How Subscriptions May Propel Atmospheric App Store Growth

“There’s an app for that,” the old digital adage goes, and shoppers seem to be taking note: Consumers’ spend in app stores is poised to top $122 billion next year per a recent App Annie report, or two times the global box office market size. To put that into further context, the company claims that consumer spend in app stores around the world is forecasted to grow five times quicker than the world economy as a whole. Overall, the company predicts that worldwide app store consumer spending will have a whopping three-year compound annual growth rate (CAGR) of 29 percent.

While the company noted that games will drive most of the growth in app store spend, recurring purchases are set to be responsible for a large chunk of spend outside of those apps. The report claims that a 2x growth rate for non-game apps is set to be powered by in-app subscriptions. Even so, games are set to comprise the lion’s share – or almost three-quarters – of total consumer spend. In fact, the PYMNTS Subscription Commerce Tracker found that the top five video game subscription services between July and September of this year generated an estimated $273 million in revenue.

The report also noted that total time spent in video streaming apps on individual devices is set to spike 110 percent between 2016 and 2019. And spending within those apps is set to rise at a much higher rate of 520 percent, “fueled largely from in-app subscriptions in video streaming apps,” according to the report. In particular, short-form video will comprise most of the time consumers spend streaming. YouTube, for instance, comprises four out of five minutes spent in the United States on apps that stream video. The report also said that social media apps like Instagram and Snapchat, along with social video apps like TikTok, are set to bolster growth.

Apple and Google App Spending

The third quarter showed a tremendous rise in app revenue. According to a Sensor Tower Store Intelligence report, global mobile apps spending on Google Play as well as the Apple App Store reached $18.2 billion during the quarter, which represented a 22.7 percent increase from one year prior. At the same time, the report said that Apple’s App Store posted a particularly strong showing, earning nearly 93 percent more app revenue than Google Play.

The numbers also indicate that roughly two-thirds – or around 66 percent – of app downloads revenue came from Apple’s App Store. That store made $12 billion in the quarter on Apple apps, which was a 23.3 percent increase from the $9.7 billion it took in during the same period the year before. And Google Play earned $6.2 billion in the quarter on Google apps, which marked a 21.5 percent jump from the year-ago quarter’s $5.1 billion.

App installs are also on the rise, growing 10.9 percent across both stores put together last quarter to arrive at 27.1 billion. And lower-cost Android devices, which are popular in developing nations, rewarded Google Play with an advantage in app install growth last quarter at a rate of 14.3 percent. (They rose from 17.1 billion to 19.5 billion year over year.) Apple’s iOS saw a bit of a lower increase of 3.1 percent year over year, with new app installs reaching 7.6 billion for the quarter.

Apple CEO Tim Cook said in early June that developers have earned $100 billion through the Apple App Store. He also announced at the time that the App Store saw 500 million weekly visitors. “The app store is clearly the best place for you to be rewarded for your hard work and creativity,” Cook said, according to CNBC.

Future mobile growth, however, is not limited to the confines of the app stores. The App Annie report noted that “mobile spend is also poised to grow for both in-app advertising and commerce … which transact outside the app stores.” In other words, there is mobile life – and spending – outside of the app stores despite their projected atmospheric growth.