Asia to be global mobile app hub

Analysts and major players in mobile industry underscore region's untapped market potential and diversity, declaring Asia as upcoming worldwide hotspot for application development. But challenges for developers remain.
Written by Jamie Yap, Contributor

Asia will soon overtake the West and become a global hotbed for mobile application development and innovation, proclaim analysts who cite the region's language diversity and long road to market maturity as main growth factors.

According to ABI Research, mobile application downloads will continue to increase over the next few years with Asia positioned as a key growth market.

In a report released Nov. 15, the analyst firm stated that between 2009 and 2015, application downloads in the Asia-Pacific region will clock a compound annual growth rate (CAGR) of 30 percent while application revenues will go up by 20 percent. By 2013, app downloads will hit 2.4 billion in Asia, accounting for about 20 percent of the world's total available market.

Seet Fei Feng, research associate at ABI Research, told ZDNet Asia in an e-mail interview, that the findings indicate that Asia is rapidly catching up with major and mature markets such as North America and Europe. In the long run, Asia will likely surpass the West as the global hub of mobile apps, Seet added.

She noted that the United States and Europe are currently still the dominant market for mobile applications, in which most of the world's app developers are based. However she said Asia is in quickly playing catchup.

The analyst attributed the growth to increasing smartphone penetration in the region, which will consequently trigger consumer demand for localized app content in native languages. This, she said, will be the main push for more app developers based in Asia to flourish.

She added that the different languages and cultures make it difficult for developers based outside of Asia to enter markets in this part of the globe.

According to Seet, countries in the region such as China and India are also only starting to settle into 3G network technologies.

Combined with the rapid uptake of smartphones, she said there is "a lot of market potential in Asia for mobile apps and developers will [want] to target this segment".

Ben Cavender, associate principal from China Market Research Group (CMR), concurred: "Asia will become a leader in both application downloads and application development."

In an e-mail interview, Cavender explained that the mobile phone in Asia is the primary Internet access point, and many consumers use smartphones as their main computing device outside the home or office.

In the case of China, the CMR analyst noted that with a growing number of graduates from Chinese universities with programming specializations, China will see an increasing number of applications being developed in the country.

Michael O'Hara, chief marketing officer (CMO) at Wholesale App Community (WAC), noted that Asia is poised to be the global hotspot for mobile apps because the region is home to leading handset maker. WAC is a non-profit organization which aims to build an open apps platform.

In his e-mail to ZDNet Asia, O'Hara cited brands such as Korea's Samsung, maker of the Galaxy tablet, and Taiwanese manufacturer HTC, which also had announced led plans to open its own app store.

ABI Research's Seet also noted that even handset manufacturers and mobile app storefronts outside of Asia are beginning to recognize the significance of the Asian market. These organizations are actively encouraging a growing pool of local app developers to come up with useful and popular apps, she added. For instance, Research In Motion (RIM) will be holding its first BlackBerry DevCon Asia in Bali from Jan. 13 to 14 next year.

iPad and iPhone maker, Apple, in October also launched a Chinese language version of its App Store which stocks localized apps.

Declining revenue from app sales
While Asia will lead the next wave of app development and innovation, Seet does not believe it will be any easier for developers in the region to make a living solely out of creating apps.

"Sales will be uncertain with the vast amount of applications out there to compete with, and it will be a tough struggle to stay on the top of the download list," she said.

According to ABI's report, while app revenues will increase, income from app sales are expected to decline due to intense market competition which will drive down average selling price of apps.

Seet added that consumers today are also more receptive of advertisement-supported apps, which tend to be free for download.

Ralf Jahns, managing director of mobile analyst firm Research2Guidance, shared the same sentiments. He noted that while the smartphone app market will churn revenues totaling US$15.7 billion in 2013, up from just US$1.9 billion last year, it is tougher now to make money from building apps compared to two to three years ago.

Jahns explained that the biggest drop in app prices took place in 2008 and 2009, and by 2010, prices for paid apps had stabilized.

App publishers will have to turn to alternative revenue streams such as in-app advertising and in-app purchasing to generate revenue, he said.

He added that with the immense influx of mobile apps, app discovery on a mobile platform becomes problematic and there is less chance for developers to stand out from the crowd and make a profit.

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