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Flurry study names ads as fastest growing mobile revenue sector

Flurry study names ads as fastest growing mobile revenue sector

Wed 01 Aug 2012 9:34am GMT / 5:34am EDT / 2:34am PDT
Mobile

Overall revenue curve is flattening as market wealth settles more evenly

A study by Flurry has predicted huge growth for the mobile app market by the end of 2012, citing advertising as the key growth area in an economy which is becoming less and less top heavy.

The blog post is largely speculative, extrapolating full year figures for 2012 from current performance and previous trends, but brooks little argument in its main points.

Firstly, the rise of advertising is highlighted, with a predicted 100 per cent growth rate for the sector taking revenue "from $980 million in 2011 to $2 billion in 2012, delivering 23 per cent of 2012 total revenue", up from 18 per cent in 2011. Premium and in-app purchase revenues are also expected to rise sharply, by 50 per cent, contributing to a total market increase of 60 per cent from $5.4bn to $8.7bn.

"Long tail revenue explodes from earning under half of all premium and in-app purchase revenue in 2010 to over two-thirds in 2012."

Flurry study on the distribution of App wealth

Secondly, the study examines the shift away from a revenue focus in the top few dominant players - almost the exact opposite of what analysts generally expect from a maturing market where key players are becoming ever more established. Instead, Flurry predicts that the top 25 iOS and Android publishers will generate only 15 per cent of the total market revenue this year, compared to 28 per cent in 2010.

"In 2012, we estimate that the Top 25 will drop to commanding about half of total revenue, or 15 per cent...The rest of the Top 100 apps will drop from earning 27 per cent of revenue in 2010 to 17 per cent of revenue in 2012," the precis of the study reads.

"Conversely, revenue generated by the long tail significantly grows from 2010 to 2012...[For]Any apps ranked beyond the top 100, we observe that long tail revenue explodes from earning under half of all premium and in-app purchase revenue in 2010 to over two-thirds in 2012."

This redistribution of the wealth curve, to a more gradual angle of repose, is also reflected in terms of normalised revenue, measuring from that generated by the top earning company on the report. Here, again, we see that curve flattening and raising as the market value increases but wealth slips down the slope towards those at the bottom, narrowing the gap to the leading pack.

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"Combined with a marketplace that reduces the power of brand recognition (e.g., apps are free for consumers to try risk free), market wealth unexpectedly continues to shift to the long tail, funding continued R&D, advertising budgets and other activities that increase their competitive strength. 

"The age of middle-class app developer has arrived. In this economy not only are the rich getting richer, but so too are the poor, and gaining on the rich."

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