State of the global app economy 2020: growth, diversity, and real-world impact

State of the global app economy

Two things have grown like crazy in 2020: Coronavirus, and the global app economy. 2020 has been crazy, but there’s been massive growth in some sectors, and mobile is one of them

In this episode of TechFirst with John Koetsier we chat with Lexi Sydow, a senior market insights manager at App Annie, about the state of the global app economy.

The good news: some newbies are winning and it’s not all the rich becoming richer. And, mobile isn’t just about what happens on your phone anymore.

We talk about:

  • downloads and growth
  • countries that are growing in time in apps and on devices
  • surprises in the data
  • time for new apps to get on to top downloads and top grossing lists
  • why new apps are getting so big so quick
  • new features apps are adding
  • the overall economic impact of apps

See below for video, audio, and a full transcript …

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John Koetsier: Two things have grown like crazy in 2020: one obviously is Coronavirus, and the other is the global app economy.  Welcome to TechFirst with John Koetsier.

We all know that 2020 has been pretty crazy, but there’s also been some massive growth in some sectors, and mobile is definitely one of those. Interesting things that are happening include that some newbies, some new entrants are winning and doing well. It’s not all the rich becoming richer, and mobile isn’t just about what happens on your phone anymore.

To dive in, we’re joined by Lexi Sydow, who is a senior insights manager at App Annie and just finished a major report on mobile app evolution. Welcome, Lexi! 

Lexi Sydow - Senior Market Insights Manager at App Annie

Lexi Sydow – Senior Market Insights Manager at App Annie

Lexi Sydow: Hi, thank you for having me. 

John Koetsier: It’s a real pleasure to have you here. Let’s dive right in. You did a massive report, what did you learn? 

Lexi Sydow: Absolutely. I definitely learned a lot from this report. We took a look at the past five years and how mobile has grown, what areas are growing the most.

So basically one of the major things is downloads. I think one of the big learnings is that we can dispel that myth that people aren’t downloading new apps, that they’re just using the ones they have. That’s pretty simply not true. We actually see that downloads growth in emerging markets are growing very quickly and driving the bulk of the growth.

But then markets like the U.S. and Japan and South Korea who maybe saw, were kind of earlier on in their mobile adoption curve, they’re still seeing record levels of downloads.

We’re still seeing a really strong level. The U.S. saw 12.5 billion new app downloads in 2019 alone, which, that is a bit of a, it’s a slight increase from the year before. So we’re seeing that kind of soften, but that’s normal. We expect usage and then consumer spend to really be the big drivers once you’ve hit a large level of downloads. But the main thing is, we still are seeing record levels of downloads. And to kind of clarify, that doesn’t include if you uninstall and reinstall, and it doesn’t include like app updates, it’s just completely new installs.

So that’s one of the biggest learnings that I think is really key, that people are actively downloading new apps across the world in many different markets.

John Koetsier: So you say record levels. What does that mean? Can you put some numbers to it? 

Lexi Sydow: Absolutely. So the U.S. had 12.5 billion downloads in 2019. We saw 2.5 billion in Japan, 2.1 billion in the U.K., around 2 billion in South Korea, and that’s for mature markets. For other economies that are larger for emerging markets, such as India and Brazil, we saw that was a lot higher and with a lot stronger growth there, around 10% growth for year-over-year view.

And then in aggregate, we actually saw around 204 billion app downloads across iOS, Google Play, and third-party Android in China in 2019. 

John Koetsier: Interesting. So the total there, let me make sure I get that number right, was about 204 billion?

Lexi Sydow: Correct.

John Koetsier: Interesting. 204 billion app downloads last year, that’s a significant amount. You also learned something about time in apps or on devices, that’s still growing isn’t it? 

Lexi Sydow: Yes, it is. So we’ve seen actually during COVID times this year that that has grown even more.

So actually in April we saw that globally the average user is spending around 4 hours and 20 minutes in app each day.

And when we kind of strip out those 8 hours that you, I guess, theoretically should be sleeping — not sure we all get that — that’s about 27% of your waking hours.

Now that varies by market. So the U.S. tends to skew a little bit lower, same with some European markets like France and Germany and the U.K. And Indonesia topped 5 hours per day, over 5 hours per day on average.

So that’s also not including when we look at the deciles, that’s when it’s really interesting for those power users in the top 10% that are spending, you know, 10+ hours a day. 

John Koetsier: Wow. I’m hoping those people are in quarantine or lockdown, or something like that, but 10 hours a day … unless that’s your job in some way, shape or form, it’s a lot of time on TikTok. 

Lexi Sydow: Yes. Yeah, it is actually. But we, I mean, I think that that speaks to kind of mobile’s sort of central role in our lives. It’s sort of not only are we viewing live when we could watch live sports, and we’re starting to now, but live sports we’re watching, we’re streaming our favorite shows — but we’re also doing things like checking our bank account, transferring money, even shopping, or even if you’re a merchant, often point of sale apps or managing your accounts that way.

So I think it speaks to just how much of our lives we’re kind of managing and using mobile for, both for those active times where we’re spending, you know, we’re watching something for 30 minutes, or TikTok where it seems like it’s ten seconds and then all of a sudden it’s two hours.

But also with those micro moments where we’re not even thinking that we’re spending that much time scrolling through an article, messaging friends, researching something on the web. So I think all of that really does add up, and while we’re stuck at home often what we’ve seen is that it really does increase across the board for most people.

John Koetsier: Well, TikTok is definitely a time sink, and maybe Instagram Reels is the new one. I’m just writing a story on that right now. And so I’m experiencing that a little bit and finding the experience very, very similar.

But I wanted to ask, you studied a ton of data, what surprised you?

Lexi Sydow: Yeah. One of the big things that surprised me is that about the amount of games and apps that are achieving high levels of success. So I actually, I figured this was quite a large amount, but I didn’t really expect that the number would be so, so high.

We found that over 60% of apps are able to reach the category that they’re in, the top 30, within six months.

So that’s impressive because we’re seeing a lot of power and a lot of marketing power go into the initial launch and drive that success. But it’s also speaking to a lot of the techniques and the sophistication in the market of marketers using organic techniques and virality at play, as well as the mobile ad spend that’s helping drive downloads as well. So to me, that really stood out. It’s something that I felt I’ve kind of monitored over time and felt was true, but the number was a little bit more surprising. 

John Koetsier: So, the apps that managed to make it into those top lists, they made it there in six months from launch.

Lexi Sydow: Correct, and that’s over 60%. 

John Koetsier: Okay, wow.

Lexi Sydow: Yeah.

John Koetsier: That’s impressive, that’s impressive. 

Lexi Sydow: Yeah it is.

John Koetsier: One of the reasons why that’s impressive is that for some months, and maybe even years, kind of the top app and top game list seemed pretty static. Maybe even especially the ones that were top grossing or something like that, right, where you’d see the same games all again and again and again. And you still see them years after, some of these major titles, but now we’re seeing more change there, we’ve seen a little more diversity there, correct? 

Lexi Sydow: Absolutely, we’re actually seeing in the gaming world what’s helping as well. We tend to see top downloads tend to have a lot of hyper casual, simple, kind of really massive fuel games, right. But we’re also seeing kind of what we look at in the gaming spectrum, kind of an expansion of both ends.

We’re also seeing demand increase for core gaming and so that’s a really interesting area where we tend to see top apps — excuse me, top games for consumer spend are dominated by core games, which makes sense. People spend more time and then the mechanics of it were sophisticated and you end up monetizing through the app stores for those specific games.

But we’re seeing core games like Call Of Duty: Mobile is a good example, that really has hit the top charts globally and is particularly dominant in the U.S. for monthly active users as well as consumer spend.

And so I think that that’s a really important indication of some of the shifting trends, whereas our phones are more, the kind of device specs are better, you know, upcoming 5G, the capabilities of playing a core game on your mobile phone, I mean, it’s there, and people are doing it and it’s quite strong. And I think that’s something we saw during COVID is that people are at home more and you might expect them to reach for the console or go on their PC or Mac and play, but we’re actually still seeing people are choosing to play core games on their mobile devices.

Fortnite and PUBG and Free Fire, these battle royale games where you kind of facilitate cross device play easily. Actually, PUBG Mobile was the top growth for time spent in the U.S. in Q2 of this year.

So we’re seeing people are spending time just playing with friends, having that social element, but through your mobile device. And having that seamless kind of view for someone playing on console, mobile or PC, I think that’s a testament to the sophistication in the mobile gaming market. And on the other side … oh, go ahead. 

John Koetsier: No worries. Go ahead, please.

Lexi Sydow: I was going to say for apps, we’re also seeing a lot more diversity of apps. We tend to see social media giants kind of dominate in the top charts historically, and that is still true. And that makes a ton of sense from the standpoint of network effects, you know, I get more value from this app the more my friends and family and people I interact with use the app itself. It kind of self reinforces and then helps to gain bigger user bases.

But we’re also seeing newcomers and more diversity in the types of apps. TikTok is a really strong example of an app that over 2019 and into 2020 completely just kind of took the world by storm, and it was actually the number one grossing app in Q2, which was a big shakeup. And then on top, on the other side, we’re also seeing things like Telegram, which is more about encrypted messaging, that broke into the top 10 for downloads and monthly active users globally in Q2. So that’s another example of kind of a newcomer that hasn’t been in the top charts before.

John Koetsier: Seeing a non-gaming app, I mean, being the top grossing … that’s pretty impressive. 

Lexi Sydow: It is. We tend to see, Tinder kind of occupied that spot for a long time, and so people paying for in-app subscriptions for specific dating features. But then TikTok is up, is a big one. And we’re also seeing things like Zoom as well in the top downloads charts, obviously that’s a big one for Q2 and Q1 of this year, just skyrocketing to the top.

Google Meet is another, Microsoft Teams, Houseparty, they’ve all — all the video conferencing business apps, but also just for fun, like Houseparty — they’ve really grown immensely this year and have been shaking up those top charts too.

John Koetsier: How are those new entrants to the top list growing so fast? What are they doing to grow so fast in six months? I mean, some of that obviously is external realities of COVID-19 and Coronavirus and shut down and all that stuff, but some of those apps have been growing, like TikTok has been growing like wildfire for quite some time.

Others might be growing more with paid as well. What are you seeing are some of the mechanics that some of those new apps are using to grow so fast? 

Lexi Sydow: Absolutely. I think if I had to distill it to one major feature, I would say being able to connect with people is a key thing. So, for instance, a lot of the games that are the top games have seen, you know, Fortnite introduced Party Hub last year, and then saw their time spent in app increase about 130% over the subsequent months.

And so I think that that’s a big feature, right, is being able to play with friends and to connect, especially during COVID where you’re not maybe able to see them face to face. So that’s a big feature and things I think as well, the blurring of social and entertainment, or social and games, for instance, is another big area.

So Houseparty saw phenomenal success this year and then pretty much blew up in markets that it was nonexistent in, like Spain and Italy, it just jumped to the top of the charts and increased its user base from a very small amount to topping the charts. And that is an interesting example, because it’s social networking, but then you also layer in games. 

John Koetsier: Mm-hmm.

Lexi Sydow: So you can play games in real time with the people that you’re engaging with. So that’s another way that it’s kind of increasing the value and the stickiness, and then it has that social network virality effect. And then with games, I think, you know, there’s having that aspect of the social side is really helping, especially if you can play with your friends while social distancing, that’s big. And then I think as well within non-gaming apps, social integrations is key.

So even TikTok, you know, you can share to Instagram Stories for instance, some of the creations you have there. And I think that actually those social integrations would have helped TikTok kind of gain a wider audience, because you’re leveraging my existing social network on Instagram — maybe that’s my primary app that I use — I’m getting into TikTok and then I’ll reshare to Instagram, and then some of my friends will join because of that.

And it kind of fits that self kind of reinforcing effect, so I think that’s really key and that’s what we’re seeing a lot. 

I will also say that maximizing the key features that are topical and top of mind for people right now. So that varies by category, but things like at-home fitness, we’ve seen apps that are pivoting from live classes, for instance, we saw Peloton kind of part of their ASO strategy was to pivot from focusing on live classes to focusing on at-home classes.

And we’ve seen that kind of across the board in fitness, is the emphasis on being home while doing it.

And that’s one, I think, telehealth, remote learning, those are buzz kind of keywords that we’re seeing really pop up as feature additions or just parts of emphasizing parts of strategies for online learning apps for education, for K through 12 or university, but also lifelong learners.

Video, obviously, very key across the board in many different apps, including, actually a lot of — that’s how dating apps have really sustained and oftentimes actually boosted their time spent during COVID in dating apps, because you can’t meet up in person, adding that video feature facilitates dates still.

And so I think those are all key things. If you’re in finance, being able to kind of rank in the top charts, focusing on contactless payments. If you’re in retail and finance, being able to, you know, transact ApplePay or remotely having a payment feature. I think those are all key things that are topical now. The apps are kind of, we’re seeing more sophistication in strategies to quickly iterate in the kind of capitalize on new features that are in demand by what people need right now. 

John Koetsier: That’s really interesting. I mean, it’s kind of like putting all the ingredients of great apps in a blender and coming out with it. I mean, that’s probably a bad way of putting it, but what I’m thinking of is an app like Fortnite where all of a sudden you’ve got concerts going on, right? And you’ve got artists who can’t connect with their fans as they formerly could. You’ve got people who want to be social and this is an interesting way to be social and enjoy a concert.

And there’s going to be movies as well, movies are going to be released there also, right? And so I think some of the big apps are starting to realize, hey, we’re a large platform, and a platform is a thing that you can use for many different things, many different purposes. Is that accurate?

Lexi Sydow: Absolutely. I think that’s a trend we’ve seen kind of rising over time, even things with like Twitch being predominantly, you know, live streaming e-sports, pivoting to cooking shows. And I would assume that during COVID while we’re all at home, that’s probably also accelerating. 

John Koetsier: Everybody is baking bread and sharing it on Facebook, yes, I noticed.

Lexi Sydow: Lot of banana bread, haha. But yes, absolutely, I think that once you — you perfectly said it, once you have a large user base and a captive audience, then that becomes a question of like, okay, well we can do a bit more and we can offer something unique and engaging and keep people sticking around.

And I think another recent indication of that is Snapchat adding kind of Minis to their app where one of the first was Headspace. So, you know, talking about wellness, which mindfulness has been a big trend we’ve seen take off especially on mobile over the last couple of years, but it definitely has been top of mind during H1 of this year. So that’s a very timely integration as well that is sort of blurring the lines, right? You’re accessing a bit of wellness while you’re in kind of your traditional social media app or photo and video app.

And I think TikTok again is a great example of blurring lines with video streaming. So we’re seeing that the cross-app usage, those who use Netflix are increasingly overlapping even more with TikTok.

And so seeing growth of that all last year, we saw strong growth and we’re seeing it continue this year in a big way. So it’s kind of, the lines are blurring, like you said, there’s a blender effect happening. 

John Koetsier: Mm-hmm.

Lexi Sydow: I think that’s why it’s really important for app publishers as well to consider looking outside of their specific category, because there’s a lot more happening in the app space and in mobile that can really, you can draw from other areas. You know, shopping can gamify their loyalty system in a way that we’ve seen happen, you know?

So I think there’s a lot of learnings to be had, but it’s definitely important to take a wide view because we’re no longer kind of looking at our apps as like a, ‘I only go to this app to message this person,’ it’s much more blended, like you said. 

John Koetsier: It’s really interesting. I mean, you see also live happening in a lot of applications that didn’t have it before — TikTok didn’t have live and recently has been coming out with live and people can go live, influencers specifically can go live. You mentioned that in dating apps as well, and very, very interesting things going on there.

Want to talk a little bit about economic impact and the size of the app economy, and maybe on two levels. I mean, there’s one level where you’re measuring what’s happening kind of stays on device, right? In-app purchases in a game, or purchase of services as you mentioned on Tinder, those sorts of things, maybe even ad monetization, right?

There’s a significant amount of revenue that’s derived that is visible on a platform, but there’s even larger potentially an amount of revenue that happens via mobile, perhaps in e-commerce or something like that, that affects real world things that happen, that get shipped, or a car that gets called via Uber, or something like that. And Apple estimated recently in a report they released about a month ago, that 80% of the economic value of mobile is not actually visible in in-app purchases.

Can you talk about the overall value of mobile according to what you see on device and maybe what we can speculate about off device?

Lexi Sydow: Absolutely. I think that’s pretty spot on.

So we saw in 2019, about $120 billion spent through the app stores. So that’s that kind of traditional in-app purchase, in-app subscription, and that’s across iOS, Google Play and third-party Android. And that’s double the global box office industry to give some scale here.

So that’s big in itself, and then we saw, you know, when you add mobile advertising in it’s even bigger. So when we look at where we think we’ll be in 2020, we predict for those two in-app purchases and ad monetization combined, we’d see around $380 billion.

But then to your point, then you have M-commerce, which is even bigger and that’s the stuff that we can’t, we’re not directly seeing, right? It’s the transactions that happen directly with the retailer, or the food delivery app, or ride sharing for instance, or maybe not as much right now when we’re not traveling as much, but historically through hotels and things like that. And that is a very large space. And so I think that that’s where you start to see, like you mentioned, it’s purchasing goods on Amazon, it’s groceries, especially now we’ve seen, we kind of use sessions within retail as a proxy for sort of like foot traffic, or kind of representing an opportunity to purchase each time. Same with kind of food delivery, or QSR apps quick service restaurant like fast food apps, and we’ve seen those sessions increase dramatically during COVID.

But then also it’s been on an upward trend overall, and so that speaks to the growth of M-commerce as well. 

And then I think when you start to look at other industries that are coming sort of into their mobile transformation, if you will, there’s a lot of other effects, economic effects for say, you know, insurance apps, right? There’s a lot of cost saving that can be achieved by, or price optimization, by using mobile as a way to strategically have more information on people’s driving habits and give them a more fair, accurate kind of representation of what their premiums should be, or what they should be paying each month.

And Root car insurance is actually one of the top insurance apps that has, it’s kind of their thing, where they want you to download the app and they track how you drive, and then in theory you get a better deal, because if you’re a safe driver you’re less of a risk.

So there are those options as well, where we start to see mobile have ripple effects in industries that we might not think transact directly on mobile. You might not sign up directly for your car insurance policy on your mobile device, although you very well might, it has that effect of impacting overall revenue spent in this space. 

John Koetsier: Maybe we’ll end here. Tell us a little bit about the amount of data that went into this report and how broad that is.

Lexi Sydow: Absolutely. So we, at App Annie, we have mobile data and analytics. We cover iOS and Google Play. We also report on third-party Android in China, which is typically a black box because there’s so many, it’s a very fragmented market. And so we have downloads data, consumer spend, usage data, and these span across categories.

So it’s market level stats as well as boiling down to app-level estimates, and those we have multiple figures in usage. So some of the things we look at are overall time spent, average time spent per user,  average sessions, we drill down deeper into retention rates. And then, not featured directly in this report, but something that’s also really interesting is our demographic cuts where we look at how Gen Z behaves versus older demos — no surprise, they’re heavier mobile users.

So it’s a lot of data, a lot of really robust data with a large global footprint that’s kind of boiled down and we look at for this report. So, and we also tend to look at, as well, the mobile ad space and how different creatives perform, what the most popular formats are, and how that’s shifting.

John Koetsier: Excellent.

Lexi Sydow: So a lot of data that goes into it, but it’s also very fascinating. 

John Koetsier: Wonderful, wonderful. Well, Lexi, thank you so much for taking some time, really do appreciate it. 

Lexi Sydow: Thank you so much for having me. 

John Koetsier: It’s been a real pleasure. For everybody else as well, thank you for joining us on TechFirst. My name is John Koetsier. I appreciate you being along. Whatever platform you’re on, hey, like, subscribe, share, comment. If you’re on the podcast later on, the audio podcast later on, please rate it, review it, that would be a massive help.

Thanks, and until next time … this is John Koetsier with TechFirst.

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