The digital economy has had a sobering last few months with the plunging stock markets and valuations. However, the recent results from the two tech behemoths have instilled a degree of confidence in the digital and the app economy. Global app spending reached $65 billion in the first half of 2022, up only slightly from the $64.4 billion during the same period in 2021, as hypergrowth fueled by the pandemic has slowed down[i]. But overall, the app economy is continuing to grow, having produced a record number of downloads and consumer spending across both the iOS and Google Play stores combined in 2021[ii]. Last year, global spending across iOS and Google Play was $133 billion, and consumers downloaded 143.6 billion apps.
Beyond the social apps, dominated by TikTok, the fastest growing categories have been video streaming and gaming. While there have been some concerns about the sustained growth of the former, the bellwethers like Netflix and Disney have found new avenues to continue their upward momentum[iii]. The downward trajectory for both linear television and the box office has been consistent, however. As the world adopts video streaming as the default, the average global box office of the six films produced by Marvel since the beginning of 2021 has fallen to $773.6 million, roughly half of the $1.5 billion average of the previous six films[iv].
Big tech results instill confidence
Apple reported Q3 earnings with revenue of $83B, up 2% YoY and above estimates of $82.8B. iPhone revenue was up 3% to $40.7B, but Mac was down 10% to $7.4B. Apple’s services revenue, more importantly in the context, grew 12% YoY to $19.6B, and 860M paid subscribers, up from 825M in Q2. Apple continues doubling its strategic investments in content for Apple TV+ and Apple Music.
“We’re also seeing revenue accelerate as we continue to make Prime even better for members, both investing in faster shipping speeds and adding unique benefits such as free delivery from Grubhub for a year, exclusive access to NFL Thursday Night Football games starting September 15, and releasing the highly anticipated series The Lord of the Rings: The Rings of Power on September 2.”, noted Amazon’s CEO Andy Jassy in the announcement. Prime Video’s robust international slate grew with the debut of more than 25 local Originals and live sporting events. New global programming includes Yosi, the Regretful Spy (Argentina), The Kids in the Hall (Canada), Modern Love Mumbai (India), Bang Bang Baby(Italy), and Lovestruck High(UK). Sports programming includes Roland-Garros French Open tennis in France, the Australian Swimming Championships, and live boxing in Japan.
The ad-supported, free streaming content service Amazon Freevee received its first major award win for Judy Justice, starring Judge Judy Sheindlin, which earned a Daytime Emmy. Freevee also premiered three new Original series—Bosch: Legacy, one of the 10 most-streamed shows across all services in May, according to streaming hub Reelgood; crime dramaTroppo; and home-renovation series Hollywood Houselift with Jeff Lewis—and one Original film, Love Accidentally. Prime Video Channels expanded its portfolio to offer more premium Spanish-language content with the addition of Vix+, TelevisaUnivisions’ streaming service. Prime Video Channels offer customers additional paid subscriptions to third-party premium networks and other streaming entertainment channels, such as discovery+, Paramount+, AMC+, Globo, BET+, NBA League Pass, MLB.TV, STARZ, and SHOWTIME.[v]
Meanwhile, Spotify’s monthly active users grew 19% year-over-year to 433 million, 5 million above guidance. Net additions of 19 million represented the company’s largest ever Q2 growth, with expectations set even higher than anticipated for Q3 at 450 million. Premium subscribers grew 14% year-over-year to 188 million, 6 million above the first quarter’s total and slightly above company guidance of 187 million. As of the end of Q2, Spotify had 4.4 million podcasts on the platform, up from 4 million in the first quarter.
The ubiquity of the plus branding did not deter Snap from getting into the game earlier. Now Snap+ has gone past Twitter Blue, the social platform’s attempt at subscription revenue. Since the subscription’s arrival in late June, Snapchat’s mobile app has generated approximately $7.3 million in worldwide consumer spending across iOS and Android, according to Sensor Tower. The figure is also around 116 times higher than the $63,000 the app pulled in via in-app purchases in the 30 days prior, from May 30, 2022–June 28, 2022, indicating the bulk of the new revenue was driven by Snapchat+[vi]. Notably, the number is already larger than Twitter’s in-app revenue, which totals nearly $4 million since Twitter Blue’s June 2021 launch — over a year’s time. Snapchat+ could be succeeding because it has more power users than Twitter, Sensor Tower data shows, as 34% of its active installs open the app every single day compared with just 19% for Twitter.
While recessionary headwinds continue to cause worry, the tech sector and especially the platforms have come to truly understand underlying consumer preferences and have evolved their businesses to a position far more resilient than some of the other sectors. While the macroeconomic conditions continue to be challenging, consumer appetite for digital content fueled by faster data speeds, affordable subscriptions and smartphones continue to drive the growth story. The sign-up and payments experiences will remain fundamentally critical for brands looking to grow, especially in underbanked markets and they will take a cue from bellwethers like Netflix that are doubling down on alternative payment methods like direct carrier billing to sustain growth[vii].