking at application starts on the Flurry network since January 2012, we see an increase in the quarterly growth rate. This is in stark contrast to theories that the app ecosystem is congested. In fact, in just over 18 months, the rate of which new apps are being started on the Flurry network has nearly doubled as shown in the chart below.
While Flurry’s market share in analytics could have increased, we don’t believe it is the major factor in the acceleration of applications starts. Instead, we believe that we have entered a new phase of mobile content explosion, driven by rapidly changing consumer behavior. Over the last two years, application developers and media companies have seen the shift from personal computers to smart mobile devices including phones and tablets that are now in the hands of over 1.2 billion people worldwide. They have also seen the wild and global success of gaming, utility and messaging applications such as LINE, Kakao, Snapchat and WhatsApp. They are simply acting accordingly. With the hopes of reaching these 1.2 billion people with a press of a button, app developers and media companies are building mobile apps like never before.
There is an Audience for That
Pundits have criticized the increasing number of apps and have often claimed that while there are millions of apps out there, very few are being used. They also claim that a few app developers have the lion share of usage, especially in the United States and other mature markets such as Japan and South Korea. Earlier this year, a report from Comscore claimed that Facebook (and Instragram) accounted for 26% of all times spent on mobile. In its latest earnings reports, Facebook’s COO Sheryl Sandberg almost confirmed Comscore ‘s numbers and claimed that Facebook’s share of people's time is larger than that of YouTube, Twitter, Tumblr, Snapchat, LinkedIn, AOL and Yahoo combined. While Facebook’s reach and percentage of time spent are in a league of their own, there appears to be plenty of whitespace for others. In fact, just on the Flurry platform the number of independently owned app developers that have a worldwide audience of over 20 million Monthly Active Users (MAU) has jumped from 7 in Q1 2012 to 32 in Q3 2013. That is whopping 357% growth in 18 months.
In the same period, the number of app developers with an audience over one million MAU has risen from just under 400 to 875, a whopping 121% growth.
These numbers are simply unprecedented, especially because most of these app developers have risen organically, and not as a result of consolidation or through mergers and acquisitions. If anything, the market, its reach and the time spent on mobile is still with the “middle class”, or the mid-tail developers and content owners. Among the 1.2 billion device owners, app developers are finding millions of people to enjoy their apps and the content behind it.
Flurry’s numbers, which show the fast rise of app developers with large audiences, seem to indicate that worldwide, consumers with smart devices are still hungry for apps and mobile content, and app developers are building at increasing rates to feed this demand. We believe that once again, Softbank’s Masayoshi Son could once again be onto something really big.
Many of us at Flurry love Mad Men, but we believe that Don Draper’s advertising industry is ancient history. Don would probably mistake smartphones for cigarette cases and tablets for coasters. More importantly, sophisticated buyers and sellers in today’s advertising market are making decisions in real time based on masses of data rather than months in advance based on charm and corporate hospitality. Advertising buying is being disrupted by efficiency gains from real time bidding (RTB) and effectiveness improvements achieved by using big data to inform mobile advertising transactions.
Data-Driven RTB In The Mobile Space
Recently Flurry launched an RTB Marketplace that enables advertisers to bid for the attention of smartphone and tablet users one at a time. We are betting big on the trend toward programmatic buying for two reasons. First, it enables precision targeting that was unimaginable in the pre-digital age and is still uncommon. Buying ad exposures one at a time enables advertisers to reach precisely-defined audiences wherever they are and whenever they use their devices. That level of precision would always have been useful, but it is especially important now that consumer interests, preferences, and lifestyles have become so varied.
Second, RTB brings a new level of efficiency to ad buying. The whole nature of an auction means that an advertiser who is willing to pay the most to reach a certain type of person will earn the opportunity to do so. The price advertisers are willing to pay provides a clear signal of the relative value they place on a customer or potential customer.
In this post we share initial results from our Marketplace to illustrate the power of combining the price signals provided through RTB auctions with the individualized targeting capabilities made possible by big data.
Building A Mobile Audience One Person(a) At A Time
The chart below illustrates three important results related to the value advertisers place on different types of mobile users and the available supply of those people’s in-app attention. The items being plotted are Flurry Personas. These are groups of devices whose owners access particular types of apps more frequently than people using other devices do.
The size of the bubble associated with each Persona represents supply, or the relative number of auctions for the right to serve an impression to a device in the Persona. Of the Personas shown here the greatest number of available impressions were for Casual and Social Gamers and the least were for Fashionistas and Food and Dining enthusiasts.
The x-axis, clearance rate, shows the percentage of auctions that had a winning bid, resulting in an advertiser displaying an ad on a device. As can be seen by looking at the right bound of the x-axis, less than half of the auctions had a winning bidder. This is a normal and expected result in RTB auctions. Reasons for auctions not clearing include price floors being set too high, bidding technologies used by advertisers’ representatives responding too slowly, some publishers being able to sell their ad inventory for higher prices elsewhere, and advertisers being uninterested in the inventory some publishers offer.
The y-axis shows the average effective cost per thousand impressions (eCPM). Even though these impressions are sold on an individual basis that is still the common pricing metric.
Fashionistas And Foodies Command A Premium, But Hipsters And Music Lovers Are Cheap
Examining supply, price, and clearance rate together reveals a lot about the state of play in the mobile advertising market. First, the fact that Fashionistas and Food and Dining Lovers are in the upper right corner implies that those Personas are of greatest interest to advertisers. It seems logical that those would be desirable psychographics, but the limited supply of ad inventory for those Personas also helps explain why prices and clearance rates are high. It means there are opportunities to generate mobile advertising revenue by publishing apps and content that attract Fashionistas and Food and Dining Lovers.
At the other extreme, Music Lovers and Hipsters have relatively low clearance rates and relatively low average eCPMs. While the supply of impressions for these groups within our Marketplace is not particularly large (as shown by the medium-sized bubbles), we hypothesize that people in these Personas are fairly easy to reach outside of our Marketplace because music fans spend a lot of time in music apps and many apps attract mobile-savvy Hipsters. It also makes sense that advertisers compete less aggressively for Music Lovers considering how inexpensive music is now compared to the pre-Napster era.
The overall diagonal pattern formed by the personas shows that the market is working efficiently, as expected. How do we know that? If a Persona had a high clearance rate but a low average eCPM we would expect advertisers to bid up the price to secure inventory. The fact that there are no Personas in the lower right corner shows that is exactly what has happened.
A position in the upper left corner of the chart means that auctions to advertise to that Persona have a high average eCPM given their rate of clearance. Here, we would expect publishers to drop their floor prices to achieve higher clearance rates. The fact that there are no Personas in the extreme upper left corner suggests that is also happening. There are some Personas with positions approaching that upper left corner: News and Magazine Readers are the most extreme example. We see two possible explanations for why those publishers didn’t drop their floors in search of higher clearance rates. One is that some of those publishers are able to sell impressions that don’t sell through our Marketplace direct or to use them themselves (i.e., to promote their own properties). The other is a policy of keeping prices above a certain level to maintain a premium image even if it means sacrificing short-term revenue opportunities.
Power Lunches Are Losing Out To The Power Of Data
RTB moves at lightning speed. A publisher can shop a single impression in the nanosecond before the winning ad appears. Compare that to the speculative, mass-market approach of the Upfronts, and it’s easy to see that advertising buying is likely to be completely disrupted by RTB.
The Persona-based targeting described in this post demonstrates the power of data to inform each bid. Advertisers no longer need to make buying decisions based on stereotypes about which types of people are interested in what type of products or content. They can define their target audience precisely, and aggregate that exact audience efficiently impression by impression. Mobile also contributes to this type of precision targeting since smartphones are highly personal devices loaded with apps that reveal much more about the person looking at the screen than standard demographics ever did. The long held promise of digital advertising is finally being realized on mobile.
All of this leads us to believe that advertisers or publishers who want to do things in the old way may be better off kicking back, pouring themselves a drink, and watching an episode of Mad Men instead of entering the fray in the mobile advertising space where data-fueled RTB is sure to win.
Apps are telling – they signal our personal tastes and interests. There are probably nearly as many unique combinations of apps as there are devices, and the apps we use reveal a lot about us. Based on Personas that Flurry has developed for its advertising clients, we are beginning a series of blog posts to shed light on different groups of smartphone and tablet users and their app usage patterns. Moms -- who often control household budgets and expenditures -- are considered the prime audience for many brands. So we thought, where better to start our Personas series than by examining what moms are doing with apps?
Our analysis for this post relies on iPhone, iPad, and Android app usage during May of this year for a large sample (24,985) of American-owned smartphones and tablets. Discussion of app usage is based on time those devices spent in the 300,000+ apps that use Flurry Analytics.
What Apps Do Moms Use?
Moms, like most other groups, spend a lot of smartphone and tablet time playing games. In fact, on Android, more than half of the time American Moms spent in apps was spent playing games. Similarly, on iPad moms spent about half their time in games, but on iPhone, that percentage drops to a little less than a third of their time. On iPhone, lifestyle apps capture a larger proportion of Moms' attention (12%) than on iPad and Android devices.
As shown below, the second most popular category among moms on iPhone and Android devices is social networking. On iPad, newsstand (24%) was the second most popular category, demonstrating its strength as a screen for displaying magazine type content.
Where Do Moms Over-Index?
Most mobile consumers spend a large proportion of their app time in gaming and social networking apps, so what makes moms different from the other American owners of smartphones and tablets? Across iPhone, iPad, and Android, American Moms spend more time in education apps than the general population. Also, moms who own an iPhone or an Android device spend a greater share of their app time in health and fitness apps. Unsurprisingly, moms are also heavy shoppers. Android moms over-index for time spent in shopping apps, and iPhone moms over-index for time spent in catalog and lifestyle apps. (For this post, we have honored The App Store and Google Play’s systems for classifying apps. In iOS, shopping apps can fall into either the catalog or lifestyle category, whereas Android has a dedicated “shopping” category.)
Moms Own More Tablets And Gravitate Toward iOS
Compared to other American device owners, moms are enthusiastic users of tablets. As shown below, among the general population 25% of connected mobile devices were tablets, but for moms that percentage is 35%. This could be driven by the fact that many parents use tablets for sharing games and stories with their children.
60% of the smartphones and tablets we looked at were iOS devices. (Note that this number is a function of the installed base of active devices, so does not reflect market shares from sales in recent quarters.) For American Moms, the numbers lean even further toward iOS devices. A whopping 77% of moms own iOS devices while just 23% own Android. There are at least two factors that may explain this. First, it could be a function of Moms’ greater tablet ownership since iPad dominates the tablet market. Second, surveys show that women in general skew toward iOS devices. The key takeaway is that moms are much more likely to be found using iOS devices than Android devices.
For Moms, Connected Devices Are More For Escape Than Utility
So what can we infer about American Moms based on their app usage? For one thing, it appears that they use smartphones and tablets as a refuge from their busy lives. On average, half or more of the time they spend in apps is spent on social networking and game apps. In this sense, they are not that different from other Americans, but it does show that even busy moms need to escape and socialize, and mobile devices provide a way to do that.
Apps where American Moms spend a disproportionate share of time relative to other Americans also tell us something about their more serious side. Those apps tend to be improvement-oriented: education and health and fitness, for example. Moms are using their devices to help them achieve personal goals and possibly to educate their children.
We hope this post gives brands and developers a better idea of where the coveted American Mom is most likely to be during mobile time, and what is capturing their attention. App developers can tap into this valuable group by building experiences that give moms an escape from their hectic day-to-day routine, keep them socially connected, and help them improve different aspects of their lives. Media planners who want to reach American Moms should continue to buy ad inventory in gaming, news / magazine, and social networking apps, and to weight their budgets toward iOS apps.
Flurry measured a 47% increase in active smartphones and tablets in the United States between April of 2012 and April of 2013. While that number sounds impressive, it actually puts the U.S. in the bottom 5% of countries for connected device growth in the past year. Worldwide, growth of these devices is exploding. To be in the top 5% of countries for growth over the past year, a country’s number of active connected devices needed to more than triple.
There are currently more than one billion active smartphones and tablets globally, and based on current growth rates we expect to reach two billion in 2014. In this report we discuss which countries are growing fastest, and the implications for the mobile ecosystem and for society more generally.
Huge Potential for Future Growth
The reason even 47% growth puts the US near the bottom of countries for tablet and smartphone growth becomes clear from comparing the size of the connected device installed base and population in five countries.
Let’s start by considering China and the U.S. These two countries currently have a similarly sized connected device installed base, but China has more than four times as many people.Combine China’s largely untapped population with its rapidly growing incomes (increasing at a rate of 8-10% a year between 2009 and 2011, according to the World Bank), and it’s not surprising that the connected device installed base in China grew by 149% between April of 2012 and April of 2013.
We expect these same forces to continue fueling growth in connected device numbers in China, and given the size of the Chinese population, those numbers could add up quickly. For example, if penetration of smartphones and tablets in China grew to that of Malaysia then 210,507,168 additional connected devices would be added to China’s installed base. We chose Malaysia as a point of comparison because it has a large Chinese population and per capita incomes where China’s are likely to be in the not too distant future.
Canada and India provide an even more dramatic comparison. They currently have similarly sized installed bases of smartphones and tablets, but India’s population is 36 times as big as Canada’s. Of course, India’s device penetration won’t catch up to Canada’s overnight, but when India’s rate of penetration equals the current rate in China, then 197,561,626 additional devices will be added to the worldwide installed base. Given India’s connected device installed base grew by 160% in the past year, we don’t think that’s going to take that long to happen.
For those keeping count, that means that the world’s number of connected devices will increase by more than 400 million (or about 40%) when the rate of penetration in India reaches the current rate of penetration in China, and the rate of penetration in China reaches the current rate of penetration in Malaysia.
100%+ Growth is the New Normal
India and China’s large populations make them dramatic examples, but their rates of growth don’t even put them at the top of the charts.Use of smartphones and tablets grew in every country in the world last year except for the three (The Central African Republic, Niger, and South Korea) shown in red in the map below. South Korea was one of the earliest adopters of mobile technology, and it appears that its market is now saturated. The countries in orange (mainly the English speaking countries, Western European countries, and the most connected parts of Asia) are other early adopters of mobile technology. Those markets still grew at rates of up to 99%, but a lot of that growth was the result of people adopting tablets as second devices.
The countries in yellow and green all saw their mobile installed bases more than double in the one year period between April of 2012 and April of 2013.That phenomenal rate of growth is all the more impressive considering what a large proportion of the world’s land mass and population those countries represent. The mobile markets of all of the large BRIC countries (Brazil, Russia, India, China) grew by between 100 and 199% (the growth rate for the yellow countries on the map). Much of the rest of South America and parts of Africa also grew at that same rate.
The number of active connected devices in countries in green in the map grew at 200% or more in the year to April 2013; those shown in the darker green had growth of 300% or more. Many of these hyper-growth countries are relatively small and not particularly affluent, so their fast growth in the past year may be a reflection of their wireless infrastructure catching up enough to allow their citizens to participate in the mobile revolution.
Implications for the Mobile Ecosystem
The discussion up to now clearly points to rapid growth in the connected device installed base coming predominantly from countries that have a lot of headroom for growth because their current rate of penetration is relatively low. That has the potential to change the foundation of the mobile ecosystem. We have become used to a world in which connected devices are reasonably expensive and replaced fairly frequently, and in which apps for those devices are developed by people in relatively affluent countries. As we look toward the connected device installed base doubling to more than two billion, we expect more of a focus on lower-cost devices that are also possibly more robust (to allow for less frequent replacement since that may be unaffordable in lower income countries). We also expect to see greater diversity of apps and app developers as apps are developed to meet the needs of increasingly diverse device users.
Things get even more interesting when we consider what people might be doing with all of those devices. Of course, they will still provide communication and entertainment, but we expect mobile devices to play an increasingly large role in many aspects of life including enabling commerce in growing economies, facilitating medical care in remote areas, and ensuring that people throughout the world have access to world-class educational resources. We can’t wait to see what else the next billion smartphones and tablets will be used for!
Over the past four years, Apple’s iOS and Google’s Android have been locked into a two horse race for mobile OS ownership. In the past year, there has been a lot of focus on the rise of Android and its lead in device market share. More recently, many analysts started questioning the true value of Android’s market share especially in the high-end smart phone and tablet markets. At Flurry, we felt that it was important to take a step back and look beyond straight device or activation numbers to simply understand what market or markets are being contested.
In this report we do just that, arguing that there is more than one race for mobile market share occurring simultaneously. We analyzed four years worth of Flurry’s data to understand who is ahead in which contests, discuss the apparent strengths and weaknesses of the competitors, and consider the implications for the overall mobile ecosystem.
Android Leads In Device Market Share
It is clear from announcements from device manufacturers such as Apple and Samsung that Android is winning the race for device market share. Flurry’s own data supports this. The number of Android devices we are tracking worldwide doubled in the past year, reaching 564 million as of April of 2013. While the installed base of iOS devices that we track has also grown over that time, Android pulled ahead in active device share in late 2012 and has maintained that position ever since. This is shown in the chart below. This lead followed a period of just over a year in which the number one spot was changing hands. Prior to that Apple dominated the connected device market following the launch of first iPhone and then iPad. Approximate launch dates of some of the major iOS and Android devices are also shown on the chart as points of reference.
iOS Leads In App Market Share
In spite of Android’s rapid rise and current lead in device market share, iOS continues to lead in terms of time spent in apps. Total time in Android apps nearly equaled that in iOS apps in March of 2012, but it has declined somewhat since then, after the launch of the 3rd generation iPad.
Considering that there are more active Android devices than iOS devices but iOS users collectively spend more time in apps, it’s not surprising that more time per device is spent in iOS apps than in Android apps. The exact proportion of time spent in apps per Android device relative to iOS devices is shown below.
Why Doesn't App Share Follow Device Share?
An obvious question that arises when looking at the charts above is why app usage shares don’t follow device shares. We think there are at least three possible explanations.
One is that at least up until now the two dominant operating systems have tended to attract different types of users. Once Apple established the app ecosystem many of the consumers who purchased iOS devices were doing so to be able to run apps on those devices. They were buying a computer that fit in their pocket or purse. In contrast, many Android devices were provided free by carriers to contract customers upgrading feature phones. To the extent that those customers were just buying replacement phones, apps may be a nice add-on, but not a central feature of the device.
A second possible reason for why Android’s share of the app market lags its share in the device market is that the fragmented nature of the Android ecosystem creates greater obstacles to app development and therefore limits availability of app content. Hundreds of different device models produced by many manufacturers run the Android operating system. App developers not only need to ensure that their apps display and function well on all of those devices, but they also need to contend with the fact that most devices are running an old version of Android because the processes for pushing Android updates out to the installed base of Android devices are not nearly as efficient as those for pushing iOS updates to iOS device owners.
The final possible explanation for the differences in device and app usage shares relates to the first two. It is that the arguably larger and richer ecosystem of apps that exists for iOS feeds on itself. iOS device owners use apps so developers create apps for iOS users and that in turn generates positive experiences, word-of-mouth, and further increases in app use.
While app share and device share are two key races in the competition for mobile supremacy, they are not the only races. Another that has been in the news recently is the race for profits, in which Apple is the clear leader. Apple also currently appears to be winning the race for developer attention – probably both because of its share of app usage as described above and because both surveys and anecdotal evidence indicate that iOS device owners tend to generate greater advertising and in app purchase revenue.
A side race that Android appears to be winning is that for the emerging world, where its lower prices and open architecture give it an advantage. Apple has taken notice of that and is fighting back with incentives, monthly payment plans and cash backs in several emerging countries. In India, for example, a Times of India article suggests that these programs have given the iPhone a 400% boost in sales in the past few months.
As we’ve shown, there are multiple contests for mobile market share occurring simultaneously. That raises a question about whether that is a temporary state that will eventually give way to a clear overall winner or if there can be multiple long-term winners. For the moment it seems as though the consumer is winning in that they are able to choose devices from two dominant ecosystems as well as several smaller ecosystems.