Mobile App Market Overview

* The calculations use the average data for the World

1. INTRODUCTION

According to the definition, a mobile application is an independent software product that is installed under the necessary operating system of a smartphone, tablet computer or other mobile device. The most popular operating systems for mobile devices today are Android, IOS and Windows.

According to their purpose, applications can be divided into many different categories: games, news applications, for working with photos, text, and so on. It is quite difficult to give a single classification, since some applications have a combination of a number of functions, which makes it impossible to classify them in a certain category.

The income of developers is provided in several ways, using various business models:

  • Paid installation of the application (purchase in the AppStore or Google Play store)

  • In-app purchases (additional functionality, bonuses)

  • Advertising

The development of the mobile applications market is promoted, firstly, by a constant increase in the productivity of mobile devices, and, secondly, by an increase in the availability of the Internet, including mobile, an increase in the speed and stability of the connection. This is crucial because most mobile applications require a permanent network connection. As of 2015, 50 million of 82 million of all Internet users in Russia use mobile devices to access the network. Internet access from desktop computers and laptops is steadily declining. For 10% of the country's population as a whole or for 14% of the total number of Internet users, mobile Internet is the only way to access the network, that is, stationary devices are not used.

2. MARKET ANALYSIS

At the end of 2016, the number of downloads of mobile applications increased by 15% compared to 2015. At the same time, users began to spend 25% more time in applications. This increase in popularity has brought publishers 40% more revenue than last year.

In the global market for mobile applications, one can note the development of countries that were formerly outsiders of the market: India, Indonesia, Brazil, and Mexico. In 2016, China came first in revenue in mobile app stores. The past year was marked by a large number of global deals, in which market leaders also participated.

Most of the revenue from mobile app stores still comes from games. The second direction that has been actively developed is shopping. The time spent by users in this type of application has grown by 30% over the year, primarily due to the United States. Thanks to the development of Internet networks and the penetration of the Internet, the popularity of streaming video applications has significantly increased; there was an increase in revenue both due to an increase in the number of users, and due to their involvement.

Nevertheless, users spent the greatest amount of time in social applications and instant messengers. However, other categories of applications within the global market have grown rapidly. Global market research shows that about half of the owners of mobile devices download and install additional applications (not pre-installed on the device), two-thirds of this number use applications regularly. Market segmentation showed that most users of mobile applications are men and women aged 25-30, married or married, have higher education.

In 2017, the global market is expected to grow by about 28-29% to $ 166 billion. Of these, $ 65 billion will be spent on app purchases and subscriptions, $ 101 billion - on mobile advertising and application promotion. At the end of 2016, app purchase costs are estimated at $ 52 billion, and advertisers' expenses are $ 77 billion. Thus, it is advertising that will become the driver of market growth. Most of the advertising is placed in social networking applications, as well as in video services and games. The share of large brands will be only 12.5% ​​of the total volume of advertisements, which reflects the characteristic difference between online advertising and mobile advertising from traditional advertising channels - small advertisers with limited budgets prevail here. According to experts, the mobile advertising market in Russia in 2016 amounted to $ 430 million.

In the coming years, one should expect an increase in the popularity of short videos, both in already popular video services and in relatively new, but gaining popularity. Short videos are most suitable for viewing on mobile devices. Augmented reality technologies are growing in popularity, on which, in particular, one of the games was released, which in 2016 became the most popular and cash register.

The largest number of mobile applications today are focused on the b2c segment, while b2b applications are just beginning to develop the market. However, specialists evaluate the growth potential of this segment very highly.

Figure 1. The average number of mobile applications used by one user per month

Figure 2. Forecast of the dynamics of the mobile application market - annual gross income, billion dollars (according to App Annie)

Figure 3. The mobile application market maturity model (according to App Annie)

Figure 4. Average indicators of the use of mobile applications by users in the EU market, % of the total number of mobile device users

According to experts, the market for mobile application development specialists will grow to $ 32.4 billion by 2018. The main types of services in this market: services for mobile engagement, management of mobile applications and devices, development of mobile applications and services.

The trend in this area is the use of services for building template applications, the subscription to the services of which can cost from 10 to 1000 dollars per month. It does not require programming skills. On the other hand, a full-fledged application development cycle “from scratch” today can range from $ 100, 000 and requires the involvement of qualified specialists.

According to the data for 2015, about 58% of the traffic of the entire Internet accounted for mobile Internet. This indicator is constantly growing, which is associated with a relative decrease in the cost of mobile devices (with an absolutely rising price for them), as well as a decrease in the cost of mobile Internet.

As for the market of mobile devices (smartphones, tablets, etc.), then, according to J'son & Partners, the sales of mobile phones and smartphones in the first quarter of 2016 decreased by 2% compared to the first quarter of 2015 and by 12% - compared with the first quarter of 2014. According to experts, first of all, such a decline can be explained by the saturation of the smartphone market. However, this is not the only reason: the negative economic factors discussed above also have a very large impact on the market. In particular, consumers are less likely to update obsolete phones and smartphones.

At the same time, however, in the overall structure of the market of mobile phones and smartphones, the share of the latter in 2016 increased by 2%, which is associated with an increasingly large population transition to multifunctional devices. Nevertheless, the share of smartphones in the total market in Russia is still lower than in developed countries: 70% in Russia against 78% on average in the world.

The main trends of 2016 include:

  • Rising prices for smartphones and other mobile devices - the average price per device is now in the range of 12-13 thousand rubles .;

  • The rapid growth of the share of LTE smartphones - in the first quarter of 2016, their share was 42% in the total market, which is two times more than in the same period last year;

  • In the first quarter of 2016, the sales volume of phablets (smartphones with a screen diagonal of 5 '' or more) was twice as high as the sales of tablet PCs.

The mobile advertising market, which is one of the main drivers of mobile application market growth, can be divided into two areas:

  • Mobile advertising used to promote brands, products and services. This includes contextual advertising, RTB-placement, targeted advertising on social networks.

  • Actually mobile applications

The main players in the mobile application market include:

  • The so-called mobile first companies for which the mobile application is the basis of the business model: ticket sales, food delivery, hotel and ticket reservations, and so on; here you can also include games and some paid or shareware applications

  • E-commerce representatives for whom the mobile application is an additional sales channel; Given the growth of mobile traffic and its decline on stationary devices, the use of mobile applications is promising

  • A traditional business for which mobile applications can be used for the most part as part of a loyalty program; the task of the application in this case is to inform about new products, news, receive feedback, that is, to become, in fact, a direct channel of communication

Despite the fact that the mobile application market in Russia is growing at a very fast pace, our country is in fifth place after the United States and several Asian countries. Experts name a number of reasons contributing to this lag:

  • Lack of qualified specialists. The mobile app market in Russia has not yet formed sufficiently: a significant part of the developers is focused on easy and quick income, and not on long-term relationships with customers and application support, while support is one of the main success factors. Developers focus on reducing the cost of their services while reducing their quality. Nevertheless, there is a tendency to improve the situation in this direction

  • The fragmentation of analytics. Developers do not have full access to quantitative and qualitative analytical data in one interface, which complicates the process of attracting the target audience and working with it

  • Low level of expertise in the mobile segment. The lack of experts in the field of mobile applications and their use by businesses leads to the fact that enterprises for which mobile applications are not the basis of the business model prefer to spend marketing budgets on traditional promotion channels

Against the background of all the above information, it is logical to assume that the mobile application market is still far from the maturity stage and has significant growth potential, which is, first of all, in mobile advertising. The market will be enlarged, performance agencies and technology leaders with their own tools will come to the fore.

The trends of the last two to three years allow us to draw the following conclusions:

  • The largest number of downloads falls on the Android platform, while iOS users are more likely to pay for the services they use; In the same way, iOS was the leader in revenue

  • Websites are becoming less competitive - most users prefer access to content through mobile applications

  • Competition between platforms has increased due to the emergence of new types of mobile devices and form factors: smart watches and bracelets, televisions and car multimedia devices on mobile operating systems

The main market trends in the near future include:

  • Application Productivity. With the growth of productivity of mobile devices, more and more powerful applications for working with databases, photos, documents appear, which gradually supersede traditional applications for stationary devices

  • Mobile games market growth. To a large extent, this growth was promoted by the development of the Apple TV platform, with the help of which it is planned to attract a significant number of users who have not previously used mobile gaming applications

  • Financial applications. The popularity of mobile banks and other applications with which you can make quick payments, as well as solve various financial problems, is growing. The main factors for the development of this segment: lower transaction costs, a high degree of transparency and increased consumer awareness.

  • Virtual and augmented reality. The development of new devices for virtual and augmented reality will have a very serious impact on the development of applications in these segments. The greatest interest here is predicted in the category of gaming applications. However, areas such as, for example, the media will also develop.

The recommendations for entering the mobile applications market in Russia are:

  • Application development in new, undeveloped formats. The largest number of applications available on the Russian market today relate to social networks, geolocation, games, music, news, content projects and transport services. Accordingly, the development of new categories, such as municipal and travel services, online retail and shopping, can give developers a chance to enter low-competitive markets

  • Localization of applications. According to surveys of the Levada Center, conducted in 2014 in 45 regions of the country, 70% of the population does not speak any foreign languages. For this reason, they refuse to use applications that do not have a translation into Russian. Thus, the translation of applications and their adaptation to Russian realities can be a very promising direction of development

  • Using alternative app stores. A rather controversial area, however, experts believe that in small stores you can stand out with great success due to their small content

Denis Miroshnichenko

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08/18/2019