Editor's note: Apple has the first-mover advantage, and its App Store sets the bar. The result is a buoyant market for apps and ample opportunity for fast-followers to (perhaps) do one better. Benjamin E. Jacobsen - Co-Founder of Mobspot, Inc., a company championing "Mobile App developers and App users on any platform," and a new author to MSG - gives his take on the size of the market and the prospects for other players.
IS THE APP INDUSTRY WORTH NEARLY $7 BILLION? Will Apple do nearly a billion dollars in revenue in its first year of the App Store? While the exact numbers are debatable, you can't ignore the monster success Apple has had with its store (which also drives device sales, by the way). How much money has Apple made? This post, titled Apple has made no more than $20 - 45m in revenue from the app store, gives us a figure. One I might add is not too shabby for a product yet to see its first birthday. What makes this more remarkable is that Apple has captured between 1-2 percent total market share worldwide (including feature phones), and only 10.8 percent share worldwide in the smartphone segment. Few (save Juniper) have taken a stab at valuing the total app industry.
StatCounter's recent announcement that Opera Mini surpasses the iPhone's Safari as the most popular web browser for mobile phones is testament to the potential of the greater industry. Opera Mini is the most downloaded Java application of all time. So, while I am excited about the enthusiasm for the iPhone, I find the conversation is missing a big-picture perspective. The question we should be asking is: What is the total app market worldwide really worth? After all, Opera Mini's success story underlines the potential of the app market beyond just the iPhone.
So, allow me to take a shot at valuing the total app industry, worldwide, for pay-apps (apps you pay to own on your phone). This is the total value excluding Of course, we have to exclude free apps like Opera Mini.
In a nutshell: If Apple can do nearly $1 billion in sales its first year and has 10.8 percent smartphone market share worldwide, how much is the total smartphone app market worth?
This post from AppleInsider tells us that Apple could do $777 million in App Store downloads in 2009.
A 10.8 percent worldwide smartphone market share implies that the total mobile app market is $7.2 billion, if all smartphone users spend as much on apps as iPhone users do. We know that this won't be the case. A much more likely scenario is one in which smartphone users will spend far less.
So, let's assume users with these handsets (other than the iPhone) spend half (50 percent) of what iPhone users on App downloads. Now let's do the math.
$7.2 billion is the extrapolated industry valuation of direct revenue from apps if consumers spent as much on apps for other platforms as they do the iPhone. Let's take $7.2 billion minus $777 million (iPhone app share), and multiply that by 50 percent. That gives us a valuation of $3.2 billion for the non-iPhone app market, or $4 billion total, including the iPhone.
($7.2 billion - $777 million) * 0.5 = $3.2 billion non-iPhone app market.)
June 10, 2009
