In less than five years the market for mobile apps has exploded. The longest standing app store, Apple’s App Store, has over 1mn apps available for download, hundreds of thousands of app developers, over 60mn apps downloaded since inception. Growth is being driven primarily by continued penetration of smartphones globally (+19%), but also by increasing spend per user. Given this growth outlook and the increasing use of apps by consumers and the growing importance being placed on mobile app strategies by brands and enterprises.
Google believer of Information at finger tips is highly secretive on information about its Google Play business. Leveraging Apple’s disclosures about its App Store payouts, data from third-party mobile app analytics companies, and installed device estimates from Gartner to estimate our Google Play forecasts. All of the Google Play store revenue is derived from the monetization of mobile apps, as Google also sells some hardware and content (e.g., song downloads), but we believe apps is the vast majority.
With an average of 900mn installed Android devices will generate on average $4.59 per device in Google Play bookings, which will result in $4.2bn in total bookings and $1.3bn in gross revenue for Google after paying out 70% of bookings to app developers. We reliably learn from Google & Industry insiders that Google is shelling out as much as 25% of the Revenues to Wireless Data Carriers thus effectively leaving 5% in Google’s pocket. This is in-line with Eric Schmidt’s talk where he once said “We basically start from ZERO and anybody who wants to compete by undercutting us have to Bleed in Red”.
Is Google App Marketing an Opportunity like Facebook ?
While Google’s Play store may be an immaterial contributor currently to the company’s overall gross profit and earnings, we see a potential significant opportunity to drive high-margin revenue through app marketing. This opportunity, in our view, is not indifferent from what Facebook has been able to do with its mobile app install ads over the past year and is a logical step for Google to pursue.