The Strategist

App Annie: mobile software revenues grew by 40% in 2016

01/18/2017 - 15:08

App publishers received $ 35 billion in revenue in 2016 thanks to App Store and Google Play. The figure climbed up by 40% compared to 2015, as follows from annual report of App Annie market research firm. The growth rate was 50% in App Store; nearly half of money came from China. Total time spent in applications increased by a quarter and amounted to 900 billion hours.

Last year, mobile application market continued to grow and develop, says App Annie. Over the past year, downloads rose by 15% throughout the world, and time spent in applications increased by 25%. All this brought 40% higher income from Google Play and iOS App Store to publishers. 2016 marked a significant shift in the ecosystem of mobile applications. This year, China has not only become App Store’s leader by revenue - revenue growth of the country in 2016 has accelerated compared to already very good performance in 2015.

Compared to 2015, global revenue growth accelerated in 2016 both in App Store and Google Play. In 2016, the developed markets have shown steady growth, yet emerging, including India, Indonesia, Mexico and Brazil, brought even more impressive results. Games still accounted for a large part of revenue from application stores, and phenomenal success of Pokémon GO was one of highlights of 2016. Although the game was released in July 2016, it was still among the top five applications by the world's income in the last week of December. Long-awaited game Super Mario Run was released at the end of the year and has become No1 app in 148 countries.

Shopping is another segment that showed an impressive growth in 2016. Thanks to eventful November, time spent in this type of applications has increased in the US by 30% year on year. In the past year, France, Germany and Great Britain have shown some of the highest growth rates in the number of sessions for shopping applications. Stemming from success of 2015, streaming video showed rapid growth of income, since the premium content area (sports broadcasts and streaming) saw an increase in both number of users and their involvement.

This year promises to be even better. In 2016, the economy has maintained a stable mobile application development dynamic. Publishers continued to create applications that change the way we interact with the world and with each other. Strong development of applications throughout the year is confirmed by a significant global increase of three indicators, such as using, downloads and revenues.

iOS App Store and Google Play paid $ 35 billion in revenue to publishers in 2016. Thus, the annual increase numbered 40%, which is higher than in 2015. Last year, income from iOS App Store grew by approximately 50%, which strengthened the platform’s position as a source of income. Revenue growth in App Store came largely thanks to China, which accounted for about half of the annual growth there.

Following trend of the previous years, games were the undisputed leader in revenue. In 2016, they brought 75% and 90% of total revenues in App Store and Google Play, respectively. Sub-category "RPG" accounted for half of all income growth from App Store. On the other hand, stores account for just less than half of all revenues in the application ecosystem. Taking in the account independent Android stores and advertising revenue, the total revenue paid to publishers in 2016 increased to nearly $ 89 billion.

The top five most profitable App Store and Google Play applications includes music service Spotify, Japanese messenger Line, video service Netflix, dating app Tinder and streaming service HBO NOW.

Many non-gaming categories also showed significant growth. Following the "Games" category, "Social Web" showed largest absolute increase in income in China, partly due to a significant increase in performance of messenger app QQ of Tencent.

Mobile retail is growing rapidly around the world. In 2016, the mobile sphere accounted for 44% of Internet traffic of retailers and 31% of their sales. Internet Retailer is sure that global sales in the mobile retail sector would reach $ 220 billion in 2016, which is 53% more than in 2015. AppAnnie expect that this percentage will continue to increase, as users will be feeling more confident in mobile shopping and spend more time in this type of application. 

As for traditional spheres, such as banking, market participants there are adapting arrival of new players, oriented on Internet and mobile applications. Applications such as PayPal, Credit Karma and Venmo are threatening to destroy the long-standing model of complex banking retail. Of course, the traditional banks still have one potential advantage: they have built up an extensive user base. In the IV quarter of 2016, monthly audience of the four leading US retail bank applications was higher than that of the top four applications of fintech companies. Yet, there is no guarantee that this pattern will continue in the future.