The surge in global app revenue, which began with the onset of the coronavirus pandemic, maybe slowing down, but the market continues to see impressive double-digit expansion, nonetheless.
Global app revenue across Apple’s App Store and Google Play in the third quarter of 2021 was up 15% year on year to US$33.6bn according to Sensor Tower Store Intelligence Data, a growth rate roughly half that witnessed in Q320. Apps sourced from Google Play enjoyed a higher rate of revenue growth – up 18.6% year on year to US$12.1bn. But Apple’s App Store still accounts for almost double that spend on a global basis after expanding 13.2% in Q321 to US$21bn.
Social networking, video sharing and messaging continue to dominate the most downloaded apps across both stores, led by TikTok, Instagram, Facebook, WhatsApp, Messenger, and YouTube. TikTok doubled its digital ad spend over the period, up 113% year on year from US$10.8m in Q320 to US$23m in Q321. Sensor Tower also noted an increased use of business apps during the third quarter, almost certainly aligned with the continued preference for remote working amongst employees worldwide.
The market may slow down in the next few months with a slight decline in the number of first time installs during the third quarter, down 1.9% from 36.4bn in Q320 to 35.7bn. That dip was slightly more pronounced on Google Play (down 2.1% to 27.6bn) than for the Apple App Store (down 1.2% to 8.1bn).
Subsequent quarters could also be affected by recent revisions of app store billing, pricing and ad tracking policies (read DOCOMO Digital chief commercial officer Jonathan Bennett’s recent blog on the subject here). It may be premature to know the exact impact, but there is little doubt that the move will support other in-app payment options.
Mobile games growth maintains an upward trajectory
Past trends have shown that mobile games have provided one of the main engines for growth within the overall app market. Separate research conducted by Newzoo estimates that turnover from the sales of paid mobile game installs, subscriptions, and in-app purchases (but excluding ad revenue) will grow 4.4% year on year in 2021 to reach US$90.7bn. That is again considerably down on the 13.3% year-on-year growth rate achieved in 2020 when global pandemic induced lockdown restrictions were in full swing.
In terms of regions, China remains the largest market for mobile games in the world. The country is forecast to generate US$31.4bn of revenue in 2021, US$11.4bn of which will be sourced from Apple’s App Store and a further US$20bn from the third-party platforms offering Android apps in the absence of Google Play in China (including those provided by Tencent, Huawei, Baidu, and Xiaomi for example).
The US is set to come a distant second with less than half of the Chinese total (US$14.8bn), the majority of which will come from the Apple App Store (US$9.5bn) and much of the remainder from Google Play (US$5bn). The third significant country is Japan, which will generate US$12.4bn of mobile games revenue in 2021, according to Newzoo (US$8,9bn from Apple App Store and US$3.3bn from Google Play). Together these three countries will account for around 65% of the global total, with no other country contributing more than 5% (South Korea comes closest with 4.6%).
Sensor Tower ranked the biggest mobile game titles in terms of the overall revenue generated during Q321 as PUGB Mobile, Honor of Kings, Genshin Impact, Pokémon GO and Roblox. However, Google Play adds Garena Free Fire, Coin Master, and Odin: Valhalla Rising into the mix.
Apps stores and operators should keep gamers close
Newzoo also polled 5,400 mobile gamers in the US, China, Germany, and Japan. It found the Pareto Principle holding up, roughly translated as 20% of players contribute nearly 80% of the revenue.
Newzoo also surmised that social media is a crucial channel to discovering new mobile games, and therefore new user acquisition. In contrast, streaming platforms, influencers, and game reviews played a more prominent role for the bigger spending players. In addition, openness to in-game ads increases with players level of investment in mobile games – in other words, they are more open to paying for subscriptions and other game-related content as they become more engaged. Just why subscription bundling with carriers can be a great way for game developers to drive user growth, and they can do more to emulate OTT streaming providers (see our recent blog for details).
Those trends are essential for key stakeholders in the mobile games market, which Newzoo expects will now expand at a compound annual growth rate (CAGR) of 11.2% to reach US$116.4bn by 2024. Indeed, mobile gaming is big business for app stores, estimated to account for 65% of all Apple app revenue in 2020, for example[i]. At the same time, research firm Omdia estimates that direct carrier billing (DCB) enablement on Google Play and the App Store generates the most significant revenue share in the entire carrier billing market.
The continued growth of mobile game revenue is very likely to expand mobile network operators (MNOs) DCB turnover in parallel, and more so if they can cement bundling partnerships with cloud gaming platform providers, which are also on the cusp of significant expansion (see our blog Cloud gaming – the next big opportunity for DCB?).
[i] App Revenue Data (2021), BusinessofApps, 4th August 2021