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Eat The Rich: The App Economy’s Middle Class Is Booming…And So Is The Poor

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In the mobile application ecosystems offered by the iOS and Android platforms, there’s now a booming “middle class” of mobile application developers, according to new data from analytics firm Flurry. Even the long tail is benefiting – something that goes counter to traditional industry trends, which tend to see wealth established at the top as an industry matures. Typically, established players and brands invade from other platforms, then start to depress the opportunities for many of the platform’s earlier players, Flurry’s report explains. But the opposite appears to be true for the app economy. Here, there’s a rapidly growing middle class of app developers, and even the long tail is generating a larger portion of the revenue than ever before.

First, a look at the revenue picture in today’s market. Using data from over 200,000 mobile applications on its network – a good-sized sample for app stores which each now have over 600,000 apps available – Flurry calculated worldwide app revenues for this year and years past. Since 2012 isn’t over yet, Flurry estimated the growth rates based on proportional changes from 2011.

In 2011, revenue from premium (paid) apps and in-app purchases was 82% ($5.4 billion) of the total revenue generated, and ad revenue was 18%. In 2012, Flurry predicts revenue to grow by 60% to reach $8.7 billion, with ad revenue growth climbing by over 100%, going from $980 million in 2011 to $2 billion in 2012. That means that for this year, ad revenue will be 23% of the total, with paid apps and in-app purchases accounting for 77%.

Drilling down into paid apps and in-app purchase revenue only (excluding ads), Flurry found that the distribution of revenue was spreading out across the long tail of mobile apps in a rather surprising way, which goes counter to the trends you’ll often see in other industries. In 2010, the top 25 ranked apps accounted for 28% of the  revenue, the top 26-100 generated 27%, and the “long tail” was 45%. Now look at 2012: the long tail is responsible for 68% of the revenue generated, with the top 25 at 15% and the top 26-100 at 17%. (See chart below). That’s quite the shift.

Flurry also normalized the data for revenue by rank in order to compare revenue generated for the top 100 apps from 2010 to 2012 estimated. The results show two major trends: one, that being in the top rankings means more revenue than before, which is not surprising due to industry growth. The second trend is that the revenue for 2012 stabilizes after the top 5 positions, then gently drops down through the top 100, but stays much, much higher than before. Remember, this is normalized data (percentage from top spot, set at 100%), not actual dollars here, so what this means is that the middle class of apps – is also growing like crazy too, in terms of earning power.

Bottom line, in the new app economy, there’s no struggle of the 99% here. The richer are getting richer, but so are the middle class and the poor. And those last two are gaining fast.


Read more : Eat The Rich: The App Economy’s Middle Class Is Booming…And So Is The Poor

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