[Report] Developer Economics 2012 – The new app economy

[The latest Developer Economics report is now live - this is the third in the report series that set the standard for developer research and focuses on five main areas: The redefinition of mobile ecosystems, Developer segmentation, Revenues vs. costs in the mobile economy, App marketing and distribution and Regional supply vs. demand of apps. Developer Economics 2012 is available for free download at www.DeveloperEconomics.com, thanks to the sponsorship by BlueVia!]

Here’s just a sample of the key insights and graphs from the report – download the full report for more!

- The new pyramid of handset maker competition. In the new pyramid of handset maker competition, Apple leads innovators, Samsung leads fast-followers, ZTE leads assemblers and Nokia leads the feature phone market. Apple has seized almost three quarters of industry profits by delivering unique product experiences and tightly integrating hardware, software, services and design. Samsung ranks second to Apple in total industry profits. As a fast follower, its recipe for success is to reach market first with each new Android release. It produces its own chipsets and screens – the two most expensive components in the hardware stack – ensuring both profits and first-to-market component availability.

- Tablets are now a mainstream screen for developers. Developers are rapidly responding to the rising popularity of tablets: our Developer Economics 2012 survey found that, irrespective of platform, more than 50% of developers are now targeting tablets, with iOS developers most likely (74%) to do so. This is a massive increase over last year, when just a third of developers (34.5%) reported targeting tablets. On the other end of the spectrum are TVs and game consoles, with fewer than 10% of developers targeting those screens.

- Survival of the fittest has played out within 12 months. Whereas 2011 was the era of developer experimentation, 2012 is shaping up as the era of ecosystem consolidation around iOS and Android. Developer Mindshare is at an all-time-high 76% for Android and 66% for iOS. Darwin’s “survival of the fittest” model explains how BlackBerry, BREW, and Bada (Samsung) have lost Mindshare by failing to compete in terms of user reach, which is by far and consistently the top platform selection criterion for developers. In 2012, developers used on average 2.7 platforms in parallel, vs 3.2 in 2011, a clear sign of consolidation. The trend is further evidenced by declining IntentShare scores for most platforms – apart from mobile web and Windows Phone.

- Windows Phone is the new cool. While Windows Phone sales continue to disappoint, a year on, with 2.6 million devices sold in Q1 2012, interest among developers continues to build up. Our survey of 1,500 developers indicated that, irrespective of which platform they currently use most, the majority of developers (57%) plan to adopt Windows Phone. At the same time, seeing as last year’s 32% Intentshare for Windows Phone added only 1% to this year’s actual Mindshare, it becomes clear that converting intention to adoption is not a given. Windows Phone is indeed the new cool, a platform generating increasing developer buzz and anticipation; but to turn the buzz into developer buy-in at the levels of iOS and Android, actual adoption must follow soon or fall flat.

- Mass-exodus from the second runners. BREW (Qualcomm), is in terminal decline; the rate at which developers are abandoning BREW is alarming, with 60% of developers now using BREW indicate they plan to stop using it. Bada (Samsung) is being abandoned by 49% of developers currently using the platform, paling against the duopoly in both shipments (20 million units cumulative) and platform maturity. BlackBerry (RIM) is close to becoming an endangered species, being abandoned by 41% of developers, – worse, it is being abandoned by 14% of those using it as their primary platform plan to jump ship. No acquirer of RIM is likely to invest in salvaging the BB platform. The developer exodus is a much greater and more measurable testament to the decline of BREW, Bada and BlackBerry than any other market indicator.

- User reach is the root cause for platform selection. In our survey of 1,500+ developers, a large installed base of devices still ranks as the top criteria for platform selection, cited by 54% of developers, irrespective of primary platform, while 43% cite low cost. In contrast, only 30% of developers selected a platform based on its revenue potential, a factor that increased by just over 10 percentage points in the last year. Reaching users, eyeballs or wallets is the root cause for platform selection. Once an application has reach, then ad impressions, paid downloads, subscriptions, or distribution deals will follow.

- Solving the “Babel tower” of developer marketing. Millions and millions of dollars are being spent to attract developers, not just by mobile firms, but also brick-and-mortar companies. Businesses vying for developer innovation ignore the fact that in a market of over one million mobile app publishers, there are many shapes and sizes of developers. We created a quantitative segmentation model that addresses how to persuade developers to adopt a tool, platform or API, based on their motivations to commit valuable resources to the platform. The eight developer segments in this model are the Hobbyists, the Explorers, the Hunters, the Guns for Hire, the Product Extenders, the Digital Media Publishers, the Gold Seekers and the Corporate IT developers.

- One in three developers lives below the app poverty line. Based on our research of 1,500+ developers we found that while the average per-app revenue is in the range of $1,200-$3,900 depending on platform, an app has a 35% chance of generating $1 – $500. This means that one in three developers live below the “app poverty line”; That is, they cannot rely on apps as a sole source of income. On the revenue-generating side, 14% of developers will make somewhere between $500 and $1,000 per app, while 13% will generate between $1,001 and $5,000 per app per month.

- BlackBerry comes out on top in terms of average revenue followed by iOS with nearly $3,900 per app per month. BlackBerry developers generate, on average, 4% more revenue per app-month than iOS developers, who in turn generate about 35% more than Android developers. iOS wins over Android due to superior demographics (Apple users are less price sensitive), superior content (higher ratio of paid apps to free apps), tablet domination (where per app prices are higher) and frictionless payment (400 million accounts on file with one-click payment).

- iOS most expensive platform to develop on at $27,000 per app. Apple’s iOS is the most costly platform to target, on average costing just above $27,000 per app, 21% more expensive than Android and 81% more expensive than Blackberry. The average app will take approximately three man-months to develop. Naturally, app development costs depend on the country and app category – for example iOS is faster to develop communication and social networking apps than Android.

- Marginalisation of telco distribution. Telco portals have seen a 47% decrease in use as a primary channel to just 3% of developers, normalized by platform. These are the same portals that used to dominate content distribution in the pre-Apple era of downloadable ringtones, wallpapers and Java applications. There is one exception: leveraging the absence of Google Play in China, China Mobile’s app store has enrolled 22% of its subscribers, and has served over 600 million downloads, according to IHS Screen Digest.

- The next 10 million apps. North America tops app demand with 41% of developers indicating this is a top-3 download region, irrespective of their region of origin. Europe claims a 31% share, followed by Asia where 25% of developers see most of their apps being downloaded. App demand in each country grows with three factors: rising levels of smartphone penetration, growing user engagement, and total addressable market of smartphone subscribers in a country. While many Western markets drive app demand due to these factors, BRIC markets will be driving demand an order of magnitude larger as their smartphone penetration increases. The next 10 million apps are not going to come from the current leading markets, but from BRIC demand for localised apps.

- The imbalance between spoken vs app languages. A local language deficit emerges when comparing the languages spoken globally, against the supply of app-languages produced by developers: 85% of developers publishing in English address just 8% (around 500 million) of the world population speaking English, while Chinese, spoken by 22% of the world population, only attracts 16% of developers. English dominates developers’ language share almost everywhere, putting local languages supply at a deficit, not only on a global, but on a regional basis as well. Developers in Europe publish in 2.45 languages, the highest multi-language use across all regions. In South America, Spanish is used by 84% of developers, while English is only used by 48%.

- Mapping the global app trade routes. Latin America has the largest share of developers (44%) experiencing demand mainly from global markets, and is therefore the most export-oriented app economy. In contrast, Europe is the least export-oriented app economy, with just 26% of developers focusing on non-regional markets. Overall, we see a far higher share of developers experiencing demand from their own region than from global markets.

Read the full, 75-page report for more insights – available for free download, thanks to the sponsorship by BlueVia!

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- The VisionMobile team

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