Making a case for apps
By Patrick Mork
We recently commissioned an industry report to get to the bottom of one central question: “What is the future value of the applications market?” There were several reasons why we decided to commission this research.
First, we wanted to get an idea on the global size of the opportunity behind mobile applications. Second, we wanted to understand how this market was split between feature phones and smartphones given the exhaustive coverage that has been given to smartphones over the past year.
Lastly, we wanted to better understand the dynamic between emerging markets and developed markets such as the United States.
To get to the answers, we commissioned Chetan Sharma Consulting to interview carriers, handset manufacturers, developers and research firms.
We also provided Mr. Sharma with full, unparalleled access to our own download numbers going back several years. A number of interesting findings emerged.
First, the applications market will be big. No surprises there. The market will surge from 7 billion downloads last year to more than 50 billion by 2012.
The resulting revenues from these downloads will rise from $4 billion in 2009 to more than $17.5 billion by 2012.
Importantly, revenue derived from ad-funded applications – free applications funded by ads within the application – will double from 14 percent of revenues to 28 percent. This, as consumers embrace free applications and marketers embrace yet another new mobile channel to reach consumers as they flee from television, print and other established mediums.
Second, although much of the hype behind applications has been around smartphones, both the study and our own data indicate there is a massive, untapped opportunity for applications targeting feature phone users.
For example, the study found that the line between feature phone and smartphone is actually blurring as feature phones become more powerful and smartphones become cheaper.
Although smartphones offer faster processors, more internal memory and a richer application experience, consumption of applications by high-end feature phone users do not vary significantly from that of smartphone users.
Finally, and more importantly for marketers trying to understand whether to embrace applications or not, there is also seems to be somewhat of a blur between mobile applications and mobile Web.
Although applications offer a richer, deeper mobile experience that will always exceed that of mobile Web – due to the ever-increasing sophistication of handsets – in many cases consumers either will not differentiate between an application and the mobile Web or be fully satisfied with the latter.
Brands need to weigh the pros and cons of either using applications or the mobile Web to target consumers. Successful brands will likely do both.
Fandango and CitySearch, for example, have applications for high-end smartphones that offer deeper, richer experience and functionality but also use the mobile Web to target the mass market with a simpler, more streamlined experience.
Either way you go, one thing seems clear: applications and the Web are here to stay and will continue to coexist for some time.