On average, Apple generated more than $1 billion a week from the half-billion-plus people visiting its App Store every week in 2019, new data shows.
That’s $54.2 billion in the year.
Chasing the (long) tail
There’s lots of reasons for this, principally a successful push toward subscription-based business models and rapidly growing consumer acceptance that there actually is a value in digital products.
This renaissance in digital engagement is also generating new opportunity for enterprises who seek to meet customers where they are with digital-first experiences.
Subscription revenues increased in 2019, with more developers offering to let users try their apps before paying for the full feature set, according to SensorTower data. Growing subscription revenues prove shoppers will pay monthly fees for apps.
Nurturing this kind of perception has been one of the big challenges for the tech industry. In the early years, the success of Napster and file-sharing showed what can happen to industries when people don’t value digital product.
The later success of iTunes, Spotify, Netflix, Amazon Prime and services like iCloud and Dropbox helped most users recognize digital value.
Now it’s generating massive money. User spending at the App Store climbed 16% year-over-year from $47 billion in 2018. Games accounted for a mighty $37 billion of this, while entertainment apps hoovered up $3.9 billion more.
We’re also seeing physical product sales become more deeply digital.
“People are more connected today than ever before,” said Jason Woosley, vice president of commerce product and platform at Adobe.
“We all have a smartphone in our pocket, and that is really what is driving the uptick in mobile commerce and e-commerce overall. You can literally think of something you need, and just purchase it right that second.
“This always-on and always connected trend will continue to accelerate, especially as the definition of mobility continues to expand to new devices and modes of accessing the Internet.”
Best in store
Apple recently announced that App Store developers had earned more than $155 billion in App Store sales since 2008. The company added that “over a quarter” of these sales came in the last year and confirmed customers spent $1.42 billion at the App Store between Christmas Eve and New Year’s Eve 2019 — up 16%. The App Store store generated $386 million in sales on New Year’s Day 2020, Apple said – up slightly on the $322 million generated the same day last year.
The trend isn’t merely visible on Apple’s App Store; even Google Play also saw increased revenues – though the sum generated by iOS was 85% greater than the $29.3 billion spent on Google Play.
The digital value chain
This flurry of statistics proves perception of digital value is growing. (This is also proven by news that Pokemon Go generated nearly a billion dollars in revenue on in-game purchases alone last year.)
That is something that should matter to enterprise professionals attempting to identify and deliver new services and business models.
Consumer willingness to pay for digital services shows business models such as “information as a service,” expansion in digital channels and sponsorship of key digital experiences are more likely to build revenue, attract customers or enhance relationships than before.
In an intensifying competitive environment, delivering such services may be mandatory – and there may be some way to go, given Gartner’s analysis that 84% of consumers using digital tools and services in 2018 reported “underwhelming” experiences.
- 60% of enterprises that have engaged in digital transformation projects have also built new business models.
- 78% of customers use mobile channels to communicate with brands.
- 80% of millennials are more likely to purchase from companies that have a mobile customer services portal.
The attention economy isn’t at all stable. A better product or service can come along and quickly steal away hard-won hearts and minds. This has always been true in business, but the rapidity with which digital solutions can be developed and distributed means competition is rapid – and response must be more agile.
It’s an intense environment.
“By 2022, 72% of customer interactions will involve an emerging technology, such as machine-learning applications, chatbots or mobile messaging, up from 11% in 2017,” Gartner predicted in 2019.
Perhaps all those ‘digital first’ executives badly needed some time out as they grappled with the challenge of continued transformation?
Though on a more serious note, this also reflects consumer willingness to invest in a huge array of tech-driven services, even those we don’t usually associate with “digital.”
Copyright © 2020 IDG Communications, Inc.