Release of the new market report on the global smartphone application market including key market figures from 1st half year 2010 by research2guidance.

The worldwide smartphone applications market grew more than $2.2 billion dollars within the first six months of 2010. Mobile application download numbers reached a total of 3.8 billion in only 6 months, compared to 3.1 billion in 2009. Our latest report provides market insights for smartphone application publishers.

Global mobile smartphone application market 2010

First half year update of 2010

The market is gaining momentum as more and more smartphone users have direct and easy access to app stores. In addition, the app stores which were founded in 2009 have finally managed to increase application numbers and are growing their app business.

Apple’s competitors like Nokia and BlackBerry started to leverage their global reach and increased the traffic on their app stores. This trend will continue in the next several months and years. The next wave of new app stores will be niche stores specializing on e.g. business or mobile health apps.

Average application prices steeped to $3.60 US per paid application in the first half of 2010.

Although there are still significant differences with regard to prices between stores, the overall decline of app prices has reclined. App publishers should be aware of the price differences between stores and mobile platforms. These price differences are a sign of a lack of market transparency. They represent a good business opportunity, but not for too long.

Additional information is available on the current research2guidance report, “Global Smartphone Application Report 2010”.

For more information please go to our webshop or contact:
Robert Kuersten
research2guidance
+49 30 609 893 366
robert.kuersten @ research2guidance.com

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PARTICIPATE IN OUR WEBINAR ON THE 1ST HALF YEAR SMARTPHONE APPLICATION MARKET UPDATE 2010

The worldwide smartphone applications market grew more than $2.2 billion dollars within the first six months of 2010. Mobile application download numbers reached last year’s level in only 6 months whilst Apple lost market share. We will discuss the latest trends and developments in the smartphone apps market and give an outlook for the next years.

DATE: Friday September 10 4pm CET (Berlin time)

DURATION: 45 minutes including 30 minutes presentation and 15 discussion

HOW TO PARTICIPATE: Join us by writing an email (webinar @ research2guidance.com). We will send you an invitation link.

Multi platform app publishing will become a major trend in 2010/2011. Besides iPhone and Android there are many more mobile application platforms to develop and distribute applications on. Which platform offers the best business potential for my app?, where can I reach my target group best?, what are the main platform advantages and disadvantages I should be aware of?, what percentage of an existing app can I re-use when porting from e.g. Apple to Android? These are just some of the questions which are being analysed in our current global mobile platform survey.

research2guidance invites mobile application developers to participate in our global survey on the future of the mobile application platforms. The objective of the survey is to analyse the business potentials of all major mobile platforms like iPhone IOS, Android, BlackBerry, Samsung Bada, Windows Phone for app publishers today and in 2013.

All app developers who would like to participate, please read more…

Survey overview:

• Objective: Understand the business potential of mobile application development platforms in 2010 and 2013
• Scope: All major mobile application development platforms for smartphones and feature phones
• Participants: App developers with experience in more than one app development platform
• Time: 28^th of June – 9^th of July 2010
• Format: Telephone interview (20-30 minutes)
• Benefit: All participants will receive the summary of the survey results
• Publishing date: The survey is part of a major report on the mobile application platforms. The report will be published in August 2010.

Would you like to participate? Please send an email to zena.cherop@research2guidance.com to schedule an appointment for the interview.

3 principal strategies for traditional publishers entering the smartphone app market -

One of the consequences of the advent of the internet and free online content was the steady decline in revenue that the traditional print media sector has experienced in the last decade. In the first years of the new century the internet offered opportunity, with publishers expecting a growing revenue stream from the sale of online content and ad sales. The fact has been sobering – because of the glut of free content available online consumers have demonstrated a resistance to paying for information freely available on the internet, and hence the challenge of generating revenue in the digital age has become a genuine issue for publishers. Although significant investment in building up online business has been made, in most cases this has not compensated for the loss of business caused by the decline in print and print advertising sales.

Following a decade of the initial hype around the online market, there is a new hype, this time around the mobile market and the opportunities for content delivery offered by mobile applications. This has been instigated by the new generation of smartphones, tablet PCs and the new distribution platform, the app store.  The following table shows potential business models, publishers can apply for their market entry.

Figure 1: Pros and cons of mobile app business models for traditional publisher

The opportunity for publishers to create genuine and important new revenue streams by delivering content to mobile screens rather than via the web is much greater, however. Here we present just three arguments that indicate why:
1.    It’s a paid environment: The primary distribution platforms for mobile apps are stores rather than open platforms like the WWW.  Every user has to set-up an account and provide payment information before they can enter the store. In a store it is normal to find price labels and to pay for the things you want. Nobody would expect to get a free copy of the WSJ at a normal kiosk, and therefore users expect to pay for it in the app store kiosks. There are free apps in the app stores, but nonetheless paid apps represent between 10%-20% of all downloads.
2.    Mobile business models are similar to traditional publisher models: Traditional publishers are well prepared because the business models of today’s app stores are a 1:1 copy of traditional publisher business models. No one has to explain how subscription works or how to up-sell in a content-based environment. (see table)
3.    Traditional publishers have great content for users on the go: What a great thing to be able to get the latest news while you are moving or to be shown the best second-hand bag in a classified ad section when you are very close to the seller. The content is instant and convenient and only needs to be brought to the small screen.

On the other hand publishers face some barriers which must be understood to avoid failure when incorporating these new models.

First of all the market is still too small for regional content. Currently mobile apps are being used by more than 100m users worldwide. Despite the hype, it is still a small market for most countries apart from the US. As most publishers concentrate on a single country or region, the addressable market/user base does not support a fast return on investment. Today, for a major app country (not including the US), a paid app exceeding 100,000 downloads is a great success. But these few successful apps still don’t generate more than a €50,000 revenue stream for the publisher, where the retail price is €0.79. This is far from the expectations which have been raised by the hype.  This means that despite the hype specifically around the iPhone and iPad, for 99% of all publishers the development of the app business is not a quick win and needs, not surprisingly, at least another 3 years to show significant returns. Because of these figures some of the traditional publishers have given their mobile app projects a low priority and postponed their activities. Management of expectations is key to not losing faith in the mid-term potential of the market, indeed it is essential in becoming successful in this market.

Secondly there is great temptation in re-using the web content a publisher already has.  Looking at the apps published by newspaper and magazine publishers, we can see that most of them are just re-using web content and in most cases the results are disappointing and not only because of the arguments presented above. It is no big news that usage behavior on the move is different than when stationary, such as when reading a paper or sitting in front of a PC. Furthermore the capabilities of smartphones and tablets, having additional features such as Instant photo and video, accelerometer, augmented reality, voice and navigation and many more, greatly differs from PCs or paper copy.  People pay for these features and they expect to a certain degree that apps incorporate them.

So what are the 3 main strategic options for traditional publishers:
Assuming that the new market has great potential, growing from 100m to almost 1bn users by the end of 2013, we see three main strategies that traditional publishers should follow when entering the mobile app market:
1.    Be bold and amongst the first: International publishers of newspapers and magazines as well as national publishers in the USA, Germany and UK should follow a first-mover strategy. The re-use strategy will work in the beginning. Users will pay for The Wall Street Journal’s or The Guardian’s content to gain easy and convenient access while on the move. In this early phase the biggest challenge is educating the users to pay for the service right from the beginning.  The second step is to use the international visibility to up-sell additional content and service features or drive traffic to the mobile web page. The first-mover strategy should also includes the active development of a multi-platform distribution strategy to gain reach, a dominant market position and experience the first mover increase in download numbers.
2.    Be smarter and innovative: National publishers in other countries and regional publishers in the advanced markets should concentrate on the Apple platform because of its highest reach today. Their app offering should be more specifically designed to meet the needs of mobile users, rather than bringing their online format to the mobile screen. Single purpose apps like a football team app, local search app, special interest apps e.g. fitness, health or music apps should be carved out of the existing content.  Whenever possible the global market should be targeted.
3.    Become a “normal” app publisher or wait and see: All other publishers must either have an app developer which is a 100% demand oriented and run the business as separate (publishing apps which might not even use current content) or execute a follower strategy over the next 1-2 years by copying the business models which work at the time the market reaches its peak.
These strategic options are only the framework for any company-specific market entry plan. research2guidance runs workshops for publishing companies to evaluate their specific market entry options and to develop the strategy implementation plan.

For more information please contact info@research2guidance.com or call +49 30 60 989 3360.
What do you think. Do you have any best practice examples in the industry?

Mobile apps have been around for some time and there is a lot of hype around the developing market. But how sustainable is this development, and where does it lead? In summary, our analysis shows that apps will eventually be as important for companies as web pages are today.

The main drivers:

What are the reasons for this optimistic view? Here are just six reasons why we think that apps will become as important as Websites to companies in the next years:

1. Ubiquity of smartphones: Smartphones will increasingly replace feature phones in stores. Nearly everyone will be able to use smartphone apps, not just – as of now – business people, social networkers and gamers. The main driver will be a reduction in handset prices, which will decrease to 100 Euro for most starter devices.

2. Manifoldness of possibilities: Smartphones are small computers which are becoming more and more powerful. They will be suitable for an increasing number of tasks which have previously been restricted to laptops or desktops. Today smartphone apps are used by companies to promote their brand or product, or to provide access to their existing products. In the future we will see a lot more use-cases, e.g. new products enabled by apps, mobile health, mobile selling, or apps which help to improve working efficiency within a company.

3. Ubiquity of app stores: For the foreseeable future, Smartphones will always depend on the app stores. If you have a smartphone or advanced feature phone you will have easy and convenient access to the world of apps.

4. Unmatched user-experience: Apps offer a user-experience which mobile Websites or widgets are unable to provide.

5. Proximity to customers: Mobile devices, especially Smartphones, are much more personal and intimate devices than a laptop or desktop device. For most users their phones are never further than 1 meter away 24/7. Imagine how attractive it is for consumer goods, food, and myriad other companies across the economy to be able to place their products and services so close to consumers.

6. Better visibility: Although there is a lot of clamor about the discoverability of apps, especially in the Apple App Store, standing out among 140,000 apps is much easier than being found amongst millions of websites. In addition, these distribution platforms are stores, and unlike the web or its search engines, they are designed to sell and present products. Cross-selling and promotions are components of their core features. The new geneneration of app stores make it easier than ever before to be in the forefront of millions of potential customers’ minds.

Although there is still a long way to go before many companies learn how to benefit from and how to engage in this exciting new market, but it won’t take long before it becomes standard business practice, especially for media, consumer goods, automotive, and food companies to communicate with their customers via an app. This applies especially to the Western and Asian countries with high smartphone shipment rates but will also impact emerging markets with a short time-delay.

See our “Global Smartphone Application Market Report 2010” for a detailed analysis of the world-wide app market.

At the end of 2009 Apple dominated the market for smartphone applications with a 77% market share of all downloads and the highest number of applications. The competition level within the Apple App Store was such that developers began searching for alternative development and distribution platforms. The tendency to publish on multiple and alternative platforms has gained momentum in the first quarter of 2010.

Figure 1: Selected App Store Growth Rates
Source: research2guidance

Apple maintains a strong lead. In the first quarter of 2010 50,000 new apps were added to the store. That amounts to an impressive 550 new apps per day! The high frequency makes discoverability and differentiation of individual apps difficult, and with the long tail getting longer every day a multi-platform strategy is becoming more and more interesting for developers.

Android also saw considerable growth, in fact even though the increase in the number of apps in the store was only half that of Apple’s, the rate of growth on the Android store was an amazing 100%+ in the first quarter of 2010. At the end of 2009 there were 20,000 apps available in the Android Store, a number which has now more than doubled. Developers clearly see the potential of this platform, as more and more smartphone devices are being shipped with an Android operating system. Whereas at the end of 2009 we counted only 6 devices with Android operating systems, now just three months later more than 50 are commercially available. The rapid growth in the variety of devices will also mean that developers will face growing complexity in the optimization of applications to allow for usability on all devices.

BlackBerry claims that it concentrates on quality, not quantity. Also they are number two in the smartphone market. Their app store has not managed to attract as many apps as the Apple or Android stores which sell less smartphone devices, nevertheless they managed to increase their app numbers by almost 50% in only three months while maintaining their higher pricing level.

Symbian and mainly the Ovi Store are reporting high growth numbers in apps but still on a low level. As the number one smartphone platform one would expect much more interest from the developer community, but the fire has not yet ignited.

Windows Mobile seems to be in stagnation. Developers are waiting for Windows Mobile 7. Maybe that will help it to finally break through.

Palm had a very good start with developers loving the store, and the number of apps in their catalog doubling over the last few months. However, we see that the attractiveness and growth rate of Palm app downloads will slow down, as most of the new apps were developed in the last year, to be published in Q1 2010, when news was very positive about the new “iPhone Killer”. Now, with dramatically bad sales figures of the Palm Pre and the sale of Palm to HP, it is not clear how developers will react.. We are likely to see a deceleration in the growth in app numbers in Q2 2010.

Bada by Samsung has gained a lot of press over the last quarter. It offers a similar concept as Apple but not only for smartphones as we define them now. Until now Samsung was not a significant player in the app store market; however their feature phones have a significant market share in North America and Western Europe. According to Samsung’s announcements they expect to sell 50-100 million new smartphones this year. That is definitely a platform to watch out for in 2010.

Independent app stores seem to be much slower. For example, the giant GetJar just managed to collect 1,500 new apps,only 2% of its previous app numbers, whereas Mobango had 65% growth. Most MNO stores are really slow. It looks like people are keener on their preinstalled app stores, and do not bother to shop around.

Please note the latest updates in our App Store Comparison report, and respective PowerPoints slides, comprising the most recent data, including app store average prices, number of apps, devices and available countries as of April 2010.

A short note on the upcoming launch of the iPad in April:

The imminent launch of the much hyped iPad by Apple – scheduled for the beginning of April – is giving rise to much speculation about what its ultimate success in the market will be. Projections range between 2m and 10m units to be sold in 2010. In comparison the iPhone sold 4.7m units in the first three quarters of 2009. Apple is of course eagerly driving the hype before launch, last weekend delaying the shipment date to outlets to April 12^th, although customers that have already ordered devices will still take delivery on April 4^th. This announcement resulted in analysts speculating that the expected demand for iPads outstripped that for the iPhone, immediately driving Apple stock to an all time high of $236.80 at the end of March.

All the hype aside, however, and there are significant arguments against the iPad matching the success if its predecessor, at least in the first years:

• Unlike the iPhone, a device with a clearly understood functionality, the purpose of the iPad will remain unclear to most users, at least at first. It is a device which is clearly the first of its type – a computer larger than an iPhone but less powerful than a laptop.
• Similarly, the exact target audience is rather vague. At first glance it appears to be aimed at consumers who will use it during “down-time” – basically people at home on the couch who might be surfing the internet or reading a book. At this point it is fair to suggest that the iPad won’t significantly change user behaviour.
• As with the above points, the choices that users will make when leaving the house – whether to take their phone only or whether to take an iPad/laptop, might not be considerably effected. Other than the convenience of reading from an iPad on bus or train users might struggle to understand the real difference between a laptop and an iPad.
• Unlike the iPhone, the iPad will not be an attractive product for MNOs to market. The iPad will be able to connect to the internet through Wifi, and Wifi customers are not particularly attractive customers for MNOs. The iPAd will need to find other channels to market.
• The price of the iPad will range between $499 and $829, and most devices will be sold unsubsidized. Even though many people may wish to purchase the iPad, the fact that they will already have a smartphone and laptop will in many cases make the cost prohibitive and the device therefore extraneous to their immediate needs.

Make no mistake, the iPad is a very interesting and exciting new product – it offers users such a wide range of possibilities: browse the web; send e-mail; listen to music; watch videos; play games; read electronic books; use applications – but it is an all-rounder that is yet to find its market. This might happen eventually, but is likely to take longer than expected. Hence, if the iPad sells 5m units this year, which represents almost the number of what the iPhone sold in 2009, it would be a success.

The launch of the Apple App Store in 2008 has started an app store race leading to 34 major application stores and hundreds of niche stores in 2009.
Although smartphone applications have been live since 2000, the race for market dominance truly began in 2009 after the success of Apple’s App Store. Before the Apple App Store launch, smartphone applications have been sold next to other digital content like ringtones and wallpapers by mobile operators (MNO) and independent stores, but were not gaining much attention outside the mobile industry. Now the market dynamic changed dramatically with big players rushing into the market.

The question is how this market is going to develop and who will win the app store race?
Today the market is dominated by the top five application stores, representing 96% of the market’s downloads, with Apple alone responsible for 77% of the all downloads (2009). There is a long tale of app stores which have not been able to generate significant download numbers because of the following reasons:
1. Reach: the reach of the app store is still too little
2. No marketing push: Only a few stores manage to draw public attention to their stores. It seems that some of the stores prefer a soft launch rather than a big bang
3. Lack of developers: Choice of applications is very limited

The market is still in its early stage and it is most likely that the market will look differently in three years time. The following market scenario seems to be most likely:
1. Companies from all different industries will learn that smartphone apps are a great tool to reach their customers. These companies will use app stores as their main distribution platforms. As a consequence the number of app publishers will increase significantly. For many companies, having a smartphone app will become just as essential as their corporate webpage.
2. Smartphone handset manufacturers understood that apps are a critical selling argument for their devices. They will distribute each new handset with a pre-installed app store.
3. The mass of mobile operators will focus on smartphones with pre-installed app stores as a vehicle to sell data tariffs to high ARPU customers.

Consequently there will be millions of apps, app stores will be on every smartphone and smartphone will become the normal mobile device at least in some regions like North America, EU and Asia. Smartphone shipment will be the main driver for the reach and success of an app store.
The users will mainly use the pre-installed app stores to explore the world of applications. This clearly puts the OEMs, OS and large MNOs in the pole position in the app store race. App developer will eventually follow the reach and submit their apps to the app store which offers the highest download numbers. Not surprisingly Nokia, Blackberry, Samsung and Google will become the top challengers of the Apple App Store in the coming years

Independent like GetJar, Handango and Mobango have benefited from the Apple App Store hype with increasing download numbers but now fear to be squeezed in the middle between OEM/OS and MNOs.
Most of the analysts see no future for independent stores, and with the acquisition of Handango by GetJar there are already first signs of consolidation, but within the growing market we think that there is room for independent app stores. This positive outlook is based on the fact that they have been able to learn how to sell mobile applications over many years. All other players are rather new to the party. Their advanced know-how is centered around the key word: app discoverability (for more details see research2guidance App Store Ranking 2010). With the growing number of app stores reaching +20.000 apps, the ability of an app store to make apps visible will be critical. Nevertheless the market share of independent stores will decrease and they will change their business focus to providing white label solutions for new app stores.
Niche stores will try to capitalize on targeting a specific customer segment. Today most niche stores are concentrating on a specific technology platform (e.g. Android, Palm, Blackberry, Symbian). In the future more and more niche stores will concentrate on a specific customer segment or application type (e.g. business apps, adult apps) or region.

The rising competition will also affect Apple’s dominant market position. Apple will most likely still be the biggest market place in 2013 but will lose its dominant role.
At the end any app publisher can benefit from this development. The app store race means a much broader choice of distribution platforms for their products. Multi-platform publishing will be the key challenge in 2010 and beyond. Any app publisher will have to know the pros and cons of each platform in order to make the right decision on where to publish an app.

An upswing in the market share of “smart” devices, along with an increase in application focus from OEMs, OS developers and mobile network operators will drive yearly app revenues from US$1.94 billion (2009) to US$15.65 billion in only four years, according to our most recent research findings.

The application market’s growth is driven by the widespread push of advanced handset capabilities by the mobile industry and the increasingly-connected global consumer base. This trend will continue, seeing global smartphone users numbering 970 million by the end of 2013.

Installed Base of Smartphone Application Users, 2009-2013

Additional details are available in research2guidance’s comprehensive new report, “Global Smartphone Application Market Report 2010.”

Look for more details on the report’s content and the available packages. And feel free to get in touch with any questions you may have!

Our new, much anticipated report is now available! Get access to exclusive insights on the corporate smartphone application market, including:

• Analysis of the current state of the market
• Successful strategies of “first mover” corporations
• Actionable best practices for corporate app publishers
• Detailed information on the capabilities and strengths of major application stores and platforms
• Specific guiding principles for corporations entering the market

Additional details are available in our “Preview: Global Smartphone Application Market 2010″ post.

Please visit our research page for more details.

Update: Review the details on the newly released report and the available package options.
The following article is an abstract from “Global Smartphone Application Market Report 2010”.

The launch of Apple’s App Store created incredible hype in the mobile industry and beyond. The mobile applications market has grown in value to almost US$2 billion in the last two years. Companies all over the world scrambled to publish their first apps, while handset manufacturers and mobile operators rushed to open up their own application stores. The number of newly published apps rose dramatically with a compound annual growth rate (CAGR) of almost 180% in the last two years.

Figure 1: Number of new apps (2007 – 2009)¹

What are the main drivers of this rapid expansion?

On the platform side, the mobile industry had long tried to jumpstart the mobile content business with little success. Suddenly, an outsider (Apple) demonstrated how the business can thrive by creating a whole new integrated ecosystem (hardware, on-deck-store, and developer portal). Other handset manufacturers and MNOs are now trying to emulate this successful model by opening their own app stores and bringing new smartphones to the market.

On the publisher side, small boutiques leveraged the ability to sell their apps to customers in a direct and effective way that was not possible prior to the launch of the App Store. Larger companies are also making first steps into the app market: as of today, only about 10% of all Fortune 2000 companies have published mobile apps, yet more than 80% have indicated the intention to increase their participation level in the market through the release of apps.

The increasing interest of companies in using mobile applications as a channel to their customers is shown in the following graph:

Figure 2: Future corporate engagement levels in the mobile market

84% of Fortune 2000 companies intend to increase their engagement level in the market in 2010.

These figures are based on the insights of more than 100 leading companies worldwide that participated in our 2009 mobile application market survey.

Some other insights of our survey:

• More than 90% of corporations that have published apps concentrate exclusively on the Apple App Store.
• The main function of existing corporate apps is to give access to the company’s core product.
• The vast majority of corporate apps lack a clear business model.
• Almost 30% of the corporate apps have so far failed to reach their set goals.
• Increased activity in mobile apps will result in a large volume of corporate-backed apps hitting the stores.
• Multi-platform strategies will gain traction through Android, BlackBerry and widget-based platforms such as Vodafone360.
• All major OEMs and MNOs will have their own app stores in 2010.

How do I identify the best point-of-entry for my company?

With the advent of the Apple App Store, the whole app ecosystem has been pushed to another level – one that offers more choice, but more complexity. The rapid pace of industry growth is clear from the number of application stores that have recently opened or are set to launch in the coming months.

Selecting the right application store and technology platform becomes one of the most crucial decisions when entering the market, as almost all major handset manufacturers and mobile carriers will feature an application marketplace in 2010 to sell apps to their customer base. Due to the lack of established industry development standards, most of those marketplaces offer proprietary development and publishing solutions. Multi-platform development will become an increasingly complex issue over the next two to three years, until sufficient technology solutions and standards are available. This means that choosing the right app store is critical to the success of your app.

How long will the hype last – and what comes next?

Within the very short time frame of only one and a half years, the mobile application market has developed from a niche sub-industry to a billion dollar market. The significance of this feat is made even more apparent by acknowledging that only a few application stores aside from Apple’s App Store managed to generate notable revenue in 2009. Despite 2009’s unprecedented expansion of the market, our research indicates that 2010 will be even more remarkable in terms of growth:

• The coming year will see more than 30 broad-based application stores aggressively pushing to expand their offerings.
• Additionally, there may be hundreds of niche stores offering access to specific customer bases.
• Providing advanced search and discovery mechanisms will be one of the main enablers for growth in 2010.
• Supporting industries (e. g. application analytics, advertising networks, hosting and payment services) will become more and more professional.
• Revenue models will become more attractive to corporations due to a growing shift from pay-per-download to transaction- and advertisement-based products.

Within the application development market, we will also see increasing focus on new smartphone hardware, as well as on less capable handsets. The latter will be driven mainly by mobile operators concentrating more on web-based application models, rather than native apps. Successful corporate market players are already anticipating this development and including more web-based applications in their portfolios.

More details on the newly released report and the available package options available at our research page.

Footnote
¹New additions of apps are based on the following stores as of 12/09: Apple App Store, Blackberry App World, Android Market, Windows Marketplace, Nokia Ovi Store, Samsung Application Market, LG Application Market, PlayNow Arena, Palm App Catalog, Vodafone 360, O2 Litmus Store, China Mobile Market, Verizon Vcast, Orange Application Shop, AT&T MEdiaMall, web2go, mStore, SK-Telecom T-Store, KT-Telecom Show App Store, TelstraOne  and other niche stores.