Eurapp Study Early Results

David Card, VP Research14 June, 2013

Shape the Future of the European App Economy

Agenda

• European app ecosystem• App developer characteristics• Platform requirements• New platform adoption patterns• Bottlenecks for the European app economy• Measuring success

European App Ecosystem

OS suppliersAPI suppliers

Devices

Social

Mobile

Smart TV

ISVs

New PlatformsEnvironment

App Developer TypesOriginator

IT Developers

Cottage Industry, Hobbyists

Aftermarket

App Stores, 3rd party app-discovery

Revenue/Monetization• Consumer spending• Business spending• Advertising• In-app spending (virtual

goods)

Jobs created

App Developer Characteristics

450,000-500,000 jobs created in US since 2007

2012 GigaOM Survey with App Developers Alliance (cottage industry)• 2/3 1-3 person firm• 60% developing paid mobile apps, 25% developing ad-supported apps• 40% part-time• 60% under 4 years experience

• US– Some  post-grad  work  or  degree  –  29%– Average  salary  $56,000

• W.  Europe– Some  post-grad  work  or  degree  –  41%– Average  salary $35,000

• Asia- Pacific– Some  post grad  work  or  degree  –  42%– Average  salary $42,000

Platform Basics

• Platforms: APIs and services• Must be win-win-win: originator, aftermarket, user• Network effects:

– Increase with participation– Lock-in– Winner-take all markets

• Key tactics: – Supply lower-cost technology– Create habitual usage – Drive customer acquisition– Enable service syndication

Representative Social Platforms

Spotify Facebook Google+ Twitter LinkedIn

Audience ✓ ✓✓✓ ✓ ✓✓ ✓✓✓Core tech ✓✓ ✓ ✓Data ✓✓ ✓ ✓✓✓ ✓✓Revenue streams ✓ ✓✓ ✓Tools & support ✓ ✓✓ ✓ ✓Discovery & distribution

✓✓ ✓✓

Syndication ✓✓✓ ✓✓✓ ✓✓ ✓

Key: checks represent relative strength of platform offering from developers’ perspective

Source: Smith's Point Analytics/GigaOM Research, 2013

Smartphone Crossover on the Horizon

2012 2013 2014 2015 2016 20170

50

100

150

200

250

Smartphone Shipments, 2012-2017

North America Western Europe Japan

(mill

ions

)

Source: GigaOM Pro U.S. consumer survey, 3/12 N = 1,165

Cashed in a digital coupon

Made a payment

Posted photos to the web

Posted to a social network

Downloaded an app

Browsed the web

Viewed a social network

Played a game

E-mail

Took photos

SMS

0% 10% 20% 30% 40% 50% 60% 70% 80%3%

3%

13%

14%

18%

19%

21%

22%

34%

40%

46%

6%

6%

26%

29%

38%

39%

43%

44%

69%

61%

69%Regular Activities on US Phones

Smartphone OwnersAll Phones

% of online adults with mobile phones

Question asks: Which of the following activities did you do monthly or more frequently on a mobile phone? (Select all that apply)

Smartphones Changed US Mobile Usage

Source: Internet World Stats, 2012

Facebook Adoption Passing 50% in Europe

Mar-11 Jun-11 Seo 2011 Dec-11 Mar-120

50

100

150

200

250

Facebook Subscriber Growth

Europe Asia North America

(mill

ions

)

Source: GigaOM Pro U.S. consumer survey, 3/12 N = 712

Look for datesSeek or offer job opportunities

ShopListen to music

Share news storiesLocal event information

Professional communicationsFind out about entertainment

Read news storiesPlay games

View or post photosCommunicate with friends

0% 20% 40% 60% 80% 100%

4%

6%

7%

9%

12%

13%

14%

14%

17%

24%

46%

79%

Regular Activities on US Social Networks

% of online adults using social networksQuestion asks: For what purposes do you use social networking sites regularly? (Select all that apply)

Communications, Photos Still Dominated Social

Source: GigaOM Research, NextMarket Insights, 2013

Smart TV Platforms Just Getting Underway

2011 2012 2013 2014 201505

101520253035404550

Smart TV Shipments, 2011-2015

Europe North America

(mill

ions

)

Bottlenecks for the Eurapp Economy

• Environmental– Platform concentration: US

companies dominate– 3+ year lag in adoption– Fragmented markets– Conservative investors,

entrepreneurs

• Technical– Cross-platform development– Dev tools, open source– Native language support tools– Lagging 4G– Data portability

• Business and Financial– Immature ad market– No standard ad measurement

“currency”– Unwillingness to pay for apps– Low-priced apps– Customer acquisition costs– Access to capital

• Resources– Fewer developers– Lower salaries– Lack of business expertise at

tech startups

Early Feedback on Bottlenecks

• Interviews with platforms, aftermarket, developers• Consensus: app developers need more support on business

development (marketing, monetization) than tech

Key Business and Financial Bottlenecks:• Revenue opportunities: direct fees seem more immediately

desirable than advertising• Marketing assistance: promotion/discovery, search advertising and

other marketing• Expansion into additional national markets• Expertise and/or platforms to support local currencies, taxes,

different carrier or platform policies, etc.

Measuring Success

• Independent Software Vendors– Revenue– Downloads; monthly users– Franchise expansion– In-app purchasing patterns– Brand lift

• IT Developers– Adoption by employees,

 customers, partners– Market-specific objectives (e.g.,

 reduced customer service  costs, increased transactions,  etc.)

• Cottage Industry, Hobbyist Developers– Similar to ISVs on reduced  scale– Ability to attract funding– Growth as exit path to IPO or

acquisition

• Sustainability– Critical mass– Path to maturity  – Extended product portfolio– True hobbyists: provide for own

 personal income, not lasting  business

Takeaways and Next Steps

• Platform growth will take care of itself• Are the platforms providing the necessary ingredients for the

ecosystem?• Who can assist with the business and financial bottlenecks? How?

• Two surveys– Independent app developers– IT app developers

• Feedback for the aftermarket model and jobs profiling• Input into the crowdsourcing exercises

On to the workshopping!