First hypothesis: Emerging markets bring traffic, established markets bring revenues
Google Play’s 30% year-over-year growth in downloads is mostly driven by emerging markets. The study contrasts exemplary growth data for Brazil (90%) and India (50%) with the US (only 10%). In addition, 7 of the top 10 Google Play app downloads markets are now emerging markets. Economic growth, improved mobile infrastructure, and device commoditization could account for this development.
In contrast, Google Play’s 40% year-over-year growth in revenue is mostly driven by established markets. The main growth driving markets are Japan (40%), Germany (50%), and the US (50%) with Taiwan being the only emerging market in the top 10 ranking of Google Play app revenue. One reason might be that app makers successfully focus on monetizing their financially most promising consumer group.
Second hypothesis: Applications bring traffic, games bring revenues
Growth in downloads is associated with both applications and games with applications dominating in terms of growth rates. Downloads of applications grew by 30% while downloads of games grew by 20% year-over-year. App Annie observed the strongest download growth in phone performance enhancing, user experience simplification (both in particularly in emerging markets), and camera enhancing apps.
In contrast, growth in revenues is only driven by games. This category achieved revenue growth of 50% while application revenue remained flat. This is surprising as most users, particularly in established markets, spend their time outside of games.
Bringing it all together: What to do to reach your goal
Based on the insight from the data, entrepreneurs and developers in the app space can think about the business model and positioning of their apps. Two strategies could be the result.
First, entrepreneurs aiming to drive the number of downloads of their app should bet on offering applications and position them for emerging markets. This could be a good strategy for apps that create value by increasing the number of users, e.g. for products with network effects.
Second, entrepreneurs aiming to create a profitable app product should focus on games and position them for established markets. The higher revenue in this segment could, however, also be a consequence of higher efforts of game developers to monetize their product offering and should be considered by entrepreneurs with scepticism.