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Developer Economics 2011

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Developer Economics 2011 is definitive report on mobile developers, apps and brands going mobile.
In this second annual report, we explore both what drives developer mindshare, and how brands are fast-forwarding into the world of mobile.

Free download at www.DeveloperEconomics.com

Created by VisionMobile, sponsored by BlueVia

Publié dans : Technologie
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Developer Economics 2011

  1. 1. © VisionMobile 2011 | www.DeveloperEconomics.com 1
  2. 2. About VisionMobile Contents Key takeaways 3VisionMobile is a leading market analysis and strategy firm,for all the things connected. We offer competitive analysis, Chapter 1:market due diligence, industry maps, executive training and Developer Mindshare:strategy, ranging from the industrys hottest trends to under winners and losers in the platform race 11the radar market sectors. Our mantra: distilling marketnoise into market sense. Chapter 2:VisionMobile Ltd. Taking applications to market 2690 Long Acre, Covent Garden,London WC2E 9RZ Chapter 3:+44 845 003 8742 The building blocks of mobile apps 43www.visionmobile.com/blog Chapter 4:Follow us: @visionmobile Brands go mobile 51About BlueViaBlueVia is the new global developer platform fromTelefonica that helps developers take apps, web services,and ideas to market. BlueVia is built on four Foundingprinciples: Scale, Tools, Business Models, and Path toMarket. BlueVia offers ground breaking, zero risk, businessmodels for developers, along with mix & match models tocreate multiple revenue streams.License Also by VisionMobileLicensed under a Creative Commons Mobile Industry Atlas | 4th EditionAttribution 3.0 License. The complete map of the mobile industryAny reuse or remixing of the work should be landscape, mapping 1,350+ companiesattributed to the Developer Economics 2011 across 85+ market sectors.report.Copyright © VisionMobile 2011 Available in wallchart and PDF format. www.visionmobile.com/mapsDisclaimerVisionMobile believes the statements contained in thispublication to be based upon information that we considerreliable, but we do not represent that it is accurate orcomplete and it should not be relied upon as such. Opinionsexpressed are current opinions as of the date appearing onthis publication only and the information, including theopinions contained herein, are subject to change withoutnotice.Use of this publication by any third party for whateverpurpose should not and does not absolve such third partyfrom using due diligence in verifying the publication’scontents. VisionMobile disclaims all implied warranties,including, without limitation, warranties of merchantabilityor fitness for a particular purpose. VisionMobile, its affiliatesand representatives shall have no liability for any direct,incidental, special, or consequential damages or lost profits,if any, suffered by any third party as a result of decisionsmade, or not made, or actions taken, or not taken, based onthis publication. © VisionMobile 2011 | www.DeveloperEconomics.com 2
  3. 3. Key messagesThe race for developer mindshareUse of mobile web accelerates. The last year has seen many twists and turns in therace of mobile platforms to capture developer mindshare. Mobile web as a platform hasseen an impressive upturn in usage, and is now in third position in our DeveloperMindshare Index. Android and iOS continue to lead with 67% of developers currentlyusing Android and 59% using iOS.Windows is not yet the third horse in the three-horse mobile race. Use ofWindows Mobile has dropped among developers in the last year, while Windows Phoneis not yet seen by developers as a commercially viable platform. Yet Windows Phone 7has managed to establish itself in the number two spot after Android in our DeveloperIntentshare Index, among platforms where developers plan to invest. Microsoft’sadvantage comes from the influx of PC and Xbox developers, Microsoft’s best-in-classtools and the promise of a substantial user base with the Nokia deal.Symbian, Java abandoned. Symbian and Java ME are the two platforms with thehighest developer abandonment rates; nearly 40% of developers currently usingSymbian and 35% of developers currently using Java ME are planning to drop theplatforms. Java ME is suffering from negative hype despite having been embedded onmore than three billion handsets. Symbian is now officially a platform with an expirydate, with the Nokia Symbian handset line-up set to be discontinued.Experimentation on the rise. Developers are increasingly experimenting with moreand more platforms and transitioning to new ones. Developers use on average 3.2platforms concurrently based on our sample of 850+ online respondents, representinga 15% increase from last year’s figure.Show me the moneyMoney cant buy you love, but users can! Large market penetration (the ability toreach users) is the most crucial factor for platform selection, important for nearly halfof the respondents across all platforms. Meanwhile, the ability to make money wasdeemed important in platform selection by just a quarter of respondents, alongside thelow cost development tools and the ability to quickly code and prototype.Losing money. In the gold rush to the applications economy, not everyone is makingmoney. About a third of respondents make less than $1,000 USD per application intotal, which is loss-making given that an application often takes months to develop.Commissioned vs. direct monetisation. Approximately 50% of app developers inour survey make money through a salary or commission, confirming that corporatemonetisation is becoming as important as making money directly through applications.For developers making money directly, the top revenue model is pay-per-download,followed by advertising and freemium (free download, then pay to upgrade).Platform revenue potential. Not all platforms are born with equal revenuepotential. Our research revealed large discrepancies across platforms in terms of therevenues applications are bringing to developers. iOS topped the chart, making 3.3x © VisionMobile 2011 | www.DeveloperEconomics.com 3
  4. 4. more money per app than Symbian developers followed by Java ME (2.7x) andBlackBerry (2.4x). Android (1.7x), mobile web (1.6x) were the weakest performingplatforms in terms of revenue per app and only ahead of Symbian (1.0).Role of operators. Traditionally, application developers have been cold anduncertain as to the role the operators can play in a software world. While the majorityof developers agree that the role of operators is to delivery data access (61%) and voice(43%), there is no consensus on the role of operators in software. Developers acrossregions disagree on whether operators should be a payment gateway, an API platform,build the best mobile services, or just leave developers alone.App stores deliver fragmented reachApp stores are a one-way street. App stores have irreversibly changed thelandscape of mobile app distribution. Today, app stores are the primary go-to-marketchannel for 45% of mobile app developers across the eight major platforms. Use ofother application distribution channels has consistently declined across the board.Moreover, operator portals, whose ‘walled gardens’ once dominated contentdistribution, are now paling in significance compared to app stores.App stores deliver reach. Reach is by far the most important reason behinddevelopers’ preference for app stores as a distribution channel. More than 50% ofdevelopers distributing through Apple, Google, Nokia or BlackBerry app stores cite theability to sell to more users as the primary reason for app store selection.App store fragmentation is an under-hyped challenge for developers. Each of thefifty-plus app stores available has its own developer sign-up, app submission process,artwork and paperwork requirements, app certification and approval criteria, revenuemodel options, payment terms, taxation and settlement terms. The marginal cost ofdistributing an application through one more app store is significant, contrary topopular perception.One size doesn’t fit allDeveloper segmentation is as sophisticated as consumer segmentation. But inwhatever metric or measure is used, one needs to acknowledge that there are severaltypes of “developers” out there, from hobbyists and students, to start-ups, self-financedprofessionals, commissioned developers, digital agencies, system integrators, as well asdevelopers working within established businesses developing B2B or B2C apps – allhaving different incentives, aspirations, priorities, needs and wants.Attracting talent. Developers who are experienced with PC/Internet softwaredevelopment are jumping into mobile. However, our research shows that aside fromApple and Microsoft, platform vendors are not attracting enough developers withexperience in mobile or PC/Internet development.Developer-market balance. Android is the one and only platform that is tri-laterally adopted by developers across all three major continents active in applicationdevelopment - Europe, North America and Asia. On all other platforms, there is animbalance of developer supply and market demand across the globe. iOS is lagging indeveloper mindshare in Asia while BlackBerry developers are almost completely lacking © VisionMobile 2011 | www.DeveloperEconomics.com 4
  5. 5. in Europe. The traditional sweet spot for Java developers has moved out of Europe toemerging markets, with 42% more respondents coming from Asia, Africa and SouthAmerica. Flash Lite has weak supply in South East Asia where the platform can deliverbest-in-class experiences on mass-market phones.Building mobile appsLearning curve. Contrary to popular perception, mobile web isn’t such an easyplatform to learn, ranking sixth in terms of learning curve. This is due to the need forweb developers to learn a complex stack of languages and technology frameworksacross client and server environments, in addition to having to battle with thechallenges of cross-browser portability.Fragmentation. Despite the bad press, Google is managing to contain Androidfragmentation relatively well. On the contrary, it’s BlackBerry and Java ME that exhibitthe greatest amount of fragmentation, with BB and Java developers needing to producealmost twice the number of app versions compared to Android developers.Localisation. Localisation will soon become a fundamental issue for mobiledevelopers, as it becomes easier to distribute apps globally, and to develop regionally-sensitive apps and content like news, music and social networks. Developers who areaccustomed to creating apps for global distribution (for example Java ME developers)in their majority are reporting localisation issues.Cloud APIs. Cloud connectivity is not just a fad among developers; it’s also where a lotof the innovation is taking place. We found that iOS, Android and mobile webdevelopers are the most active users of cloud APIs, while BlackBerry and Javadevelopers were the late adopters of the ‘cloud’.Multi-screen future. The developer ecosystem is gearing up for a multi-screenfuture. In our research, almost 50% of respondents who develop for smartphones alsodevelop for mid-range (messaging and Internet capable) phones. Nearly 25% ofAndroid, iOS, Java, mobile web and Qt respondents are planning to target TV and set-top boxes in the future. Moreover, our research confirmed that mobile web is also themost versatile platform, with mobile web developers currently targeting on average 2.5different screen types.Brands drive mobileBrands go mobile Where there is a company website or a corporate intranet today,there will be a mobile app tomorrow. Such is the momentum behind consumer brandsand virtually every self-respecting company out there, whether it’s B2C apps forenhancing the core business, or B2B for mobilising the corporate intranet. Moreimportantly, while app stores kick-started the mobile app economy, it is brands that arenow fuelling it.Brand journey through mobile. Despite the diversity across verticals and regions,we found that all companies go through a three-stage journey as they extend theirdigital strategies into mobile. In their first steps in going mobile, “newbie” brands thinkof an app as a way to ‘advertise’ whatever product or service they are providing. As theyget Street Smart, brands ask, “How can we use apps to drive our core business?” And © VisionMobile 2011 | www.DeveloperEconomics.com 5
  6. 6. finally as Connoisseurs, the question becomes “Can we turn apps into a new, revenuegenerating business?”The platform conundrum. For brands, extending their presence to mobile is a verydifferent beast, compared to any other digital medium. Whereas on the web one needscompatibility with two or three mainstream browsers to reach 80% of users, goingmobile means using the top three or four mainstream native platforms (iOS, Android,Symbian and BlackBerry) to reach just over 20% of the devices sold, on average.Platform priorities For companies going mobile, platform priorities are mixed, butthe core challenge is common – market penetration and reach across the customerbase. Organisations developing B2C apps (targeted at consumers) are extending theiroffering first Apple and then to Android, to mobile web, to BlackBerry and finally toWindows Phone 7. For B2B apps (applications paid by the corporate IT manager orCIO), HTML is already the platform of choice- not just for deployment on mobile webbrowsers, but also by converting HTML and JavaScript into native iPhone and Androidapps using tools from companies such as Appcelerator, PhoneGap, RhoMobile andSencha. © VisionMobile 2011 | www.DeveloperEconomics.com 6
  7. 7. About Developer EconomicsWelcome to Developer Economics 2011, the quintessential mobile developer researchreport. In this second annual report, we explore both what drives developer mindshare,and how brands are fast-forwarding into the world of mobile.Developer Economics 2011 takes the reader across the entire developer journey, fromthe shift of mindshare and why “users can buy you love,” to how money is made inmobile. It covers the hottest issues, from app design and promotion to monetisationand user support.In this year’s research, we have delved into the world of brands that are going mobile,to understand what makes them tick, and how they are planning to conquer the mobileworld. While app stores initially kick-started the mobile app economy, it is brands thatare now fuelling it.We spent the last few months quizzing developers and industry executives about thefuture of mobile. Our research included 20+ industry executives, along with 900+developers from 75+ countries working on 8+ major platforms.We believe our work has yielded important insights about the future of mobiledevelopment and hope you enjoy reading this report as much we enjoyed writing it!Matos, Elizabetta, Andreas, Michael, Anne and Vanessa at VisionMobile.@visionmobilewww.visionmobile.com/blogThank you!We‘d like to thank the executives and developers who helped make this report a reality– those who spent the time on the phone or online to offer a glimpse of the worldthrough their eyes, with its ups and downs. You know who you are.We’d also like to thank the many companies who helped us reach out to developers –Distimo, Enough Software, Flurry, Funambol, GetJar, LiMo Foundation, MEX,Microsoft, Mobile Monday London, Nokia, Oracle, Qualcomm, RIM, WAC, WIP –without which we would not have been able to reach such a diverse spectrum ofdevelopers.And of course – a huge thank you to James Parton and the team at Telefonica, withoutwhose financial support this research would simply not have been possible. © VisionMobile 2011 | www.DeveloperEconomics.com 7
  8. 8. Welcome to Developer Economics 2011How quickly time flies!Last year we, like VisionMobile, felt there was a real gap in the market for a piece ofresearch that credibly identified the issues facing developers in the mobile space.Based on the response to 2010’s inaugural report, it seems you agreed with us. Thesuccess of the publication really surpassed our expectations. The report wasdownloaded over 10 thousand times, while TechCrunch called it “one of the mostprofound [reports on mobile development]…to date”.We’re delighted to be supporting the project once again in 2011, as this allows theresearch to be made freely available for download. Telefonica remains steadfastlycommitted to understanding the needs of developers, in order to help shape theBlueVia roadmap, and 2010’s Developer Economics findings were a key input into thethinking that produced the initial release of BlueVia.This year’s edition delves into the hottest issues in mobile apps: which platforms gainedand lost developer mindshare, what are the most popular revenue models, which go-to-market channels are the fastest to pay, how apps in smartphones vs. tablets vs. TVs willplay a role in the future, and more.We have more than doubled the number of respondents, compared to 2010’s research,with developers now representing 75 countries. For the first time, we have addedinsight into digital strategies from over 50 leading international and regional brands,through 20 one-to-one interviews with digital agencies, media, retail and Internetcompanies.I hope you enjoy reading the report as much as we have enjoyed working withVisionMobile to deliver it.James Parton, Head of BlueVia Marketing@jamespartonwww.bluevia.com © VisionMobile 2011 | www.DeveloperEconomics.com 8
  9. 9. Research methodologyThe Developer Economics 2011 research was conducted between January and April2011. The research is based on a large-scale online developer survey, developerinterviews, and interviews with industry executives working in commercialorganisations and digital agencies.Among the 900+ participating developers, 850+ took our online survey. Thesedevelopers represented 75 countries, across eight major platforms: Android, iOS,Windows Phone, Symbian, Java ME, MeeGo, mobile web (HTML and JavaScript) andQt. Each platform was represented by at least 50 developers who reported spending themajority of their time on that platform. To remove platform bias, we averaged allresults presented in this research across these eight major platforms.The developers that took part in our online survey came in their majority (90%) fromEurope, North America and Asia while another 10% came from South America, Africaand Oceania. Respondents included both novice and seasoned developers, with anaverage of three years mobile experience, and six years PC development experience. © VisionMobile 2011 | www.DeveloperEconomics.com 9
  10. 10. Developers had a mix of roles, with 50% involved in a technical role, another 25%employed in a commercial role, and 20% being hobbyists. Note that many respondentswere winners and runner-ups of developer awards, including Nokia’s Calling AllInnovators and the Android Challenge. Respondents also included five MicrosoftMVPs, and 16 Forum Nokia Champions.In addition to the online survey, one-to-one interviews were carried out with over 40developers. This group ranged from hobbyists to CEOs of games companies, and fromone-person startups to technology giants.Moreover, 21 one-to-one interviews were carried out with senior executives from a widespectrum of commercial organisations and digital agencies. All the executives we talkedto had decision-making authority, and the majority worked within or with marketingand strategy departments. Sectors covered directly or indirectly included digitalagencies, media, retail, pure Internet, telecoms, FMCGs (fast-moving consumer goods),sports, banking & financial, marketing & communication, health, automotive, travel,leisure, and music. © VisionMobile 2011 | www.DeveloperEconomics.com 10
  11. 11. © VisionMobile 2011 | www.DeveloperEconomics.com 11
  12. 12. WHO IS WINNING THE RACE?1. Developer Mindshare: winners and losers in the platform raceThe impact of apps and software ecosystems in the mobile industry has been nothingshort of astonishing.Apps have turned the handset manufacturer business upside down in the last two years,as players with strong software ecosystems like Apple and Google replaced the weakestof the old guard’ in the leaderboard of top-five handset vendors by unit sales. Nokiahad clung for too long to the 10-year-old Symbian platform – and at the last minute ithad to “jump off a burning platform” by partnering with the lesser of two evils(Microsoft rather than Google) to salvage its smartphone line. Sony Ericsson andMotorola failed to recapture the glory of the RAZR and Cybershot days, and aredropping off the top-ten chart. © VisionMobile 2011 | www.DeveloperEconomics.com 12
  13. 13. The total market share captured by the top-five handset OEM leader-board has shrunkfrom 80% to under 60% in less that two years, as Apple stormed the high-endsmartphone market and modular platforms from Google and MediaTek made itpossible for tens of low-margin assemblers to take up around 30% of global handsetsales. The number two and three handset OEMs Samsung and LG are the only oneswho managed to survive with only minor scratch wounds, maintaining their salesranking by aggressively responding to mobile operators’ demand for smartphones withnumerous Android phone and tablet models.Software has also disrupted the network operator world in many ways. Today, softwareinnovation outpaces network innovation by at least a factor of five: applicationdevelopers often reach market in only three to six months, while operators take 18-24months to launch a new service. In other words, it has become impossible to innovateoutside software. Any such innovation will be outrun and marginalised by more agile,more nimble software-led players.More importantly, software-led players like Apple and Google have benefited at theexpense of the very network operators who funded their entry into mobile; the vastmajority of Android handset models produced in 2008-2010 have been sponsored byoperators in order to attract new subscribers, while the majority of iPhones have beensubsidised as part of a 12-24 month telco contract. It is these same software-led playersthat are now competing with operator services and challenging their established controlpoints, including location look-ups, billing, service discovery, authentication. Software-led players are even questioning the operator hold on mobile termination (see GoogleC2DM) and subscriber activation (see soft SIMs).As telecoms players are dragged to the software era, network operators and handsetOEMs need to become ‘platforms’ (enablers) for developer innovation. They also needto rebuild their strategies on the game rules of software economics, as we shall see next.The impact of software economicsThe single biggest surprise that software has brought to the mobile industry has beenthe change of economics – from supply-side economies of scale to demand-sideeconomies of scale.The mobile industry has been built from the ground-up on supply side economies ofscale; billion-dollar investments behind handset vendors have created productionpowerhouses where the few are able to dramatically drop supply and manufacturingcosts. This is why Nokia has been able to buy handset components in far highervolumes and at far lower prices than everyone else, allowing Nokia to dominateemerging markets in terms of price points. Supply-side economics of scale are commonsense: the bigger the company, the lower the costs; the lower the prices, the bigger thesales.What software introduced was demand-side economies of scale. Also known as“network effects,” these economies are driven by demand, i.e., the number of users ordevelopers of a software platform. A classic case of network effects is a telephonenetwork: the utility of a network increases with the size of the network. The more users,the more valuable the network is to those users. Software platforms like Windows,Android and iOS operate based on network effects: the more users, the more devices © VisionMobile 2011 | www.DeveloperEconomics.com 13
  14. 14. are sold, the more developers are attracted to the platform, the more apps aredeveloped, the more users, etc. The next diagram illustrates network effects in the caseof Google’s Android platform.The textbook ‘worst practice’ here is Nokia: the Finnish OEM has been excelling atcreating supply-side economies of scale. With over 400 million devices shipped in2010, Nokia can demand unbeatable pricing from its suppliers, and thus has aninherent advantage in cost-sensitive emerging markets.At the same time, Nokia – like most of the traditional top-five OEMs includingMotorola and Sony Ericsson - failed to understand the demand-side economies of scalepracticed by Google and Apple. For too long, developers were a second priority forNokia’s Symbian and Java platforms. Lacking in the attractiveness of both its route tomarket (Ovi) and its platforms, Nokia quickly saw developer mindshare migrate to iOSand Android. Both these competing platforms managed to build self-sustainingnetwork effects of unprecedented scale; for example, Apple reached 10 billion appdownloads in the space of 30 months. Eventually, Nokia had to backtrack against 20years of corporate strategy and outsource its smartphone platform to a coopetitor –Microsoft – whose Windows business has flourished due to network effects.Winners and losers in the platform raceSince the beginnings of the smartphone era, the platform race has never been so fastmoving. In the space of two years, Apple’s iOS and Google’s Android have captivated © VisionMobile 2011 | www.DeveloperEconomics.com 14
  15. 15. the attention of users, industry brands and mobile developers alike. Nokia’s Symbian –once the unquestioned king of mobile platforms, having been deployed in over 500million devices as of Q1, 2011 – is now officially being phased out, while Nokia’squarterly smartphone sales volumes have for the first time fallen behind Android.Microsoft’s Windows Phone 7 is making a strong comeback thanks to best-in-class userexperience and developer tools. However, Microsoft has a challenging year ahead as ittries to stand on the shoulders of Nokia to compete in terms of user base with Appleand Google.Mobile web (the platform for apps written in HTML or JavaScript) is continuallyincreasing in terms of developer attention and media hype. At the same time, HTMLapps can’t compete on equal grounds with native platforms, in terms of user experienceor depth of API reach. Meanwhile Java, with its broken promise of write-once-run-anywhere, is fast being eclipsed out of the smartphone-centric mobile developeragenda, with Java’s advantages in the feature phone market largely being ignored bydevelopers.All in all, the platform race has not only intensified, but also sped up. Yet, amidst all theindustry hype, there is no accurate metric of how mobile platforms are falling in or outof favour with developers.Our Developer Mindshare Index does exactly that, by tracking which mobile platformsare mostly used among developers. The next chart shows the top eight mobileplatforms, and how the Developer Mindshare Index has changed in the last year. © VisionMobile 2011 | www.DeveloperEconomics.com 15
  16. 16. The past year has seen many twists and turns in the mobile platforms used most bymobile developers. Developers are increasingly experimenting with more and more platforms. Developersuse on average 3.2 platforms concurrently based on our sample of 850+ onlinerespondents. This represents a 15% increase from last year’s figure, indicating howdevelopers are more willing to experiment with new platforms and activelytransitioning to new ones. In parallel, more experienced developers are entering themobile app economy, which helps boost the average platform numbers.Android and iOS have further solidified their top two positions in the Mindshare Index,and are now established in a league of their own in terms of both developer ecosystemand user base. Apple’s iOS stands at over 350,000 apps and 110 million devices sold,while Android stands at over 200,000 apps and 110 million devices sold, as of Q1 2011.Mobile web as a platform has seen an impressive upturn in usage over the last year, andis now in third position in the Developer Mindshare Index. The popularity of mobileweb as a platform is driven by four factors:1. Mobile web is the primary choice for cross-platform development and for addressingthe long tail of device models beyond iPhone and Android.2. Segments of web developers familiar with HTML and JavaScript development arebeing attracted to develop for mobile devices. Moreover, web developers deal withfragmentation (resolution, aspect ratio, input methods) as part of their day-to-day workand so are well equipped to deal with the multi-platform nature of mobile.3. Companies across industry verticals – from brands to banks – who are extendingtheir digital strategies into mobile apps are using the mobile web as a low-cost, mass-reach platform across devices globally. Similarly, corporate IT departments that need to © VisionMobile 2011 | www.DeveloperEconomics.com 16
  17. 17. take their legacy intranets to mobile devices are choosing mobile web as the defaultplatform.4. A host of HTML-to-native development tools are helping HTML/JavaScriptdevelopers target smartphone native app markets, as well as the long tail of mass-market phone browsers. Examples include Appcelerator, PhoneGap, RhoMobile,Sencha and The M Project. Moreover, native apps can be designed to encapsulatefunctionality in the form of web content, which eases cross-platform development.Windows is not yet the third horse in the three-horse mobile race. Use of WindowsMobile has dropped among developers in the last year, due to two reasons. First, theolder Windows Mobile has been dying a slow death in the last two years, with Microsoftunable to match Apple or Google in terms of device sales or developer hype. A largenumber of Windows Mobile MVPs (most valuable professionals - the acknowledgedcommunity opinion leaders) have been attracted by the strength of Apple’s consumerapps proposition and switched to developing iPhone apps. Second, the newer WindowsPhone is suffering from lacklustre sales, estimated at just over three million handsetssold by the end of Q1, 2011, according to Gartner and IDC figures.Java ME and Symbian platforms show a steady mindshare decline. Java ME is sufferingfrom negative hype despite having been embedded on more than three billion handsets.Symbian is now officially a platform with an expiry date, with the Nokia Symbianhandset line-up set to be discontinued.Across mobile platforms, Android is not just the king of developer mindshare, it’s alsothe easiest platform for developers to experiment with. This is for several reasons: 1. Android has fewer restrictions on ‘deep’ APIs like access to the home screen, multimedia codecs, SMS texting, telephony and streaming functions when compared to the iPhone. 2. Android Market offers instant publishing, versus Apple’s ‘undocumented’ app approval policy. That allows developers to iterate quickly on Android applications, versus waiting for Apple’s approval process to complete. 3. Applications on the Android are easy to sideload (i.e., to install from a connected PC, rather than from an official app store). This facilitates beta testing among peers, without having to meet quality standards needed for publishing an app to the Apple App Store.What’s even more telling of the future of the platform race? Our Developer IntentshareIndex, tracking the top-eight mobile platforms developers are planning to use.Combined an indication of which platforms developers are abandoning, it shows theebb end flow of developer interest across mobile platforms.Despite being a young, six-month old platform, Windows Phone 7 has managed toestablish itself in the number two spot, claiming nearly 35% in the DeveloperIntentshare Index. Microsoft’s advantage comes from the strength of the XNA andSilverlight developer tools and the promise of a substantial user base with the Nokiadeal. Microsoft has also cleverly targeted its Windows Phone platform - not to existingWindows Mobile developers who are disillusioned with the legacy platform, but to © VisionMobile 2011 | www.DeveloperEconomics.com 17
  18. 18. previously untapped segments of desktop and games (Xbox) developers, which are newto mobile.Google’s Chrome OS ranks highly with the promise to follow Android’s marketpenetration with nearly one in four developer stating they plan to use - Google’sChrome OS ranks highly with the promise to follow Android’s market penetration withnearly one in four developer stating they plan to use the platform.MeeGo and Qt still garner developer optimism. Nokia has left developers with noguidance as to the future of MeeGo and Qt, and yet developers show more interest inthese two platforms than BlackBerry, on which RIM is spending hundreds of millions inacquisitions.As the platform abandonment chart shows, Symbian and Java ME are the twoplatforms with the highest developer abandonment rates; nearly 40% of developerscurrently using Symbian and 35% of developers currently using Java ME are planningto drop the platforms.The Java ME abandonment comes as no “Windows Phone development toolssurprise: neither Oracle nor Sun have spent any are first class - for example bothmarketing dollars visibly promoting the Java designers and developers can workmobile platform. Moreover, what’s been missing collaboratively on the same project.in Java ME is the direct-to-consumer This level of sophistication isn’tdistribution channel (a.k.a. app store), which available on either iOS or Android.”Sun did not have the vision or commitment to Andreas Tsouchlarisintroduce. In the case of Symbian, Nokia dealt R&D Manageran epic public relations blow to its own platform, Binary Logicannouncing on February 11 it would put all itssmartphone eggs in the Microsoft basket. © VisionMobile 2011 | www.DeveloperEconomics.com 18
  19. 19. The Palm OS and WebOS mindshare decline is also to be expected, given that HP hasmanaged to convince neither the mainstream media nor developers that it can competeas a platform vendor in a game where the rules are defined by Apple and Google.Qualcomm’s BREW is perhaps the biggest surprise amidst platforms being abandoned.With the latest BREW MP platform, Qualcomm made a platform investment ofhundreds of millions of dollars, including a development team of over three hundredpeople. And, it managed a major feat, in closing deals for AT&T and Verizon featurephone devices. Yet, with BREW remaining an aging development environment,Qualcomm has not managed to retain developer mindshare and compete in the newrules of the game, where apps and APIs matter over and above devices and carrierdeals. Already 25% of respondents using BREW are planning to abandon the platform.Before WAC has managed to ship its first device (see our case study on Smart’sNetphone), developers are already abandoning the widget-based, operator-backedplatform. This comes as little surprise given the poor track record of operator-drivensoftware platforms, including SavaJe, the i-mode alliance, LiMo Foundation, and nowWAC. Creating a developer ecosystem requires very different culture and organisationalDNA than what’s needed to build a telecoms network.Flash is another platform that appears to be losing the battle for mobile developermindshare. While overall mindshare for the Flash platform increased in 2011, webelieve this is due to new segments of ActionScript developers and Flash designers whoare starting to develop for mobile. In parallel, Flash runs sixth among platformsdevelopers plan to abandon. The root cause is nothing else other than Adobe’s ownmobile strategy, who much like Sun failed to materialise the vision of a write-once-run- © VisionMobile 2011 | www.DeveloperEconomics.com 19
  20. 20. everywhere platform. We argue that the “Flash Lite is in decline and manyfailings of Adobe’s strategy can be traced to development houses have closedthree reasons: shop. We ‘re one of the few Flash Lite companies still running becausea. Reach over consistency. Adobe over- we have been able to keep ourselvesprioritised reach over consistency in deploying small.”its Flash Lite across mobile platforms. Despitehaving Flash Lite deployed across more than Stefan Wessels Co-founderone billion handsets, the platform ended up Breakdesignbeing fragmented, inaccessible to developersand with an aging platform installed base. Assuch Adobe had to scrap Flash Lite and start from scratch with Flash on mobile.b. Old-school culture. Adobe has traditionally had a US-centric, media-conglomerateculture, contrary to Macromedia whose Flash Lite platform Adobe acquired. By beingUS-centric, Adobe has been unable to realise the opportunities in developing regionssuch as Asia. Moreover, by focusing on large business partners, it has been unable tocultivate momentum among developers in the long-tail. Last but not least, Adobe hasnot been playing fair with their developers, for example closing APIs in favour ofexclusive commercial deals around those APIs or shutting down products like FlashCast, completely. As a an old-timer Flash Lite developer notes, “you can never rely onAdobe to put developers ahead of its commercial interests.”c. Platform complexity. Adobe’ introduced a complex platform (ActionScript 3)which alienated their designer, non-programmer developer audience who has sincebeen moving to native platform alternatives like iPhone and Android.At the other end of the application economy, brands and companies across verticalshave had a slower, less refined approach to platform selection. Apple and, to a certainextent, Android are the preferred entry point for brands and publishers who want toextend their digital strategies to mobile with a ‘premium’ experience. Moreover, asbrands and organisations increase their understanding of mobile, so their digitalstrategies demand reach into the mass-market. This demand for reach is usually servedthrough three means: mobile websites (developed internally or outsourced), and insome cases use of mobile app publishing platforms (e.g. Communology, Conmio,Mobiletech) or magazine-style publishing platforms like Flipboard, Taptu and Zite.Users can buy you loveDeveloper mindshare has indeed shifted greatly within the last of 12 months. But whatare the drivers of platform selection? In other words, what makes developers investtime and effort in this or that platform? Is it a question of money, features, fun orreach?We found that developers have become even more business-savvy in the last year.Among the top five reasons for selecting a platform, there is just one technical reasonand four commercial ones, as shown in the next graph.Money cant buy you love, but users can! Large market penetration (the ability to reachusers) was the most crucial factor for platform selection: half of the respondents across © VisionMobile 2011 | www.DeveloperEconomics.com 20
  21. 21. all platforms thought that market penetration was the top reason for platform selection.Meanwhile, the ability to make money was deemed relevant by just a quarter ofrespondents. In fact, the ability to make money, on average, is no more important thanthe ability to code and prototype quickly.Interestingly, the scoring of platform criteria doesn’t change significantly acrossdevelopers with a technical role, compared to those working in a commercial rolewithin a development house. The only notable difference was that revenue potential asa reason for platform selection was, understandably, twice as important for developerswith a commercial role than for hobbyists.Platform selection criteria do not vary significantly by company size, either. The onlynotable insight is that as companies grow, platform selection criteria shift away frommarket penetration and into prioritising the platform the client has requested.However, before platform vendors go out and start adapting their marketing messagesto emphasize user reach, there is some very important small print here: platformselection criteria differ considerably across developers using different platforms.For example, platform selection for iOSdevelopers is heavily skewed towards “Low cost of entry is critical for acommercial criteria. On the contrary, for new platform. For a small company,Windows Phone developers the selection is the main considerations in adoptingheavily skewed towards technical criteria, an a new platform are the cost ofindication that Microsoft does not yet have a porting and hitting the max amountcommercially appealing platform. The next of users with a single version.”chart shows the importance of the top two Roger Nolancommercial and top two technical criteria CTO at Ambient Industries,for platform developers, relative to the producer of the Flook location browser.average, across the top-eight platforms. © VisionMobile 2011 | www.DeveloperEconomics.com 21
  22. 22. Preparing for a multi-screen futureIt’s no secret the vast majority of mobile developers are targeting smartphones. Most ofthe news buzz these days is focused on Android and iOS. But beneath the veneer of‘smart’ devices, the developer ecosystem is gearing up for the multi-screen future wheresmartphones are no longer the ‘cream of the crop’ amongst the digital channels toconsumers.In our research, almost 50% of respondents who develop for smartphones also developfor mid-range (messaging and Internet capable) phones. Moreover, we saw a four-foldincrease in the number of developers planning to develop apps for TV or set-top boxes,indicating that the market for living room apps is developing momentum. Nearly aquarter of Android, iOS, Java, mobile web and Qt respondents are planning to targetTV and set-top boxes in the future.It is widely accepted that mobile web is the “Programming and UI metaphorsprevalent choice for multi-screen app are very different on all platformsdevelopment. Our research confirmed that (iOS, Android, WP7).. in practice themobile web is also the most versatile code reuse is minimal between theplatform. Mobile web developers currently platforms. We ‘re actively looking attarget on average 2.5 different screen types, HTML5 for multi-platformahead of Android and Qt developers, each of development.”whom targets 1.8 screen types on average. Mobile software developer, working for a leading UK news publisherBesides the mobile web, there is no othermainstream platform today designed for © VisionMobile 2011 | www.DeveloperEconomics.com 22
  23. 23. cross-screen development. “Programming and UI metaphors are very different on allplatforms (iOS, Android, WP7).. in practice the code reuse is minimal between theplatforms. We ‘re actively looking at HTML5 for multi-platform development.” notes amobile software developer working for a leading news publisher in the UK.Java, the king of cross-platform apps, has lost its allure. Java developers come third inplanning to target multiple screens. Moreover, Java developers show a very strongintent in transitioning from mid-range to smartphones, away from the stronghold ofthe Java platform.The next graph shows the developers currently targeting different screen types.Currently iOS developers show strongest preference for targeting smartphones,whereas Java developers show strongest preference for targeting mid-range phones.But future intent is very different; iOS and Blackberry developers show least interest ina multi-screen future, whereas Qt and Android developers show most interest towardscoding for multiple screens.Mobile developers: one size doesn’t fit allWe know by now that not all developers wear a ponytail, khaki shorts or propellerbeanies. Such misconceptions date from the days when software engineers wereperceived as unsociable geeks sitting in a back room, and never talking to theircustomers.Most network operators, handset OEMs or consumer brands often use the word“developer” to attach a label to anyone developing mobile applications, whether ahobbyist or a programmer within a Fortune-500 company. However, in today’s world,where developers are the foremost mobile innovators, we need to become more savvy inunderstanding who exactly these “developers” are.There are many ways to segment “developers”: by geographical region, platform used,level of experience, criteria for platform selection, by the category of applications theyare developing or by industry verticals they are catering to. Developer segmentation isas sophisticated as consumer segmentation. But in whatever metric or measure is used, © VisionMobile 2011 | www.DeveloperEconomics.com 23
  24. 24. one needs to acknowledge that there are several types of “developers” out there, fromhobbyists and students, to startups, self-financed professionals, commissioneddevelopers, digital agencies, system integrators, as well as developers working withinestablished businesses developing B2B or B2C apps – all having different incentives,aspirations, priorities, needs and wants.We next look at some of the ways developers differ based on app categories, level ofexperience and geographical location.Application categories matterDevelopers focus on different app categories based on their primary platform. Wefound that business apps are particularly popular among Windows Phone developers,but equally unpopular among Android developers. Entertainment apps are popularamong iOS and Qt developers. Games are popular among Qt and Java developers, butrare among mobile web and Windows Phone developers.This implies that platform vendors need to cover their soft spots, in terms of appcategories that developers are less active in. Operators, meanwhile, need to tap into theright developers to address their service portfolio. Finally, for developers, genre gaps onspecific platforms may provide opportunities to stand out.Experience mattersEvery self-respecting software platform today needs to have a fast learning curve (moreon that in Chapter 3). At the same time, there’s no substitute for experience – and thedistribution of development experience is anything but balanced across the developerecosystem. We see platform vendors lacking sophistication in their targeting of thedeveloper ecosystem as we discuss next.With the shift away from Symbian, Nokia is bleeding high-calibre mobile developers.Symbian developers are on average the most experienced in mobile software, with thesedevelopers being 15% more likely to have seven-plus years of mobile experience.We can also quantify the signs of Apple’s allure towards experienced PC and Internetdevelopers, since the iOS platform attracts significantly more developers with seven-plus years PC/Internet experience, compared to other platforms. This confirms thatexperienced software developers are moving into mobile, using iOS as an entryplatform, in what we believe is driven by the sudden rise in demand for developertalent, especially in North America.Since launching in late 2010, Windows Phone 7 has done pretty well in attractingseasoned developers. We see experienced mobile developers coming to WindowsPhone, with a significant bias of current Windows Phone developers having betweenthree and six years of mobile experience - an indication that Microsoft’s strategy to tapinto PC and Xbox developer segments is paying off. © VisionMobile 2011 | www.DeveloperEconomics.com 24
  25. 25. In conclusion, developers who are “Entry to Android is very very easy.experienced with PC/Internet software There will be a stampede of developersdevelopment are jumping into mobile. on Android.”However, our research shows that aside Kishore Karanalafrom Apple and Microsoft, platform Experienced Symbian developervendors are not attracting enough Teleca Indiadevelopers with experience in mobile orPC/Internet development.The developer-market mismatchWe firmly believe software innovation will not just be global; like news and music, webelieve that mobile apps will follow a regional route. That is, most popular mobile appswill be local (or locally adapted) apps. As such, it is important for platform vendors andOEMs to cultivate and capture local developer talent and mindshare. Yet, we are seeingmany regional gaps across the mobile developer ecosystem where developer supplydoesn’t match market demand, especially on BlackBerry, Java and Flash Lite platforms.BlackBerry developers are naturally concentrated in North America, with 16% morerespondents from that region; but in addition, they are almost completely lacking inEurope. This reveals a major gap in RIM’s developer marketing efforts.The traditional sweet spot for Java developers has moved out of Europe to emergingmarkets: Asia, Africa and South America, with 42% more respondents from theseregions. This is due to low penetration of iOS and Android in Asia, Africa, and SouthAmerica, and also to Java having suffered from negative hype in the traditionaldevelopment hubs of Europe and North America.Flash Lite is another platform that exhibits a huge gap between markets (demand) anddevelopers (supply). The sweet spot for Flash Lite is in emerging markets where theplatform delivers best-in-class experiences on mass-market Nokia Series 40 handsets -and not on the iPhone or Android platform where Flash can’t compete with native appsin terms of user experience. Yet there are very few Flash developers targeting suchemerging markets. “We are one of very few developers for Nokia handsets in the SouthEast Asia region. The Flash Lite theme market for low-end phones is a blue ocean,”notes Stefan Wessels, co-founder of Breakdesign, a company with more than 7 millionapp downloads.Android is the one and only platform that is tri-laterally adopted by developers acrossall three major continents active in application development: Europe, North Americaand Asia. “Entry to Android is very very easy. There will be a stampede of developers onAndroid” notes Kishore Karanala, a seasoned Symbian developer with 5+ years ofmobile app experience working for Teleca India. In contrast, iOS is lagging in developermindshare in Asia, due to the relatively low penetration of Apple devices in Asiancountries. © VisionMobile 2011 | www.DeveloperEconomics.com 25
  26. 26. © VisionMobile 2011 | www.DeveloperEconomics.com 26
  27. 27. WHERE IS THE MONEY?2. Taking Applications to MarketThe developer journeyThe life of a mobile developer is a complex one. It’s not just a two-step, idea-to-appprocess. In today’s global application market, there are tens of steps in taking an idea tomarket – including planning, developing, debugging, support forums, test frameworks,packaging, pricing, publishing, billing, marketing, sales tracking, user support andapplication updates, to name just a few.To illustrate the intricacies of app development, we’ve put together the DeveloperJourney, a chart showing the tens of touch points in the life of a mobile developer. TheDeveloper Journey is an important tool, not just for appreciating the complexity ofmobile development, but also for helping platform vendors map the competitivelandscape of supply and demand, and understand how to differentiate.The Developer Journey consists of the following six stages. Note that the DeveloperJourney presents a comprehensive model covering every possible touch point – whichimplies that most developers will selectively touch on some of the stages below, but notall. © VisionMobile 2011 | www.DeveloperEconomics.com 27
  28. 28. 1. Application planning is the stage where a developer takes a concept through theinitial stages of feature design, prototyping, selecting the right platform, and designingfor the right users.2. Develop & debug, is where the hard work takes place: coding the application,designing the UI, testing and porting. This stage is where the vast majority of developerprograms are focused today.3. Market readiness, an often under-hyped part of the developer journey where theapplication is readied for publishing to the market – including localisation, packaging,variant management, certification and submission.4. Distribution & monetisation is the stage addressed by app stores. It involvespublishing the application, establishing billing and distribution agreements and makingmoney from application sales, ads or other monetisation means.5. Retailing & discovery is the stage where an application needs to be promotedthrough as many channels as possible, so as to grab user attention. Retailing is the stagefacing the most challenges today, due to the over-supply of applications and thebottleneck of discovery.6. In-life use is the final stage, in which developers need to track sales and usageanalytics, support users and manage ratings, as well as update the application with bugfixes and features.Chapter 1 in this report has looked at the application planning stage. Chapter 3 will lookat the develop & debug stage. The rest of this chapter will examine the last four stagesof the developer journey, i.e., the challenges and opportunities in taking applications tomarket.The application store duopolyIn 2011, app stores are a fact of life and they are here to stay. Our research found thatuse of app stores as a primary distribution channel has surged by over 30% comparedto 2010. Today, app stores are the primary go-to-market channel for 45% of mobile appdevelopers across the eight major platforms.App stores have irreversibly changed the landscape of mobile application distributiontoday. In the last year, use of other application distribution channels has consistentlydeclined across the board; most notable are the year-on-year 20-30% declines in appdistribution via third party aggregators, on-device preloads, and via developers’website.Operator portals, whose ‘walled gardens’ once dominated content distribution, arepaling in significance compared to app stores. “Downloads through operator portals arestill less than one million per month on average per operator,” notes an executive at onemobile app development house and continues, “Compare that to one billion per-monthdownloads from the Apple App Store”. © VisionMobile 2011 | www.DeveloperEconomics.com 28
  29. 29. It’s no wonder operator portals have lost their shine. Telcos have typically outsourcedtheir portal operations and development to major IT suppliers who have lacked theculture and incentives to evolve with the times. “The same people who failed in WAPportals are doing operator app stores now,” points out the CEO of a leading mobile appagency in Germany. Moreover, the discovery and purchase process through an operatorportal has major drawbacks to modern app stores. “It’s more complex to download agame through an operator portal than to open abank account,” notes Christopher Kassulke, CEO “What T-Mobile does in oneat Handygames, a major app development house. year in terms of downloads,And still, in 2011 – in the era dominated by app we do in one week.”stores and long-tail innovation – there are tier-onetelcos who require developers to sign 20-page Manager Top-ten games developercontracts before they can discuss a deal.Use of each channel to market also varies significantly per platform. App stores areused primarily by iOS (77%) and Android (54%) developers. In contrast, mobile weband Java ME developers distribute apps primarily through their own websites andportals, due to the lack of app stores with sufficient reach and discoverability.Reach is by far the most important reason behind developers’ preference for app storesas a distribution channel. More than 50% of developers distributing through Apple,Google, Nokia or BlackBerry app stores cite the ability to sell to more users as theprimary reason for app store selection.Exclusivity is not a critical reason for app store selection, either; only one in fiveAndroid and Blackberry developers choose an app store because it was the onlydistribution channel available. Moreover, neither the revenue share split nor the speedof payment are cited as important reasons for distributing via an app store. Support formarketing and promotions is the third most important reason for using app stores as adistribution medium; we expect marketing support to increase in importance as appstores develop more sophisticated targeting and promotional programs. © VisionMobile 2011 | www.DeveloperEconomics.com 29
  30. 30. All in all, app stores dominate over every other distribution channel because of reach,not exclusivity or payment terms.App stores are relatively quick to pay, too. Just over 60% of respondents using appstores get paid within one month from submission. The only distribution channel that’sfaster to pay is when developers are using their own website, where 75% of respondentsget paid within a month of the purchase.Drilling down into the ins and outs of the four main app stores, our research revealssignificant differences across Android Market, Apple App Store, BlackBerry App Worldand the Nokia Ovi Store – as the next chart reveals.Apple’s App Store has a notoriously unpredictable quality control and curation processduring app submission, which causes some dissatisfaction across developers. Themainstream press is peppered with stories of apps whose approval was inexplicablydelayed or even rejected when the apps conflicted with Apple’s own agenda.Android, on the other hand, places priority on developers with an automaticsubmission process with no QA or curation, resulting of course in an increase in ‘noise’from low-quality and even copyright-infringing or malicious applications in theAndroid Market. “The problem with Android Market is that you cannot tell if anapplication is an official app or a look-alike” notes an application developer who’s beendeveloping on Symbian and Bada platforms. “Something needs to change in AndroidMarket to get the quality of apps up to the same level as the Apple App Store” saysRoger Nolan, CTO at Ambient Industries, producer of the Flook location browser.The application quality review process is straightforward in the case of Android, but notso for Nokia’s Ovi Store. Developers that we spoke to report that the Ovi Storesubmission process is cumbersome and unnecessarily restrictive. Due to toughapproval criteria, an application typically takes five or more review cycles before it can © VisionMobile 2011 | www.DeveloperEconomics.com 30
  31. 31. appear on the shelf. Given that the turnaround time for each review cycle is 7-10 days(compared to just 24 hours for the GetJar store), that means that the time-to-marketfor Ovi Store apps is often 1.5-2 months. Moreover, Ovi Store content needs to beapproved on a country-by-country basis. To make things worse, the review cycle isn’tstreamlined, which means that each cycle is handled by a different reviewer withinNokia. Another important issue is that the root certificates have not been installed onsome S40 handsets (esp. in India), which means that even if an application is approved,it can’t install on the handset. “The only reason we persevere with Ovi is that once weget the app approved, the downloads are quite substantial” notes an applicationdeveloper who uses a multi-channel distribution strategy.Ovi is not alone in being criticised for its problematic “Typically it takes 1-2 days to haveapplication submission process. “It’s difficult to get a an app published on GetJar and 2-sign-off for Bada apps. Every week we have a new 4 weeks on the Nokia Ovi Store.”problem with the Samsung App Store, includingpoor documentation, language barriers and Mark Shoebridge Binuunreasonable control from Samsung, even on Sydney, Australiaapplication design issues” notes a developer in theUK who has already published four Bada apps.The fragmented app store landscapeBesides the four main native app stores – Android Market, Apple App Store, BlackBerryApp World, and Nokia Ovi Store – there are hundreds of distribution channels tomarket. There are over fifty different app stores, and many more if one includes themany operator portals globally. Furthermore, the selection of app stores availablevaries by region, operator or manufacturer deals. © VisionMobile 2011 | www.DeveloperEconomics.com 31
  32. 32. App store fragmentation is an under-hyped “Eventually apps will evolve to achallenge for developers. Each of these fifty-plus consolidation of submission andapp stores has its own developer sign-up process, payment mechanisms but aapp submission process, artwork and paperwork multitude of discovery options. Inrequirements, app certification and approval the world of scarcity you can win acriteria, revenue model options, payment terms, lottery ticket. In the world oftaxation and settlement terms. This implies that abundance, the competition is forthe marginal cost of distributing an application attention.”through one more app store is significant, contrary Jai Jaisimhato popular perception. CEO Open Mobile SolutionsTherefore, while the native app store is used by40-80% of developers (depending on theplatform), there is a significant opportunity – and associated cost – in using a multi-channel strategy in app distribution.In platforms like Android, where tens of app stores compete for user attention, thepicture is quite complicated. Unfortunately, the vast majority of developers do not havethe resources to distribute their apps through more than one or two app stores. At theother end of the spectrum, only a dozen or so software houses can deliver apps to themajority of app stores, with that number typically ranging to 70+ app stores.We believe that the app economy needs a single entry point for application submission(one per platform), along with a million distribution channels:- one app submission process, i.e., a single website, single contract, single approvalprocess, single billing & settlement and a single mix of business models per platform- a million distribution channels, i.e., a million different channels through which toretail and sell apps to consumers with a variety of prices, promos, bundles, and regionalaccess that help developers more effectively market their applications.An early role model for this single-in, many-out distribution model is perhaps Amazon.Amazon’s app store addresses many of the challenges of Android Market, includingquality control and curation, relevance and recommendations, as well as devicecompatibility, showing only those apps that are compatible with each handset model.Amazon further leverages its retailing expertise and consumer insights to set the pricefor each application, between 70% of the sale price and 20% of the list price.More importantly, Amazon offers a wealth of cross-selling opportunities forapplications, by listing an application next to relevant digital or physical goods, basedon the click-stream of each user and their preferences. Amazon is playing the“doorkeeper” role that operators used to play in the past, but more importantly, isallowing developers to reach out to more users through cross-selling andrecommendations mechanisms.We believe that app store fragmentation offers two opportunities. First, for app storebrokers with a develop-once-publish-many model, who can take an application andpublish it across multiple app stores. Second, for app stores that offer sophisticatedmarketing and promotional channels that can optimise app pricing based on the user,region or bundle the app appears with. © VisionMobile 2011 | www.DeveloperEconomics.com 32
  33. 33. Getting ready for launchPlanning and testing comes before publishing an app. The vast majority – around 90%of developers – use some form of planning or testing technique before publishing theirapps, whether it is peer reviewing, beta testing or market research. In fact, developersuse two planning techniques on average, irrespective of their primary platform,pointing to how planning is seen as essential for developers to compete within thecrowded applications marketplace.By far the most popular planning and testing techniques before app launch are peerreviewing with friends or colleagues and beta testing with customers. Both thesetechniques are used on average by about 50% of developers. Use of market research hassignificantly increased in the last year, and is most popular among developers who useapp stores as their primary channel to market.Despite the importance of app planning, most developers still use ratherunsophisticated techniques, like peer reviewing, for establishing whether an applicationis ready for launch. And it’s not a question of price; beyond the use of elaborate, costlytechniques, like running focus groups or using scenarios and personas, there are moreaccessible planning alternatives that exist today that can help in the stages leading tothe launch of the app. For example, application analytics (e.g. Distimo, PositionApp)can reveal important competitor intelligence about apps in the same region or genre,while crowd-sourced beta testing (e.g. Mob4Hire, uTest) can offer crucial, unbiasedfeedback to developers before app launch.The unpopularity of sophisticated planning techniques is due to a lack of awarenessmarketing and, in some cases, affordable pricing on the part of tools vendors. Somepoor planning also results from the ‘not invented here’ syndrome, a not uncommon © VisionMobile 2011 | www.DeveloperEconomics.com 33
  34. 34. phenomenon in which software developers “On Android and iPhone your app isassume ultimate knowledge of their target going to be buried almost instantly.customer. Regardless, app developers’ lack of But if you can go from 1,000 toplanning presents a ‘blue ocean’ opportunity 10,000 to 50,000 downloads veryfor platform vendors and OEMs to quickly you get picked-up by the appdifferentiate their developer programs by store algorithm - which means youoffering subsidised access to app store immediately get calls from Nokiaanalytics and crowd-sourced beta testing. and Samsung who want you on their platforms.”In the case of branded apps, marketing Cross-platform app developer, UKmanagers in industry verticals are used to verysophisticated marketing techniques, spendingmillions to better understand their customers. Getting to know the behaviour,preferences and expectations of mobile users is becoming imperative in the case ofmobile apps, too. To improve targeting, brands are routinely measuring downloads,frequency of use, patterns of feature use and time/day of use.Post app launch bluesThe biggest challenges for developers, post-app launch, are customer support, updatingapps in the field and developing incremental features, as voted by over 40% ofrespondents. Managing negative user ratings is another important challenge,particularly for developers who distribute via Apple, Google or Nokia app stores.App promotion is another thorny issue for developers publishing their ownapplications. Developers are clearly discontent with the lack of promotion optionsacross most app stores; there are very few off-the-shelf tools available to helpdevelopers promote their apps. Four out of five developers do promote their apps, with © VisionMobile 2011 | www.DeveloperEconomics.com 34
  35. 35. the primary techniques being social networks (Facebook, Twitter, etc), followed by freeapp demos, and – particularly amongst developers using app stores – blogs and forumpostings. Only one in 10 developers promote their apps using ad networks, with webkeyword search being the most popular, followed by mobile keyword search and mobileads. “Printed ads and web ads do not work well for apps. The user has to be one clickaway from downloading the app” notes Olivier Milcent, Chief Marketing Officer forMomac, a mobile app platform house.Despite the challenges in application promotion, best practices are starting to emerge inup-selling and cross-selling. A major games house sees a 20% conversion rate from freeto paid with an ad-supported, “full freemium” model. In other words, one in five userswho try a fully functional, ad-supported game, go on to buy the paid, ad-free version ofthat game, or buy another game that is advertised. In contrast, ‘light’ or ‘demo’ versionswith limited features or levels result in lower conversion rates.Given the long tail of hundreds of thousands of application developers, what the appeconomy lacks is an out-of-the-box “SDK” for app marketing. Such a toolkit wouldallow developers to invest in targeting the right users and increasing exposure. Thislack has prompted tens of startups to offer recommendation and promotion tools thathelp connect the right app to the right user; examples include Appaware, Appboy,Appolicious, Apprupt, Appsfire, FrenzApp, Flurry, Explorapp and Chorus. However,such tools are still a long way from becoming mainstream, with promotional platformslike Flurry’s App Circle being used by less than 4% of our respondents. © VisionMobile 2011 | www.DeveloperEconomics.com 35
  36. 36. Show me the moneyMoney matters. But in the gold rush to the applications economy, not everyone ismaking money. About a third of respondents make less than $1,000 USD perapplication in total, which is loss-making given that an application takes months todevelop.Moreover, not all platforms are born with equal revenue potential. Our researchrevealed large discrepancies across platforms in terms of the revenues applications arebringing to developers.We compared per-application revenues reported by developers for different platforms.Symbian scored lowest, so we assigned a base value of 1.0 to its reported per-app, thenrated other platforms relative to this “revenue index”.iOS topped the chart, making 3.3 times more money per app than Symbian developersfollowed by Java ME (2.7x) and BlackBerry (2.4x). Java should come as no surprisehere, given it is still the primary platform for developing games on feature phoneswhich often have higher price points than smartphone apps. Android (1.7x), mobile web(1.6x) were the weakest performing platforms in terms of revenue per app and onlyahead of Symbian (1.0). The important insight here is that large device sales do nottranslate into higher app monetisation for developers, as the case for Symbian shows.Note that we excluded developers making more than $100K per app, and those who didnot know or could not indicate revenues. © VisionMobile 2011 | www.DeveloperEconomics.com 36
  37. 37. The amount of revenue generated from an application on average is not just aboutmarket reach. It’s a complex orchestration of techniques across the entire go-to-marketlifecycle of an application, including usability guidelines, quality control, applicationdiscovery, and billing options. Even small details like the mix of revenue models make adifference. For example, the Apple App Store does not allow trial versions ofapplications, which motivates users to buy before they try, which indirectly increasesdeveloper revenues. As a counter example, Windows Marketplace offers a trial versionfor applications, which doesn’t help developers monetise from impulse purchases – anaive differentiation move on the part of Microsoft.There are more complexities around monetisation. For example, while Java ME offers © VisionMobile 2011 | www.DeveloperEconomics.com 37
  38. 38. relatively high revenues per app, Java ME developers did not necessarily respondpositively when we asked about their level of satisfaction with revenues (i.e. whetherrevenues were above or below expectations).The previous graph is quite telling. The good news? One in three developers see thelevel of revenues they expected. The bad news? On average, there are five times moredevelopers who are dissatisfied with their mobile application revenues than there aresatisfied developers. The platforms do add some colour to the picture; iOS developershave more positive impressions than any other platform, whereas Java ME has themost developers dissatisfied with revenues, since feature phone Java games downloadsare in decline.Besides the revenues individual developers are seeing, how are revenues distributedacross app categories? Games dominate all other application categories bringing in atotal of 45% of revenues from paid downloads and in-app purchases in the Apple iOSApp Store in April 2011, according to analytics firm App Annie. The revenue breakdownby category is based on a bottom-up statistical model drawn upon more than 40,000apps, which use the App Annie sales analytics service.How do developers make money?Much like the web, the application economy is steadily shifting to corporate funding;more and more developers are working for a salary or commission. Approximately 50%of app developers in our survey make money through a salary or commission,confirming that commissioned app development is becoming as an important part ofthe app economy as making money directly through applications.For developers making money directly, the top revenue model is pay-per-download,followed by advertising and freemium (free download, then pay to upgrade). Despitethe hype surrounding newer revenue models, we found that subscriptions and in-app © VisionMobile 2011 | www.DeveloperEconomics.com 38
  39. 39. purchases are three times less popular than the pay-per-download model, across allmajor platforms.The distribution of revenue models varies widely by platform. Among mobile webdevelopers, advertising was the most popular model, with many Android developersalso using this model. Pay-per-download was most popular among iOS developers.App stores have radically enabled new revenue models. For example, use of pay-per-download is three times higher for developers using an app store, as opposed todevelopers who primarily distribute apps through their own website. Use of advertisingand in-app purchase is almost double for apps distributed via an app store.Finally, a small percentage of developers (on average one in 10, irrespective ofplatform), make money through brand extensions or service revenues. This revenuemodel appears to be more popular than average amongst mobile web developers.When it comes to brands and commercial organisations, generating direct revenuesfrom a mobile app is not often the top priority. Most brands introduce apps as a way toincrease accessibility and interaction with their target market. However, organisationsbecoming savvier in extending their digital strategies into mobile, are seeking togenerate revenue as well. Our research highlighted three main mobile revenue streamsthat brands are looking into: advertising, one-off or subscription-based app sales (if the © VisionMobile 2011 | www.DeveloperEconomics.com 39
  40. 40. application adds genuine value, e.g. as a game, utility, business, travel, fitness, or otherapp) and in-app purchases, especially in games, social networking, travel and sportsapps.The role of mobile operatorsIn the last few years, mobile network operators (‘carriers’ if you live in North America)have been unwillingly dragged into the software era – one dominated by economies ofdemand that Apple and Google live by, not economies of production that operatorshave been accustomed to.As the innovation in mobile has shifted to software, so network operators have beenkeen to re-establish themselves and take part in software-led innovation. As such, theleading operators in Western, smartphone-populated markets – including Telefonica,Vodafone, Orange, Telenor, AT&T and Verizon – have launched developer innovationprograms and network API platforms. Many have also launched their own app stores.The Wholesale Applications Community (WAC) is essentially an operator-centricinitiative to help operators compete against Apple and Google, who dominate thesmartphone innovation and value chain. The WAC aims to help operators develop asolution that encompasses an application runtime, app stores and APIs.Traditionally, application developers have been cold and uncertain as to the role theoperators can play in a software world. While the majority of developers agree that therole of operators is to delivery data access and voice, there is no consensus on the roleof operators in software. For example, developers don’t agree on whether operatorsshould be a payment gateway, an API platform, build the best mobile services, or just © VisionMobile 2011 | www.DeveloperEconomics.com 40
  41. 41. leave developers alone.However, marketing efforts on behalf of operators have been paying off. There is nowmuch more awareness amongst developers that the role of operators should be to offera platform of network APIs.We are also now seeing important regional differences in how developers perceiveoperators. For example in Asia, many more developers (14% above the global average)see operators as a payment gateway or API platform, and not just a data or voice pipe.In Europe and North America, developers are showing signs of discontent withoperator-owned services, with many more developers (20% above the global average)suggesting that the role of operators is to deliver data and voice, and not to own servicesor to offer a supermarket-like proposition.Yet, operators still have a lot of ground to cover in capturing developer mindshare.Business model polarityA fundamental change that we believe operators need to undergo is to see developersnot as resellers of network APIs, but as benefactors or agents driving end users to thenetwork’s core business. Operators need to greet developers not with price-lists, whichare commonplace among network API programs, but with partner programs in whichdevelopers get to share in the revenue generated when they drive users to the network.They should let developers focus on finding new ways to innovate with apps that usetelco capacities, instead of worrying about whether their cash flow is adequate.In other words, operators need to change their business model from a “developer pays”model to a “developer gets paid” model. If developers create apps that use telco APIs,they drive traffic or usage, which benefits both the user and the telco. It’s not thedeveloper that needs to pay – it’s the user. What needs to happen is a change in whatwe call “business model polarity”.Consider this scenario in the traditional developer-pays world: A developer builds anSMS-to-Twitter service; the user sends a new tweet as a text to a short code. The reply,an SMS back to the user, is then paid by the developer. The developer is penalised forgenerating traffic to the network. This is the “developer pays” model and it doesn’twork.In the “developer gets paid” model, a single API allows the user to pay for both outgoingand return SMSs in one shot, and the developer gets to use the API for free and even geta revenue share kick-back in return. The developer can focus on building a viral service,and won’t have to worry about success costs. © VisionMobile 2011 | www.DeveloperEconomics.com 41
  42. 42. This is a fundamental polarity change. Instead of the developer paying for access tonetwork resources, the developer gets paid for driving increased voice or messagingrevenues.Matchmaking developers to usersBesides tools or APIs, operators have an even more important role to play, byconnecting developers to users. We believe operators are sitting on a pile of gold: a pileof untapped intelligence on who their customers are, their interests, where they aregoing, and who are they influencing and being influenced by.Before we conjure any images of Big Brother here, let’s view this customer intelligencein a different light. Namely, as helping users find the right applications. Wefundamentally believe that operators can leverage the mountain of customerintelligence to support developers in solving the discovery problem - which still plaguesthe app economy - by helping users find apps relevant to their location, social circle,and buying habits. In other words, operators can become the best matchmakersbetween developers and users, between the right app and the right user. © VisionMobile 2011 | www.DeveloperEconomics.com 42
  43. 43. © VisionMobile 2011 | www.DeveloperEconomics.com 43
  44. 44. HOW DO PLATFORM CHARACTERISTICS STACK UP ?3. The building blocks of mobile appsGetting to grips with mobileNot all platforms are designed equal – and getting to grips with mobile developmentcan be a major investment of time and effort, depending on which platform you chooseto learn.Android and Qt are by far the easiest platforms to learn, with respondents requiring anaverage of under six months to master. In contrast, Java ME and Symbian are thehardest platforms to get to grips with, taking over 10 months to master.Contrary to popular perception, mobile web isn’t such an easy platform to learn,ranking sixth in terms of learning curve. This is not due to the complexity of any onelanguage like HTML or JavaScript, but due to the need for web developers to learn acomplex stack of languages and technology frameworks across client and serverenvironments, in addition to having to battle with the challenges of cross-browserportability.The next chart illustrates the relative learning curve per platform, and how not allplatforms are born equal. © VisionMobile 2011 | www.DeveloperEconomics.com 44
  45. 45. Measuring fragmentation “Commercial and UX considerationsFragmentation is as old as software itself. aside, 97% of the application codeFragmentation challenges have been a key topic of across iPhone and iPad is usuallydiscussion in mobile industry circles since Java the same.”ME started proliferating in 2004-5. No matter the Alex Curyloplatform advances, fragmentation remains an Winner of "Most Innovative Product",unsolved problem – both for developers targeting Apple Design Awardsmultiple platforms, but also for the likes of Apple,Google and Microsoft, for whom fragmentationcan break the ‘platform story’.Moreover, fragmentation is a challenge for brands and commercial organisations goingmobile, as it adds a completely new dimension of complexity. For brands, extendingpresence to the web is a straightforward process involving developing a website andtesting it across the two or three mainstream browsers found on 80% of devices. Goingmobile complicates things much further, as developing across the top three or fourmobile platforms (iOS, Android, Symbian and BlackBerry) reaches just over 20% of thedevices sold on average, and represents a much more resource-intensive operation asthere is very little code reuse across these platforms. Extending user reach beyond this20% presents formidable challenges which can only be addressed only with a lowestcommon denominator approach.To quantify platform fragmentation we asked developers how many versions (alsoreferred to as SKUs - stock-keeping units) of their apps they need to develop. © VisionMobile 2011 | www.DeveloperEconomics.com 45
  46. 46. We were able to quantify that indeed Apple’s iOSis the platform with the least fragmentation (on “Anyone who states Android isaverage four versions per app), as has been fragmented must have nowidely noted from empirical evidence in the experience developing onpast. Apple manages fragmentation through two BlackBerry or Nokia platforms. Evenprimary means: first, it has standardised the iOS has a six different devices ofscreen size and resolution for its handsets and varied capability now.”tablets; and second, as an OEM and platform Brian LeRouxvendor, it has commercially streamlined the Nitobi Softwaremeans by which most iPhone or iPad users areupgraded to the latest OS version.In contrast, our research indicates that Android developers must create six versions oftheir apps on average, which is on par with mobile web apps.The stark difference in fragmentation across Apple and Android devices is also evidentamongst the different platform versions in the installed base of devices. According toGoogle data released on May 2011, 25% of active Android handsets run on platformversions more than 18 months out of date. Meanwhile, according to app analytics firmLocalytics, only 20% of existing Apple 3GS devices had not yet been upgraded, just twomonths after the introduction of iOS4. In other words, Apple devices have the youngestruntime age in the mobile industry.The intensity of Android fragmentation has been widely discussed, and is often cited asthe biggest sore point for the platform. We analyse Android fragmentation into fivedimensions:1. Release speed: Android’s unprecedented speed of innovation (three major versionsreleased between Q2 2010 and Q2 2011) means the core platform itself is changing toooften for developers to keep up.2. Complex incentives: Unlike Apple, Google doesn’t make its own hardware –meaning Android phone OEMs lack commercial incentive to keep updating handsetsthat have already been sold. Instead, they have an incentive to push users to shortentheir device replacement cycles. The commercial update process is especially entangledwhen handsets have been produced for a particular mobile operator. Note that Googlerecently unveiled a compliance program that will force handset manufacturers toupdate their platform for the first 18 months since handset launch.3. OEM fragmentation: Many handset OEMs differentiate by customising Androidwith user interface changes, and their own applications and features. For example,HTC’s Sense UI differs from Sony Ericsson’s Rachel, Motorola’s MotoBLUR, Samsung’sTouchWiz and LG’s S-Class user interface. All OEM additions – whether UI layers,features or even bug fixes –create traces of fragmentation for developers.4. Screen fragmentation: As Android is being used for multiple screen resolutionsand form factors, from smartphones and feature phones to DECT handsets, set-topboxes and cars, there will inevitably be the need to adopt an application for differentscreen sizes – not to mention adapting the Android codebase to run on a different typeof ‘screen’ than Google designed it for. For example, the Android Honeycomb platform © VisionMobile 2011 | www.DeveloperEconomics.com 46
  47. 47. for tablets and TVs is very different than the Android Gingerbread platform forsmartphones, in addition to differences across tablet screen sizes.5. Codebase forking. China Mobile’s Ophone and China Unicom’s Wophone are‘forked’ (branched) versions of Android for the China market. Other forks includeCyanogen and MiuiAndroid, which are unofficial, customised versions of Androidtargeted at tech enthusiasts.Our research confirmed that, contrary to popular perception, Android is still relativelyunfragmented. Rather, it is Java and Symbian that are amongst the most problematicplatforms in terms of fragmentation, with developers needing to create on averageabout twice the number of app versions for these platforms, compared to Android.Moreover, BlackBerry – alongside Java ME – is one of the platforms with the greatestamount of fragmentation. This should come as no surprise, given the diversity acrossBlackBerry device capabilities, input mechanisms and screen resolutions. As of March2011, close to 40% of installed base of BlackBerry devices run versions of the OS thatare older than version 5. Note that only devices running version 5 and above arecapable to support the BlackBerry App World application store.On the flipside of fragmentation challenges is opportunity. A number of companieshave emerged to offer porting tools aimed at bridging the gap across platforms. Thesecompanies include Appcelerator, Ansca, Didmo, DragonRAD, iFactr, Innaworks,Metismo, Mobile Distillery, MonoTouch, MoSync, Open-Plug, Recursion software,Rhomobile, RunRev, Sencha, StackMob and TapLynx.Source: VisionMobile Mobile Industry Atlas, www.visionmobile.com/mapsGoing global: Localisation issuesWith close to one billion apps available, and over 800 million smartphones shipped todate, apps are a global phenomenon. But, in going global, many developers are havingto deal with localisation, i.e. translating their application to local languages.Localisation is not yet a mainstream issue: nearly 70% of our respondents either havenot tried localizing their apps or have never had any issues with it. But localisation willsoon become a fundamental issue for mobile developers, as it becomes easier todistribute apps globally and to develop regionally-sensitive apps and content like news, © VisionMobile 2011 | www.DeveloperEconomics.com 47