An overview of the revenue lost due to piracy in mobile applications market

1. 2011
Piracy of Mobile
Applications
Tip of the iceberg
An overview of the revenue lost due to piracy in mobile applications market.
27 September 2011 Radhika Chittoor Balani
10/31/2011

2. Table of Contents
Introduction ............................................................................................................................... 3
Current Market Scenario ........................................................................................................... 4
Pirated Applications Availability .............................................................................................. 7
References................................................................................................................................. 8
27 September 2011

3. Introduction
Mobile developers, irrespective of the platform are faced with rampant piracy issues eating away
into the probable revenues. The revenues expected from the mobile applications are going to be
in the tune of USD 11 Billion by the year 2014 going just by the United States downloads alone.
As per the Gartner report, the mobile apps worldwide download is going to cross the USD 21
Billion mark by the year 2013 while the total revenues of the application stores inclusive of sales
and advertising would be more than USD 29 Billion by 2013.
But this growth in the mobile apps market does not necessarily translate into revenue for the
application developers as the market is highly prone to piracy. One can safely assume that
almost 75% of the applications downloaded on to the mobile devices are done without going
through the payment process, leading to huge revenue loss to the developers.
Due to jail breaking in case of iPhone it is has become easy to install the pirated versions of the
mobile applications. Owners of these jailbroken devices can install pirated software using any of
the applications available. There is a huge difference in the number of paid downloads for any
gaming software and those using the paid version.
Piracy has a three pronged effect on the mobile applications market as it affects the publishers’
top line, leads to creation of sales reports which do not match the analytics reports and lasts it
also increases the popularity of the application making it more susceptible to piracy.

4. Current Market Scenario
The Apple’s iOS powers the devices like the iPod, iPad and the iPhone. It is a Unix based system
and leverages on the basic security controls to ensure the security. These are primarily the
access control, encryption, application provenance and isolation. Having said that it is still not
safe to assume jailbreaking is not possible in the iPhones. Though Apple is working towards
coming up with versions more secure than the previous, jailbreaking occurs within a few days of
the new version’s launch.
When Jailbreaking is done
the iPhones are open for
running of pirated
application. This makes it
difficult to find out the exact
number of legal users for a
mobile application. For
example, as per Apple’s
Game Center, there are
about 1600 user scores for
Fingerkicks- the iOS
soccer application from
Gameized. But the copies
sold actually are only about
1,160 as given by Gameized. This shows the extent of piracy in the mobile applications market.
The ratio of applications available for free as against paid is 31:69, out of which almost 13% of
the paid applications are available as pirated versions for free download. The magnitude of piracy
can be better captured by noting that almost 97% of the top 100 mobile applications are pirated.
Following are some of the key figures highlighting the magnitude of piracy in iOS:
Piracy Loss Estimations
01 Jan 2010 01 Sep, 2010 Early 2011
Total Applications 150,000 250,000 350,000
Estimated Paid 3,000,000,000 6,500,000,000 10,000,000,000
Application Sales
Estimated Paid 17% 17% 17%
Applications Sales
Total Paid Applications 510,000.000 1,105,000,000 1,700,000,000

5. Piracy Loss Estimations
Downloaded
Average Applications USD 3.00 USD 3.00 USD 3.00
Cost
Applications Revenue USD USD 3,315,000,000 USD 5,100,000,000
1,530,000,000
Piracy 75% 75% 75%
Lost Sales USD USD 9,945,000,000 USD 15,300,000,000
4,590,000,000
Expected Purchases 10% 10% 10%
Lack of Anti-piracy USD 459,000,000 USD 994,500,000 USD 1,530,000,000
Loss
Source: 24/ 7 Wall St.
Piracy does not simply mean direct revenue loss. This is primarily because more often than not,
though a particular pirated software is installed it is most likely that it has not been used more
than once or twice initially. Most of the illegal installers of the software use it in the beginning and
then just stop using it.
Keeping in view this it has been found out that as against the initial
revenue loss calculated to the tune of USD 459 Million the actual loss
incurred due to the piracy was USD 30 million. As per one of the It is important to note that one
studies conducted it has been found that at least one pirated cannot calculate the loss of
application can be found in 38% of jailbroken iPhones. The
revenue by simply multiplying
conversion rate for a pirated application to purchased is less than
the cost and the pirated
copies.
0.43% showing that though most people go for pirated version to
verify the apps before buying they end up either losing interest or
getting used to the pirated version.

6. The market statistics in terms of USA alone for the iPhone applications piracy are as given in the
picture below:
Source: 2011 mtiks, LLC
Some of the companies which have acknowledged their revenue loss because of piracy are:
Company Name Piracy Rate Application Cost Application Name
Neptune Interactive 90% USD 1.99 Tap-Fu
Inc & Smells Like a
Donkey Inc
Web Scout Inc 75% USD 0.99 iCombat
Freelance Developer 75% USD 4.99 Layers
Fish Labs 95% USD 7.00 Rally Master Pro 3D

7. Pirated Applications Availability
AppTrackr which is part of Hackulous, is a popular pirate collection webpage. One needs to have
AppTrackr along with Installous to download any pirated application easily. AppTrackr is a web
based directory which has a list of all the pirated applications available whereas Installous helps
in downloading these pirated versions to be downloaded on the jailbroken iPhone. Further
Hackulous furthers allows for sharing of the pirated applications, making it even easier for all to
gain access to the apps for free.
Another site which allows users to download and install mobile applications for free is the
Grabuolo.us. Other sites which promote piracy are the torrent sites out of which the top few are
The Pirate Bay, Torrentz, BTJunkie and so on.

8. References
http://www.thinq.co.uk/2011/7/13/90-cent-iphone-games-are-stolen/
www.yankeegroup.com
http://www.mtiks.com/
http://geeknizer.com/iphone-app-piracy/#ixzz1ZFfD39k2
http://www.gameized.com/