The App Economy in 2014: Where’s the Money?

On the surface, 2013 looks like the year that Google and Apple in tandem crushed all the other smartphone operating systems. Google and Apple accounted for 94 percent of smartphone sales in Q4 2013, and the trend looks like it will continue in 2014.

2013 also looks like the year Google finally beat Apple. By Q3 2013, Android alone was responsible for 81 percent of smartphone sales, according to data from Vision Mobile’s Developer Economics surveys. And in Q1 2014, a clear majority (71 percent) of mobile developers are developing for Android, while only 55 percent of developers are developing for iOS, with the next contenders, Windows Phone and Windows 8 trailing at 26 and 21 percent respectively.

But considering the fact that iOS apps are still making more money than Android apps, did Google really beat Apple? Users spent over $10 billion on 3 billion app downloads in Apple’s App Store during 2013, with $1 billion spent in December alone, as reported by Apple. App revenue was split 65 percent Apple, 35 percent Google; which is still an improvement for Google, as back in April 2013 the split was 74 percent Apple, 26 percent Google.

iOS as a platform also generates more revenue for its developers: the average iOS app generates between $500 and $1000 per app per month, while Android is far behind with median revenues between $100 and $200 per app per month, and again, Windows Phone and Windows 8 trail behind with median revenues between $1 android vs iosand $50 per app per month.

Additionally, 54 percent of iOS developers are reported to be making a viable income from their apps, while only 38 percent of Android developers have reached the same benchmark.

Revenue sources are likely a contributing factor to this gap. iOS app developers generate the majority of their revenue from pay-per-download (27 percent) and in-app purchases (30 percent), while Android developers rely on in-app advertising (26 percent) and pay-per-download (30 percent) to generate revenue.

Both iOS and Android developers make the majority of their revenue from game apps. A great game can go viral and catapult an indie app developer to the top of the app stores. (Of course this can backfire, such as when the creator of Flappy Bird took down the app because he found the experience too overwhelming. But before he took the game offline, it had been downloaded 50 million times and was generating around $50,000 a day in revenue.)

So what does this all mean for mobile app developers? Despite Apple’s small overall market share, iOS users are primed to spend more money on their apps, and this doesn’t look to change, likely because Apple has always concentrated its efforts on catering to customers with more money to spend in the first place. Of Android phones, few models are as high-end as the average iPhone, and many Android models are low-end phones meant to replace feature phones, whose customers aren’t used to spending money on apps. Android may, however, be able to close the gap through the sheer number of sales.

Also, despite the overwhelming numbers in favor of Apple and Google at the beginning of 2014, it will be interesting to see how long the duopoly of Apple and Google lasts this year. With new operating systems appearing in the market, combined with the fact that the largest number of people ever will be able to afford smartphones for the first time in 2014, this could be the year we have a new up-and-coming OS that Apple and Google both have to watch out for.

What platforms are you developing for this year? Share your thoughts with us in the comments.

(Image credit: TechCrunch)

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