Mobile analytics firm App Annie has released new research – the App Annie Mobile App Forecast – and it makes for some fascinating reading. While we may be seeing slower growth in smartphone sales in mature markets, the global picture still shows tremendous growth left for both app downloads and revenue from smartphone apps. Games will still be responsible for the vast majority of revenue production for mobile apps, but the overall share will shrink in the future as other categories of apps grow even faster than games. These projections have immense implications for all marketers, showing how the mobile market will unfold in the future and where marketers need to be present.
Let’s take a look at the specifics in the App Annie report. Globally, App Annie predicts that mobile app store revenue will grow to $51 billion in 2016, and top $101 billion in 2020. This will be driven by the continued adoption of mobile apps in developing economies around the world, and by the increasing ability of mobile apps to grab greater “wallet share” in mature economies. Games made up 85 percent of mobile revenues in 2015, which represented about $34.8 billion globally according to App Annie. The firm projects that total games revenue will hit $41.5 billion in 2016, and an astounding $74.6 billion in 2020. (That’s roughly equal to the total revenue of the global games market in 2012.)
While the growth projected for games is impressive, other mobile apps will be growing even faster. Games by 2020 will be 75 percent of mobile app revenues. App Annie expects 100 billion game downloads annually by 2020, and non-game apps will be at 182 billion annually in 2020.
Notably, App Annie also projects that apps will be growing substantially in other realms, as the same model looks likely to be applied to VR/AR, wearables, TVs, smart home devices and cars. Not all app types or revenue models apply well to all form factors, of course, but as these new areas grow apps (and revenues) will grow with them. We’ve already seen App Annie begin to track Apple TV app revenue, and it’s not unreasonable to expect a substantial amount of games revenue in the future for VR/AR, smart TVs and microconsoles. Games are already a substantial category for the Apple Watch, at least in terms of downloads. As wearables gain in power and popularity, gaming will certainly have a place in that market.
The rapid growth of smartphones in markets like India, and in developing nations in Africa, represents enormous new market opportunities. While it’s hard to make games that easily cross cultural and language barriers, the global success of games like Candy Crush Saga and Minecraft show that it’s quite possible to create games with world-wide appeal, however hard it might be. Marketers that can find ways to surf this wave of mobile growth will find success in the bright app future ahead.
The [a]listdaily caught up with one of the authors of the study, Sameer Singh, Senior Industry Analysis Manager at App Annie, to find out more about the future of mobile apps.
Mobile users don’t seem to download new apps very often, something of great concern to game publishers. Will this change in the coming years?
Actually, our forecast figures show that 111.2 billion new apps were downloaded by users in 2015. Across a base of 2.6 billion devices, that’s an average of 42.8 new app downloads per device over the course of the year. Even if we zoom in on games, our numbers show 45.4 billion downloads in 2015. So clearly, the perception that users no longer download apps is inaccurate. In addition, we expect the number of new app downloads per device to grow over the forecast period. Of course, the level of growth varies by region. As we’ve shown in our “App Market Maturity Model,” download growth may be slower in mature markets like the United States because the number of new smartphone owners is lower. However, this coincides with increased app usage and accelerating revenue growth as users settle on their go-to apps.
Time spent on apps in Android phones grew, according to your report. How much has time spent on games grown?
According to our Usage Intelligence data, time spent in the Games category on Android smartphones grew 36 percent worldwide (excluding China) from 2014 to 2015. This shows that net new smartphone users are still contributing to usage growth in a relatively mature category like Games. Meanwhile, overall growth is being driven by categories like media and video, shopping and transportation.
You project much of the growth in game monetization to come from greater monetization in mature markets. Do you think that mobile game monetization in the US and Europe could begin to resemble the much higher monetization we currently see in Japan and Korea?
Games are deeply rooted in Japanese and South Korean culture, so game monetization levels are significantly higher than in Western markets. We do expect to see monetization accelerate meaningfully in the West from an already impressive base. However, the watermark set by Japan and South Korea will remain out of reach at least in the near future.
How do you see mobile advertising growing over the next few years? Will this become a more important source of revenue for games?
Our revenue forecast is restricted to app store revenue and does not take into account revenue from advertising. That said, we expect advertising revenue to experience strong growth in concert with the number of net new smartphone users and app usage.
Are mobile game revenues going to become more or less concentrated in the top-10 grossing games over the next few years? Why?
Competition in the mobile gaming space has intensified in recent years. We’ve actually explored this topic in-depth in previous reports – 2015 Retrospective and Rise of the Indies. Our analysis shows that revenue concentration in mobile gaming has declined precipitously over the past few years, even as industry revenues grew. We don’t expect to see any change in this trend in the near future. Part of this is because, smartphone growth has attracted multiple players and investors. Even companies that previously focused exclusively on platforms like consoles and PCs have been making the jump to mobile. This has led to a notable increase in the number of high quality games available. Even Indie publishers have stepped up their efforts to grab a piece of the pie.