February 11, 2016

App Store Consumer Spend to Exceed $100 Billion in 2020, Says App Annie

"Apps have become the primary way we engage with media, brands and ultimately with each other. They are the digital interface through which we live, work and play," App Annie explains in a new report that looks into the future of the mobile app economy.

According to the San Francisco, Calif.-based business intelligence company and analyst firm, "the strategic importance of the app market spans well beyond gaming and media industries. Now all companies need to view themselves as app publishers irrespective of their mobile strategy. Apps drive engagement and brand loyalty and can be monetized directly through app stores, advertising, commerce or any combination of the above."

The report presents five key findings:
  1. Global mobile app store gross revenue will grow to $51 billion in 2016 and exceed $101 billion in 2020. Growth will be largely driven by two factors: strong app adoption in developing economies across the globe and mobile apps' ability to capture greater wallet share in mature economies;
  2. Global mobile app store downloads will reach 284 billion in 2020, as the global installed base more than doubles between 2015 and 2020. Much of the growth will be driven by smartphone adoption in emerging markets;
  3. Mature markets like the United States are in the midst of a shift from a download growth phase to one that is characterized by strong growth in app usage and resulting revenue expansion;
  4. The iOS App Store will retain gross revenue leadership until 2017, at which point the combination of Google Play and third-party Android store revenue will surpass it due to the wider proliferation of Android devices; and
  5. While games revenue will dominate through the forecast period, revenue for apps excluding games will exceed 2015 levels more than 4x by 2020, accounting for over 25% of all app store spend. Time spent in apps from categories like Social, Shopping and Transportation strongly suggests that advertising and commerce will form a significant proportion of economic activity in the app ecosystem beyond the $101 billion we are projecting in store sales.
Elaborating on the first key finding above, the report says:
As apps deliver more value to users and device penetration rises, we forecast consumer spend on app stores (gross app revenue) to grow by 24% to $50.9 billion in 2016 and reach $101.1 billion in 2020. And even beyond the store revenue for mobile apps included in this report, there will be explosive growth in mobile commerce and advertising revenue. There will also be a growing contribution from apps as they expand into new platforms, namely wearables, TVs, virtual and augmented reality (VR and AR), home Internet of Things (IoT) and automotive.
Emerging markets will produce significant revenue from apps. For example, according to an App Annie blog post regarding its report, "China will surpass the U.S. in terms of total revenue from app stores by the first half of 2016, having surpassed it in downloads in early 2015."

Furthermore, "Revenue in the Americas and EMEA will nearly double over the next five years from 2016 levels, but both will be outpaced by the growth in APAC. We forecast that APAC will grow to $57.5 billion in 2020 with China driving more than half the revenue in the region by the end of the forecast period."

A final point worth mentioning from the report: "Mexico, Brazil, Turkey, Indonesia, China and especially India are poised for some of the strongest growth over the next five years. In the years ahead, billions of new smartphone owners in these emerging markets will join the app ecosystem. This opens up a huge opportunity for developers to target unmet needs and create whole new markets."

Aaron Rose serves as President and CEO of ROI3, Inc., a Seattle, Wash.-based company that empowers people in emerging economies through innovative, technology-based solutions. He is also the editor of Solutions for a Sustainable World.

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