What Does The Mobile Internet Ecosystem Contribute To The GDP?

Want to know how much the mobile internet industry is worth? How much do apps contribute to a country’s GDP? Since everyone uses a mobile phone, these numbers are huge and all set to soar even further. A report called ‘The Growth of the Global Mobile Internet Economy’ done by the Boston Consulting Group stated that “The revenues generated by the mobile Internet ecosystem are a big contributor to global GDP. We estimate that in 2013, they amounted to $682 billion in the 13 countries (mentioned in the graphic) that account for approximately 70 percent of global GDP, or a substantial portion of the $2.9 trillion a year in revenues generated by all mobile technologies worldwide.”

But look where these numbers are headed in 2017. “By 2017, we estimate that mobile Internet revenues will have grown to $1.55 trillion across these 13 countries, an annual increase of 23 percent. Even in the economies where the mobile ecosystem is most mature, such as Japan and South Korea, annual growth will still be around 10 percent. In the major economies of the U.S., China, and the EU5, growth will be around 25 percent a year or more. The single largest contributor in the future will be apps, content, and services, fueled by the rapid expansion of mobile shopping and advertising”, the report elaborated.

Since apps and other forms of content is where the money is, how much is this ecosystem worth it currently, and going forward? While most app developers give away their work free, (“the vast majority of app downloads continue to cost nothing: nine out of ten downloads in 2013 were free, and eight of the ten most-used apps globally are given away”), the freemium revenue and the advertising models are what will reward them. While this seems obvious, smaller developers need to give away their work free of cost to generate word-of-mouth publicity, which more established players don’t have to do.

The report explained, “Global mobile advertising revenues are expected to have reached $18 billion in 2014, up from $13.1 billion in 2013, and this growth will continue until 2017, when spending will exceed $41 billion. About 90 percent of Apple’s global App Store revenue in 2013 was attributable to freemium apps—which are free to download but can ultimately lead to in-app purchases—up from 77 percent in 2012. Freemium apps have demonstrated their profitability but some have also come under criticism for allowing users to incur unexpected costs, such as through any in-app purchases that they wind up making.”

“One area where developers are demonstrating success is building apps for other businesses. Some 70 percent of developers say they are profitable when doing contract work for others. Demand for app development is growing as industrial applications increase. Companies often do not have their own in-house developer talent and are willing to pay for functionality that can increase sales and profits.”

While cheap knockoffs are a issue for developers to deal with, their bigger problem is how to make money, when more than half of them earn less than $500 a month per app, and “the top 1.6 percent of developers earn more than the other 98.4 percent combined.” These are usually the bigger app developers who do more niche work (eg. a wedding planner app) for people or companies, who hire them for their expertise. Moving towards providing these more specific “on request” kind of apps will prove more lucrative for developers.

Written for the Ericsson blog. http://www.networkedindia.com/