Editor’s note: Apple has the first-mover advantage, and its App Store sets the bar. The result is a buoyant market for apps and ample opportunity for fast-followers to (perhaps) do one better. Benjamin E. Jacobsen - Co-Founder of Mobspot, Inc., a company championing “Mobile App developers and App users on any platform,” and a new author to MSG - gives his take on the size of the market and the prospects for other players.
IS THE APP INDUSTRY WORTH NEARLY $7 BILLION? Will Apple do nearly a billion dollars in revenue in its first year of the App Store? While the exact numbers are debatable, you can’t ignore the monster success Apple has had with its store (which also drives device sales, by the way). How much money has Apple made? This post, titled Apple has made no more than $20 - 45m in revenue from the app store, gives us a figure. One I might add is not too shabby for a product yet to see its first birthday. What makes this more remarkable is that Apple has captured between 1-2 percent total market share worldwide (including feature phones), and only 10.8 percent share worldwide in the smartphone segment. Few (save Juniper) have taken a stab at valuing the total app industry.
StatCounter’s recent announcement that Opera Mini surpasses the iPhone’s Safari as the most popular web browser for mobile phones is testament to the potential of the greater industry. Opera Mini is the most downloaded Java application of all time. So, while I am excited about the enthusiasm for the iPhone, I find the conversation is missing a big-picture perspective. The question we should be asking is: What is the total app market worldwide really worth? After all, Opera Mini’s success story underlines the potential of the app market beyond just the iPhone.
So, allow me to take a shot at valuing the total app industry, worldwide, for pay-apps (apps you pay to own on your phone). This is the total value excluding Of course, we have to exclude free apps like Opera Mini.
In a nutshell: If Apple can do nearly $1 billion in sales its first year and has 10.8 percent smartphone market share worldwide, how much is the total smartphone app market worth?
This post from AppleInsider tells us that Apple could do $777 million in App Store downloads in 2009.
A 10.8 percent worldwide smartphone market share implies that the total mobile app market is $7.2 billion, if all smartphone users spend as much on apps as iPhone users do. We know that this won’t be the case. A much more likely scenario is one in which smartphone users will spend far less.
So, let’s assume users with these handsets (other than the iPhone) spend half (50 percent) of what iPhone users on App downloads. Now let’s do the math.
$7.2 billion is the extrapolated industry valuation of direct revenue from apps if consumers spent as much on apps for other platforms as they do the iPhone. Let’s take $7.2 billion minus $777 million (iPhone app share), and multiply that by 50 percent. That gives us a valuation of $3.2 billion for the non-iPhone app market, or $4 billion total, including the iPhone.
($7.2 billion - $777 million) * 0.5 = $3.2 billion non-iPhone app market.)
Given these assumptions, the total addressable market for non-iPhone smartphone users is approximately $3.2 billion in 2009 alone. This, of course is direct app revenue, and does not include advertising, in-app sales, carrier data revenues, feature phone app sales, and other yet-to-be-developed revenue models.
What does this figure represent? Is this pent-up demand in search of a marketplace? It sure looks like it. In any case, the number is staggering, and why this fact hasn’t gotten more attention is surprising.
But I can tell you from my experience at Opera, the success of the iPhone app store is great for the industry. Apple’s app store (although benefiting from massive multimedia marketing campaigns) is the proof-point our industry needed to see its own much greater potential. Apple gets high ranks for making the job of marketing or selling an app that much easier. Mainstream consumers now realize it’s not rocket science to load an app on their phone. Now it’s part of an every-day routine for many mobile users.
Apple has created a market, but does it dominate it?
AdMob’s Mobile Metrics Report recently released compares mobile Web usage to market share of mobile devices. As this chart from AdMob shows, the iPhone literally tops the charts for mobile Web usage - and that despite the fact the device only accounts for 10.8 percent market share of devices (according to Gartner’s latest estimate).
Symbian is next, followed by RIM and Windows. With the launch of the Palm Pre, greater penetration of Android devices soon to come, and Microsoft opening its Windows Skymarket app marketplace, it’s a safe bet that consumer spending on apps on other platforms might total half of what iPhone users spend on apps (If you disagree, please make your case for lower estimates in the comments below, or email me - ben@mobspot.com .)
Let’s put a growth-figure in here. If we accept the figures from Ovum, which predict 15 percent per year growth for smartphones, then you end up with an app industry worth nearly $7 billion.
Not bad. We are excited about the App Store concept, which has taken much of the pain out of discovering and buying apps. Now is the time to get equally excited about the opportunity for apps on all platforms.
And why shouldn’t we be excited? Apple’s App store has caused a shift in consumer behavior. It has captured our interest (even passion), encouraged us to explore the mobile Web, and put downloading and purchasing apps central to our daily mobile routine.
Where does this leave Apple?
It may be riding the cool factor now, but where is it written that cool apps will only be created for the iPhone? I’m confident developers are already working on more great apps for other platforms.
Apple also doesn’t have a monopoly on delivering a great consumer experience. I’m sure developers are hard at work coming up with new approaches that likewise set the bar.
My take: Apple has created a market. But it has also paved the way for some fast followers to follow suit - and even go one better. I’m excited about the avalanche of apps we’re sure to see available across all platforms, and the impact on mobile industry and consumer behavior at all levels. What do YOU expect?
About the author:
Prior to founding Mobspot, Ben was Director of Global Marketing at Opera Software, where he led multiple record-setting product launches of Opera Mini. Opera Mini is the most downloaded mobile application in the world. He has a BA from the University of Washington and an MBA from Copenhagen Business School.









