1. Sectoral Analysis of the Mobile Applications Industry
By Nikhil Abrol – IMT Ghaziabad

2. Layout of Presentation
PART 1
Analysis of the Global Mobile Apps Industry
PART 2
Classification of Mobile Apps
PART 3
Analysis of the Top Publically listed App based Companies
PART 4
App Development
PART 5
Analysis of the Indian Mobile Apps Industry
PART 6
Future of Mobile Apps

3. Part 1 Analysis of the Mobile Apps Industry
A Global Perspective

4. Mobile Apps are taking over: A change in paradigm
Mobile apps are not a phenomena, they are here to stay!
Based on the graph we can see that the average time spent on the mobile apps is increasing vis a vis time spent on traditional web browsing
In 2010, smartphones outsold personal computers, which caused tech analysts to shift their attention to the handheld platform
During the fourth quarter of 2010, million smartphones were shipped worldwide, whereas only 53.9 million units had been shipped in the corresponding quarter of 2009
Source: aabri.com case study

5. Revenue of the Mobile Apps Industry Globally
Total revenue of the mobile apps industry is around $35 billion globally and is expected to rise at CAGR of 120% from 2014 – 2017
We see from the Gartner report that the majority (70%) top-line contribution for app developers comes from the Paid for Apps
We can see that there is a predicted increase in the revenue from the In-app purchases and we see that it will also overtake the revenue from Paid for apps, this is because in both the apps market, the top grossing apps are those who allow users to download for free and then sell them add-ons, Hence more developers are shifting to this model

6. Free Apps vs Paid for Apps
The free apps downloads will continue to hold around 90% of the market share, this is contrary to the commonly held belief that the apps industry would look towards a paid apps revenue model as the market matures
The emergence of IAP or In App Purchase revenue model is a better means to generate revenue – it encourages performance-based purchasing i.e. users are willing to spend more if they are happy with the experience
Advertising, meanwhile, is a marginal driver of revenues for most app makers Gartner notes that the proportion of free apps using advertising is actually falling: It will decline from 88 percent in 2013 to 86 percent in since In-app advertising is not yet an effective means of reaching targeted audiences for advertisers
Source: Gartner

7. The Global Smartphone Market
It is important to take a look at the increasing worldwide smartphone market as most of the mobile applications are smartphone based
The Smartphone Market is growing by 28.6% with Samsung as the market leader with 30.2% share
Increase in competition as new Chinese entrants such as Lenovo, Huawei, Xiomi etc. are gaining popularity and eating into market share of Samsung and Apple
Source: idc.com

8. Different OS, Different App Markets
Period
Android
iOS
Windows Phone
BlackBerry OS
Others
Q3 2014
84.4%
11.7%
2.9%
0.5%
0.6%
Q3 2013
81.2%
12.8%
3.6%
1.7%
Q3 2012
74.9%
14.4%
2.0%
4.1%
4.5%
Q3 2011
57.4%
13.8%
1.2%
9.6%
18.0%
Android is the most preferred Operating System with a large and increasing market share
Continuous decline in blackberry OS and phones
Windows Phone and IOS market share have remained stagnant
Source: idc.com

9. Number of Apps in Different OSs
Android users have the maximum number of apps to choose from, around 1.3 million apps in Google Play store
Apple Apps store is not far behind with 1.2 million apps and they experienced a boom much before the android market
Windows phones and amazon kindle are sold less hence app developers produce less apps for them
Top apps comprise 80% those downloaded globally, posing a challenge for developers to make money through app development
Source: statista.com

10. Porter’s 5 forces analysis for the Mobile Apps Industry
Rivalry within Industry
Intense – Developers fighting for the same audience in just 2 main markets
Threat of Substitute Products:
Moderate-High – Many developers are providing same utility
products
Threat of New Entrants:
High – As many Imitator’s app come up in a short duration
and offer the same
utility
Bargaining Power
of Suppl iers:
Low – Platfor m specifi c applica tions
Competition from free products
Bargaining
Power of Buyers:
Very High –
There are close to 1billion users

11. Part 2 Classification of Mobile Apps

12. Different Types of Mobile Apps
Native Apps
Native apps live on the device and are accessed through icons on the device home screen Native apps are installed through an application store (such as Google Play or Apple’s App Store)
They are developed specifically for one platform, and can take full advantage of all the device features
Web Mobile Apps
Web mobile applications are software programs that run directly from the web browser on mobile phones and tablets
Some examples of popular web applications are popular social networks (the versions that are accessed through the browser), and chatting applications, online mobile games, and cloud-based office applications
Hybrid Apps
Hybrid apps are part native apps, part web apps
Like native apps, they live in an app store and can take advantage of the many device features available
Like web apps, they rely on HTML being rendered in a browser, with the caveat that the browser is embedded within the app
Source: nngroup.com

13. Apps by Category and Average time spent on them per person per month
Search Portals & Social
10 hours 56 minutes
Entertainment
10 hours 34 minutes
Communication
3 hours 48 minutes
Productivity and Tools
2 hours 16 minutes
Commerce and Shopping
1 hour 33 minutes
Source: entrepreneur.com

14. Part 3 Analysis of the Top Publically Listed App based Companies
A Financial Analysis

15. Financial Analysis of Top Public App Companies
Zynga
King
Glu Mobile
Take- Two Interactive
Market Data
Market Cap
$ 2.47 bn
$ 4.27 bn
$ 0.54 bn
$ 2.43 bn
Company Listing
US: Nasdaq
US: NYSE
Headquarters
San Francisco, US
Dublin, Ireland
New York, US
Employees
2,034
665 -
2,530
Financial Performance
Sales FY 2013
$ 0.87 bn
$ 1.88 bn
$ 0.22 bn
$ 2.35 bn
Growth
-31.85% %
111.29%
93.54%
Operating Profit FY 2013
$ 0.12 bn
$ 0.72 bn
$ 0.70 bn
Margin
13.60%
38.40%
29.79%
Relative Valuation
Price to Earnings Ratio
6.13 x
19.84 x
16.34 x
Price to Book Value
1.28 x
23.68 x
3.15 x
3.11 x
1 Year Stock Return
-39.51%
1.40%
54.34%
Source: Bloomberg.com, WSJ.com

16. Part 4 App Development
A Cost-Benefit Analysis

17. The Process of App Development
Planning
Idea Generation
Choose a platform
Design Prototypes
Development
Customer Development
Modify & Finalize Design
Finalize Design
Software Development
Testing
Marketing & Distribution
Marketing
Prepare for release
Launch
Maintenance
Source: crashlytics.com

18. Costs of Developing Apps
Based on the type of app, a basic simple app would cost somewhere around $3000-$8000
According to that article, a survey of 96 mobile app developers showed the average cost to develop an app was $6,453
A complex app that has features like cross platform, or social login, personal profiles, in app purchases, customer ratings, website connection, app layout and design, app icon etc. can cost around a $100,000- $120,000
Average app developer in the US charges around $100 per hour
Source: formotus.com

19. Cost-Benefit Analysis using example
Advantage of Developing Mobile Apps
What makes the creation of mobile apps so cheap is a simple trick: producers can first put out an initial version featuring levels or 30 hours of simulation gameplay. If the app sinks, the production can be closed down. If it soars, new levels and expansion packs can be churned out at short intervals
Less time for app development: around 4 months
Initial marketing costs if any can be held below $30000
Clash of Clans
Developed by Supercell
Initial app development cost $160000
Currently is the top grossing app in the iPhone Apps Store
Took a team of 5 developers 4 months to roll out the initial app
Due to In-app purchases, its weekly revenue is around $ $220000
Source: bgr.com

20. Part 5 Analysis of the Indian Mobile Apps Industry

21. Indian application market likely to touch Rs 3,800 crore mark by 2016
Scope of the Industry
App downloads in India are estimated to account for less than 5% of global app downloads despite being the world’s second largest mobile user market after China
App downloads in India are expected to grow at a compounded annual growth rate of 75-80% till 2015 to about 9 billion from around 1.56 billion in 2013
At present, there are 9,000 app development companies in India - According to a Nasscom report, most of these were launched during the last three years
67% of the Indian developers are not making enough to sustain them or their business, i.e. they are below the ‘app poverty line’ of $500 per app per month
With the growth of the domestic app market (user base and download numbers), more and more individuals will concentrate on developing apps for the Indian market, creating more apps and download opportunities
Indian application market likely to touch Rs 3,800 crore mark by 2016
Source: mint.com businessstandard.com

22. The Indian Mobile User
App downloads in India are estimated to account for less than 5% of global app downloads despite being the world’s second largest mobile user market after China
Only 15% of mobile phone users in India download apps, with 90% of them preferring free ones
38% of the smartphone users are between the age group of 15-35
Some of the apps that have garnered more than 100,000 downloads include Zomato, MakeMyTrip, M-indicator, OLX, Flipkart, Hike, Redbus, Freecharge, Snapdeal and more
According to a survey by Appszoom there are 99 times more Android users compared to iOS users in India
Source: bgr.com livemint.com

23. Part 6 The Future of Apps
What’s Next?

24. Future of the Mobile Apps Industry
The market for mobile apps is already big - and it’s just going to keep getting bigger. If a business doesn’t already have a mobile app, it might get left behind
In 2015, 1 billion smartphones will be sold - twice as many as the number of personal computers
 By 2017, its expected that over 268 billion downloads will generate $77 billion worth of revenue

25. The Future Trends in the Mobile Apps Industry
Outside Promotion
To get noticed in the crowded apps store, mobile app ads are on the rise
Facebook says mobile app adds are now 59% of its revenue
Context Aware Marketing
Improve users experience by utilizing persons interests, history, preferences and precise indoor location to personalise content and services
Preparing to be Worn
As smartphones and wearable technology improves, mobile apps will need to keep up in order to deliver information in new and innovative ways
Advanced User Experience
Developers are pushing the envelope for user interface design to accommodate more content by utilizing novel technologies for that “wow” factor
Mobile Connected Smart Objects
Mobile app controlled smart objects such as fridge, TV, A.C., LED Lights, toys, medical devices, home appliances, power sockets etc.

26. By Nikhil Abrol – IMT Ghaziabad ft14nikhilabrol@imt.ac.in
Thank You
By Nikhil Abrol – IMT Ghaziabad