Patrick Kane works at Priori Data and gave a talk at App Promotion Summit Berlin on the topic of App Market Trends And the 2016 Outlook. The talk covered the latest trends in the current app market as well as what to expect in 2016.
You can find the video of the talk below along with the full transcript.
Morning, everybody. Fantastic. So welcome as well to everyone. It’s a pleasure to be here to give the opening address for what I think is going to be a fantastic day. Really looking forward to it, and thank you to James and Matthew and Andrew for the invitation and for putting on this great event. So today I’m going to be talking to you about…We got the [inaudible 00:00:28]. There we go. Today I’m going to set a little bit of context for what we see in the app stores today. We’re a data provider, so we get a nice, objective, overall view of someof the trends that are happening in the marketplace today. And then I want to leave you as well with some of our thoughts for the larger opportunities, trends, challenges that we may be faced with in 2016 hopefully as a way to set the stage for the day. And I think that it’s really shaping up to be a very interesting year, so looking forward to the discussion here across the course of the day and to setting that stage with data right now. Just for some context essentially for where my comments and our data is coming from, I’ll just do a slide or two on our background. So my name is Patrick. I’m the founder and CEO of Priori Data. We’re an app store intelligence company based here in Berlin. We’ve been live for about two and a half years now, and I’m really passionate about bringing business intelligence to app developers and everyone in the ecosystem. I really believe that data can help people make better decisions, and I think more people should have access to this type of data than currently happens in the marketplace. We’re really trying to play a key role in bringing about that shift, hopefully with the goal of making more successful businesses coming out of apps. As I said, we’re based here. We’re a team of 22 people, fully international backgrounds, which is very Berlin startup, as you might imagine, these days.
Essentially, we are a powerful premium app store intelligence platform at a better value than most of the offers in the marketplace. We collect data directly from the app stores. We blend that data and model that data together with information that’s shared with us by app publishers, app developers. And the combination of that is download and revenue estimates on a daily basis for every app in the App Store and Google Play Store across more than 55 countries. You can use this information in a premium intelligence platform to help you track competitive intelligence, to help you follow market trends, to understand who newcomer apps are and how well they’re doing in which segments, and to keep track of that in a beautiful dashboard that helps you make really actionable decisions on top of that. App market data does not exist without the contribution of the publishers and developers, many of whom are in this room. We work, and in the last 12 months, we’ve had over 10,000 apps share our program or join our program. By contributing your data to our program, you get free access to our product in return, and you help us build a better intelligence platform, which then serves the full industry. And these are some of the partners that we’re lucky to have and count as working with us to build a smarter app economy. So I’ll get into now a little bit of some of the trends that we’re seeing, and I think frankly some of the challenges which are existing in the marketplace today, which James also alluded to, so the state of the app union, as we call it. Right now, we really see that mobile is only really working for the top 1% or the top 0.1%, as we’ll actually show a little bit of data on in a minute. We think there are a number of challenges, but three fundamental challenges. Primary challenges that we’ve identified are an imbalance in the supply and demand, so consumer demand is essentially flat-lining while there continue to be more apps coming into the marketplace every day. The discovery question is a huge one. We’ll talk about that a little bit and how we see that impacting the
performance of newcomer apps in the stores. And finally, the result of those two things leads to a significant market concentration at the very top, whichmakes it harder for new innovative companies to come into the space. So we’ll address each of these points individually with some data behind them. This is a slide which is looking at the growth in the number of apps, so supply, which is the purple line, over the last 12 months. We tried to look at a current view on this, versus the average downloads that are going through the stores every month, which is the green line. And essentially the takeaway is that over time in the last 12 months consumer demand has essentially flat-lined. We haven’t been growing double-digit percents month over month like we have been expecting and if we were looking at this data in 2011, 12 and 13. Conversely, the number of apps coming into thestores has continued to increase, 20% on an index basis in the last 12 months. That’s about 500 new apps per day, and we seem to have lost the video feed. There we go. Thank you. Five hundred new apps per day, 100 new publishers per day coming into the marketplace. And if the demand is flat, that means that there’s a smaller pie on average for everyone who’s in the space. And this is really impacting the success of players in the marketplace today. And what we’ve seen is if you want to be successful as a newcomer app these days, you need to have more experience, you need to be better funded. It’s really becoming aprofessionalized, mature, competitive space in ways that we haven’t seen in the last years. We also look at who makes it into the top charts. This isn’t necessarily the goal nor should it be the goal for most of the people in this room probably. But it is still a very good proxy for success in the app stores and also for your level of visibility and discoverability for consumers.
We did a study which looked at the average length of time that a new app into the top charts actually spent there. So what is the period of time that you can actually be discovered through a top list if you make it in there for the start? The results are pretty remarkable. Fifty percent of new free apps that earn a top 200 position, and we’ve looked across, we used eight markets, all categories, and top 200 as kind of our benchmark cutoff, and 50% of those new free apps that come in are in and out within a single day. If you take the full time period to a week, 90% of new apps that make it into the top charts are out within a week. So this is not a lot of time, particularly if you’re spending heavily on future acquisition, to really stay visible and ensure that you’re getting organic growth and organic visibility on top of what may have been a paid acquisition campaign. Only 4% of the new apps which come into the top charts on a monthly basis actually stay there for longer than two weeks. That’s 350 apps globally, and we’re talking about an app store which has millions of apps, right? So it’s very very difficult to get that staying power even if you’ve succeeded in getting into the top charts in the first place, which is not all that easy. What happens when you have this very fluid and short time that you can spend at the top of the charts? Well, it leads to significant concentration in the market, and that’s what this slide actually represents. So we’re showing here the share of the market by downloads on the left side and by revenue on the right side which is going to the top publishers. So we’re not looking at apps, we’re actually looking at the portfolios or the companies behind these apps. And the green bars are showing the share of the market which is actually going to the top 100 companies according to our data in the app stores, and it’s pretty remarkable concentration. About 70% of all the downloads in the entire marketplace are going to 100 companies and about 60% of all the revenuegenerated through the app stores, through paid downloads and in-app purchases, are going to the top 100 companies. A hundred companies out of 450,000 who
are currently publishing apps is 0.01%. That’s a significant concentration that in our opinion is not a healthy dynamic to be sustained over a longer period of time. We showed this slide last year. I think it’s instructive to take a look at how over time the top charts and the top performing apps have changed and what type of companies are finding those really successful and sustained positions. We’re looking at the categories of the top apps in October 2013, 2014, and then just last month to see the trajectory. And we’re looking at a small sample of apps, so it’s not indicative for the whole store, but we think it’s actually a nice way to map the transitions that have happened and that have not happened actually over this time period. And in 2013, 10 out of 10 of the top 3 downloaded apps were gaming. So you see action games, strategy games, RPG games, etc. In 2014, there was a major shift. Actually, none of the top 10 were gaming apps. You saw a lot of social networking, a lot of photo and video, some entertainment, the usual suspects which you probably know. So what does this look like in 2015? Well, it’s a very interesting comparison to last year. Two out of the top 10 here are games, but actually if you look at the individual app titles which are here, 50% of the apps in the top 10 today were there in the same place last year, so not a lot of turnover. Sixty percent of the top 10 are published by three companies, Apple, Google and Facebook. The two gaming companies which have succeeded in making it into this top list are at this point what we consider classics or franchises or using their portfolios to cross-promote their apps, which obviously gives them a really favored position. And the two names that you probably don’t recognize are actually Chinese apps.
So if we take these points together and we see the challenges that may exist for publishers out there today, how can we summarize that? Well, Michael of…so VP Marketing at Plami [SP] Games, has put it this way, “With over two million apps, discoverability is close to impossible. Acquisition strategies are not enough anymore. It’s been a while since burse [SP] campaigns have been viable. Is the mobile app gold rush over?” And with that, we’ll turn to what we think is interesting for 2016 and what that represents for an outlook, “Is the mobile app rush over, finished?” We think it’s doubtful, but we think that actually 2016 is going to change the frame of the discussion in a really meaningful way. So the discussion since 2008 has been focused in this very simplistic, head-to-head comparison about mobile web versus mobile apps, and we think that this somewhat misses the point about really understanding what consumer behaviors are, how consumers discover and want to interact with apps, and how marketers and user acquisition professionals can actually benefit from that. And we think going into 2016, there are some changes afoot in the stores that are actually going to make this not a question of one versus the other, but a synergy between the two. Fred Wilson, who’s a venture capitalist at Union Square Ventures, put this summary together, which I think is very nice, “The mobile web is top of funnel, mobile apps are bottom of funnel.” So he uses the analogy of a store, and he says people window shop with the mobile web, but if they want to come into the store they will use your app. I think this is instructive, because if discovery in the app stores is challenged, which we’ve seen, then why don’t you use a more open discovery method via web? But if people really like the richness of the experience, the privacy, the personal experience, the ease of use of the mobile app, why don’t you give them that opportunity as well through the native app experience? I think about it as trying to blend the optimal user funnel as a mix of mobile web and mobile app, use the discovery through the more open channel, which is
mobile web, convert that discovery into your mobile app using deep linking, indexing, maybe even app streaming, which we’ll talk about, deliver that rich experience to the user with your mobile app, and then leverage some of the techniques that you have, such as push notifications, to keep those users retained, engaged over time. So if web and apps are not mutually exclusive, why does this notion exist in the first place? And this is really an interesting point. We have a quote here from Greg at Search Engine Land, who says, “Well, part of the reason the discussion is so charged is because it really represents the surrogate for Apple and Google’s competing views or visions on what mobile is.” And that has beenentering into the discussion. And what we see for 2016 is that these two firms are putting a lot of emphasis on implementing these visions, these in some ways competing visions, on the stores, which are going to shake up the marketplace in a significant way. And these are the examples that we want to call out. So Apple, as everyone knows, with iOS 9 has allowed ad blocking technology to come into the app stores. Most people consider this to be just on your mobile Safari browser. You can remove ads as you’re reading news articles. But what many people don’t know is actually that there are now apps in the stores which allow you to block an advertisement within the native Facebook application. And this is a major, major shift that has ramifications and implications for anyone who’s trying to use mobile advertising as a way of attracting users. You can compare that or contrast that with Google’s approach, which if anyone saw the announcement a few weeks ago about the app streaming, they aretaking the idea of indexing the content of your app and making actually some of the functionality which exists in your native application to exist within the browser itself, potentially bypassing a download.
So this is an opportunity where Google is saying, “We want to bring the content out of the app itself, make it visible and discoverable to a mobile browser, and how is that going to impact the user acquisition and the marketing strategies that you actually implement?” Very different visions?” Google obviously has their interest in selling advertisements, which the web seems to be a better environment for. Apple wants to protect the consumer experience; they want to make sure that it’s as seamless and efficient as possible for consumers to have a great experience on an Apple hardware device. And these competing visions are really taking a major step forward in 2016 that I think will impact most people in the room. So just wrapping up, the supply-demand imbalance, the challenge-discovery market, and the market concentration really do pose fundamental challenges for most of the people in our industry right now. The gold rush is not over, but things will change, and the outperformers we think in the marketplace will be those who leverage the different web and app channels in the best possible way, hopefully synergizing them. And finally, 2016 is shaping up to be a very big year where the major platforms are taking firm stands on their vision of mobile, and we think it’s going to be a wild ride. So thank you very much for listening. Hope everyone has a fantastic day today, and we look forward to having conversations and seeing you at the quiz later today where the winners will get free access to our intelligence platform. So thank you very much.