In the release of our mobile app store forecast, we highlighted the growth we are projecting across mature and emerging markets. In this post, we share key insights on the China app market given its unique characteristics and growing dominance in the global market.
China is the largest smartphone market and many Chinese consumers view this device as their primary computing device. Given the prominence of smartphones, China is on track to become the largest single app market this year, surpassing the United States in gross app store spend. Looking at Android specifically, the absence of Google services (and Google Play) to date has created app distribution opportunities filled by numerous third-party Android stores, including some from prominent regional players like Tencent and Baidu. However, the lack of a unified distribution channel has proven to be a challenge for Android app developers targeting China.
China is a tale of two markets: mature and emerging and our forecast reflects the characteristics of both developed and emerging economies. While smartphone ownership in Tier 1 and Tier 2 cities like Beijing and Harbin nears saturation, other cities and regions are still underpenetrated with significant room for growth. Continued declining prices of high-quality Android smartphones will contribute to expanding smartphone ownership in emerging China. As a result, the installed base of smartphones and tablets in the country will grow 2.1x to 1.4 billion by 2020.
Third-Party Android Stores Dominate Downloads Through 2020
We expect app downloads to hit 49.0 billion in 2016 and 90.2 billion by 2020 thanks to strong smartphone adoption in emerging China. Third-party Android stores will be the primary driver of this growth, increasing 2.6x from 2015 to 2020. iOS downloads will also increase, but at a lower rate thanks to Apple’s strength in maturing Chinese Tier 1 and Tier 2 cities.
Looking at categories, game downloads will continue to grow but similar to global trends, will be outpaced by downloads of other apps as developers uncover new use cases for first-time users and as existing smartphone owners expand their app usage. Consequently, we expect the share of game downloads to decline from 42% to 32% over the forecast period.
China to Drive One-Third of Mobile App Store Revenue by 2020
Gross app store revenue in China totaled $8.7 billion in 2015 and will reach $30.9 billion in 2020. While major urban centers like Beijing and Harbin will continue to drive this growth in 2016, market expansion will extend south and west to Guangzhou and Henan and the regions surrounding Shanghai in the forecast’s latter years.
China has proven to be a strategic market for Apple. iOS gross app revenue totaled $3.4 billion in 2015 and will grow 2.6x over the forecast period. While revenue per device on iOS far exceeds other platforms, the sheer number of Android devices in China drives the majority of revenue through third-party Android stores in aggregate — totaling $5.2 billion in 2015. Continuing this trend, revenue from third-party Android stores will grow 4.2x by 2020 as smartphone adoption accelerates in China’s smaller cities. Games will continue to remain the dominant revenue driver, but we expect their share of revenue to decline from 88% in 2015 to 75% in 2020 as subscription models on other apps gain steam.
This forecast shows our confidence in China remaining an app store powerhouse for years to come, accounting for 54% of APAC revenues in 2020, despite potential macroeconomic headwinds. For app developers looking to tap into or expand within this market, we offer three recommendations:
- Look beyond the crowded games market and understand local economies (within China and other Southeast Asian markets) to discover unmet needs to grow your app business.
- Despite app store fragmentation, do not ignore Android. Identify the few large third-party Android stores that closely align to your target market’s consumer demographics.
- Experiment with new revenue models to tap into current and future Chinese consumers and leverage mobile’s growing share of our time and wallet.
Learn more about the app economy’s growth now through 2020. Download our Q2 mobile app forecast.
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- App Annie’s forecast includes download and gross revenue from smartphone and tablet app stores including the iOS App Store, Google Play, all third-party Android app stores (including the Amazon app store and those in China), Windows Phone Store, Samsung Galaxy Apps, etc. It does not cover new app platforms like wearables, smart TV boxes and virtual or augmented reality devices.
- Revenue: App Annie’s revenue forecast sizes the gross spend by users across these app stores and includes revenue generated from in-app purchases, subscription and paid downloads. Because it is reflective of consumer spend on apps — not net to publishers — it is inclusive of any sales taxes and app store fees. It does not include advertising revenue or any transactional revenue from commerce-centric apps like Ctrip, Taobao or Didi Dache.
- Download: App Annie’s download forecast includes only the first instance of installing an app on at least one of a user’s devices from an app store. Downloads do not include downloading a previously downloaded app to the same device, a newer device or a different device that is using the same user’s store account. Downloads do not include sideloaded apps (apps acquired outside of app stores).
- App Annie tracks usage at the device level using a privacy-protective hashed device ID. Data is reported to third parties only in aggregated format.
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