App store revenue

App store revenue is not an ideal way to scope the value of an ecosystem to developers. The majority of the revenue comes from games, mostly freemium using IAP, while a large proportion of the most valuable apps are offered for free and generate revenue through other means (Facebook or Amazon, for example).

However, it does give a pretty good proxy for the broader behavior of the users, and it also of course is very relevant for developers who do want to to charge. 

For the first time, Google gave numbers for app store developer revenue at IO this year, and in the latest quarterly results Apple gave (almost) like-for-like numbers: 

  • Google said it paid out $5bn to developers from Google IO in 2013 to Google IO in 2014 (a little over 13 months)
  • Apple said it has paid out $20bn to developers in total by the end of the June 2014 quarter, and at WWDC June 2013 it gave a figure of $10bn paid to developers (at the June 2013 earnings call a month later it then said it had paid out $11bn). So in the last 12 months, it paid out roughly $10bn. 
  • Google also said at IO that it has 1bn 30-day active Android users - the degree of precision is not clear. The iOS number is fuzzier: trailing 24 months' sales would be a little under 500m, but extending that to a three year lifespan would take it to over 600m. 

Obviously all of these numbers are rounded and were given at scheduled events, so need to be taken as imprecise. The fact that four different growth rates are involved also makes calculating ARPUs a little tricky.

That said:

  • In the last 12 months, on public numbers, Google has paid out roughly half of Apple - $5bn versus $10bn, on roughly double the number of devices. 
  • On a run-rate basis, annual gross app store revenue across iOS and Android is now $21bn. 

The chart below shows the public data points. 

The problem with this, of course, is that with only two data points from Google, we don't know the trajectory - if this is a steep curve the recent period might be pointing more sharply upwards. 

A further observation: if the current market dynamics remain, Google Android's user base will at least double in the next few years - the iPhone base is still growing, but it will probably not double. However, those users will be gained at progressively lower (much lower) device price points, and with significantly lower spending profiles. 

For more discussion of why the two platforms look different, see this post. 

Finally, just to make life easier, Play is not the only payment system you can use on Android, even Google Android. A material number of apps, mainly games and mainly in emerging markets, use other payment methods. So that number might really be somewhat higher. 

Mobile interaction models

The interaction model for the desktop internet was pretty much settled 15 years ago. It turned out that the answer was a web browser. Stand-alone apps such as Pointcast were a mostly blind alley, and while apps persisted for email and IM, and for very specific things like music, the words ‘web’ and ‘internet’ became effectively synonymous to anyone non-technical. Over time we added Ajax and better search and better social, but everything really happened inside the browser.

In mobile this is quite different: nothing is settled. We have the web and apps and of course app stores, and then we have many complications - voice, in-app payments, web apps, hybrid apps, widgets, push notifications, social messaging apps, Google Now and Siri. Then there’s the hardware layer - images, barcodes, NFC, bluetooth, location, motion sensors etc. Innovative and disruptive new interaction models can very often find a route to market, far more easily than they could on the desktop internet. Sometimes, they scale to a hundred million users in a year to two. And we have more and more waves of innovation coming, with things like local wireless from Apple and deep linking to within apps from Android, and a very fast-evolving social messaging space, and more things in 2014 and beyond.

So, we can actually have a pretty limited idea of what the dominant interaction models will be in 5 years. 

(There is a dream, of course, that all these nasty choices and options will go away and we can go back to the nice, simple, limited web, but that doesn’t seem very likely just yet.) 

One of the big changes here is the removal of monopolies. If the web is not the only interaction model then web search loses power as a discovery and acquisition channel. And in parallel Facebook’s desktop monopoly on social has not transferred to mobile and it seemly unlikely that it ever will (I wrote about the reasons for this here). So both of the key channels on the desktop are smaller and less crucial, and also work significantly differently, and are pretty poor at driving some key types of engagement, now that you’re not just looking for a click on a link. This changes lots of things, and creates lots of new opportunities.  

The puzzle for Google is how it brings its vast, decade-old machine learning project to bear on this new complexity of data and behaviour. The obvious problem is that data and behaviour within apps are effectively dark matter that it can’t track (hence the deep-linking initiative in Android). But this is balanced by much richer data collection. Your Android phone feeds it with data all the time - where you are, what you look at, where you go after you search and what you did the day before. The challenge is finding the right ways to collate and present that data - Google Now is one example but probably not the only one. The search box and the page of results is just one possible interface to that machine-learning project - what does Google look like after the search box?

Social faces a different set of challenges. It seems to me that on mobile Facebook will never have the near monopoly that it briefly enjoyed on the desktop - smartphones remove most of the frictional barriers that keep you on one social network. But mobile social more broadly is a vast opportunity. With web search no longer the dominant channel, social, on a far more social device than the PC, has an open door to push at. Tencent announced that the first 5 games that it launched with Wechat integration, starting in August, have had 576m registered users. Mobile social is an engagement, interaction and distribution channel, and it appears to be much richer, and probably much bigger, than social was on the desktop. 

If this is the end to near-monopolies in acquisition and discovery, it’s also interesting to think about it as the end to monocultures. If the interaction model shifts away from web search, that change makes different models and different types of behaviour possible. In turn, one might ask - what models and companies and behaviours were precluded by Google on the web? What good ideas didn’t work because of the way Google did search and the way Facebook did social? How did that monoculture shape things, and how does that change now? 

Airdrop and app discovery

Airdrop is one of the most interesting new features in iOS7. It takes a new P2P wireless stack built in at a lower level, and offers it as part of the standard system sharing panel. 

Apple demoed it using photos, but since it's a system service, any app can use it to send, well, anything. Kayak is using it to share flight searches - click on the images to see the user flow. 

This is zero configuration and needs no access point or cellular coverage - it just finds who's in the room. 

A preview of some kind might be better in the last call to action (Kayak is using a URL scheme). But apply a little imagination, and you can see all SORTS of things you could use this for. Anything you can turn into a file or link can be handed to a friend as you chat to them. Magazine articles, property or restaurant listings, game levels, in-game currency...

Of course, featurephones had this a decade ago with Bluetooth, theoretically (and this uses Bluetooth for some of the process). But Airdrop uses nice fast wifi for transfer and, as so often, Apple has taken an existing concept and 'productised' it - turned it into something normal people might use without any trouble or fuss. 

App stores, portals and discovery

We used to browse Yahoo to discover cool websites. 15 years later we browsed apps stores in the same way. Neither scaled very well. 

For those too young to remember, Yahoo started as a hierarchical tree that, theoretically, contained every single website that existed. The screenshot below (from the Web Archive) shows it circa 1996. If you clicked on those links you could see a listing for every site on the web (or at least that was the idea). Does this look familiar


Screen Shot 2013-08-15 at 11.10.36.png

Of course, this didn't scale once the web started taking off. You can't browse through a catalogue with millions of entries. Equally, with over 900k apps on the iOS app store and almost as many on Google Play, browsing there has also become meaningless. Browsing an app store is like browsing Amazon - you could spend the rest of the year clicking 'next item' and not see that one cool thing you really want but didn't know existed. 

After the web directory the next stage was the 'portal' - a page with someone's ideas of what might be useful. This is what Yahoo became, and it's also what the front page of the iOS or Android app stores look like now. The purpose of these screens is not to allow people to discover your  app or service - they cannot hope to be comprehensive in that way. The front pages of an app store do not exist to help developers - they can't. Rather, they exist to help the users - to ease them into the idea of apps. But they can only scratch the surface of 'discovery'. 

All of this means that saying "we made an app and no-one downloaded it, and Apple didn't help" is like saying "we made a website and no-one came, and Google didn't help" or, even more, "I wrote a book and no-one bought it, and Amazon didn't help". Amazon might help - it might feature you, just as Apple might. But that's for the users' benefit, not yours, and it cannot possibly scale to all apps or all books. 

The difference between Yahoo and app stores, of course, is that web search came along and addressed some of the underlying tasks in a quite different way, but search does not necessarily work well for apps. Search requires you to know roughly what you're looking for, but a lot of the best apps (and indeed web sites) are things you hadn't imagined could be possible - they're 'magic wands'. If you didn't know Hailo or Evernote were possible you wouldn't search for them - and yet the app store home page cannot possibly showcase all such things. 

The obvious answer, of course, is self-promotion - you promote your app like you would your website or your book.

Screen Shot 2013-08-15 at 11.54.14.png

But there are some other more interesting things also going on in discovery.  

The first trend is the way that Siri and Google Now surface information. If you ask Siri for sports scores or restaurants or films, you don't need to work out what the best service or app to use might be - you just ask the question (and Apple's BD team has picked one). Google Now takes this a step further - it it also knows the sports score, but it tries to work out new things you might be interested in unprompted - it reads your email, knows you're interested in a flight and pops up to tell you it's running late. As they develop, these concepts may work well for the discovery of some kinds of apps, but neither approach scales well across thousands of apps. And neither would tell you about a 'magic wand'.

The other trend, though, is social. I don't really mean social recommendation aggregators, which work on the basis "people who liked this also liked'. Rather, plain vanilla sharing. Twitter cards let you share an app directly, but also deep link to content within one. 


Many of the emerging mobile social messaging apps are trying to turn themselves into platforms, and they have hundreds of millions of users. A little piece of atomised content, a card, the size of a smartphone screen, embedded into a message, is a great way for knowledge of a service to spread (I wrote a little more about this angle here). Meanwhile,  the grandpa of social networks, Facebook, is pushing hard to build a mobile app distribution business. Kik, of course, has just launched a Zynga game built in HTML5 within the messaging app itself. 

Even more interesting, though, are some of the APIs inside iOS7. Apple has built a local, zero-configuration wireless sharing tool kit. No access point and no NFC needed - any app can reach out and find any other iOS device.

Screen Shot 2013-08-15 at 11.45.52.png

Apple surfaces this in the new system service Airdrop, shown above. The demo uses photos, but Airdrop is part of the standard sharing panel that any app can use, and (without breaking the NDA) it looks like anything you can make into a file could be sent. So an app can include a 'share this with friends' that sends people in the room an app store link. Or a game level. Or in-game currency. Or a deep-link to content within an app. That makes app discovery work quite differently. 

Airdrop, though, only works with people in the same room, and so has a different set of scaling problems.  The leading social messaging apps all have hundreds of millions of users, and I've lost count of how many such services there are in total - I found over 50 on Google Play that had over 1m reported downloads, and there are dozens more. Pretty soon there'll be more messaging apps than ad-tech companies - a new bubble is inflating. But  there might be a fair bit of value for those that can turn themselves into distribution and discovery channels. 

GetJAR, Facebook and failed downloads?

GetJAR reports that it has delivered 113m downloads of Facebook mobile apps. This covers Android, Nokia and the J2ME feature phones but not (obviously) iOS, nor preloads of OEM Android apps, which are huge. 

But according to Facebook those three addressable categories ‘only’ add up to around 66m active users. And GetJAR is competing with the Android Market for installs, so there should be even more than 113m Facebook downloads to reconcile with those 66m actives. 

There are two three possible explanations:

  1. a massive failure rate for installs of downloads: 50% or more (i.e.people download the app but then can’t find it or make it work)
  2. a massive featurephone base not showing up in Facebook’s app-by-app stats. However, there isn’t really room in the numbers for this latter: as the charts in my previous post show, iOS, Android and RIM apps account for 210m of the solid 250m mobile users number that Facebook discloses
  3. GetJAR is including application updates in downloads

Bill Nguyen, founder of Color (and a few other things) on why $41m for a photo sharing app isn’t insane, honest…