Google Play App Revenue Gaining on Apple iTunes

Android app revenue grew 70 percent on strong “in-app” purchasing last quarter, according to analyst report.

Samsung Phone with Android Robot icon

"Credit Apple for what they've achieved, but give Google credit for having created this little green robot," said Paolo Pescatore of CCS Insight.

Google Play app revenue increased 70 percent in the first quarter of this year. That rapid growth rate isn’t enough to put Google Play on par with the Apple iTunes App Store, but it may persuade more money hungry developers to create tablet and smartphone apps for the Android platform, according one research firm.

“We saw revenue from Google Play almost doubling in the first quarter of this year over the two previous quarters,” said Paolo Pescatore, director of apps and media for U.K.-based mobile communications research and advisory firm CCS Insight. “At the current pace, Google Play could soon exceed revenue from iPhone apps.”

Pescatore authored the report based on analysis he has been conducting for the past two years. Apple separates revenue figures from iPhone and iPad apps while Google Play combines them for smartphone and tablet apps. This revenue distinction for iOS apps allowed CCS Insight to determine that app revenue from Google Play has already surpassed for the first time those generated from iPad apps downloaded from iTunes.

At its recent Worldwide Developer Conference, Apple announced that it had surpassed 900,000 apps for iPhone, iPad and iPod Touch devices and has paid developers $10 billion since the iTunes App Store opened. Google Play has an estimated 800,000 apps, but to-date the app store has been generating three times less revenue than iTunes, according to a recent research report from Canalys.

Pescatore’s analysis of the revenue generated per day from the top 300 apps in both stores found that iPhone and iPad apps more than doubled those on Google Play (an estimated $13.8 million versus $5.1 million). However, revenue from Android-based smartphone and tablet apps, grew at a much faster pace than iOS apps during the first three months of the year. Most of that revenue was generated from free applications that offer “in-app” purchases.

“I do see this revenue growth as sustainable,” Pescatore said.

App Revenue Follows Android Device Growth

There’s also a heated battle being waged for the app download lead with Android gaining fast on iOS; Apple iTunes last month passed the 50 billion app download milestone and just days later Google Play hit 48 billion. The post-holiday first quarter tends to be quieter, according to Pescatore, but this year there was an exceptional surge of Android tablet and smartphone app downloads, especially in Asia.

“It’s just a testament to the volume of Android-based devices in the marketplace,” he said, pointing to news from the recent Google I/O event that 900,000 Android devices will be activated this year, doubling the number of devices from 2012.

According to IDC, within four years after Android was released, the operating system was running 75 percent of the smartphones around the world.

“Google is experiencing exceptional growth and they have a clear mandate where they want to drive this kind of open ecosystem regardless whether that’s high end or low end smartphones and tablets,” said Pescatore.

The Freemium App Revenue Model

The increase in app revenue is a testament to the increase in new Android devices, particularly in Asia, according to Pescatore, and a shift from paid apps toward so-called “freemium” apps, which consumers download at no charge and then make purchases and upgrades from inside the app.

App Revenue from Google Play

A recent report from U.K-based research firm CCS Insight shows revenue from Google Play apps nearly doubled in the first quarter over the two previous quarters.

“People feel a lot more comfortable if they can try before they buy,” said Pescatore. “If you look at the Google Play Store today, the freemium model is by far where the most revenue is generated. Google Play is really offering developers a viable revenue opportunity, whereas before it was much more about iOS, which still dominates with its combined iPhone and iPad downloads.”

Pescatore joked that there’s an app for everything, but believes it should be true because the mobile device is such an integral part of people’s lives. Yet it can be expensive to develop an app, anywhere from $50,000 to $70,000 for an immersive experience and in some cases even more. “Then getting the app to work across platforms can get quite costly,” he said.

“There’s always demand for global, well-recognized brands such as Disney, Rovio and Gameloft, but we shouldn’t underestimate the value of local developers, particularly in Asia, because there’s a strong appetite to have content that is locally relevant,” he said.

Quarter on quarter he sees many local publishers ranking high. “If you look at the majority of the top 300 free apps, a greater proportion of those apps are locally relevant to the audience,” he said.

“There are many stores today, in particular the Windows Phone store, where they don’t do a good job in attracting the key content owners of the services that people are using in any given country.

Trends for Mobile App Makers

“Quite clearly app volumes follow device availability,” said Pescatore. “Q4 of last year was a bumper quarter, just stellar in terms of new apps and download volumes,” he said, “driven by the launch of the iPhone 5, iPad Mini, Samsung Galaxy S3 and other new devices.”

Google Play daily app revenue

Revenue generated each day globally through mobile apps downloaded from Google Play increased by 70 percent in the first quarter of 2013 compared with the fourth quarter of 2012. Source: CCS Insight

The second quarter could bring slower growth in app downloads and revenue and any significant ramp up may not happen until the end of the year. He sees no reason why OEMs and handset providers would change their traditional new product cycles because they want to maximize sales.

“There may be a couple who buck the trend just to get a bit more visibility, but they’re taking a huge risk in terms of marketing,” he said.

While games are more popular than any other app category, Pescatore believes entertainment apps will be increasingly important.

Video on mobile devices is growing at an alarming rate,” he said. “It has a wrecking ball effect on any network. The growth of YouTube, the amount of clips generated and amount of activity it generates on mobile is absolutely phenomenal.”

He sees quarter on quarter demand growing for apps that extend content services like Netflix and LoveFilm in the U.K. These are services that people pay to get at home and having a mobile app gives them more options for using the service.

“They want to get it on their mobile device, and in most cases it’s free to do so,” he said.

Google Play App Revenue Gaining on Apple iTunes

Android app revenue grew 70 percent on strong “in-app” purchasing last quarter, according to analyst report.

Samsung Phone with Android Robot icon

"Credit Apple for what they've achieved, but give Google credit for having created this little green robot," said Paolo Pescatore of CCS Insight.

Google Play app revenue increased 70 percent in the first quarter of this year. That rapid growth rate isn’t enough to put Google Play on par with the Apple iTunes App Store, but it may persuade more money hungry developers to create tablet and smartphone apps for the Android platform, according one research firm.

“We saw revenue from Google Play almost doubling in the first quarter of this year over the two previous quarters,” said Paolo Pescatore, director of apps and media for U.K.-based mobile communications research and advisory firm CCS Insight. “At the current pace, Google Play could soon exceed revenue from iPhone apps.”

Pescatore authored the report based on analysis he has been conducting for the past two years. Apple separates revenue figures from iPhone and iPad apps while Google Play combines them for smartphone and tablet apps. This revenue distinction for iOS apps allowed CCS Insight to determine that app revenue from Google Play has already surpassed for the first time those generated from iPad apps downloaded from iTunes.

At its recent Worldwide Developer Conference, Apple announced that it had surpassed 900,000 apps for iPhone, iPad and iPod Touch devices and has paid developers $10 billion since the iTunes App Store opened. Google Play has an estimated 800,000 apps, but to-date the app store has been generating three times less revenue than iTunes, according to a recent research report from Canalys.

Pescatore’s analysis of the revenue generated per day from the top 300 apps in both stores found that iPhone and iPad apps more than doubled those on Google Play (an estimated $13.8 million versus $5.1 million). However, revenue from Android-based smartphone and tablet apps, grew at a much faster pace than iOS apps during the first three months of the year. Most of that revenue was generated from free applications that offer “in-app” purchases.

“I do see this revenue growth as sustainable,” Pescatore said.

App Revenue Follows Android Device Growth

There’s also a heated battle being waged for the app download lead with Android gaining fast on iOS; Apple iTunes last month passed the 50 billion app download milestone and just days later Google Play hit 48 billion. The post-holiday first quarter tends to be quieter, according to Pescatore, but this year there was an exceptional surge of Android tablet and smartphone app downloads, especially in Asia.

“It’s just a testament to the volume of Android-based devices in the marketplace,” he said, pointing to news from the recent Google I/O event that 900,000 Android devices will be activated this year, doubling the number of devices from 2012.

According to IDC, within four years after Android was released, the operating system was running 75 percent of the smartphones around the world.

“Google is experiencing exceptional growth and they have a clear mandate where they want to drive this kind of open ecosystem regardless whether that’s high end or low end smartphones and tablets,” said Pescatore.

The Freemium App Revenue Model

The increase in app revenue is a testament to the increase in new Android devices, particularly in Asia, according to Pescatore, and a shift from paid apps toward so-called “freemium” apps, which consumers download at no charge and then make purchases and upgrades from inside the app.

App Revenue from Google Play

A recent report from U.K-based research firm CCS Insight shows revenue from Google Play apps nearly doubled in the first quarter over the two previous quarters.

“People feel a lot more comfortable if they can try before they buy,” said Pescatore. “If you look at the Google Play Store today, the freemium model is by far where the most revenue is generated. Google Play is really offering developers a viable revenue opportunity, whereas before it was much more about iOS, which still dominates with its combined iPhone and iPad downloads.”

Pescatore joked that there’s an app for everything, but believes it should be true because the mobile device is such an integral part of people’s lives. Yet it can be expensive to develop an app, anywhere from $50,000 to $70,000 for an immersive experience and in some cases even more. “Then getting the app to work across platforms can get quite costly,” he said.

“There’s always demand for global, well-recognized brands such as Disney, Rovio and Gameloft, but we shouldn’t underestimate the value of local developers, particularly in Asia, because there’s a strong appetite to have content that is locally relevant,” he said.

Quarter on quarter he sees many local publishers ranking high. “If you look at the majority of the top 300 free apps, a greater proportion of those apps are locally relevant to the audience,” he said.

“There are many stores today, in particular the Windows Phone store, where they don’t do a good job in attracting the key content owners of the services that people are using in any given country.

Trends for Mobile App Makers

“Quite clearly app volumes follow device availability,” said Pescatore. “Q4 of last year was a bumper quarter, just stellar in terms of new apps and download volumes,” he said, “driven by the launch of the iPhone 5, iPad Mini, Samsung Galaxy S3 and other new devices.”

Google Play daily app revenue

Revenue generated each day globally through mobile apps downloaded from Google Play increased by 70 percent in the first quarter of 2013 compared with the fourth quarter of 2012. Source: CCS Insight

The second quarter could bring slower growth in app downloads and revenue and any significant ramp up may not happen until the end of the year. He sees no reason why OEMs and handset providers would change their traditional new product cycles because they want to maximize sales.

“There may be a couple who buck the trend just to get a bit more visibility, but they’re taking a huge risk in terms of marketing,” he said.

While games are more popular than any other app category, Pescatore believes entertainment apps will be increasingly important.

Video on mobile devices is growing at an alarming rate,” he said. “It has a wrecking ball effect on any network. The growth of YouTube, the amount of clips generated and amount of activity it generates on mobile is absolutely phenomenal.”

He sees quarter on quarter demand growing for apps that extend content services like Netflix and LoveFilm in the U.K. These are services that people pay to get at home and having a mobile app gives them more options for using the service.

“They want to get it on their mobile device, and in most cases it’s free to do so,” he said.