Who would have every thought that the app business could become so lucrative, especially when you consider that most apps cost $1 – $3, with very few costing more. According to the latest IHS study, by the end of this year, sales could reach $15.5 billion – more than the total of 2010, 2011, and 2012 combined! Almost 90 billion smartphone and tablet apps will be download this year alone, which just about doubles the 49 billion apps download in 2012.
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Apple and Google applications lead in almost all countries and account for 85-percent of global spending. The most popular apps – gaming – with Candy Crush, Clash of Clans, and Hay Day taking the lead. The app sales keep climbing because the sales of smartphones and tablets are on the rise. Jack Kent, principal mobile media analyst at IHS, said:
The overall driver still is the increased adoption of smartphones and tablets. We’re going to see more than two billion smartphones and tablets in use by the end of 2013.
He goes on to explain:
Another global trend is in countries like Japan and South Korea people have always spent more money on games and apps, but they have particularly increased this year. Japanese people used to spend money on games on their mobile browsers and not on app stores, but this year it has really shifted.
The other trend is that in the past a customer would pay $1 – $3 for a game and that was it – there was no way for the developer to make any more money. Now, they will gladly give you the game app free, such as Candy Crush, but then the user must continue to buy additional features, and once hooked on the game, the user cannot resist spending a dollar here or there, because they want to keep playing the game. This in-app purchasing is now the dominant business model that developers use to make their money, and it’s working since more than 80-percent of that $15 billion is coming from in-app purchases rather than paid downloads.
Many media apps, such as Netflix, will give you a free app, but charge you directly for the content that you choose to watch or stream. Mobile advertising is another high growth area, with revenues projected to be around $6 billion by the end of this year, with the majority coming from Facebook.