New data and trends from the iTunes store

The release of iOS 2.0 in July 2008 is arguably the defining moment of the smartphone era, contributing (along with 3G connectivity) to the iPhone moving from a good if limited device to the archetype that, even 5 years later, all other mobiles are striving to first replicate and then improve upon.

The App store has been a major success for Apple, with Horace Dediu estimating that they produce $1.6bn in revenue per quarter. We are approaching the occasion of the 50 billionth worldwide app download, and to coincide Apple have updated their all-time charts for a number of territories.

They previously did this on the occasion of the 25 billionth app download, in March of last year. 25 billion apps downloaded in 14 months equates to an average of around 60m downloads a day (with Horace Dediu putting the current daily rate at around 70m).

Last time I took a look at some of the trends within the charts. I’ve repeated that here, with ten bullets below. All data correct (apart from any typos that slipped through) as of May 2nd 2013.

  • Stability: The majority of the top apps are holdovers from the previous list – 13 of the 50 paid apps are new, and 20 of the 50 free apps. I’ve counted YouTube and Google Maps as new apps, although different builds did exist previously
  • Games still dominate: 17 of the top 25 paid apps on both iPhone and iPad are games
  • But What’s App stands alone: What’s App is the most popular paid for iPhone app, and is the only paid-for social networking app fits in the list. Although existing downloads won’t be discounted, it will be interesting to see whether the mooted 69p a year fee will deter new users from downloading
  • Franchises have emerged: Although there are exceptions, many of the top apps are from major companies and even those grassroots successes – Angry Birds, Draw Something – have been sucked up into either major merchandising and sequelitis, or bought out. Angry Birds is the poster-child for success, and Angry Birds Rio is the only title of theirs not to make the chart
  • But it is still possible to break through: 4 Pics 1 Word has become this year’s Draw Something, and has made both the top iPad and iPhone free charts despite being out for less than 3 months
  • Price homogeneity: The rise of in-app purchases as a legitimate – if controversial – revenue generator means that prices have dropped to around the 69p mark. Electronic Arts have heavily discounted their titles, including FIFA 13, to raise the user base and drive in-app purchases
  • Few five star games: Inevitably, scale can lead to hype and disappointment and so only 3 of the 100 apps featured have 5 star ratings – Cut the Rope and Plants vs Zombies in iPhone, and The Room on iPad
  • Free entertainment apps lag in score: Free music and entertainment apps score relatively lowly – with the exception of TV Catchup, the highest score is 3.5. YouTube trails with a score of 2, presumably due to complaints that the previous pre-installed app was removed (at Apple’s behest)
  • Device differences remain: 12 free apps and 9 paid apps appear in both iPad and iPhone lists, but the differences point to how the devices remain distinct. The iPhone is a personal device used on the go for timely information; the iPad is a lean-back device, that can also be used for creation
  • The future: How will the list differ when the next milestone (100 billion?) is reached? Will we see Vine or Snapchat enter the free charts? Will the next wave of franchise games prove more popular than the last? Will the TV companion app to beat all other companion apps truly emerge? I’m going to chicken out of making any predictions, but any or all of the above could happen

Pictures of the charts are below, and can be clicked on to expand into a more readable version.

iphone paid ipad free ipad paid iphone free

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Will the general public become tablet owners?

Way back in January 2010, I wrote a blog post entitled “The general public doesn’t need an iPad“. I felt that the iPad would struggle to achieve mainstream success as it was a disruptive technology that people had little reference to – it was competing with something that didn’t exist rather than something inferior. Furthermore, I argued that none of its features were truly unique, and that the functionality could be enjoyed using other devices.

Since then?

“U.S. tablet usage hits ‘critical mass,’ ComScore reports”

“iPods changed the media industry, iPhones ramped even faster; iPad growth leaves siblings in the dark” – Mary Meeker.

Tablets have been more successful than I envisaged.

However, we’re not quite in “mea culpa” territory yet. Comscore’s stat is among smartphone owners, not adults, while the iPad has benefited from iPod and iPhone’s introduction and success – from production and distribution mechanisms to consumer desire of the Apple brand. Also, just because last year saw x% growth doesn’t mean this year will see x% growth. And finally, semantically, people still don’t need an iPad. People just want one.

Tablets aren’t mainstream. Yet. Could they be?

Potentially, the main barrier to tablets becoming mainstream is category distinction. There is a dotted line going from the iPhone’s 3.5 inch screen to the Galaxy Note’s 5.3 inches to the Kindle Fire’s 7 inches to the iPad’s 9.8 inches to the Galaxy tab’s 10.1 inches. With the Asus Transformer Prime paving the way for touch-screen laptops, tablets could get squeezed between smartphones and next generation computers into oblivion. The battle could be less about size, and more about open vs closed ecosystems.

But if the tablet market stabilises at one or two form factors – say 7 and 10 inches – could it achieve mainstream success? Possibly, though I think game console ownership could be a useful comparison point in that tablet computers are desirable but not essential.

Their desirability stems from their usage occasions, which is the key component I overlooked in my 2010 post. Tablet use does not compete directly with phones (out and about) or computers (largely fixed location at home/office) – instead they are used primarily in the living room, bedroom and on holiday (Source). Why is that?

  • Living rooms are a social space. The tablet is the most social device – it is tactile and better than either a mobile or laptop for showing and sharing
  • Living rooms are dominated by the television. The tablet is the best device to switch out of standby and begin browsing or chatting – whether as a companion experience or independent to the viewing
  • Living rooms are a place of relaxation. Casual gaming is now huge. Angry Birds on a tablet is a far better user experience than on a phone (particularly for the less dexterous), and casual games aren’t as visible on laptops
  • Bedrooms are for preparing for sleep as well as sleeping. E-readers and tablets are fundamentally changing the book-reading industry (and potentially the newspaper and magazine industry, though I think this will be more difficult given that a book is a coherent narrative, and newspapers and magazines are great at editing disparate content)
  • Holidays and travel in general require equipment that can do as much as possible in as little space as possible. A tablet is ideal.

All of these functions can be performed by phones, laptops or traditional media but the tablet hits the sweet spot. Hence penetration grows, and with the introduction of the Kindle Fire, Nexus 7, Surface etc it will continue to do so for a while yet. Though I’m still not certain tablets will become mass, they can certainly become mainstream.

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Image credit: http://www.flickr.com/photos/pswansen/5680074913

Data and trends from the iTunes store

To tie in with their 25 billionth app download (made by Chunli Fu of Qingdao, China), Apple have released the top 25 rankings for their paid and free apps within the UK iTunes App Store. Some interesting (and in some cases unexpected) things have emerged.

Data below is correct as of March 6th. Where apps are universal (ie they can be downloaded on both iPhones/iPods and iPads), I have included their reviews and rating within the iPhone charts as iPad cannot be split out (and the disparity in installed bases means it is safe to assume that the majority of actions relate to iPhones). Apple don’t release download figures, but news stories such as this one can help establish some benchmarks for estimates.

Click the images or open them in a new tab in order to make them more legible.

So what can we tell from these charts?

  • Games dominate the paid-for charts: 42 of the 50 paid apps are games, but it doesn’t dominate the free charts to the same extent – although people pay for games, they are transitory and can be superseded by sequels or alternatives – unlike information-based apps
  • Games are much better at encouraging ratings/reviews: Games have three times as many reviews/ratings as non-games: Demographics might play a factor (younger game players being more likely to rate) but many games also prompt people within apps to give reviews or ratings, as positive reviews are a major factor in deciding which app to download
  • It helps to be early: Despite ever-increasing user bases, only 4 of the top 50 iPhone apps were released after 2010. Getting in early, and reaping the benefits of large numbers of reviews and ratings, provides a strong profile even among newer users
  • Time sensitivity on iPhone is key: Nearly all of the top iPhone apps (outside of games/entertainment) are either time sensitive or impulse – social networks, news, weather, search etc.
  • Three of the top 4 iPad apps are TV catch-up services, and another four of the top apps are news services. The tablet is living up to its reputation for lean-back media consumption
  • But can the iPad also cater to business needs?  A quarter of the top Paid apps (including the number one app) are productivity or education based. This suggests the affluent, business-orientated user base are experimenting with using their iPads to replace other devices. Will this experimentation turn into habit?

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Replacement cycles

There have been several news articles recently that incorporate quotes from people lamenting lower than anticipated sales for new technological innovations. These articles on Smart/Connected TVs and the Nintendo 3DS are but two examples.

As everyone knows (or at least should know), technological superiority is not enough to guarantee success. Hence the Beta-Max not succeeding over VHS or the Atari Jaguar or Neo-Geo losing out to their 16-bit incumbent predecessors.

Nevertheless, too much attention is paid to the specific product when predicting future success. A combination of technological innovation, strong branding, suitable distribution and attractive price point may prove a compelling package. Yet this may not correspond to sufficient demand.

Even if an organisation pays sufficient attention to the market and adequately segments and targets a particular group of consumers, there is still no guarantee of success.

Randomness aside, a major – and what appears to be to be overlooked – factor is replacement cycles.

Once early adopters have been sated, a product will only move into mainstream penetration if the general public find a compelling reason to upgrade their existing kit. Since most, if not all, new devices are evolutionary rather than revolutionary, this can be a tough ask.

(NOTE: Looking at it from a purely technical perspective, one could argue that the different 3D technologies are revolutionary. However, from a consumer perspective it is fundamentally evolutionary. At heart, it is the same service but with a graphical innovation).

Smart TVs do face a particularly tough challenge, as they are entering the market just after the majority of the mainstream have recently gone through a replacement cycle. This cycle was unusually synchronised due to the twin forces of legislation – digital switchover – and technology/manufacture. Flat screen HD TVs may show the same channels, but larger and lighter screens offer twin benefits of better picture (when compared to analogue equivalent) and easier placement (e.g. wall hanging) and transportation (transporting a 50 inch CRT up a flight of stairs was possibly one of the most painful experiences of my life).

Smart TVs may have additional services that appeal to the mainstream, but since the core proposition – watching live TV – remains unaltered, I don’t perceive many mainstream viewers as being eager to adopt their recently acquired HD TVs.

On a similar note, now that the market is already saturated with set-top boxes, second screens and such like, it may prove difficult for both Youview and Google TV to offer a compelling upgrade proposition (Nigel Walley has written an interesting piece on Google TV here)

The 3DS was always going to be a tough sell – the DS was massively successful among casual gamers who were unlikely to upgrade because of a novelty gimmick. But it also points to the wider trend in gaming of extending the life cycles of consoles and platforms. Interestingly, this is supply side rather than demand side – the costs of investment are so great that developers want a longer life cycle to maximise their profitability.

Looking at other forms of technology, I’m particularly intrigued to see the effect of replacement cycles for tablet computers. I was quite sceptical about the chances of mainstream success for the iPad to begin with. While it has undoubtedly been successful (and profitable) among the early adopters, I’m still not convinced iPads/tablets (market share means they are effectively synonymous) will permeate the mainstream before all laptops become touchscreen.

As such, what will happen when everyone who is likely to want a tablet computer already has one? Will tablets need to work on the same principle as mobile phones, which are effectively rented for the duration of a contract and then swapped for a new one? Given the additional cost of manufacture and purchase, I’m not sure how feasible this is.

In fact, perhaps the mobile industry points to way to shortening upgrade cycles. With the trends toward digital consumption, we are slowly being accustomed to not tangibly owning things. Perhaps this could be extended to hardware. Do we still need to own our TVs and games consoles, or could we rent subsidized devices over a period of time, before swapping them for the latest models?

Rental shops have had a bit of a bad reputation for ripping off the old and poor, but perhaps a rejuvenated version could be due a comeback.

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Image credit: http://www.flickr.com/photos/mgat/3282519651/

The perception of disruption

Network effects hasten the rate of innovation. Therefore, the rate of technological change is faster now than it has ever been (at least if my memory of Solow-style exogenous growth models is correct.

This tends to be iterative. Small, continual improvements that improve the efficiency of processes and provide new opportunities for people to achieve their desires.

But, over time, this can be problematic.

Particularly with user perceptions.

The core proposition (and branding) of a product or service will try to remain fairly constant. But feature creep will bloat and complicate.

It is even possible that some innovations will supersede the original benefit in terms of usefulness and relevance, but it gets lost in the perceptions of users since it is only additive to the core proposition.

In order to focus upon the most useful innovations, a disruption is necessary. A break with the past.

Mobile is a good example of this.

Mobiles have evolved at a rapid rate. They got smaller as technological processes improved but then bigger as new features emerged. Cameras, music players and internet connectivity all augmented the core proposition – a device to make calls on, wherever you are.

But the internet has superseded the phone network. Email and social networks (and Skype) sit alongside voice and text, along with the numerous other benefits the mobile internet offers.

And a disruption was needed to make these innovations apparent. Because ownership doesn’t equate to usage.

This disruption was led by the iPhone.

Nokia has tended to lead technological innovations, but Apple repackaged the device. It brought back usability and simplicity, with the mobile internet at the core of the offering.

Nokia, Sony Ericsson and Samsung (NSS) may offer “smartphones” or internet enabled phones. But they are perceived fundamentally differently to the disruptors – Apple, BlackBerry and HTC/Google (ABH).

NSS represents an easy choice – a safe upgrade on something familiar with. The bells and whistles may be a bit shinier, but the phone is basically the same. And behaviour remains similar.

ABH are disruptive. They represent a new type of phone. People will think more carefully about switching. The benefits are framed in what is different or better to their current phone. Once they have invested, this behaviour needs to be justified and so they utilise the functionality. Behaviour changes.

The data from Essential Research’s Brandheld study illustrates this.

Looking purely at those claiming to own a smartphone (we gave them a consumer friendly definition outlining benefits; many wouldn’t know whether their phone allowed third party apps to be developed), there was no real difference in claimed internet use via a computer. ABH owners spend 25 hours a week online; NSS owners spend 24 hours.

But when the data for mobile internet usage is explored, a different story emerges.

  • 65% of ABH smartphone owners access the mobile internet every day; 29% of NSS smartphone owners do so
  • 78% of ABH smartphone owners access the mobile internet at all; 63% of NSS smartphone owners do so

The ABH figures are actually skewed by BlackBerry. 87% of iPhone owners say they use the internet on their phone on a daily basis. They are also far likelier to use services such as games, maps and commerce based services.

Is there hope for the incumbent? I’m not so sure. Clay Shirky noted, with regard to media companies, that there is no incentive to disrupt the core business model. Executives are used to things working successfully in one way, that they will seek to protect this for as long as possible rather than embrace the risk of the new.

Can this be combated? Maybe, but maybe not. It seems to be cyclical. Eventually the disruptor becomes the incumbent, and the process repeats itself.

On a sidenote, as previously mentioned I don’t think the iPad will disrupt the computing space. It is disrupting a market that is nascent; the mobile market was well established before it was disrupted. If anything, I think the iPad will just precipitate touchscreen laptops.

The data I used above was from Brandheld. More information about the project can be found here, and I’ve included a Slideshare presentation below that indicates some of the key findings (Although I worked heavily on the project and analysis, I didn’t write this document. As you can tell. I don’t possess Keynote and I would never include the word “insight” in a presentation)

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Image credit: http://www.flickr.com/photos/jesse_sneed/2383953694/

The general public doesn’t need an iPad

iPad - evolution by Steve JobsSteve Jobs’ powers of presentation and salesmanship have been well remarked upon. However, one statement in his recent keynote address launching the iPad jarred for me.

All of us use laptops and smartphones now

Who is this “us”? The people in the audience? The people in Apple’s target market? Because it certainly isn’t everyone.

Data from Brandheld indicates 24% of UK mobile phone owners aged 16 or over think they have a smartphone (given our consumer-friendly definition of one), while 59% say that they have a laptop with wireless broadband. 17% say that they have access to both.

To an extent, this is just me being pedantic. Of course everyone doesn’t have a smartphone or laptop. Not everyone has a phone of any kind, let alone food, clothing or shelter.

A device doesn’t necessarily need 95% penetration to be ubiquitous; it merely needs to be the most desirable. Look at the iPhone. While sales are still increasing, probably no more than 1 in 20 people in the UK currently own one. Yet it has defined the category.

But I think the turn of phrase is interesting because it indicates the scope of the iPad. It is not a mainstream device. Not yet, anyway.

More so than the iPod and iPhone, the iPad is a disruptive technology. The market for tablet computers isn’t yet fully defined. There is no well established pre-cursor like the Walkman or Nokia series to create consumer expectation, for Apple to then surpass. The Kindle, the e-reader et al are nothing more than niche.

Unlike the iPod and iPhone, there is no obvious unique selling point to differentiate the device. Certainly, nothing to rival “1,000 songs in your pocket” or touch screen mobile web browsing. It will be a tough sell.

The five (original) steps in Everett Rogers diffusion of innovations model are

  • Awareness
  • Interest
  • Trial
  • Evaluation
  • Adoption

With disruptive technologies, the challenge is getting beyond the second stage. Aside from going to the Apple store on Regent Street in London, the only opportunity people in the UK will have to trial the technology is by testing an iPad that a friend or associate purchased. The path to adoption will be very slow.

Additionally, interest piques if, in general terms, a device is able to demonstrably save someone time, money or effort. The iPad appears to be a jack of all trades, but is it a master of any?

  • Web browsing: Web browsers themselves are optimised for mouse and keyboard navigation. Nevertheless, touch-screen specific web applications can modify and improve the experience
  • Video: Video is passive, so a touch screen isn’t really relevant. For lengthy programmes, the iPad will also become uncomfortable unless some sort of docking station is purchased in addition
  • Reading: This is where the potential lies. Somewhat unfairly, the iPad is essentially a glorified Kindle. But as with the Kindle, the high outlay and the ongoing costs render it worthwhile to only the most avid readers
  • Music: There seems to be little discernable additional benefit
  • Gaming: There is some real opportunity for multi-touch gaming but there is also a danger the iPad gets caught between the more portable iPhone and the more immersive Project Natal/Motion sensitive in-home gaming
  • Photos: There are certainly advantages to storing and displaying photos, but the lack of camera on the iPad is a startling omission
  • Brushes – an application that could be genuinely useful, but it is not a deal-breaker. Unless you want to pay $500 for a glorified etch-a-sketch.

Admittedly, the first generation iPod (bulky, mac only) and iPhone (2G, no GPS or cut, copy & paste) were relatively poor. A killer feature could emerge on the 2nd or 3rd generation iPad. But at this stage, it appears to be little more than a status symbol for a small niche of technology enthusiasts to store next to their minidisc, neo geo and em@iler.

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