What will 2023 bring for mobile apps and games? In this TechFirst with John Koetsier we chat with Data.ai CEO Ted Krantz about 21 new billion-dollar mobile apps including Call of Duty Mobile, Bumble, and HBO Max.
We also chat about entertainment, about third-party app stores competing with Apple, and the decline in ad revenue growth for mobile apps. One category that’s growing fast: travel, hotel, airplane ticket booking, and rental car booking apps.
On third-party app stores competing with Apple … I speculate about Google, Facebook, Epic, Rovio, and other big tech companies and mobile app publishers establishing their own app stores to ensure they can deliver exactly the apps they wish in exactly the way they want.
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Transcript: 2023 mobile predictions
(This transcript has been lightly edited for length and clarity.)
John Koetsier: Hello and welcome to TechFirst, everybody. It’s almost 2023. In fact, it’s December 20 when we’re recording this. Which means, guess what? We start to look back — what happened? And we start to look forward — what’s going to happen? A good person to chat with when you’re wondering those thoughts, is somebody who has a lot of data.
We’re talking with Ted Krantz today. He’s the CEO of data.ai, and that’s one of the top platforms for digital and especially mobile data. Welcome, Ted. How are you doing?
Ted Krantz: I’m doing fantastic, John. Thanks for having me.
John Koetsier: Awesome. Always good to have you. Third time lucky. We tried to set this up a couple times. I think I screwed up. I think we had some other issues but it’s all good, here we are. Let’s start with the past. What happened? What was a big story in 2022?
Ted Krantz: Well, I think for us, the big story is gaming and kind of coming off of the inflated point that we have in Covid, a bit of a false high expecting it to continue trend-wise. It didn’t. It softened a little bit. And, you know, you can also see in terms of the monetization across the board as well, the mobile platform is plateaued a little bit.
And I think that the big story from my perspective is that the global economy is kind of riding the break here on mobile growth and we need to get by that reality for these numbers to probably translate to reality.
John Koetsier: And yet you’ve got some new entrants in the billion dollar club, correct?
Ted Krantz: We do, indeed.
There’s gonna be 21 new entrants to the billion dollar club. Twenty-one. So if you haven’t checked out our app Pulse, John, I encourage you and your viewers to do so as well.
We have what’s called the mobile performance score, it’s a FICO score. And some of the big winners that we see coming up are Call of Duty, HBO Max, and Bumble. And out of a score out of a perfect kind of 100, it’s based on your ability to acquire, engage, sentiment with the app, and monetization. And just to give you an example, Call of Duty ranked the highest. It was 100 on acquisition, 100 on engagement, sentiment at 79 — which is really good, sentiment is very tricky — and monetization a perfect 100 as well. So, yeah, there’s some very big winners on mobile.
John Koetsier: 21 new apps making a billion dollars. Is that billion total? Is that a billion a year? Is that billion since inception?
Ted Krantz: Yeah, since inception. Yep.
John Koetsier: Very, very nice. That’s a good club to be a part of. Anybody surprise you on mobile? I mean, we all know TikTok’s been massive for a while, it’s growing fast. Call of Duty, it’s interesting that it’s hit the billion dollar club on mobile, which is a big deal. That’s a franchise that’s been around for a while. Any apps that, wow, I didn’t see that one coming?
Ted Krantz: Yeah.
John Koetsier: I guess I know one. Lensa, right? I mean, like…
Ted Krantz: There you go.
John Koetsier: … holy cow, took the world by storm a month ago or so and we can’t get away from its AI-generated images. Anything else?
Ted Krantz: Well, I think what also took me back a little bit when we’re going through the report and building it out, you know, 70% of time spent on mobile is in an entertainment realm. So, not just gaming, but OTT, right? All of these engagement opportunities on mobile are really through an entertainment reality at this stage of the game, which kind of took me back a little bit.
John Koetsier: Mm-hmm.
Ted Krantz: And you can see things that are kicking up during the course of next year that, you know, probably are not too surprising with travel bookings, hotels. That category is growing around 45% going into next year, year-over-year, which is great, but that’s offsetting the decline in gaming which is about three points behind pace. And then the rest of the app infrastructure is probably around 7% growth.
So, net-net on all of that, you’re looking at consumer spend relatively flat year-over-year.
John Koetsier: That makes a ton of sense, right? I mean, like you said, we had the Covid hangover. We couldn’t go anywhere, couldn’t do anything… play lots of games, whatever. But interestingly you said entertainment is still massive, right?
Ted Krantz: Yes.
John Koetsier: 70% of our time. And we’re starting to look at the travel apps and all that stuff. One thing that might be concerning for some app categories that are particularly dependent on ad revenue — you’ve seen a slowdown in advertising in some cases?
Ted Krantz: We are.
We’re seeing almost a 50% decline in terms of advertising. This year it was about 14% growth. We see it going into the sevens, maybe seven and a half percent growth in 2023.
So it is slowing down. Now, all that said, it is a little bit kind of a back to the future equation of, you know, spray and pray with advertising. There’s so many compromises here on first-party, IDFA, fingerprinting, that nature. Performance marketing is tougher, but the bet on digital over offline has already been made. It’s substantiated that everybody is betting on digital to outperform, and of that, mobile represents 65% of the digital advertising.
John Koetsier: So, just so I understand that correctly, you’re not seeing a decline in total ad dollars, but you’re seeing a decline in growth rate. Is that correct?
Ted Krantz: Yeah. The ad spend slows from 14 to about seven and a half percent.
John Koetsier: Okay.
Ted Krantz: Total amount going to advertising, we see around $362 billion from mobile.
John Koetsier: Interesting. Interesting. Okay, cool. You know, we always talk about the new apps. And I saw … I got pitched the other day, Talking Tom, Outfit7— I think they’re based somewhere in Europe, could be Portugal, it could be Spain, somewhere like that, or maybe Malta — but they’ve had Talking Tom for forever. 10 years, been one of the top games, and I actually have that on my mobile.
And I have Subway Surfers and they’ve got the 10-year logo there. Some of these apps are… they’re franchises that are lasting and lasting and lasting …
Ted Krantz: Yeah. Casual gaming, if you really nail the IP and the engagement, the LTV is incredible, right? Talk about an incredible LTV.
I don’t know if you saw the stat, but TikTok at 9 billion is what we represent the LTV of TikTok to be.
John Koetsier: Ouch, ouch. I’m going a little off script here…
Ted Krantz: And 25 hours a month.
John Koetsier: [Laughing] I’m going a little off script here ’cause we didn’t discuss talking about TikTok that much, but I’m kind of wondering if we’ll see TikTok revert to mean, slow growth, maybe even decline a little bit in 2023? That’s probably super contrarian and probably really dumb on my part honestly ’cause we’ve seen nothing but growth there.
But we continue to see political issues. Some other nations might ban it, who knows? But I’m just wondering, you know, is that gonna continue to just blow up the mobile ecosystem or what’s your thought?
Ted Krantz: Well, if experience has been any indication, anytime you speculate and make hard calls, you set yourself up… [laughter]. Now, I would say longer term, you’re probably right. I’m not so sure so much of that decline will be felt in 2023, it’s just such a machine.
And then you start talking about even on the advertising side, in-app native search, right, capabilities of TikTok. That’s another advertising haven potentially. So, yes, you do have some of these more geopolitical risks and regulatory concerns, but I’m not so sure that’ll all play out fully in 2023.
John Koetsier: Interesting. You talked about in-app search and in some cases you’re saying that could potentially replace Google, or at least some of the searches that would go to Google or go to Bing or something like that.
Ted Krantz: Exactly. Yeah. I think that the in-app component of now what’s capable with native search and also just being, you know, real in terms of what the data’s representing.
The higher you are on the engagement front, the better the LTV, the more you’re gonna be able to elongate your functionality within the app, take advantage of nuances, and create an experience within that app that buys more time. And so advertising will follow.
John Koetsier: And the more you become an ecosystem, right, people are staying in there doing more things, spending more time, it also could potentially correlate with the retail ad network phenomenon where you can start selling ads against your search results.
Ted Krantz: Yes.
John Koetsier: Interesting. Also, that could be promoted videos in the case of TikTok, could be very different things in different apps. Super interesting.
One thing that we saw, I wanna say two weeks ago or so – Mark Gurman had a post about it in Bloomberg Business Week – Apple being forced to potentially allow third-party app stores is not something we’ve seen on iOS for forever.
We see that on Android, of course, especially in China and Asia and other places, Eastern Europe, other third-party Google Plays, if I can put it that way. We’ve never seen that on iOS. And DigitalEurope’s new Digital Markets Act made me predict in June, I wanna say, or July, that they would have to allow it on iOS. What do you think the impact is of third-party app stores?
Ted Krantz: Well, you know, I’ve been at the company eight years and this topic has come up multiple, multiple times. Independent of the reality, it’s still Google and Apple dominating the game. But even Huawei, we’ve had opportunities where we’ve looked at that, and again, getting back to the regulatory, there are concerns there in terms of what we might be able to do.
This EU decision is big. It’s an extremely kind of daunting reality, I’m sure, in terms of how this has played out specifically for Android and iOS and more competition within the stores. I do think over time that it’s good for everyone.
As we’ve seen, there’s oftentimes a lot of noise in terms of the premium that’s being charged to participate in the stores, and I think this could open things up and level the playing field a little bit, but way too early to call in terms of how much that will really play out.
John Koetsier: It is really early. I did some speculation, I wanna say a week ago, on it in a blog post, and it can go wild places. Just imagine, for instance, I mean, Facebook owns a significant chunk of app discovery via its advertising products. What if Facebook did an app store for iOS? Interesting.
Ted Krantz: Oh, I know. Yeah.
John Koetsier: What if Google did an app store for iOS? What if, obviously Fortnite with Epic is gonna do some kind of app store if they’re in any way allowed to. But what if Rovio does one, right? And all the Angry Birds apps and everything like that. Super interesting stuff. You could get big brands doing it too — the Nike app store.
I think it’s really challenging to beat Apple on its own turf. The connection that it’s got, the deep integration that it’s got, the trust level that it’s won already. But, yeah, it will be an interesting 2023, 2024.
Ted Krantz: Yes, indeed. I think even as evidenced by what Apple and Google are doing with search engine on a mobile device and kind of the commitment moving forward at some point on Chrome. And so I think people are starting to figure out what lane you’re in. We’re truly in Mobile 2.0 at this stage. From my perspective, there’s a lot of disruption. I think it’ll be very interesting to see how this plays out.
John Koetsier: You know, not only that, we’ve talked before about super apps and of course that’s big in Asia, we haven’t really seen that come in the West yet. Will we see that come? Will Google take that…
Ted Krantz: You know, if Elon was trying to tee that up, right, with X ?
John Koetsier: [Laughing] I think he’s got more things to worry about right now. Hold what he’s got rather than build more. But it is interesting, I mean, I’ve always thought that Google Assistant, or Siri, or Alexa could be sort of that “super app,” in some sense.
Ted Krantz: Yeah.
John Koetsier: But we’ll see how that plays out. Any other predictions for 2023?
Ted Krantz: Those are really the big ones that we talked about there. You know, again, entertainment driving 70% of time spent on mobile, that is just mind blowing. But much more of the original content as a driver moving forward too, if you’re an HBO fan and you’re kind of checking out “White Lotus” and some of these other premium players that original content is driving the engagement.
You know, even Apple+ with some of the content that they’ve released has become a player. So I think that’ll be a bigger trend as well.
John Koetsier: I was so negative on Apple+ when it first came out and they had just a few things there, and I didn’t like the interface — I still don’t like the interface, I still find it much harder to use than Netflix or something, Amazon Prime or anything like that — but I have to admit, I was wrong. They’ve done some amazing things. They’ve released some amazing content and I’ve actually spent time watching stuff on Apple TV+. So, yeah, this is my mea culpa, my moment of shame. [Laughing]
Ted Krantz: Right? You don’t wanna bet against Apple, that’s for sure.
John Koetsier: Shoot. Uh oh. Well, Ted, it’s been great. I hope you have a wonderful vacation period. Hope you’re taking some time off, and talk to you again sometime in 2023.
Ted Krantz: Thanks, John. It was fun as always.
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