Ict data market 2010 m ccorp_vietnam

MCCorp (mcgame.vn)

The State of Mobile
Application -Market Research

10

Table of Contents

Page | 2

GLOBAL WIRELESS DATA MARKET 2009 .................................................. 3

OVERVIEW OF US AND JAPAN MOBILE MARKET ..............................18

THE GLOBAL MOBILE APPS MARKET........................................................27

APPLE APP STORE WORLDWIDE ................................................................41

APPLE APP STORE - IPAD AND IPHONE .................................................49

IPAD WORLD ......................................................................................................59

2 TINHVAN©2010, Brian -All rights reserved | MCCorp (mcgame.vn)

Global Wireless Data Market 2009
Page | 3

Executive Summary

The Global Wireless Markets continued to grow rapidly especially in India and China
where the carriers (combined) are adding almost 30M new subscriptions every month.
Amongst the two, India is outpacing China 2:1. China touched 750M subscriptions while
India crossed 525M by the end of 2009. With 4.6B subscriptions, the global subscriptions
penetration was above 68%.

The global mobile data revenues reached $220B and mobile data now contributes 26%
of the overall global mobile service revenues.

As expected, the overall global mobile revenues stayed pretty flat for the year at around
$1.1 trillion as many regions were hit by the recession and the competition pushed the
ARPU lower for many operators. While the countries like US, Japan, China, and India
showed very little signs of pullback, most of Europe and the developing world
experienced a decline in overall service revenues in 2009. Additionally, all the major
markets have their data contribution percentages above 10% now.

For some of the leading operators, data is now contributing almost 50% of the overall
revenues. However, the increase in data ARPU is not completely offsetting the drop in
voice ARPU for most operators. NTT DoCoMo continues to dominate the carrier ranking
in terms of the mobile data service revenues, Verizon Wireless which became #2
replacing China Mobile and is slowly edging towards the #1 spot and is likely to overtake
DoCoMo within the next few quarters.

Though 4G as a standard hasn't been defined yet, the discussions around LTE and
WiMAX deployments grew intense. Telia Sonera became the first operator to
commercially launch LTE. At CTIA, Sprint/HTC became the first players to launch a
WiMAX smartphone and MetroPCS/Samsung took the honors for the LTE smartphone.


2009 also marked the year when the global data traffic (monthly) exceeded the global
voice traffic. In the US, the yearly mobile data traffic exceeded the voice traffic for the
first time.

Bharti Airtel of India just acquired Kuwait-based Zain Group to become the 5th
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largest telecom group in the world (at the end of 2009, it was #9). There are now
14 telecom groups with 100M or more subscriptions. While China Mobile’s ARPU
is 1/5th of its western counterparts, it operates its business at higher margin,
around 51%. There are a number of global players mainly in Europe and Asia who
have mastered the art of running lean operations and if they have good bank
balance they are going to go shopping in the days ahead.

From the revenue perspective, the $50 billion revenue club is more exclusive with China
Mobile, Vodafone, AT&T Mobility, and Verizon Wireless as its sole members.

As we sit at the cusp of the iPad era, there is a bigger transformation taking place and
that is of the connected consumer electronic devices (CEDs). Few years from now, most
popular CEDs will have connectivity. We are also approaching the start of phase where
pricing of access will start to morph - we will see the introduction of family data plans
(something we have been advocating for some time), ability to connect multiple devices
to the same GB plan, more granular use plans (per session/day/week/mo/yr etc, roll-over
GBs anyone?). As the number of connected devices/consumer increases, we will start
worrying about Average Margin Per User (AMPU) or Average Margin Per Connection
(AMPC) because ARPU won’t quite capture the dynamics of the industry.

Impact of Global Recession

• Telecom in general fared better than other industries. In some regions, it hardly caused a
tremor. However, in most nations, the impact was felt by the operators. Amongst the 40
major operators we studied, SK Telecom, 3 Australia, KTF, T-Mobile Netherlands, Rogers,
Softbank Japan, Singtel, Vodafone Italy, T-Mobile Germany, 3 Sweden, Telstra, China
Unicom, and Vodafone Germany experienced increase in both the data ARPU and the
overall ARPU during 2009. Some of increase was due to the fluctuation in international
currencies e.g. Korea.


• Looking at the data at a country level, most nations noted a decline in overall ARPU. Only
Venezuela, Pakistan, Argentina, Bangladesh, Australia, and Poland showed positive
increase in ARPU since 2008.

• Rule of Three is kicking in most markets with smaller players having to consider the M&A
Page | 5
option to remain viable. T-Mobile/Orange, Bharti/Zain tie-ups are just the start of that
process. We are likely to see many international mergers in 2010 and beyond as power in
the mobile ecosystem self-adjusts.

• 5 new players joined the 100M subscriptions club. The new members are: Bharti Airtel
(India), MTN Group (South Africa), Orascom (Egypt), Etisalat (UAE), and MTS (Russia). The
top 9 telecom groups in the world are: China Mobile, Vodafone, Telefonica, America
Movil, Telenor, T-Mobile, China Unicom, TeliaSonera, and Orange.

Service Revenues

• US extended its lead over Japan as the most valuable mobile data market in service
revenue with US adding $44.56B vs. $32.5B for Japan in 2009. China with $20.3B was
ranked number 3. US registered the highest growth amongst the top 3 with over 40%
increase from EOY 2008 levels followed by Japan and China.

• The top 10 nations by service revenues are: US, China, Japan, France, Italy, UK, Germany,
Brazil, Spain, and India.

• The top 10 nations by data service revenues are: US, Japan, China, UK, Italy, Germany,
France, Australia, Spain, and Korea.

• NTT DoCoMo continues to dominate the wireless data revenues rankings with over $16B
in data services revenue in 2009. Almost 46% of its overall revenue now comes from data
services. DoCoMo also crossed the 95% 3G mark.

• NTT DoCoMo was followed by Verizon Wireless, China Mobile, AT&T, KDDI, Sprint
Nextel, Softbank Mobile, T-Mobile USA, O2 UK, and China Unicom to round up the top
10 operators by wireless data service revenues.

• Each of the top 5 carriers exceeded $10B in yearly mobile data service revenues in 2009

• Data revenues for the top 10 operators now account for almost 43% of the global mobile
data revenues.


• The biggest jump in data revenues was experienced by Verizon, Softbank, and AT&T.
DoCoMo saw an 11% increase for the year.

• Most of the operators in the developed nations are contemplating future strategies to
boost data revenues such that the decline in voice revenues is at least compensated for.
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There are very few operators who have experienced increase in overall ARPU.

• China reported approximately $20.3B in data revenues for 2009 and the percentage
contribution from data services is around 32%, data ARPU is around $3.2. For India, data
ARPU continues to stay below $0.50 as most of the new adds are voice only subscribers
and there is continued price pressure in the market.

• China Mobile remains the most valuable telecom operator with over $195B in market
cap. It is followed by Vodafone at around $122B. Telecom groups in mature markets are
under enormous pressure to either come up with a global expansion strategy or
accelerate their existing plans.

• In 2009, SMS’s vice like grip on data revenues continues to loosen a bit with many
carriers seeing an increase in non-SMS data revenues. On an average, Japan and Korea
have over 70-75% of their revenue coming from non-SMS data applications, US around
50-60%, and Western Europe around 20-40%.

• NTT DoCoMo has been at the cutting edge of the mobile data evolution by creating new
markets. They are exploring new technologies and social experiments ahead of almost
anybody else in the market. Our long history with the Japanese and Korean markets has
taught us that while the individual strategies in each market will differ, one should study
the trends, technologies, and ecosystem dynamics in these markets to get a sense of
what’s coming.

• From the revenue perspective, the $50 billion revenue club has limited membership with
China Mobile, Vodafone, AT&T Mobility, and Verizon Wireless as its sole members.

ARPU

• Most of the major operators around the world have double digit percentage
contribution to their overall ARPU from data services. Operators like DoCoMo, and
Softbank are over 46%. KDDI, 3 Australia, 3 Italy, 3 UK, Vodafone UK, O2 UK, Telstra, and
3 Sweden exceeded 35% and many others are on the verge of crossing the 30% mark.


• NTT DoCoMo reported the highest data ARPU for the year while Rogers took away the
honors for the highest overall ARPU. Other notable percentage increases in ARPU were
from 3 Italy, SK Telecom, KTF, T-Mobile Germany, 3 Sweden, and T-Mobile Austria. The
Japanese operators saw a decline in ARPU by 3%.
Page | 7
• The biggest percentage contribution by data ARPU has been consistently registered
(since mid 2002) by two Philippines carriers – Smart Communications and Globe Telecom
with over 53% (or $2) contribution coming from the data services.

• Softbank of Japan looks set to be the first major operator (outside of Philippines) with
more revenues coming from data services than voice.

Mobile Data Traffic

• We have been calling attention to the tremendous increase in mobile data traffic for
some time. The discussion has hit mainstream and many operators are scrambling to
nail-down their short-term and long-term strategies to manage the data traffic growth in
their networks.

• The global mobile data traffic exceeded an Exabyte for the first time in 2009. In fact, the
data usage is growing so fast that this year, the two territories experiencing the most
growth - North America and Western Europe are both going to exceed an Exabyte in
mobile data traffic.

• 2009 also marked the year when the global data traffic (monthly) exceeded the global
voice traffic.

• For many of the superphone heavy operators, devices like iPhone and Android account
for more than 50% of their total data traffic.

• 2010 will mark the first year when the total number of mobile broadband connections
will exceed the total number of fixed broadband connections.

Subscriptions

• India continues to be the hottest market on the planet in terms of net-adds with (again)
a world record-setting month in Jan 2010 with 19.9 million net adds. To give you a


perspective, this is almost 1.5 times the number of subscribers US added in the whole
year. It is like adding a Canadian wireless market every month. For the year 2009, India
added 177 million subs vs. 106 million for China. Combined, one year of growth in these
two market is equivalent to the size of the third largest market - the US, to date. Making
Page | 8 money on the net-adds is a different proposition all together (more discussion on the
international market in our global market update later this month)

• Thanks to the explosive growth in the emerging markets, the global mobile market went
past 4.6B in 2009 and is likely to cross the 5B mark in 2010. The global mobile
subscriptions now represent over 68% of human population on planet earth.

• China crossed the 700M subscription mark in July while India's total went past 500 in
Nov. In the meantime, US crossed the 90% subscriptions mark in 2009.

• In the last 10 years, the growth patterns in the mobile industry have completely reversed.
In 1998, the developed world accounted for 76% of the subscriber base, in 2008; the
percentages have flipped with developing world now accounting for 76% of the
subscriber base and are likely to increase to 85% by 2018.

The top 10 nations by subscriptions are: China, India, US, Russia, Brazil, Indonesia, Japan,
Germany, Pakistan and Italy.

Mobile Apps

• The total number of app downloads in 2009 reached 7 billion resulting in approximately
$4.1B in revenues 12% of which was from mobile advertising.

• The number of non-carrier appstores jumped to 38 from 8 in the previous year.

• While Asia had the highest percentage of the download share, North America had the
highest share of the apps revenue accounting for over 50% of the total revenue.

• The paid ASP in 2009 was approximately $1.9 and the advertising revenue generated
from the free applications was approximately $0.09/user/app/year

• For a more detailed analysis of the mobile apps market, please see below page “ Global
Mobile Apps Market”

Others


• Messaging still accounts for the lion-share of data service revenues. However, other
services such as Mobile Music, Mobile TV and video streaming, Voice navigation, PNDs,
Mobile Games, IMS, LBS, Mobile advertising, and others have gradually chipped away the
share from messaging. Alternate devices with wholesale cellular agreements are also
Page | 9 flooding the market. In Japan, Mobile Commerce is expected to do much better than
Mobile Advertising. Though not much talked about, enterprise applications are also
being adopted widely esp. in North America as more workers become mobile and
corporations seek efficiencies in their operations and supply-chain.

• Nokia dominated the year as usual but the revenue share is shrinking and so is the
lucrative smartphone share. Apple, RIM, and Google are relentlessly attacking the top tier
while Samsung, LG, and others giving a tough fight for the bottom tier. We see a new
middle tier emerging that has the form factor of a featurephone and functionality of a
smartphone. The smartphone category is getting further split into regular qwerty
smartphones like Blackberry and the touch and full browser based superphones like the
iPhone and Droid.

• The year was dominated by several blockbuster device launches like the iPhone 3GS.

• Next few years will be big for infrastructure providers as many countries both developed
and developing get into upgrading their infrastructure.

• Willcom, the small Japanese carrier that started the flat-rate unlimited phenomenon filed
for bankruptcy last month.

• In the US, the increase in messaging volume catapulted US as the number one texting
nation by messages/user/month going past the long-time leader Philippines.

• Deployment of 3.5G technologies is in full swing. However, it is the discussion of 4G that
is occupying the headlines, even though 4G hasn't been fully defined yet and the current
candidates for 4G are nowhere near the performance goals of 4G (150Mbps/50+Mbps).
Many larger operators have laid out their plans for deploying LTE starting this year.

• Regulators playing an active role in making the markets competitive and attractive in
the long-term.

• The velocity with which the smartphones are being introduced into the market esp. the
western markets, one wonders if in five years, we will be using the moniker to describe
devices and if the "dumbness" in the device market will be practically eliminated. Led by
Apple's Appstore success, significant investments are pouring into the appstore world. In


parallel, the debate over apps vs. mobile web is intensifying. The implications of the
transition will be significant on the ecosystem on many levels.

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Mobile Markets: The New World Order

Arrows indicate change in position in 2009

Mobile Revenue Distribution


Page | 11

Recession, Competition or Both?

Wireless Data ARPU in Different Global Markets (2009)


Japan ($24, 44%)
Philippines ($1.8, 47%)

40%

Australia
New Zealand Austria
HongKong UK
US
China Germany Singapore
Page | 12
Indonesia Venezuela Netherlands
Switzerland
Czech Italy Belgium
Data as a % of total revenues (average

Norway
Portugal Sweden France
Mexico Canada
across carriers in the country)

Denmark
20%
Malaysia Finland
Spain
South Korea
Israel
Turkey
Russia
Thailand Greece

Source: Chetan Sharma Consulting, 2010
Brazil

India
10%

Asia

Europe

Americas

$5 $10 $20
Average Wireless Data ARPU
(USD) for carriers in a country

Wireless Data ARPU of Major Global Carriers (2009)


SMART
($2, 53%)

50% Softbank

Page | 13 A
NTT DoCoMo

3 Sweden KDDI

40%
3 Italy
Telstra
O2 UK
3 Australia
3 UK
Data as a % of total

Vodafone Germany Verizon
revenues

AT&T
O2 Germany Vodafone UK Sprint
T-Mobile UK
China Unicom T-Mobile Germany Rogers
Vodafone Italy SK Telecom
China Mobile KTF T-Mobile US B

Source: Chetan Sharma Consulting, 2010
Orange - UK
20%
Vodafone Spain Orange France

Vodafone India
Reliance
Bharti
Asia

Europe

C Americas

$10 $20 $30
Wireless Data ARPU (USD)

Size of the Global Mobile Market (2009)


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Global Population approx 7B

Each dude represents approx 100M subs


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Top Carriers by Wireless Data Revenues

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Top Telecom Groups by Subscriptions


Top Telecom Groups by Revenue

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Page | 18 OVERVIEW OF US AND JAPAN MOBILE MARKET

A. US Wireless Market – First Quarter, 2010

Executive Summary

The US wireless data market grew 6% Q/Q and 22% Y/Y to exceed $13.2B in mobile data
service revenues in Q2 2010 - on track so far to meet our initial estimate of $54B for the
year.

Having narrowly edged NTT DoCoMo last quarter for the first time, Verizon Wireless
continued to maintain its number one ranking for the 1H 2010 in terms of the operator
with the most mobile data revenues (though the difference was thinner than the amoeba
membrane). The total wireless connections for Verizon were almost 100M with 92.1M
being the traditional subscriber base. Rest of the 3 top US operators also maintained
leading positions amongst the top 10 global mobile data operators.

Sprint had the first positive netadd quarter in 3 years and has been slowly and steadily
turning the ship around. T-Mobile did better on the postpaid netadds but overall
additions declined again. The larger question for the market is if 4large players can stay
competitive. Generally, the answer is no. But these are different times and there are a
number of permutations and combinations that are possible.

The US subscription penetration crossed 95% at the end of Q2 2010. If we take out the
demographics of 5 yrs and younger, the mobile penetration is now past 100%. While the
traditional net-adds have been slowing, the “connected device” segment is picking up so
much that both AT&T and Verizon added more connected devices than postpaid subs in
Q2 2010. Given the slow postpaid growth, operators are fiercely competing in prepaid,
enterprise, connected devices, and M2M segments.


Data traffic continued to increase across all networks. By 1H 2010, the average US
consumer was consuming approximately 230 MB/mo up 50% in 6 months. US has
become ground zero for mobile broadband consumption and data traffic management
evolution. While it lags Japan and Korea in 3G penetration by a distance, due to higher
Page | 19 penetration of smartphones and datacards, the consumption is much higher than its
Asian counterparts. Given that it isalso becoming the largest deployment base for
HSPA+ and LTE, most of the cutting edge research in areas of data management and
experimentation with policy, regulations, strategy, and business models is taking place in
the networks of the US operators and keenly watched by players across the global
ecosystem.

As we had forecasted, the tiered pricing structure for mobile broadband touched the US
shores with AT&T becoming thefirst major operator to change its pricing plan based on
consumer consumption. We will see the pricing evolve over the next 2-4 quarters as the
US mobile ecosystem adjusts to the new realities and strategies for mobile data
consumption.

In the connected device category, iPad like its flashy cousin dominated the headlines, the
sales numbers, and the industry profits. The device sent every slate maker back to the
drawing board, many projects were cancelled and strategies are still being formulated to
capture a new burgeoning space and Apple again has a massive lead of mindshare and
pocketbook.

Kids of the now generation are growing with connected electronics that is fundamentally
altering the behaviors and expectations of interaction, communication, consumption,
and monetization.

All this has setup an fascinating period in the communication/computing industry.
Convergence is everywhere and is leading to fundamental reset of the value chains and
ecosystems.

What to expect in the coming months?

31% of the US subscription base is now smartphones. The pace of product introduction
is accelerating with each quarter. Devices of all shapes and sizes are coming into the
market literally every week. Players are having to re-evaluate their businesses and long-
term strategies. Several new impressive devices got introduced during the course of 1H
of 2010 including the iPad and EVO.


There are several players whose future is at stake (to put it mildly). The competition has
grown fierce and companies are finding it hard to take ideas from R&D to products in
market in a short amount of time.

Microsoft announced its comeback with the W7 commercial launch imminent. The
Page | 20
change in UI was refreshing and the expectations are quite high. W7 v2 is likely around
the corner to update on the flaws of v1. HP acquired Palm in an attempt to become
relevant again in the mobile device space. It has been an action packed 1H 2010 and we
can expect more of the same for the remainder of the year.

2010 has also been active on the regulatory front as the national broadband plan was
unveiled in March and the subsequent debate over the course of nations broadband
future kept the spectrum, net-neutrality, and exclusivity issues at the forefront.

To start planning for 4G, 5G, and beyond, US should think about rolling a 50 year
broadband plan. While more spectrum is always helpful, will we have all the spectrum we
need in 2050? or do we need to invent new technologies and business models that use
spectrum more wisely? This topic will keep the industry occupied for some time to come.
(We will be going in-depth into this subject at our Sept event with some very senior and
experienced executives)

2010 is also the year of network rollouts. T-Mobile has been rolling out HSPA+ at an
impressive rate, Clearwire announced its intention to move to LTE, Verizon is betting big
on LTE and looking for competitive marketing advantage over the course of the next 12
months. AT&T has been adding backhaul, upgrading to HSPA+ and planning for LTE all
at once. Even the smaller carriers like MetroPCS are looking for competitive advantage
with quicker LTE launch and beat others by carrying the first LTE smartphone.

US wireless data market

Service Revenues

• The US Wireless data service revenues grew 6% Q/Q to $13.2B in Q210. Compared to
Q209, the mobile data service revenues grew 22%.

• Verizon and AT&T accounted for 75% of the increase in data revenues in Q2 2010.


• T-Mobile’s 3G drive is starting to pay off. While the net-adds were still in the red, its
data growth is starting to match with its peers. The 20% 3G smartphone base definitely
helps.

• Verizon Wireless again nudged past NTT DoCoMo in overall mobile data revenues by a
Page | 21
whisker. By the end of the year, China Mobile and AT&T are also likely to cross their
Japanese counterpart in quarterly mobile data service revenues.

• AT&T and Verizon now account for 70% of the market data services revenues and 62%
of the subscription base.

ARPU

• The Overall ARPU increased by $0.46 reversing the declining trend of the past three
quarters. Average voice ARPU declined by $0.13 while the average data ARPU grew by
$0.58 or 4% Q/Q.

• The average industry percentage contribution of data to overall ARPU is now 31% in
Q210.


• Verizon led in data ARPU with $17.37 followed by AT&T and Sprint. In terms of %
contribution, all the top three operators exceeded the 30% mark. T-Mobile ended the
quarter with approximately 25% of its revenue coming from data services.

Page | 22


Page | 23

Subscribers

• Overall netadds stayed stable at just over 3M with AT&T gaining the lion-share (though their
count now includes the connected devices while other operators don’t specifically include that
in the calculations).

• The texting see-saw between US and Philippines continued in Q210. US averaged around 639
messages/user/mo marginally behind Philippines.

• For the third straight quarter, AT&T reported more net-adds from connected devices than
postpaid subs. Connected devices are now 7% of AT&T’s subscription base.

• Sprint got back into the positive net-adds territory again after 3 years. T-Mobile’s net-adds
continued to decline. T-Mobile’s 20% and Sprint’s 23% subscriber base is now prepaid. The
national prepaid penetration is touching 20%.


Page | 24


B. Overview of the Japanese Mobile Market
Page | 25

Japanese mobile market quick glance

 85% of mobile phone subscribers use online services.
 96% on 3G & 35% on 3.5G.
 50%of subscribes on flat-rate data plans.
 55% are GPS enabled phones.

The market growth

 Broad coverage of 3G network.
 Flat-rate data plans.
 Operators had more influence upon mobile ecosystem than in GSM markets.

 Many people commute by train and use mobile in the train

Latest trends of operators

 DoCoMo is going to be a recommendation platform.


 iPhone is putting up a good fight, but the market size is still small in Japan.

 Monthly subscription plan is important.

 Mobile traffic is growing larger than PC traffic.
Page | 26

Mobile ad growth forecast in Japan

Latest trends of mobile market: E-Commerce


Page | 27

THE GLOBAL MOBILE APPS MARKET

Executive Summary

Mobile applications (apps) have been around since the late nineties and the apps stores
have been available for a quite some time as well. Operators have been offering content
and applications on their appstores for most of the last decade. But it wasn’t until the
launch of Apple Appstore that the appsworld started to blossom in earnest. First, it
fundamentally changed the revenue model in favor of the developers which has become
the current defacto standard (70/30) in the mobile apps business. Second, it brought
more developers into the ecosystem as it fostered the notion of focusing on just 1-2
platforms rather than the entire device ecosystem to be relevant. Third, the time-to-
market equation changed for developers so that they can get the application from
conception to market in a fraction of a time of what was possible in the past. Finally, the
importance of a seamless end-to-end user experience to increase usage and
monetization became a core principle in the mobile apps space.


While Apple has played a significant role in reenergizing the mobile apps space by
bringing more consumers and developers into the ecosystem, there is significant activity
outside the iPhone or smartphones space that is often not discussed. The purpose of this
research study is to take a holistic look at the mobile apps space across all platforms and
Page | 28 on a global basis to get a sense of the size of the mobile apps market and the direction it
is headed.

The overall mobile apps downloads are expected to increase from over 7 billion in 2009
to almost 50 billion by 2012 growing at the rate of 92% CAGR. The revenue from mobile
apps which includes both paid downloads and revenue from advertising and virtual
goods is expected to increase from $4.1 billion in 2009 to $17.5 billion by 2012 at the
rate of 62% CAGR. Though ondeck (operator managed) mobile apps sales exceeded
those from offdeck in 2009, by 2012, offdeck is expected to hold the lion share of the
mobile apps revenue.

The dynamics of the app market are quite different in emerging nations where to
effectively monetize the significant app momentum (app downloads/active user and
growth rates in some of these countries exceed those from the western markets,
irrespective of the device type), creative strategies are needed to attract new consumers
and different business models will be required to make the regional ecosystems viable.

Overall, by enhancing discovery, improving user experience, dropping price barriers, and
increasing developer revenue share, the apps ecosystem can continue to prosper.

The paper presents the results of the study in more detail as well discusses the future of
mobile apps and how the app economy is likely to evolve.

The Mobile Apps Explosion

The overall global subscriptions base is expected to exceed 5 billion by the end of 2010
(figure 1) with over 27% of them being data subscribers (messaging not included)
meaning that they are either actively downloading content and apps and/or actively
browsing the web. In the next three years, the data penetration is expected to reach 45%
with North America leading the way with almost 60% of its base as active data


subscriptions. The advent of apps helped fuel the growth in data subscribers as the
availability of flat free pricing attracted users to upgrade and try out new applications.

In the US, almost all smartphones and many featurephones are now required to have a
data subscription.
Page | 29

The year 2009 saw an explosion of the Appstores. Non-carrier appstores jumped from a
mere 8 to 38 last year (figure 2). Almost all OEMs, big or small, have launched their own
appstores. Additionally, many vertically focused, or country specific or platform specific
appstores are trying to take advantage of the gold rush. This dynamic evolution is fueled
by thousands of new developers who are developing for specific platforms.

The shift from the old revenue share model where developers used to get as little as 10%
of the revenue to a 70% share of the revenues has made the whole mobile apps
ecosystem attractive for developers. Also, the development and the go-to-market costs
have come down significantly, especially for the developers who want to focus on just 1
or 2 platforms. Even though the fragmentation of platforms remains a significant
problem, developers don’t have to port applications to devices that will have little to
zero ROI.


Page | 30

The explosion in mobile apps has come about by the troika of three specific trends that
have empowered consumers to become appfanatics. First, the devices have become
more powerful with up to 1-2 GHz processors. Second, the wireless networks are
delivering consistently high bandwidths and better user experiences with 3G+
deployment. Finally, the creativity of developers has blossomed with access to native
APIs, richness of the platforms, ease of development, and the favorable revenue sharing
terms.

Additionally, many in the ecosystem including operators are pursuing an on-device
storefront strategy to make the user experience of search, discovery, and fulfillment
better. The app marketing done by Apple and others has raised the level of exposure to
the consumers who want to try out new apps and spend discretionary money on new
apps.

The mobile advertising ecosystem has also become more robust to provide developers
with an added avenue to monetize their applications. Many developers like Tapulous and
mig33 see apps as a way to build fiercely loyal communities of millions of users and once
the user base gets scale, it can be used to sell other digital and virtual goods to start a
new revenue stream. The creative elements in mobile advertising has seen a significant
improvement on platforms such as the iPhone and Android and made the ads more
engaging for the consumer and rewarding for the advertisers.


Smartphones vs. Featurephones

The classification of devices into buckets has been a long standing debate in the
Page | 31 industry. In the early days, the division was easy as the form factor, functionality, OS, and
capabilities of smartphones was quite distinct from the featurephones which used to
have limited processing power, smaller screens, and were primarily for voice and
messaging. However, over the last 12-18 months, the edges between the categories have
blurred significantly.

While no one will confuse the current version of Apple’s iPhone or Google’s Nexus One
to be featurephone or conversely a Motorola Razr or Nokia 2720 to be a smartphone, it
is the middle category that is becoming more difficult to separate out.5 Consider devices
like the Samsung Instinct6 which is a 3G device with capabilities for video, applications,
emails, and with up to 8 GB, it can’t be confused for a featurephone, yet, since it is a Java
phone, some might categorize it as a featurephone based on the platform.

Similarly, INQ1 by INQ Mobile the first social mobile device is based on BREW - hardly
considered a smartphone platform yet its mobile data usage is higher than even the
iPhone.7 Similarly, Japan’s largest mobile operator NTT DoCoMo reaped the benefits of
mobile data services without the introduction of smartphones in any meaningful way, it
was more due to the deeply integrated services that were in tune with the culture of
content consumption as well as lucrative 91%/9% revenue split in favor of the developers
and publishers that encouraged them to participate and invest in the ecosystem.

We are clearly seeing a middle category emerge that provides functionality of a
smartphone in the form factor of a featurephone.8 For the purposes of this paper, we
included devices with large screen form factor, virtual or physical qwerty keyboard,
application download and streaming capabilities in the smartphone category.

Mobile Apps Market

The dynamics of the global apps market vary by region. In North America and Western
Europe where smartphone penetration exceeds 25% and 3G penetration is above 40%
(as of 2009), the total number of downloads on smartphones is significantly higher than


those on the featurephones. Thus, despite the lower penetration, the revenue generated
is more than revenues generated from featurephone downloads. One of the reasons is
the high number of active data users on smartphones compared to featurephones. In
China and India, featurephones rule and as such the downloads and apps revenue are
Page | 32 relatively higher from such devices. Figure 4 shows the distribution of devices in various
regions by devices type.

In 2009, the total number of apps downloads (global) were approximately 7 billion with
Asia leading the way with 37% of the global downloads. By 2012, the total number of
apps downloads are expected to grow at 92% CAGR to almost 50 billion downloads per
year (figure 5). This is in part due to increasing number of featurephone users becoming
active app users and due to the increase in the number of apps downloads/user/month
across the board.


Page | 33

The corresponding revenue figures for 2009 were over $4.1 billion growing 62% CAGR to
$17.5 billion by 2012 (figure 6). While Asia had the highest percentage of the download
share, North America had the highest share of the apps revenue accounting for over 50%
of the total revenue.


If we look at the revenue from the perspective of ondeck vs. offdeck and paid vs.
advertising (figure 7), ondeck paid had the biggest share of the pie followed by offdeck
paid. Advertising based revenue accounted for about 12% of the overall revenue though
by 2012, advertising is expected to generate 28% of the app revenue.
Page | 34

Operators still have a larger share of the apps revenue for a couple of reasons a) the ASP
on an operator deck is almost twice the offdeck average and b) featurephones still make
up the bulk of the global market device base. However, the balance has been gradually
shifting in favor the offdeck ecosystem.

While the growth in the mobile apps market will continue to astound many, one should
keep things in perspective. Overall, the global mobile services (operator reported service
revenues) revenue exceeded $861 billion in 2009 with approximately $220 billion coming
from data services (including messaging).9 So, even though the mobile apps revenue is
growing at a fast pace, it represents a relatively small percentage (albeit growing) of the
overall data revenues in the ecosystem.

Business Models - Distribution of App Revenue

The business models for apps have evolved over time. Initially, the focus was entirely on
the paid downloads or the subscription based models that bundled other forms of
content like the ringtones and pictures with applications.10 However, over the last 3-4
years, advertising based models have become both popular and successful with
developers and the app ecosystem. In fact, for some developers, the advertising revenue
on some platforms (like Android) is bigger than the revenues generated from the paid


downloads. Some mobile players have focused on building loyal and vibrant
communities which creates an audience for selling/up-selling/cross-selling virtual, digital,
and even physical goods virtual, digital, and even physical goods

The main forms of monetization for apps are:
Page | 35
1. Paid

a. Subscription

b. In-app

2. Advertising

a. Impression-based

b. Performance-based

c. Promotion

3. Virtual Goods

4. Up-selling/cross-selling other goods

5. Hybrid

There are two broad categories of paid and advertising. In 2009, advertising contributed
almost 12% to the overall apps revenueThis share is expected to more than double by
2012 to almost 28%. In some of the developing regions, advertising will account for
more than 50% of the apps revenue by 2012.

If we break down the revenue by featurephone/smartphone and ondeck/offdeck, in
2009, featurephone ondeck paid apps revenue had the biggest market share with 35%
followed by smartphone ondeck and offdeck paid apps revenue streams respectively.

Average Selling Price (ASP)

The price range of applications in various stores can vary from $0.99 to $999. However,
if we look at the average selling price of only the downloaded apps, the paid ASP in 2009
was approximately $1.9 and the advertising revenue generated from the free
applications was approximately $0.09/user/app/year (figure 8).


Though advertising revenues per user per application doesn’t equate to ASP of
the app, for the purposes of this paper, we are looking at the advertising revenue
that can be generated by each free downloaded application/user/month. As
always, there is pressure on the ASP and as the number of the apps consumed
Page | 36 per user increases, we are likely to see the paid ASP decline by 29% in three years
while the advertising revenue/app is likely to stay relatively flat. The
improvement in targeting and creative elements will make mobile advertising
more attractive and engaging thus negating the pressure on CPMs/CPCs.
Additionally, we are likely to see new measurement metrics emerge in mobile
advertising that will help in monetizing the free apps a bit better.

We are also likely to see the increase in the sales of virtual goods and redemption of the
coupons and promotions. The various channels of mobile advertising like the web,
messaging, video, search, display are going to work more tightly together to make the
mobile advertising experience for the consumer and brand better.

Business models in Emerging Markets

There are significant differences in ASP by regions. North America has the highest overall
ASP with $1.09 followed by Europe with other regions below $0.20 (figure 9). Itis evident
that the business models required for the emerging markets will be quite different than
the western markets as the market economics and dynamics are quite different. Most


consumers are on prepaid so more data plan choices are needed to convert subscribers
into data users. Then, given the propensity to pay, mobile advertising will play a more
significant role in the app economy in countries like Indonesia, Brazil, India, and China.
As seen in the western markets, providing a bucket based or an unlimited data offering
Page | 37 takes away the fear factor from the consumers and data usage including app downloads
jumps significantly.

For the emerging markets, it is a volumes game. While the ASPs will be smaller, if an
overall strategy is executed well, the volume of data usage and app downloads can make
up for the smaller per unit revenues (either from paid downloads or advertising).

Indeed, the data shows that despite these markets being featurephone heavy,
application downloads in emerging markets can actually exceed downloads on

smartphones in western markets.

Mobile Apps vs. Mobile Web - Impact on Evolution and Revenues

There is a lot of discussion and debate in the industry on the topic of Mobile Apps vs
Mobile Web in the industry. As we have seen in the past, three critical factors will
determine how this plays out over the next few years:

1. Penetration of HTML5+ browsers on mobile


2. Difference between the native OS support and browser access to the same
APIs

3. Implementation differences between various browsers

Page | 38

As things stand in early 2010, there are pros and cons to both approaches and as such it
is not an either/or situation but rather the decision is based on the type of the
applications. Developers will choose native vs. browser direction for their apps based on
the business and technical goals for their apps. Today, native provides much richer
functionality and access to capability and as such much richer experience than a browser
does. For example, the recent Winter Olympics app by AT&T (figure 10) combines
different elements of image, text, news feeds, social networking, video, and in-app
advertising in a seamless fashion. To accomplish that in the browser will be difficult.

The user experience won’t match the performance of a native app. This issue is even
more pronounced for highly interactive games from companies like EA, Gameloft, Glu,
and others.

On the other hand, the fragmentation issue in mobile only gets worse with each year
with new devices, different implementations and operating systems, the cost of rolling
out an app across multiple devices around the world can increase exponentially.13 As
such, the browser provides the prospect of being the great unifier so you can truly
design once and run everywhere (where the browser is available). For the simple apps


that are less interactive and require less multimedia capability, like the popular social
networking and news/weather apps, browser provides the perfect avenue to maximize
impact with least amount of development.

However, when considering a global market, one needs to be mindful of the rate at
Page | 39
which HTML5+ browsers will penetrate the market (or in other words what’s the
“effective reach”). While things might move relatively quickly in the western markets, in
many of the developing markets, the penetration of devices with HTML5+ browsers (and
fast broadband mobile networks) will only increase gradually over the course of this
decade. As such, the HTML5+ browser reach will be limited, so developers will weigh
against the technical and business requirements of the applications with cost to build
such applications and how that fits in with their business strategy and revenue goals.
Some might decide to build both versions with web version for some markets and native
apps for the others. Browser won’t be the great unifier that some hope for anytime soon.

While there is hope that browser will have same access to APIs that any native apps
does, native support is generally always ahead of the browser support and the leading
developers looking for an edge in user experience are likely to go native. For some it is a
matter of semantics. For example, many web shortcuts or URLs are available as app icons
which primarily link to a website. A good percentage of the downloads for the most
popular social networking app - Facebook is via an app icon that can be downloaded as
an app.

Finally, it is a misconception that there won’t be fragmentation in the implementation of
the mobile browsers by OEMs. There will always be differences due to the primal urge to
differentiate and as such developers can expect to have these differences in the future
though the fragmentation in browsers is only marginal to that created by the native OSs.

Given the above, we are likely to see both worlds (native and web) coexist for a long time
to come. Depending on the needs of the applications and business models, both models
will stay in place for the foreseeable future. The dominance of one over another will
largely depend on the device capabilities and reach in any given region.

In fact, a larger focus should be on app search and discovery, quality of content, end-to-
end user experience, zero billing friction, developer ecosystem and how to make
developers more profitable and successful. These issues are important to tackle to keep
the app economy vibrant and healthy. Operators and OEMs can play a crucial role by
opening up the network and device APIs and building a fair and sustainable business
models that help the smaller developers. For example, in some Asian countries, the


operators still get 40-70% of the app revenue. Smaller developers who don’t have the
scale of billions of downloads will find it hard to survive in such an economic climate.

Additionally, data plans should be attractive enough to fit the needs of the subscriber,
for example, Bharti Airtel introduced daily, 3 day, monthly data packs with varying data
Page | 40
caps so that users can pick the plans per their needs. One should segment the user base
granularly and design data packs that fits the needs of each of these segments. Such
strategies enable quicker adoption especially in countries where mobile is the primary
vehicle for Internet access.

Apps to go where no app has gone before

Connectivity breeds apps. It is a given that as consumer electronic devices become
wirelessly connected, consumers are looking to download apps on those platforms. Apps
download on the iPod have been every bit of a success as they have been on the iPhone.

Similarly, we will see a significant uptick in the apps for devices such as the the iPad,
telematics platforms in vehicles, digital cameras, navigation devices, picture frames,
weight scales, and the list goes on and on. These apps will entertain and amuse
consumers, analyze data on the devices, connect users with content and friends, and will
interconnect various end-points in the pervasive mobile ecosystem in a much more

profound manner.

Conclusions

Over the course of the last two years, thousands of new developers have entered the app
ecosystem. With the capability to design better user experiences and a more lucrative
business model, developers have been designing apps for literally every possible
scenarios. From highly interactive games that only used to run on consoles to simple
news or weather look up apps, there is practically an app for every scenario from bar
exams to simulated libation consumption.

The app ecosystem itself is adjusting across multiple dimensions of regions,
offdeck/ondeck, device type, and paid/advertising/virtual goods. The growth in the
quality of the mobile advertising has opened up new revenue streams for developers.

More accurate analytics, control over pricing, and generally a shorter time-to-market
capability is providing developers to have a better understanding of how users react to
apps, features, and pricing and enables developers to adjust their strategies accordingly.


As the number of active data subscribers across the planet continues to grow and as
new forms of consumer electronics devices come online, we will continue to see the
proliferation of apps in many directions.

Page | 41

Apple App Store Worldwide

The major findings are:


 The most popular applications are the most expensive in Europe ($3.86 average), and
the least expensive applications are in North America ($2.43) and Asia ($2.69).
Although this may reflect that less expensive applications are more popular in North
America and Asia, this may also be caused by the fixed price tiers that Apple uses for
Page | 42 converting application prices to other currencies.

 Overall and worldwide, prices of the most popular applications have decreased 15%
on average during the period, December 1, 2009 through February 28, 2010. The
largest relative price decrease occurred in Australia where prices dropped 27% from
$3.77 to $2.74.

 The most popular applications in the Navigation category are the most expensive in
Europe. This is due to the large number of turn-by-turn navigation applications
covering different regions in Europe (e.g. TomTom Western Europe, Eastern Europe,
UK and Ireland).

 Games is the most popular category in Australia and North America (USA, Canada
and Mexico), where 51% and 39% of the applications respectively, ranked in the top
overall category are games.

The average price of the most popular paid applications is displayed above and is broken
down by continent. The most popular applications are most expensive in Europe ($3.86).
The most popular application prices are least expensive in North America and Asia where
they cost $2.43 and $2.69 respectively, on average. Although this may reﬂ ect that less
expensive applications are more popular in North America and Asia, this may also be
caused by the ﬁ xed price tiers that Apple uses for converting application prices to other
currencies than USD (EUR, GBP, etc).


Page | 43

The average price of the most popular paid applications for each region is displayed
above for the period December 1, 2009 through February 28, 2010. The largest relative
price decrease occurred in Asia where prices dropped 27% from $3.77 to $2.74. Prices of
the most popular applications in Asia decreased 10%, dropping to $2.78 on average.


Page | 44

The average price of applications broken down by category (Games, Books, Navigation)
and continent is displayed above. The most popular Books and Games titles average at
$2.49 and $2.82 respectively. Navigation applications are most expensive and prices
differ most per continent as well. This is caused by the large number of turn-by-turn
Navigation applications covering different regions in Europe (e.g. TomTom Western
Europe, Eastern Europe, U.K. & Ireland).


Page | 45

Besides differences in average prices between continents, the most popular content
differs per continent as well. As can be seen above, Games are most popular in general.
In Australia and North America however they are most popular compared to the other
continents, where respectively 51% and 39% of the applications ranked in the top overall

category are games. Books and Navigation applications comprise only a small
percentage of the most popular applications in each continent.

Page | 46


Page | 47


Page | 48


Page | 49

Apple App Store - iPad And iPhone

This report focuses on the Apple App Store for the iPad and iPhone in the United States.
The major findings are:

» The number of applications in the Apple App Store for iPad has grown to 4,870
since the release of the iPad on April 3rd. In the last two weeks alone, the number of iPad
applications has grown by 32.7%.

» The largest application category on the iPad is Games with 1,577 titles (32%),
followed by Entertainment and Books with 455 and 396 titles, respectively.

» Of the 186,414 applications in the Apple App Store for iPhone, 73% are paid,
while 80% of the 4,870 applications in the Apple App Store for iPad are paid.

» An application in the Apple App Store for iPhone costs $3.82 on average, as
opposed to $4.67 in the Apple App Store for iPad.

» On the Apple App Store for iPad, Medical and Finance applications are the
most expensive at $42.11 and $18.48 on average, respectively. This is significantly more
than the average price for applications in these categories on the Apple App Store for
iPhone ($10.74 and $5.74).

Number of applications
Page | 50
The number of applications in the Apple App Store is displayed above for the past three
weeks. Nine days after the release of the iPad, the Apple App Store for iPad contained
3,670 applications: 2,654 applications that were exclusively compatible with the iPad and
1,016 universal applications*. In the last two weeks alone, the total number of
applications in the Apple App Store for iPad has grown by 32.7% to 4,870 applications
on April 26. The total number of applications now available in the Apple.


Page | 51

As shown above, 73% of the 186,414 applications in the Apple App Store for iPhone are
paid, while 80% of the 4,870 applications in the Apple App Store for iPad are paid. The
largest category on the Apple App Store for iPad is Games, and it attributes significantly
to the higher percentage of paid applications: 82% of the 1,577 Games in the Apple App
Store for iPad are paid, while only 69% of the 34,181 Games in the Apple App Store for
iPhone are paid.


Page | 52

The total number of applications available in the Apple App Store for iPad is 4,870 (April
26). The largest category on the iPad is Games with 1,577 titles (32%), followed by
Entertainment and Books with 455 and 396 titles, respectively.


Page | 53

Along with differences in the proportion of free versus paid applications between iPad
and iPhone, the average prices differ as well. On average, an application in the Apple
App Store for iPhone costs $3.82, as opposed to $4.67 in the Apple App Store for iPad.

On the Apple App Store for iPad, Medical and Finance applications are most expensive at
$42.11 and $18.48, respectively. This is significantly more than the average price for
applications in these categories on the Apple App Store for iPhone ($10.74 and $5.74).

The higher price of Medical applications is signficantly influenced by six applications
published by Lexi-Comp which are priced between $9.99 and $299.99.


Page | 54

Highest ranked paid applications - Apple App Store for iPad


Page | 55


Highest ranked free applications - Apple App Store for iPad

Page | 56


Highest ranked paid applications - Apple App Store for iPhone

Page | 57


Highest ranked free applications - Apple App Store for iPhone

Page | 58


Page | 59
iPad World

The Apple App Store for iPad was officially launched along with the iPad on April
3, 2010. This report covers the Apple App Store for iPad and iPhone in the United States
as of April 6, 2010. The major findings are:

» In total, there are 2,385 applications that are available exclusively for the iPad.
The largest category on the iPad is Games with 833 titles (35%), followed by
Entertainment and Education with 260 and 205 titles, respectively.

» Games and Entertainment applications are more popular on the iPhone than
on the iPad: 70% of the most popular applications on the iPhone are published in
either one of those categories, compared to 40% on the iPad.

» 83% of applications on the iPad are paid, while only 73% of all applications are
paid on the iPhone. The average price of all paid applications that are solely
compatible with iPad is $3.61 compared to $3.55 for applications compatible with
iPhone.

» Medical applications are most expensive on both the iPad ($9.39) and iPhone
($10.73). On the contrary, Education ($9.10), Healthcare & Fitness ($4.41), Music
($6.86) and Sports ($4.95) applications are significantly more expensive on the
iPad. Books are currently cheaper on the iPad than on the iPhone which may be
influenced by the iBookstore availability on the iPad.


The total number of iPad applications is displayed above. In total, there are 2,385
applications that are available exclusively for the iPad. The largest category on the iPad is
Games with 833 titles (35%), followed by Entertainment and Education with 260 and 205
titles, respectively.
Page | 60
Please note that applications that are compatible with both iPhone and iPad are
excluded from this analysis.

Number of Ipad Applications


As depicted above, Games are more popular on the iPhone than on the iPad: 56% of
applications in the Top Overall category on the iPhone are Games, compared to 32% on
the iPad. The same is true for Entertainment: this category accounts for 14% and 8% of
Page | 61
the most popular applications on the iPhone and iPad, respectively. News (6%) and
Productivity (8%) applications however are signiﬁ cantly more popular on the iPad in
these two categories. Interestingly, the four most popular paid applications are
Productivity applications: Pages, Numbers and Keynote by Apple, Inc. and GoodReader
for iPad by GoodiWare Ltd.

Most Popular Ipad and Iphone Categories


Page | 62

Aside from differences between the iPad and the iPhone in terms of the most popular
content, pricing differs as well. As shown above, 83% of applications on the iPad are
paid, while only 73% of all applications are paid on the iPhone. The average price of all
paid applications that are solely compatible with iPad is $3.61 compared to $3.55 for
applications compatible with iPhone.


Proportion Paid: Free

Page | 63

Along with differences in the proportion of free versus paid applications between iPad
and iPhone, the average category prices differ as well. Medical applications are most
expensive on both the iPad ($9.39) and iPhone ($10.73). Opposed to this, Education
($9.10), Healthcare & Fitness ($4.41), Music ($6.86) and Sports ($4.95) applications are
signiﬁ cantly more expensive on the iPad. Books are currently cheaper on the iPad than
on the iPhone which may be inﬂ uenced by the iBookstore availability on the iPad.


Average Categories Price
Page | 64

Highest ranked paid iPad applications


Page | 65

Highest ranked free iPad applications


Page | 66


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