March 26, 2013
WhatsApp and Angry birds are two great examples to illustrate the fast growth of the applications sector. Every minute, WhatsApp app posts 118 million SMS, every hour 708 million SMS, and around 17,000 million every day. If WhatsApp charged for each as with SMS, Jan Koum and Brian Acton, its creators, would be the richest men in the world and it would probably be the most profitable company. WhatsApp is a good example of the Internet economy with startups trying to get first a mass of loyal customers through network effects, and after trying to charge users a little fee.
Apple App store has over 800,000 apps and Google Play offers another 700,000 apps. Microsoft, Amazon and Blackberry are other main app stores. Up to 11 platforms and 24 independent stores are available. There are around 2.4 million app in the world, according to the CTIA. Almost 65% of the app are free. According to Gartner, this year the applications economy will generate around US $24,450 million, 62% more than the previous year, but only half of what is expected for 2015. But for every successful application like WhatsApp or Instagram (bought by Facebook for US$984 million) there are tens of thousands of unpopular applications who will disappear.
According to Gartner, 63% of the applications we have today in mobile have nothing to do with what we had last year. While the most popular apps like Facebook and Twitter grow steadily, the rest of the sector is very volatile, such as games that have popularized the “gamification economy” (encouraging activity with prizes) and freemium, consisting of free download after micropayments or fee for extra services. For example, it is free to download a heart rate monitor, but if you have to pay around US$ 3.25 for the historical graphs.
According to a survey conducted last year by GigaOM between application developers, the average income is 38,000 per year. Only 12% earn more than $80,000 and 65% less than $28,000.
The economics of applications are cannibalizing other internet sectors. For instance, Internet browsers are used less, because consumers are increasingly jumping from app to app, and it also takes time away from other activities. According to Flurry Analytics, the time spent with applications, more than two hours a day, is getting closer to pass the average time in front of the TV. The main cause of this is the popularity of games that is made almost half (43%) of all the time spent with the applications (26% are social networking, 10% in other entertainment and news 2%).
According to CTIA, in the last five years, the economy of applications in the USA has created 510,000 jobs. A good example how the sector has developed is the evolution of the Angry Birds franchise. Three years after the creation of the most popular mobile game as a free application, Angry Birds has now its own theme parks in various parts of the world, and is offering prepaid cards. The owner of Angry Birds, Rovio is launching its own video network for games and has many growth opportunities. The CFO of Rovio, Mr. Vesterbacka said the firm has managed revenues of around $3 billion in the last three years through sales of the game itself and a wide array of marketing ventures, including clothing, stuffed animals, theme parks, a soon-to-be launched animated television series and a feature-length film due out in 2016.