So What do we Learn from Chetan Sharma's Report on Mobile Apps

Its always a good day to see something about our industry numbers from author and statistician-extraordinaire, Chetan Sharma, our good friend. And he's the first to tackle that headache for our industry right now, what is the total size of the mobile phone application market. Not just Apple iPhone App Store apps (free and paid), not all app store apps (Nokia Ovi, Google Android etc - there are four dozen app stores already), and not just smartphone apps - but all apps in the mobile industry.

Sponsored by Getjar (did you know them, the second largest app store in the world behind Apple's?) Chetan Sharma's AORTA company has released the Sizing Up the Global Mobile Apps Market study, dated March 2010. He has a free 19 page pdf report with the findings. Very good stuff. So what do we learn from it.

Lets start from the money. In 2009 the total value of all apps income to the mobile industry was 4.1 Billion dollars. Before you think that wow, Apple has done an amazing job - bear in mind that the majority of this income is from operator app sales ("on deck" as Americans like to call them). So if your operator sells some Blackberry handsets and a business data package and then a business app - that is operator business. Or someone with a feature phone that does Java, who downloads a Java game from the operator's WAP based application download service, that is operator income. The Apple App Store is 'off portal' income. Chetan's 4.1 Billion dollar total includes all apps.

How many was that in 2009. A big number 7 Billion total downloads (remember Apple, with all its buzz and attention only did 2 Billion last year, and the other branded app stores are miniscure compared to it). And the average cost across all apps (including free ones) is about 59 cents. The Asian market gets most downloads but the North American market earns most of the revenues. Advertising based apps were worth 12% of the total or 492 Million dollars. This is a significant number. Remember some of the - should I say misguided - analysts suggested mobile advertising (total, global) was worth something between 1 and 2 Billion dollars last year - when Japan's mobile ad market alone is worth over 1 Billlion. Most who measure mobile ads (seriously haha, not these clueless ones) tend to count the values of the major ad categories in mobile like banner ads )(think Admob) and SMS ads and MMS ads and preroll and interstitial ads and mobile search ads etc. The realistic value of mobile advertising in 2009 is more in the range of 4 Billion to 7 Billion dollars.

Now we have - I believe for the first time in the public domain at least - a solid number for this hard-to-pin number, the value of mobile adver-apps at half a billion dollars. Very very good stuff, Chetan. Brilliant. Thank you on behalf of all of us reading this blog. It also adds to the aggregate number that the serious analysts and statisticians of the mobile industry need to add to the mobile ad market size. Note that mobile ad market size would in some cases 'jump' by 10% just by this factor alone.

Remember me fussing and dismissing the app store hysteria as being totally overhyped and beyond any reason because of its miniscule, irrelevant value. Chetan (and I promise I did not try to influence him to make this point) points out that the total value of the mobile industry service revenues were 861 Billion dollars in 2009. So all apps, app store apps free and paid, plus operator sold apps at 4.1 Billion dollars formed only one half of one percent of the industry's revenues. Do you see now why I keep reminding everybody to lets focus on where the real money is, not this fledgeling niche haha.. Oh, Chetan also mentions that the total mobile data market was worth 220 Billion dollars (this includes SMS obviously) so out of all mobile data revenues of this industry, mobile apps generated under 2%. Interesting yes, but not yet anything to get overly excited about. Again, please if you are in the mobile data industry, please do focus most of the effort on SMS, MMS, WAP etc.

We also get an analysis of the regional differences - really no surprise here, North America makes most money per app, Europe second, Africa last. The more fascinating numbers are on the average cost of paid apps (remembering most apps are free). Paid apps had an average price of $1.90 in 2009. Again, remeber this is not the same as app store price, as business-oriented apps tend to be significantly more expensive (ie Blackberry enterprise apps or Nokia E-Series apps) than consumer-oriented app store apps. But yes, the global average price per paid app is $1.90.

While Chetan did not explicitly provide the breakdown between how many apps were paid and how many free out of the 7 Billion total, the average cost numbers give us the facts to calculate this. So I did the quick math and we find that in 2009 there were 5.1 Billion free apps (generating ad revenues of 0.09 cents per app on average) and 1.9 Billion paid apps earning $1.90 per app. Multiplied accross, we arrive at 7 Billlion total downloads earning 4.1 Billion dollars.

Again, lets take some context. If we look at the world installed base of mobile phones - the world downloaded more than one free app per mobile phone subsriber per year (and most of those phones were not able to handle apps). Chetan told us in the report that 20% of all mobile phone subscribers on the planet were active users of mobile data excluding SMS. Out of 4.6 Billion subscribers, that means 1.15 Billion active users of (non-SMS) mobile data last year. Now, consider the apps. The world delivered 4 free apps on average globally, per active mobile data user per year. One free app per quarter in effect. Plus sold a little over 1.5 apps per active mobile data user last year.

If we want to consider the "ARPU" of mobile apps spending of paid mobile apps, by active users of non-SMS mobile data, then that comes to 3.14 dollars per year or 26 cents per month on average that we spend globally on paid mobile apps. That number may seem small. But the world's average spend on the most popular mobile data content type - ringing tones - is at the level of 11 cents per subscriber across the whole global subscriber base (measured so, because essentially every phone and network and country can do ringing tones). From these small monthly streams, massive rivers of revenues appear when aggregated on the mobile industry scale.

So there, that is what I got out of Chetan's excellent report. Let me also comment briefly on the forecast part of the study. I generally ignore all forecasts (except mine) because it will happen soon enough and we'll know. I take the real numbers ie 2009 numbers in this case, and ignore the forecast part of such reports. But I am at the privileged position where I don't need the forecast number to run my business haha, and better yet, I get paid to do such forecasts for my customers. So yes, Chetan has very dramatic numbers in his forecast, including an annual growth rate of 92% for application downloads (nearly doubling per year) and 62% for the revenue growth on an annual basis. I can say this - Chetan Sharma is one of the most respected and widely quoted statisticians of our industry, his methodology is sound and he has a fantastic record. I would not want to put my number on this forecast, because right now the apps space is so volatile, subject to so big forces that can tip the future one way or another. It is a brave man who makes such a forecast at this stage haha. But by that, I mean I honestly think Chetan's forecast could turn out to have been too low, just as much as it could be too high. I do agree with his direction and general magnitude - the apps space will grow dramatically in the next few years. Very dramatically.

Make sure you get your copy of Chetan's free report. As he always does, that report has a lot of further supplemental info, very very valuable resource. And thanks to Getjar for sponsoring this research.
 

Comments

[Romain Criton]

Hi Tomi,
Thanks for letting us know about this report.
I particularly appreciate his balanced approach of the Web vs. Apps debate.

[Chetan Sharma]

Thanks Tomi for taking the time to review and post feedback

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Mobile apps will continue to do well in the developed world. However, let's not forget that most people in the developing world do not have access credit cards to purchase them. There's still a huge market for so called 'dumb' phones in those markets that do not need the level of investment in infrastructure and services required to run.

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