More iOS and Android devices are activated on Christmas Day than on any other day of the year. This year was no exception. On this Christmas Day 2012, more iPhones, iPads, Galaxys, Kindle Fires, and more, were activated than on any other day in history. Moreover, as soon as we could tear the wrapping paper off our cool new devices, we started downloading a record volume of apps. Let’s get into the numbers.
How Did Santa Fit All Those Devices Into His Sleigh?
The chart below shows the number of new iOS and Android devices detected worldwide by Flurry on Christmas Day. With more than 260,000 apps using Flurry Analytics, Flurry detects over 90% of all new iOS and Android devices activated each day. The company regularly triangulates its device coverage with publicly announced figures from Google and Apple.
In order to appreciate the magnitude of new devices activated on Christmas Day, Flurry established a baseline using the average from the first 20 days of December. Over this period, daily activations averaged around 4.0 million per day, with variance of a few hundred thousand in either direction per day. On Christmas Day, activations soared to more than 17.4 million, a 332% increase over the December baseline. By comparison, Christmas Day 2011 held the previous single-day record, having reached 6.8 million device activations. Christmas 2012 is more than 2.5 times larger than Christmas 2011, which surpassed its own baseline by more than 300%.
With a record number of iOS and Android devices flooding the market, we next look at the surge in app downloads. For these figures, Flurry estimates its percentage penetration per platform to estimate total market app downloads. The company also benchmarks download volumes tracked in its system against publicly released app download milestones from Apple and Google.
More App Downloads Than Partridges in Pear Trees
The above chart shows that, compared to the baseline, app downloads more than doubled on Christmas. Specifically, over the December 1 – 20 baseline, download volumes increased by 112% on Christmas. Despite the ever-growing installed base of existing smart devices, the influx of new devices on Christmas Day still helped deliver a record download day, besting that of any previous day in history.
It Was Christmas All D*mn Day
For our next chart, we look at the distribution of downloads per hour across Christmas Day 2012. The shape of this curve looks like a table top, with downloads jumping early in the day to around 20 million per hour, when most of us were still in our pajamas, and remaining at this level for most of the day, even after the egg nog was gone. For perspective, we compare this to the average distribution of downloads per hour clocked between December 1 – 20.
More of Us Asked Santa for Tablets This Year
For our final chart, we drilled down into the split between smartphones versus tablets. While smartphone activations typically outpace that of tablets by 4:1, on Christmas Day 2012, more tablets were activated than smartphones. The big winners were Apple iPads, Apple iPad Minis and Amazon Kindle Fire HD 7” tablets. In particular, Amazon had a very strong performance in the tablet category, growing by several thousand percent over its baseline of tablet activations over the earlier part of December.
Over the next week, up through New Year’s Day, app download rates will remain significantly elevated. Flurry anticipates downloads to surpass more than 1.5 billion, and have a shot at breaking through the 2-billion download barrier for the first time ever. We look forward to accelerated growth in 2013, and continued success for developers.
Apps are big business, and the biggest app business is games. In 2012, Flurry estimates revenue earned from apps will approach $10 billion, with games taking over 80% of the pie. The free-to-play business model (aka freemium), where consumers download and play the “core loop” of a game for free, but then pay for virtual goods and currency through micro-transactions, is the most prolific business model in the new era of digital distribution. When it comes to app consumption on iOS and Android smart devices, consumers spend over 40% of all their time using games.
The most successful companies in the new mobile economy, from Electronic Arts to Zynga and Mobage to Supercell, deeply understand consumer behavior differences by game genre. This level of understanding greatly informs a company’s app acquisition, retention and monetization strategies. In this report, Flurry examines the consumer behavior differences by app usage, retention and demographics for the top nine freemium game genres in mobile gaming. For this analysis, Flurry leveraged a sample of more than 300 million consumers using iOS and Android games each month. Please note that, for consistency, we include only free titles.
In the chart below, we lay out a “loyalty matrix” that plots the top nine freemium game 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.
Quadrant I represents a “sweet spot” for developers, whose games are used intensively by a set of highly retained users. Well-designed “appointment” mechanics drive frequency, as users are compelled to maintain and progress in their respective game. Social Turn-based games succeed in building an active, loyal user base by offering popular “evergreen” games played among friends. From a revenue perspective, while there exists significant potential to show advertising impressions to consumers who use so frequently, games in the Slots and Resource Management & Simulation (labeled as “Mgmt/Sim”) genres commonly monetize via in-app purchase. However, companies that maximize revenue in Quadrant I extract revenue from consumers willing to pay via in-app purchase, and then by showing ads to those who do not pay.
Quadrant II is characterized by the most intensive usage over a short customer lifecycle, and is occupied solely by the Strategy genre. This audience is demanding, game lifecycles are short and a game’s live services must be flawlessly executed. Successful Strategy game developers accelerate monetization by driving competition among players (“Player vs. Player”) and by encouraging fast game progress through premium currency spends. With frequency of use so high, users churn through content quickly. To maximize retention, developers must continuously release new content after the game’s initial launch.
Quadrant III also attracts a fickle gaming audience, but adds the challenge of having fewer opportunities per week to monetize the user. The well-documented success of the Card-Battle genre in Asia, and now Western markets, is even more impressive when considering the short time frame developers have to drive transactions. Targeted user acquisition is critical to avoid paying for large batches of users that will drop off quickly due to the “hardcore” nature of the content and game mechanics.
Quadrant IV features easy-to-play and highly repeatable games that can remain on a user’s “play list” for years. These evergreen titles may lack the depth required to generate sizeable in-app purchases, but do generate substantial advertising impressions over time. In addition to driving strong ad revenue, the large audience size of these games can be used to cross-promote a developer’s more narrowly focused, but better monetizing titles.
As the mobile app economy grows, the sophistication of its related advertising services will reach those found on the Internet today. Leveraging big data, the ability to target users based on demographics and personas, and then track the effectiveness of such targeting is just starting to take hold (Flurry has invested in this direction with its own services like Flurry AppCircle, an ad network, and Flurry Ad Analytics, an ad effectiveness solution). As developers and app marketing providers become more savvy, they can better acquire the kinds of users that will reliably play and pay in their apps. Below, using the same sample set of games, we look at the Age and Gender of users by genre.
A quick review shows that Quadrant I is largely comprised of middle-aged females that play games we know to have attractive retention and usage metrics.
Quadrant II shows that males are not extending into the same 40+ average age-range as female players. Casino / Poker games tend to attract older males the best.
Quadrant III is undoubtedly the hottest sector of the mobile gaming market, with young, male “core” gamers pausing their console gameplay sessions to increasingly play mobile games. These young men are difficult to corral, but can monetize at a rate that justifies the cost and effort of acquisition.
Quadrant IV shows younger females adopting games that feature more involved gameplay than those played by the middle-aged female crowd. While the youngest users enjoy the quick solo experience of the Endless genre, the late twenties / early thirties crowd are diving deeper into game mechanics and making it a social experience.
As mobile gaming rapidly matures, it is becoming increasingly difficult for new and small developers to succeed. The game quality bar has risen dramatically, user acquisition costs continue to climb and organic installs via app store discovery and featuring are harder to come by. One great equalizer for developers is the ability to collect and harness the power of data. In fact, game developers tend to be the “power users” of analytics, using sophisticated metrics to track user progress, tune gameplay and maximize monetization (a large part of Flurry Analytics' use base is game developers). In an industry that has historically been considered more artistic and subjective, connected devices and the ability to rapidly iterate on already shipped titles has ushered in an age of science and measurement. In short, data has enabled the “gamification” of the mobile industry.
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.