I was there when the original pitches were made about the mobile content economy. I recall well how carriers originally made the case to publishers that mobility would reverse the trends of the then-loathed “free-for-all” Web. In 2005 and 2006, many media brands were thoroughly frustrated by the trickle of ad revenues the Internet was producing for them, and the intransigence of consumers about paying to play with their content. Mobile promoted itself as a thorough reboot of both consumer attitudes and infrastructure.
Unlike the Web, mobile was a place where the pipes were tightly controlled by only a few gatekeepers who could set prices and limit third-party access. This was a platform where consumers were already used to paying for services, so the wallets were open, anyway. And unlike the Web, there was a micropayment payment system built into mobile -- carrier billing. Better yet, there was a subscription model that could keep your subscribers paying and paying until they remembered someday they were being charged for downloads they never used anymore. Remember the day when cell phone bills were bloated by little $1.99 and $2.99 monthly charges access to news headlines and rudimentary mobile Sudoku?
Well, a decade later, the paid content economy has indeed flourished on mobile -- but not in the shape that carriers and early adopter publishers originally envisioned. Juniper reports that the world app economy will realize $99 billion in annual revenues by 2019 worldwide. More than 239 billion apps will be downloaded in 2015.
But the early dream of people paying for news through constrained gateways is long gone. The Google and Android app stores quickly killed the carrier portals, and these operators are in full retreat worldwide from the app sales market. According to Juniper, only about 1% of app revenue comes from up-front payment at the moment of initial download. Freemium is the paid-content model across the ecosystem. But only 12% of revenue is coming from pay per download. Most publishers are aiming at a subscription model for ongoing revenue.
While games remain the largest share of the paid-content market, Juniper finds that dating apps like Match, Tinder and Zoosk have become one of the largest areas for growth, as have navigation and messaging apps. In fact, messaging app activity has totally disrupted the messaging and even voice space. WhatsApp has over 700 million users, Facebook Messenger over 500 million, Viber 236 million. Juniper claims that WhatsApp is responsible for over 30 billion messages per day, rivaling traditional SMS traffic worldwide. In some international markets like the Netherlands, this transition has resulted in a 60% drop in SMS usage between 2011 and 2013.
But it is not just the carriers that have been surprised and preempted by recent app purchasing trends. Apple and Google no longer have the control over app distribution they once had. According to Juniper, the Chinese market has introduced its own model to the mix. China now accounts for 59% of global app downloads as the format has become a blockbuster in that rising smartphone market. The Chinese download an average of 90 apps per handset annually, compared to a worldwide average of 28. And on smartphones, the download rates are a staggering 200 per year. This massive and massively active market has now reduced all other app markets, including the U.S., to a single-digit share of global downloads.
But in China, Google’s access to this market is limited, allowing rivals like Baidu to dominate. Ironically, one of the most popular categories of apps in China is virtual private network apps (VPNs) that customers use to circumvent national firewalls and access unrestricted app markets.
Growth is far from plateauing, even in maturing segments like gaming. App downloads will rise 28% this year. And while lifestyle, productivity and communication will be the growth sectors, gaming is not done expanding. Juniper expects further migration of console gaming to devices and the proliferation of more social gaming.
One important area for growth and business model innovation will likely be in video. While multimedia apps are only ranked 5th in terms of downloads, the category is second in generating revenue. We may start seeing partnerships between network operators and these streaming media apps for bundled pricing.
I would extend that idea a bit to cable/satellite/ISP companies that may start eyeing partnerships with niche subscription video apps or even Hulu, HBOGo and Netflix to make access to their service part of the monthly bundle. The app universe is still a fragmented place of discrete subscriptions and siloed experiences. This remains its greatest weakness. Deep linking is starting to help somewhat in connecting apps to one another. Even the app alerts and notifications platforms have helped unify the experience by pushing some app content to a single screen. But it still seems to me there is a basic inefficiency to this icon-based, tap-and-load experience that awaits a an App 2.0 reimagination.
Just as the mobile content world carriers envisioned a decade ago has morphed into something wholly unexpected by them, this app ecosystem may be unrecognizable to us in five years. Or at least I hope it will be.