Mobile applications target market sizes

As mobile application stores continue to appear like wasps flocking to a jam sandwich, with the Ovi launch, being joined by a Java application store from Sun, the Blackberry Application World and the Vodafone App Store joining a market already busy with operator application stores, and independent application stores from people like Handango , GetJar the time couldn't be better for a mobile application developer surely?

A top down analysis of the mobile market normally starts with the following sentence

• There are 3 billion mobile subscribers in the world today, and this number is growing

At which point many executives miss the next 10 minutes as they are spending the time trying to get their heads around what 3 billion people actually is, and engaging in business fantasies along the lines of "if we could get just 1% of this market paying us just €1 per month for our superb product we'd make an extra €360m per year". However looking around at the mobile landscape there are very few application companies making anywhere near that sort of money. Looking at Opera Sofware - who provide browsing functionality for embedded devices, in 2008 they made just €43m revenue from the devices segment. Now this is an awesome performance for a mobile application company, but represents just ¢1.5 for each of those 3 billion mobile subscribers.

So why is there such a big gap between the potential market, and what the best performers are able to capture?

To understand that we have to look at what consumers are buying when they buy a mobile phone. When consumers buy a mobile phone they are buying a product for communications - the primary motivation has been voice, and text messaging - and this is reflected in mobile operators revenues - just 8% of Vodafone Group's overall service revenue comes from data.

This contrasts with the PC market, where when consumers buy a PC they get a "bare bones" machine that can be specialised with software to do what they want - from games, office, email or even web software in the browser. So consumer's expectation on buying a PC is that they will add something to it. The expectation on buying a mobile phone is that they will communicate with it.

So when we look at the total market addressable in mobile for application developers we should include a factor that indicates consumers desire for additional functionality. Let's look at the market with this factor included.

Platform	Units in market	Consumers interested in applications	Actual addressable market
Symbian S60	100m	10%	10m
Apple iPhone + iTouch	30m	50%	15m
Android	1m	30%	300k
Java ME	2,400m	5%	120m

So we see that Java ME is by far the largest market - which is not that surprising as this is where most of the money is made in the mobile application market - by Java games developers. More interesting is the smartphone space - where the numbers indicate that Apple actually has a larger market share than Nokia as far as developers are concerned - this is backed by Apple's continued investment in App Store advertising - increasing the value of their iPhone and iPod Touch devices to consumers, and raising consumer awareness of applications - thus driving success to their developer partners. A virtuous circle. As Apple makes significant margins on the sale of their new devices, and aren't under the same margin pressure as other manufacturers this trend is likely to continue - growing consumer awareness of applications for Apple devices, and growing the overall volume. Developers - you better get onto the Apple store if you want to grow your revenues and market share too.

Comments

[GlobalSchmidt]

Matt - great summary of the debate we heard when there were 2 Billion subscribers. We'll probably still be hearing it at 4 Billion ;)! Interesting that in PCs and Mobile alike, inter-operability among platforms (Android as PC OS?) is diverging. Maybe our kids will achieve world peace and platform-harmony all at the same time!