If there is one thing, Epic Games Inc. and

Apple Inc.

AAPL 1.98%

can both agree, even if they fight each other, it is that it is worth arguing about the app economy.

In the 13 years since Apple launched the App Store, the number of apps has exploded. The business of delivering them to people’s smartphones has grown into a multi-billion dollar revenue stream for Apple and the other major market operator.

alphabet Inc.’s

Aco 2.40%

Google.

App stores have become key gatekeepers in accessing software that allows users to do everything on the Internet, including watching TV, reading books, and checking the weather. The key to the stores ‘business models is that they charge a commission on consumers’ purchases of digital goods and services. They don’t take any of the sales in real world goods and services, like t-shirts or car trips bought through an app in their stores, but when someone spends a video game advantage or subscribes to an online fitness program, the gatekeepers are Get their cuts.

The fees that Apple and Google levy – in many cases 30% – are at the center of the lawsuits that “Fortnite” creator Epic Games has filed against the technology giants. Epic claims that Apple’s App Store rules stifle competition and violate antitrust laws. Apple denies Epic’s claims on the grounds that the rules are applied equally and that collecting a commission is legal and covers costs such as maintaining user privacy.

The trial in Epic’s case against Apple began on May 3 and has the potential to improve an important part of the iPhone manufacturer’s service business.

Here’s a snapshot of the rising app economy.

Consumers spend billions of dollars in app stores.

According to analysts Sensor Tower, consumer spending on digital goods and services has increased over the years, and the amount of money businesses make on commissions has increased at the same time.

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Apple started the App Store in 2008 – one year after the introduction of the first iPhone – with 500 apps. The Google Play Store was launched in 2012 through the integration of the Android app marketplace into Google’s music and e-book platform. Each company’s decision to route in-app purchases of digital goods, services, and subscriptions through its payment processing systems contributed to the increase in sales.

Apple and Google recently pledged to reduce their developer commissions in some cases starting this year.

Worldwide consumer spending in app stores

Game apps dominate spending.

Mobile games generate income mainly through the sale of virtual goods or access to special game modes. These editions have game apps like

Tencent Holdings GmbH.

According to Sensor Tower, “Sensor of Kings” and “Pokémon Go” from Niantic Inc. are among the largest apps in terms of annual sales in the App Store and Google Play.

Revenue sharing by category

Digital ads grow in apps.

In addition to in-app purchases, many apps make money from ad sales, a business that has grown in recent years, data from Omdia shows. Often times, advertisements appear in games as videos that reward players for viewing them with perks in-game. Apple and Google set the guidelines for developers to generate income from in-app ads.

Apple doesn’t make money directly from in-app ads, but Google does from its AdMob platform. Both companies offer developers the option to pay to have their apps ranked at the top of user search results or to reach customers on app store pages. However, such revenue is not recorded in the following table.

Advertising revenue from mobile apps has changed since 2016

Netflix, Tinder, and TikTok are some of the most popular nongame apps.

In recent years, more nongame apps were among the top 10 consumer digital spending apps on the App Store than on Google Play. These apps have included

Netflix Inc.,

Playgroup Inc.’s

TikTok from Tinder and ByteDance Ltd.

Epic, whose “Fortnite” game is one of the top mobile apps thanks to digital editions, has tried to extend its attack on Apple and Google beyond the gaming world. It has testimony from businesses including match and sought

Spotify technology SA,

as well as smaller app developers to make his case. A match manager said a senate body last month These app store fees are the company’s fastest growing expense and would soon dwarf $ 500 million a year.

Netflix, Spotify, and other companies bypassed Apple’s cut by selling subscriptions and downloads through their websites instead of their apps. Apple prevents companies from mentioning in their apps where else consumers can sign up and does not allow companies to reduce revenue by 30%.

Top 10 apps worldwide by consumer spending

Tencent Video, a Chinese video app, had the eighth highest sales on the App Store in 2020.

Google One, a cloud storage service

Tencent Video, a Chinese video app, had the eighth highest sales on the App Store in 2020.

Google One, a cloud storage service

Tencent Video, a Chinese video app, had the eighth highest sales on the App Store in 2020.

Google One, a cloud storage service

Tencent Video, a Chinese video app, had the eighth highest sales on the App Store in 2020.

Google One, a cloud storage service

Consumers are downloading more apps than ever before.

The increase in downloads reflects how people are increasingly turning to mobile devices as the primary means of accessing the Internet. It also speaks to the popularity of the free-to-play and “freemium” models adopted by developers, which allow consumers to try an app before they have to commit to spending any money on it.

Free games are completely free, but offer the option to purchase virtual perks or experiences, while freemium apps provide basic free features for free and for additional or full access.

App downloads

Free with

In-app purchases

Free of charge, no

In-app purchases

Free with

In-app purchases

Free of charge, no

In-app purchases

Free with

In-app purchases

Free of charge, no

In-app

purchases

Free with

In-app purchases

Free of charge, no

In-app

purchases

The number of app store developers is increasing.

The pool of active developers in Apple’s App Store and Google’s Play Store has grown steadily over the years. According to analysts at the analysis company App Annie Inc., the pandemic has accelerated this trend, which in particular is increasing the demand for apps for food and drink, shopping and games.

Most of the apps in the Apple App Store are free.

The total number of apps in the App Store was lower last year than in 2017, partly because Apple is cleaning up those that no longer meet the inclusion criteria. In 2016 and 2017, extensive apps were deleted from its platform.

In the meantime, the proportion of apps that are free and do not offer in-app purchases has increased. Despite this trend, sales in the Apple App Store have increased because Consumers have spent more money in apps that offer in-app purchases and in paid apps. The number of active iPhones worldwide has risen from around 900 million in 2019 to over a billion this year.

Apple App Store apps

Free with

In-app purchases

Free of charge, no

In-app purchases

Free with

In-app purchases

Free of charge, no

In-app purchases

Free with

In-app purchases

Free of charge, no

In-app purchases

Free with

In-app purchases

Free of charge, no

In-app purchases

Write to Roque Ruiz at Roque.RuizGonzalez@wsj.com and Sarah E. Needleman sarah.needleman@wsj.com

Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

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