Applications Bring Subscribers; Revenue Brings Developers

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Applications Bring Subscribers; Revenue Brings Developers

Which Mobile Operating Systems Will Pay Out Big for Developers Through 2014?

Todd Day

Industry AnalystMobile & Wireless Communications Group

Information & Communication Technologies

April 15, 2010

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Storefronts and Value Chain Participants

Primary Application Storefront Features

Application Storefront Snapshots – by Smartphone OS

Developer Revenue Share

Application and Game Downloads

Smartphone OS Participant Notes

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Focus Points

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Storefronts and Value Chain Participants

Smartphone Application StorefrontsSmartphone Application Storefronts

Targeted App StoresTargeted App Stores Independent App Stores

Independent app stores are offered by industry participants offering direct-to-consumer smartphone application distribution services

Applications targeted at multiple smartphone platforms or device types are offered

Independent app store providers also power other smartphone storefronts on a branded or a white-label basis

Targeted app stores are usually managed by device vendors or OS providers, and are meant for a well-defined set of end-user devices

Targeted app store providers can also work very closely with independent app store providers to leverage their expertise in managing highly scalable application storefront services

•Increased revenue from demand for smartphones

•Leverage manufacturer-specific applications to increase user base and quality of products

•Ability to partake in mobile advertising as another revenue stream

Value Chain ParticipantsValue Chain Participants

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Primary Application Storefront Features Chart

Proprietary App Source

Phone Client

Desktop

Multiple Device Support

Non-App Content

Billing System

Return Policy

Carrier-Specific Stores

Developer Share

Developer Fee

App Listings

Minimum Nonfree Price

Notable Restrictions

Yes

Yes

Yes

No

No

iTunes

No

No

70%

$99 One Time

Unlimited

$0.99

Stock AppDuplication

No

Yes

No

Yes

No

Google Checkout

24 Hours

Yes

70%

$25 One Time

Unlimited

$0.99

Carrier Demands

No

Yes

No

Yes

No

PayPal

No

No

80%

$200 One Time

$200 for every 10

$2.99

None

No

Yes

TBD

Yes

TBD

CC, Carrier

24 Hours

Yes

70%

$99 Annual

5, then $99/Year

TBD

None

Yes

Yes

TBD

Yes

No

CC

TBD

TBD

70%

$99 One Time

TBD

TBD

Non-native SDK

No

Yes

No

Yes

Yes

CC, Carrier

No

Yes

70%

Free

Unlimited

TBD

None

Apple Google RIM Symbian Palm Microsoft

Source: Gizmodo, Frost & Sullivan

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Android – Google Inc.

Android Market has seen rapid growth in both number of applications, and number of total downloads since launching late in 2008. It’s worth noting, however, that the application development and rapid growth didn’t start full speed until 2009 when more Android devices were launched.

2009:•21,100 total applications•309+ million downloads through Android market and independent app stores•$128 million in application revenue•$3.30 average price per paid app through Android Market•$9.80 average price per paid app through independent app stores•Approximately 12.6% of total downloads were paid applications

2014 Projections:•595,000 total applications•8.7 billion downloads through Android Market and independent app stores•$3.6 billion in application revenue•2nd by a small margin in applications and downloads to iPhone

Android OS Storefronts SnapshotAndroid OS Storefronts Snapshot

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iPhone OS – Apple Inc.

iTunes and the App Store are the only two places which applications can be bought for iPhone OS devices, which currently include the iPhone, iTouch, and iPad. iPad currently uses a different version of the iPhone OS, making some applications specific for the iPad. Apple is the clear leader in the application storefront market, and will likely continue to be one of the key driving forces behind its growth over the next three to five years.

iPhone OS Storefront SnapshotiPhone OS Storefront Snapshot

2009:•151,000 total applications•2.7 billion downloads•$1.96 billion in application revenue•$1.38 billion in developer revenue•$589 million in Apple revenue (excluding developer fees)•$3.55 average price per paid app•Approximately 20.5% of total downloads were paid applications

2009:•151,000 total applications•2.7 billion downloads•$1.96 billion in application revenue•$1.38 billion in developer revenue•$589 million in Apple revenue (excluding developer fees)•$3.55 average price per paid app•Approximately 20.5% of total downloads were paid applications

2014 Projections:•628,000 total applications•11.2 billion downloads•$8.2 billion in application revenue•Still leading the market in total applications and downloads

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Symbian OS – Symbian Ltd.

Symbian OS has the largest smartphone market share worldwide. Much of this is attributed to the connection between Symbian Ltd. and Nokia. Although, Symbian is also used by companies such as LG, Motorola, Samsung, and Sony Ericsson. Nokia’s app store “Ovi” is currently the primary application storefront for the Symbian OS. Symbian just released their OS to manufacturers as a complete open source OS. This should help increase development efforts on the Symbian platform in the long-term.

Symbian OS Storefronts SnapshotSymbian OS Storefronts Snapshot

2009:•12,600 total applications•128.5 million downloads•$99 million in application revenue•$3.55 average price per paid app through Ovi app store•$13.28 average price per paid app through independent app stores•Approximately 22.2% of total downloads were paid applications

2014 Projections:•34,000 total applications•344.4 million downloads•$265 million in application revenue

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BlackBerry OS – Research In Motion

BlackBerry App World was launched in 2009, and has seen growth in application development. However, given BlackBerry’s position in the global smartphone market and a core user base of enterprise customers, many of the applications have a different purpose. With this enterprise focused purpose and usability comes a higher price point on applications. As a result, BlackBerry OS has the highest average price per paid application in the smartphone market.

BlackBerry OS Storefront SnapshotBlackBerry OS Storefront Snapshot

2009:•11,600 total applications•109.8 million downloads•$191.4 million in application revenue•$8.20 average price per paid app through App World app store•$11.09 average price per paid app through independent app stores•Approximately 21.1% of total downloads were paid applications

2014 Projections:•34,900 total applications•330 million downloads•$576 million in application revenue

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webOS – Palm

Palm Catalog was launched in 2009 and in its first year has had limited success in attracting new developers, which has led to a limited number of applications and the smallest application storefront of all the smartphone operating systems in the market. With a limited number of devices, the WebOS platform hasn’t seen the growth comparable to Android, despite having one of the best OS platforms on the market. Without changing their OS strategy, Palm will likely continue to see limited success in the market.

Palm OS Storefronts Snapshot(due to emulation on WebOS devices, the numbers for Palm include the older Palm applications)

Palm OS Storefronts Snapshot(due to emulation on WebOS devices, the numbers for Palm include the older Palm applications)

2009:•5,100 total applications•42.9 million downloads•$11.4 million in application revenue•$2.50 average price per paid app through Palm Catalog•$12.85 average price per paid app through independent app stores•Approximately 10.5% of total downloads were paid applications

2009:•5,100 total applications•42.9 million downloads•$11.4 million in application revenue•$2.50 average price per paid app through Palm Catalog•$12.85 average price per paid app through independent app stores•Approximately 10.5% of total downloads were paid applications


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Windows Mobile – Microsoft

Windows Mobile is one of the original smartphone operating systems on the market. As a result, prior to launching Windows Marketplace in 2009, independent app stores were the only place to buy applications for the Windows Mobile OS. To date, application development has been slow, with Windows Marketplace having the smallest number of apps available. However, Windows Mobile continues to be a strong application development platform in independent app stores.

Windows Mobile Storefronts SnapshotWindows Mobile Storefronts Snapshot

2009:•13,300 total applications•115.8 million downloads•$248.9 million in application revenue•$7.00 average price per paid app through Windows Marketplace•$11.74 average price per paid app through independent app stores•Approximately 18.5% of total downloads were paid applications


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Developer Revenue Share Forecast

Source: Frost & Sullivan

• All of the primary application stores share 70% of application revenue with developers, with the exception of App World (BlackBerry) which shares 80% of application revenue

• Rapid growth in the mobile application market helped the application revenue to reach nearly $3 billion total revenue in 2009

• Developers will likely see over $3 billion in 2010 and approximately $10.5 billion in 2014

• By 2014, the total application market is expected to be close to $15 billion

• As new products (like the iPad) and competing devices running Android, webOS, Windows Mobile 7, or Symbian enter the market over the next two to three years, downloads will continue to increase

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Application and Game Downloads

• Apple’s iPhone OS and Google’s Android are positioned to account for 80% - 90% of downloads in the application storefront space

• 2009 saw approximately 3.4 billion total downloads. Due to continued growth of smartphones and increased competition, than number is expected to grow just over 500% by 2014

• Major changes in OS or device strategy by Palm, Microsoft, RIM, or Nokia could drastically change the competitive landscape of the market

• Convergence of applications between targeted and independent application storefronts for Apple’s competitors will benefit all participants in gaining market share back from Apple.

Source: Frost & Sullivan

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Apple’s success to date has been one of the key driving forces behind the rapid evolution of both smartphones and applications. With the new iPad release, Apple has added yet another product into its ecosystem. As a result, the iPhone OS will likely remain the top smartphones OS in terms of applications, downloads, and revenue generation in the app store space through 2014.

Google’s Android is currently the fastest growing smartphone OS globally due in large part to its availability, costs, and functionality. With handset manufacturers the likes of Samsung, LG, Motorola, HTC, and others looking to compete with Apple, Android is a perfect fit. Currently, there aren’t as many applications, however over the next two to three years, Android will begin to challenge Apple.

RIM has a long tradition of smartphones which function exceptionally well for the enterprise users. However, in recent years, smartphones have begun to established themselves as a must-have consumer device. RIM has still been relatively successful to date, however, they will need to continue to evolve their developer ecosystem in order to compete with Apple and Google.

Symbian was just released as open source by the Symbian Foundation in February, 2010. In doing so, it is likely that more developers and manufacturers alike will take another look at designing applications and services into the Symbian OS. In order to remain the top OS however, Symbian will need to gain a larger share in the North American market where app stores are leading in growth.

Palm’s webOS is a very compelling and unique operating system – the first to offer true multitasking capabilities. Despite the value of the OS, the closed environment and few devices are limiting the growth of the webOS ecosystem. In the long-term, Palm will likely need to merge with one of the other major participants (RIM or Nokia are good choices), or license their OS in order to compete.

Windows Mobile was one of the original smartphone OS’s, and like RIM, has a big enterprise space. Licensing fees are one of the biggest challenges facing Microsoft. How do they compete with open-source OS’s like Android? Windows Mobile will likely continue to be a competitor due to their customer base, however, like Palm, they will need to evaluate their strategy for long-term success.

Smartphone OS Participant Notes

Apple

Google

RIM

Symbian

Palm

Microsoft

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For Additional Information

For Additional Information

Jake WengroffCorporate CommunicationsInformation & Communication Technologies(210) [email protected]

Craig HaysSales ManagerInformation & Communication Technologies(210) [email protected]

Brent IadarolaResearch ManagerMobile & Wireless Communications(210) [email protected]

Applications Bring Subscribers; Revenue Brings Developers

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Transcript of Applications Bring Subscribers; Revenue Brings Developers