Contents

Key takeaways Chapter 1 - Mobile Duopolies: The widening gap between the haves and the have nots Chapter 2 - The Developer Tools Landscape: The cogs and gears of the app economy Chapter 3 - Rise of the Mega SDKs: The developer tools landgrab

Also by VisionMobile®
Mobile Innovation Economics Workshop A strategy workshop introducing the new economic thinking necessary for successful innovation by telcos. Find out more visionmobile.com/strategy

1
© VisionMobile 2013 | www.DeveloperEconomics.com

About VisionMobile ™
VisionMobile ™ is an ecosystems analyst firm working with top-5 telcos and handset makers. We are best known for Developer Economics, the de-facto knowledge hub of the app economy. We are also behind Innovation Economics, the strategy workshops helping CxOs to define winning innovation strategies. Our mantra: distilling market noise into market sense. VisionMobile Ltd. 90 Long Acre, Covent Garden, London WC2E 9RZ +44 845 003 8742 www.visionmobile.com/blog Follow us on twitter: @visionmobile

Contents
Key takeaways Chapter 1: Mobile duopolies The widening gap between the haves and the have nots Chapter 2: The Developer Tools Landscape The cogs and gears of the app economy Chapter 3: The rise of the Mega SDKs vendors: Consolidation in the developer tools land grab

Terms of re-use
1. License Grant. Subject to the terms and conditions of this License, VisionMobile™ hereby grants you a worldwide, royaltyfree, non-exclusive license to reproduce the Report or to incorporate parts of the Report (so long as this is no more than five pages) into one or more documents or publications. 2. Restrictions. The license granted above is subject to and limited by the following restrictions. You must not distribute the Report on any website or publicly accessible Internet website (such as Dropbox or Slideshare) and you may distribute the Report only under the terms of this License. You may not sublicense the Report. You must keep intact all notices that refer to this License and to the disclaimer of warranties with every copy of the Report you distribute. If you incorporate parts of the Report (so long as this is no more than five pages) into an adaptation or collection, you must keep intact all copyright, trademark and confidentiality notices for the Report and provide attribution to VisionMobile™ in all distributions, reproductions, adaptations or incorporations which the Report is used (attribution requirement). You must not modify or alter the Report in any way, including providing translations of the Report. 3. Representations, Warranties and Disclaimer VisionMobile™ believes the statements contained in this publication to be based upon information that we consider reliable, but we do not represent that it is accurate or complete and it should not be relied upon as such. Opinions expressed are current opinions as of the date appearing on this publication only and the information, including the opinions contained herein, are subject to change without notice. Use of this publication by any third party for whatever purpose should not and does not absolve such third party from using due diligence in verifying the publication’s contents. VisionMobile disclaims all implied warranties, including, without limitation, warranties of merchantability or fitness for a particular purpose. 4. Limitation on Liability: VisionMobile™, its affiliates and representatives shall have no liability for any direct, incidental, special, or consequential damages or lost profits, if any, suffered by any third party as a result of decisions made, or not made, or actions taken, or not taken, based on this publication. 5. Termination: This License and the rights granted hereunder will terminate automatically upon any breach by you of the terms of this License. Copyright © VisionMobile 2013 v.015

Also by VisionMobile
Mobile Innovation Economics Workshop A strategy workshop introducing the new economic thinking necessary for successful innovation by telcos. Find out more visionmobile.com/strategy

2
© VisionMobile 2013 | www.DeveloperEconomics.com

Key messages
The following are based on VisionMobile’s recent survey of 3,460 developers across 95 countries, with a balanced sample across North America, Europe and Asia, plus developer interviews and research insights.

Mobile market duopolies
Mobile handset Industry growing at 23% CAGR. Despite the doom and gloom circling many mobile handset makers, the industry has been on a steady growth trajectory achieving a 23% CAGR in revenues since 2009. Underlying this growth are the increasing smartphone sales that now account for over 40% of all handset sales, fuelled by low cost Android devices that are rapidly eating away feature phone market share. A game of duopolies. The 700 million smartphones shipped in 2012 are underpinned by the Google / Apple duopoly in mobile platforms which jointly commands 80% in mobile developer mindshare. This is underscored by the Samsung and Apple handset maker duopoly, which combines a smartphone market share of 46%, and accounts for 98% of handset industry profits across the top-8 handset OEMs. Excluding Apple, total handset industry profits are at 2009 levels, implying that Apple is reaping all of the added value out of the apps-based mobile computing paradigm which it introduced. In this same period, Samsung captured the remaining value by quickly transforming from a feature phone incumbent to a smartphone leader, eating away the profits of the old guard Nokia who was slow to react to the changing basis of competition - from the best phones, to the best apps. Samsung’s profit recipe. As the top-selling handset OEM in 2012, Samsung’s stellar success with Android smartphones is down to three differentiating elements: firstly inhouse ownership of the most expensive hardware components, ensuring both earliest availability and lowest bill of materials. Secondly, fastest time to market in launching a new smartphone based on the latest Android software release. Thirdly, a strong Galaxy brand and marketing campaigns that differentiate Samsung from the crowd of tens of Android handset makers. Tablets are still outsold 3 to 1 by PCs, but they are expected to reach parity in the next 1-2 years. This will be a critical inflection point for the PC duopoly of Microsoft and Intel, who are seeing their once-dominant position in computing being severely disrupted by mobility, where Android dominates platforms and ARM licensees Qualcomm and Mediatek dominate chipsets.

Platform haves and have nots
Developers swarm around iOS/Android but keep looking for viable alternatives. Having established a dominant position in consumer markets, Android continues to lead mobile developer mindshare, with 72% of developers now developing for the platform, a 4 percentage point increase compared to our 2012 survey. iOS shows a 5 percentage point drop in Mindshare, which we attribute mostly to the influx of Asian developers showing a clear preference towards Android. Developer mindshare varies widely by region, with Android leading in Asia and Europe, while North America

3
© VisionMobile 2013 | www.DeveloperEconomics.com

shows platform parity. The considerable share of mobile developers intending to adopt Windows Phone (47%) and BB10 (15%) indicate that there is still developer interest in a viable third app ecosystem. HTML is the main technology co-opetitor to the Android-iOS duopoly. HTML is the third most popular choice among mobile developers, 50% of whom use the HTML-based set of technologies as a deployment platform (to create mobile web apps) or as a development platform (to create hybrid apps or HTML code translated into native apps). Overall, HTML is much more successful as a technology, not a platform, with Firefox OS (and WebOS before that) being the main web-centric attempts at creating a complete alternative to iOS and Android, including native platform APIs, and a means to distribute and monetise apps. HTML should therefore be seen not as competition, but rather as a complement to native platforms, and one that reduces externalities by lowering barriers to entry and exit from these platforms. Windows Phone: buy it and they will come. Windows Phone remains unchanged in developer mindshare at 21% of developers despite the very high intention to adopt in our previous 2012 survey. Developers seem to be waiting for the right market signals – a critical mass of handsets - before investing in the platform. Despite Windows Phone challenges, Microsoft has positioned Windows 8 as a tablet-too platform, and thanks to strong Windows license renewals, the company is able to reposition mobile market share figures to their advantage. BlackBerry mobile mindshare remains stable at 16%, with developers being on standby mode in anticipation of BB10 sales. Moreover, Intentshare, i.e. developer plans to adopt BlackBerry, has not subsided since our the 2012 survey, indicating that the major outreach effort undertaken by RIM during the build-up to BB10 release is having some positive impact. Symbian mindshare, on the other hand, is rapidly and predictably disappearing, as is, Samsung’s Bada, despite outperforming Windows Phone sales in Q3 2012. 74% of developers use 2+ platforms concurrently, but money is concentrated in iOS/Android. At the same time, developer platform choices are now narrowing. On average mobile developers use 2.6 mobile platforms in our latest survey, compared to 2.7 in 2012 and 3.2 in our 2011 survey. 80% of respondents in our sample develop for Android, iOS or both, making them the baseline in any platform mix. Developers that do not develop for one of these two platforms generate, on average, half the revenue of those developers that do, leaving little doubt as to the concentration of power within these two major ecosystems. Most developers are iOS-first. iOS is a clear winner in the shoot-out against Android, with 42% of Apple/Google developers prioritising iOS, against 31% for Android. Several other factors come into play when making a decision on the “lead platform”, such as prior experience or local handset sales patterns, but iOS comes out as a clear winner across all platform competitive points except cost and learning curve. iOS, Android and BlackBerry are lead platforms. In our survey of 3,460 developers, iOS emerged as the highest priority platform, with 48% of iOS developers using it as the lead platform among all others. iOS, Android and BlackBerry constitute lead platforms, which are most often used as a main platform among their developers. Windows Phone and HTML are extension platforms, as they are typically used by

4
© VisionMobile 2013 | www.DeveloperEconomics.com

developers to extend their app footprint into customer segments or regions not adequately covered by their lead platform. At the tail end of developer preference are Symbian, Qt, Flash and JavaME ,the “gap fillers”, now used to address all remaining market niches. HTML5 needs better native platform APIs, and development environment. HTML5 is becoming a viable alternative to native for developers working on app categories such as Business & Productivity (used by 42% of HTML developers), Enterprise (32%) and Media apps (28%). To compete with native, HTML5 needs better native API access (35% of HTML developers), a better development environment (34%), better debugging support (22%). More importantly, optimised HTML5 devices were not as seen as important as the native API access or dev environment. This leads us to conclude that HTML proponents such as Facebook, Mozilla and Google should focus on cross-platform tools and development environments on at least equal measures as they focus on full platform efforts like Facebook Platform, Firefox OS and Chrome OS. Tablets reaching developer mindshare parity with smartphones, but TVs remain niche. The majority (86%) of 3,460 developers in our survey target smartphones, while a large share of them also develop on tablets, led by iOS developers (76%) indicating the attractiveness of the iPad as a development and monetisation platform. TV development remains niche (6% of Android developers), as the hype cycle around the “Smart TV” experience is yet at a very early stage.

The revenue haves and have nots
The steep learning curve of app entrepreneurship. Developers have a lot to improve in planning their app business. 49% of developers in our sample build apps they want to use themselves, but end up generating the least revenue. The most revenue-generating app planning strategies are those that extend an app either into verticals or different geographies. To some extent, these strategies rely on an already established and successful business: apps that have been tried and proven in at least one market and are generally less risky options or “low hanging fruit” for developers. Advertising is now the most popular revenue model for apps, used by 38% of developers in our global sample. At the same time, it is the monetisation model with the least revenue per app. In-app purchases and Freemium are on the rise, having grown by 50% compared to our 2012 survey and are now used by more than a quarter of the developers in our survey. In-app purchase is now the second most popular revenue model on iOS, with 37% of developers using it, falling slightly behind Pay per download. Lack of customer understanding in lean app development. We find it remarkable that only 24% of developers in our sample plan their apps based on discussions with users, a figure which does not change with development experience or proficiency. This indicates that the bottleneck of the build-measure-learn cycle of lean development is the “measuring”, or understanding customers. This highlights the need for a frictionless two-way feedback channel between developers and users, much like what GetSatisfaction pioneered for web apps, and which now HelpShift is pioneering for mobile apps.

5
© VisionMobile 2013 | www.DeveloperEconomics.com

The Developer Tools Landscape
Over 500 tools for today’s app developers, designers and entrepreneurs. In the last 3 years, developers have moved from being coders, to innovators, designers and makers - and a prized customer for the 100s of firms making up the SDK economy, part of the bigger B2D (business to app developer) market. Developer expectations for tools and services have changed in the recent years due to the flurry of startups, from Appcelerator to Zong, which emerged. App developers today have over 500 third party tools (APIs, SDKs, components) to choose from, catering to every stage along the developer journey. Developer tools, from ad networks to user analytics SDKs are a core part of the Android and iOS platform economics, and a major platform differentiator. Ad services mainstream, other tools use is fragmented. 90% of the nearly 3,460 developers we surveyed use at least one third-party tool or service, with an average of 1.47 tools used concurrently. Among those developer services that we benchmarked the most popular is ad networks and exchanges (34% of developers), reflecting the widespread popularity of advertising as a revenue model. Advertising is the most popular revenue model, while ads can also act as a promotion channel that facilitates app discovery. User analytics (28%) and cross platform tools (27%) follow in popularity with a longer tail formed by developers of crash analytics, BaaS, cross promotion networks and voice services. Google’s AdMob, is clearly the dominant mobile ad platform, adopted by 65% of developers that use ad services. AdMob has recently expanded to ad exchange services, a move that aims to counter the threat that ad exchanges pose for Google. Second runners, each used by 12% of developers in our sample, are Inneractive, an ad-exchange/mediation service and InMobi, an ad network growing out of India to become a major player in emerging markets. Apple’s iAd service comes fourth overall with 11%, and despite being quite popular among iOS developers, AdMob is the leading ad service on iOS, used by 66% of iOS developers that we surveyed. PhoneGap and Appcelerator lead developer mindshare across 100+ cross platform tools. PhoneGap tops CPT rankings, used by 34% of developers, followed by Appcelerator and Adobe Air with 21% and 19% developer mindshare respectively. With over 100+ cross platform tools available, the choice for developers can be a challenge. Amidst differentiating features for CPTs are access to native APIs, performance optimisation and the ability to reproduce native UI elements on each platform. The user analytics duopoly: Google (69%) and Flurry (49%) are well ahead of competition. User analytics services are becoming increasingly important as a tool to optimise app engagement and reach, and act as a proxy for user feedback. User analytics services are significantly more important for iOS developers - used by 39% of iOS developers in our survey vs. 28% for Android, 25% for WP and 15% for BlackBerry. Usage of analytics serves as an indicator of the level of competition among developers on different platforms. Parse leads with 28% mindshare in Backend-as-a-Service tools but competition for second spot is heating up as BaaS rises in popularity. As mobile apps become more sophisticated, so the need increases for back-end features like managing users, introducing social features, or synchronizing cloud data. Mindshare leader Parse is followed by enterprise-focused CloudMine (11%). Sencha.io and ACS, both

6
© VisionMobile 2013 | www.DeveloperEconomics.com

commanding a 10% share among developers using BaaS, are solutions that are well integrated with their corresponding development frameworks (Sencha and Appcelerator) and therefore do not directly compete with services such as Parse or StackMob. The Backend-as-a-service market is in early stages, crowded with over 30 vendors that strive to differentiate by constant innovation and additions to their feature sets - we have yet to see any service dominating the sector to the extent observed in other developer tools sectors, such as ad services or user analytics tools. TapJoy (53%) is the leader in cross-promotion network mindshare, according to our survey of 3,460 developers, with Flurry AppCircle (20%) and Chartboost (18%) following behind. Cross-promotion networks (CPNs) are used by developers both as a means for promoting their apps by means of free traffic exchange across apps, ads paid by cost-per-app-install or in some cases incentivised installs. CPNs are also used as a revenue model, for developer acting as inventory publishers. Voice APIs have not made the transition from web to mobile. While voice services cater to diverse use cases, their mobile developer mindshare is limited to single digits, as voice APIs are still tied to the developer perception of telephony, a long way from the future voice-enabled apps. Voice-enablement leaders Twilio and Voxeo have been much popular within web developer circles, with Twilio rising once in late 2011 to a top-10 API provider ahead of Facebook, as tracked by ProgrammableWeb. Yet these voice services are yet to make a major impact in mobile apps. Skype (telephony URIs) and Microsoft (speech recognition and transcription) are often used, followed by Twilio and Tropo API users who focus on conference calls, inbound/outbound calling and voice portal services. Telcos like AT&T, Verizon, Telefonica and Deutsche Telekom have also released voice APIs in 2012 in a move to extend telephony assets into new revenuegenerating voice use cases. The Developer tools universe expands and consolidates. The Business to Developer (B2D) market, has seen a continual expansion in the last three years, with a flurry of B2D startups emerging to address the ever increasing developer needs. For every 1,000 app startups, there is a developer tools startup. In parallel, there is consolidation taking place via organic expansion (e.g. Flurry, Papaya expanding services organically) and via mergers and acquisitions (e.g. Appcelerator acquired Aptana, Cocoafish, Particle Code and Nodeable, Apigee acquired Usergrid and Instaops, Burstly acquired TestFlight and Flurry acquired Trestle). Consolidation to continue to 2015, led by mobile marketing and enterprise. We expect the trend of consolidation of the tools landscape to continue unabated until 2015, six years after the B2D market for apps was born, while expansion will focus only on unaddressed developer tools sectors in the post-launch phase of the developer journey. We expect two main clusters of developer tools to lead the consolidation: firstly, marketing tools, as the discovery bottleneck will only worsen as we go from 1.5M to 10M apps, and while the Apple and Google stores continue to dominate app distribution. Secondly, Enterprise Mobile Services, which are creating revenue demand for vendors to mobilise their intranets, and to allow employees to bring their own device (BYOD) to work. Unlike the consumer apps space, enterprises have a substantial IT budget per employee, and very stringent requirements for data security, identity management, backend systems integration, and support-level agreements.

7
© VisionMobile 2013 | www.DeveloperEconomics.com

About Developer Economics
Welcome to Developer Economics 2013, the fourth in our de-facto research series of the developer economy. This report focuses on developer tools, examining six developer sectors: ad-networks and mediation engines, backend-as-a-service, cross-platform tools, cross-promotion networks, user analytics, and voice services. We also take a close look at many of the critical issues for developers today, such as most popular platforms, opportunities and challenges with HTML5, cross-screen development, app revenue models, monetisation potential and much more. The findings of this report are based on an online survey of over 3,400 developers, as well as 20 qualitative interviews, conducted in October 2012. Our sample was truly global, with a balanced sample across North America, Europe and Asia, but also significant minorities of developers from Africa, Oceania and Latin America. We hope this report gives you insight into the latest trends on mobile development and an understanding of the rules of the new app economy emerging around apps and ecosystems. We hope you enjoy reading it - as much as we enjoyed writing it! AndreasP, Matos, Christina, AndreasC, Mark, Vanessa, Chris, Michael and Stijn at VisionMobile. @visionmobile www.visionmobile.com/blog

Thank you!
We'd like to thank all the people and organizations that helped us make this project possible. Special thanks go to: Our sponsors, without whom we wouldn't have been able to complete this project: AT&T, Mozilla, Nokia, BlackBerry, BrightCove and Telefonica. Our Marketing and Regional partners that helped us reach an unprecedented 3,460 developers across the globe, breaking new records for the largest, global mobile developer survey. The developers and mobile insiders that took the time and interest to share their experience with us. Alexey Sazonov, Christopher Kassulke, George Karavias, Raj Singh, Maximiliano Firtman, Tzach Hadar in our Developer Advisory Board that provided valuable feedback throughout this research. And finally, Kinvey and SoundCloud for their input during the preparation of the research.

8
© VisionMobile 2013 | www.DeveloperEconomics.com

9
© VisionMobile 2013 | www.DeveloperEconomics.com

Research methodology
The Developer Economics January 2013 research is based on a large-scale online developer survey and one-to-one interviews with app developers. The online survey was designed, produced and carried out by VisionMobile over a period of five weeks between October and early November 2012. One to one interviews were conducted from November to December 2012. The online survey received over 3,400 responses, more than double the number of our previous 2012 survey. Respondents came from 95 countries. The online survey was available in 7 languages (English, French, German, Korean, Portuguese, Russian and Spanish) and promoted by 25 marketing and regional partners within the app development industry. As a result, the survey reached a substantial number of respondents across all continents. The survey respondents were balanced across Europe (39%), Asia (27%) and North America (24%). We also gathered a developer sample from Africa (4%) and South America (4%). In terms of countries, respondents came primarily from the US (18.7%), India (13.9%) and the UK (5.6%) followed by Russia, Germany and France. We also received responses from Venezuela, Uruguay, Vietnam and Kazakhstan to name a few of the 95 countries in total, making this report truly reflective of the new, global, mobile app economy.

Respondents were asked to indicate the main platform they use for development among 14 mobile and desktop platforms. To minimise the sampling bias for platform distribution, we compared the distribution across a number of different developer outreach channels and identified statistically significant channels that exhibited the

10
© VisionMobile 2013 | www.DeveloperEconomics.com

lowest variability from the platform medians across our whole sample base. We derived a representative platform distribution based on these channels and weighted our results based on this distribution, as depicted in the graph below. In order to exclude outliers in our sampling, we derived median rather than mean values where appropriate. Re-calibrating and adjusting our research methodology was deemed necessary as we strive to capture trends across an ever growing, diverse and widely distributed developer population.

11
© VisionMobile 2013 | www.DeveloperEconomics.com

12
© VisionMobile 2013 | www.DeveloperEconomics.com

13
© VisionMobile 2013 | www.DeveloperEconomics.com

CHAPTER ONE

Mobile duopolies
The widening gap between the haves and the have nots
Despite the doom and gloom circling the mobile handset industry, and the slowdown in handset shipments observed in Q3 2012, the industry has been in fact on a steady growth trajectory achieving a 23% CAGR in revenues since 2009. Underlying this growth are the increasing smartphone sales that now account for over 40% of all handset sales, a massive 12.5 percentage point rise since Q3 2011. The growth in smartphone sales, is fuelled by low cost Android devices that rapidly eat away feature phone market share.

14
© VisionMobile 2013 | www.DeveloperEconomics.com

2012 was the year that established Android’s dominance in the smartphone market. In Q3 2012 Android accounted for 74% of all smartphones sold and 30 % of all handsets sold. Propelled by Android, Samsung became the top-selling mobile handset OEM, starting in Q1 2012, and ending a 14-year reign by Nokia. Samsung’s success with Android is down to three differentiating elements, as we covered in our Mobile Insider note on The Apple and Samsung Profit Recipe (www.visionmobile.com/insider) - ownership of the most expensive hardware components, including screens, memory and processors, ensuring both earliest availability and lowest bill of materials. - fast time to market in launching a new Android handset based on the latest Android software release, beating all other handset makers to early adopter profits. - strong Galaxy brand and marketing campaigns that differentiate Samsung from the crowd of tens of Android handset makers. Samsung has led not just the Android race, but has also challenged the iPhone on a single handset basis: for the first time, an Android handset, Samsung’s flagship Galaxy S3, became the top selling smartphone, outselling the iPhone 4S during Q3 2012.

Meanwhile Apple experienced a slump in sales during most of the year, despite having a very successful Q4 2011. At the same time, Apple is expected to recover in Q4 2012

15
© VisionMobile 2013 | www.DeveloperEconomics.com

following a strong performance by the iPhone 5. Industry analyst consensus forecasts record iPhone sales, in the region of 43 to 63 million units; a wide range indeed, but higher than any previous quarterly actuals.

Handset industry profits grew thanks to Apple
The booming handset industry is underpinned by the Google / Apple duopoly in mobile platforms; a duopoly that, in turn sustains the handset maker duopoly of Apple and Samsung. With a combined smartphone market share of 46%, Samsung and Apple account for nearly all handset industry profit – in Q3 2012 Apple and Samsung took 60% and 38%, respectively of all profits across the top-8 handset OEMs. Excluding Apple, total handset industry 2012 profits are at 2009 levels, implying that Apple is reaping all of the added value out of the apps-based mobile computing paradigm which it introduced. In this same period, Samsung captured the remaining value by quickly transforming from a feature phone incumbent to a smartphone leader, eating away the profits of the once dominant Nokia who was slow to react to the changing basis of competition - from the best phones, to the best apps. To sustain its profits Apple needs to refresh its unique product experiences which are challenged by the Galaxy S3, and to continue spearheading new unique product experiences in TVs, e-readers, watches and beyond.

16
© VisionMobile 2013 | www.DeveloperEconomics.com

The lack of profitability among established handset vendors is not a sign of an unhealthy industry but of an industry in transformation. As mobile devices become mobile computers the value will be increasingly shifting towards apps and third party developers, a similar path to that tracked by the PC industry. In this new paradigm only those who are offering integrated experiences through a tailored value chain will remain profitable, as shown by Apple and Samsung, and much like Harvard Professor Michael Porter has observed in every other industry.

Tablets challenge the PC status quo
Google has raised the bar on the tablet front by releasing a high quality device (Nexus 7) at a low price-point ($199 for the basic version), putting its weight behind the low-end disruption of the tablet status quo and the rise of the 7-inch tablet. Apple’s reaction, releasing a less expensive iPad, is a clear sign that the Android threat in tablets is a valid one, and a rare concession in Apple’s recent history. While Apple’s iOS remains the dominant platform in tablets with a powerful ecosystem fuelled by a steady supply of apps, the iPad will be challenged by the Nexus, much like the iPhone 4S sales were challenged by the Galaxy S3. Tablets are still outsold 3 to 1 by PCs, but they are expected to reach parity in the next 1-2 years. This will be a critical inflection point for the likes of Microsoft and Intel who are seeing their once-dominant position in computing being disrupted by mobility, where the Android platform and ARM-licensed Qualcomm and MediaTek chipsets dominate. While smartphones can barely be seen as competitors to PCs and notebooks, tablets present a real PC substitute for the majority of consumer use-cases. The danger for Microsoft and Intel is not just the dwindling size of the PC market relative to mobile computing, but also the threat of being uprooted from their dominant position in their own (PC) market.

The economics of apps
Developers and publishers mostly value reach and revenue opportunities, in that order. This is directly reflected in the choice of platforms they develop on – iOS and Android – which offer the widest reach, as we will see in the next section. The choices that developers make, translate into consumer demand via the added value created by apps, which then translates into developer supply. This cycle of consumer demand and developer supply is known as the network effects that have transformed the mobile industry in recent years. Consumer choices are extensively reported and tracked by handset vendors and analysts alike. In Developer Economics we examine the less known and understood “developer” part of the equation. In the Developer Economics 2013 survey, attracting more than 3,400 respondents, we asked developers about their choice of platforms and screens, revenue models, third party services they use and many other important elements of the app economy. In doing so we aim to understand how developer choices, together with consumers’ choices will affect the future of the mobile industry, an industry that now attracts VC funding that exceeds the R&D expenditure of each of Google, IBM, Apple or Nokia according to investment firm Rutberg & Co. With 30% of that funding going to mobile applications, developers are now at the centre stage of the mobile industry dollars.

17
© VisionMobile 2013 | www.DeveloperEconomics.com

Developers Driving Ecosystems HTML is the main technology alternative to the Android-iOS duopoly for mobile developer mindshare

Having established a dominant position in consumer markets, Android continues to lead mobile developer mindshare, with 72% of developers now developing for the platform, a 4 percentage point increase compared to our 2012 survey. While Android is still perceived by developers as a less profitable platform compared to iOS (as we shall see), its market share offers the potential for unprecedented reach into smartphone users. The long term health of the Android ecosystem will depend on Google’s ability to manage API and screen fragmentation especially as the majority of the Android installed base is running an API version that was introduced at least two years before the latest version of the API, as of January 2013. Android developers must also consider different ways to engage with a demographically diverse and fragmented user base, the average purchasing power of which is significantly diluted by rock-bottom priced Android devices attracting low-income consumers. iOS shows a 5 percentage point drop in Mindshare, which we attribute mostly to the influx of Asian developers showing a clear preference towards Android. Developer mindshare varies widely by region: for example mobile mindshare for iOS in Asia is 48% vs. 76% for Android, while in North America the two platforms command an equal mindshare of 65%. Platform mindshare varies also between mobile

18
© VisionMobile 2013 | www.DeveloperEconomics.com

and desktop developers, i.e. developers who develop only on mobile, versus those that also develop apps for desktop platforms. HTML is the third most popular choice among mobile developers, 50% of whom use the HTML-based set of technologies as a deployment platform (to create mobile web apps) or as a development platform (to create hybrid apps or HTML code translated into native apps). Note that we have not compared our HTML mindshare results to the earlier 2012 survey, as the latter looked only at mobile web as a deployment platform. Overall, HTML is much more successful as a technology, rather than a platform, with Firefox OS (and before it WebOS) being the only attempt at creating a complete, web-centric alternative to iOS and Android, including native APIs, and a means to distribute and monetise apps. With Firefox OS in early commercialisation stages, HTML should be seen not as competition, but rather as a complement to native platforms, and one that reduces externalities by lowering barriers to entry and exit from these platforms. Windows Phone mindshare remains unchanged despite the very high Intentshare score in our previous Developer Economics survey. Developers seem to be waiting for the right market signals – a critical mass of handsets - before adopting the platform. The release of Windows 8 could help Windows developers make the leap into mobile development however there are only anecdotal signs to this effect as sales of Windows Phone 8 devices have been lacklustre. Microsoft’s attempt to harmonise the user and developer experience across screens is the right strategy for protecting their existing PC revenue streams and establishing a foothold on the mobile computing market. Moreover, Microsoft has positioned Windows 8 as a tablet-too platform, and thanks to strong Windows license renewals, the company is able to reposition mobile market share figures to their advantage. To provide a fighting chance for their mobile strategy to succeed, Microsoft must iterate fast both its platform and own hardware (Surface) in order to reach the right product-market fit. BlackBerry mobile mindshare remains unchanged at 16%, with BlackBerry developers being on standby mode in anticipation of BB10 sales. Moreover, Intentshare, i.e. interest in BlackBerry has not subsided since our the last Developer Economics survey, indicating that the huge outreach effort undertaken by RIM during the build-up to BB10 release is having some positive impact. Symbian mindshare, on the other hand, is rapidly but predictably disappearing, as is, Samsung’s Bada, despite outperforming Windows Phone sales in Q3 2012. “We try to address 90% of all Android users. This includes about 60% of users who are 5 versions behind.”
Founder App development house

19
© VisionMobile 2013 | www.DeveloperEconomics.com

Windows Phone: buy it and they will come Mobile developer Intenshare shows 47% of developers plan to adopt Windows Phone but poor consumer adoption is holding them back

Microsoft’s Windows 8 & Phone 8 strategy brings a unified Metro interface to all devices and enables significant code sharing between apps across PCs, tablets and smartphones. However these synergies have yet to pay off and Windows Phone is facing a bootstrapping issue despite Microsoft’s multi-billion-dollar investment in the platform. Lack of developer interest is not the issue here, as highlighted by the high levels of Intentshare. Developers seem to be on standby, waiting for the market signals – the consumer adoption - that justify an investment in the platform. Moreover, Microsoft’s attempt to fund development of Windows Phone apps created misalignment of developer incentives. Instead of focusing on consumers, developers were focused on getting the easy money, which resulted in sub-par apps. As we said earlier, you can’t buy developer love. The majority of mobile developers have already adopted iOS and Android, hence the relatively low Intentshare among those platforms. Beyond iOS and Android, mobile developers are showing interest in Facebook, with 23% of mobile developers indicating that they plan to adopt the platform. Facebook offers little in terms of mobile app development at present but it provides unprecedented reach. With around 1Bn active users, it is one of the widest reaching digital platforms on the planet.

20
© VisionMobile 2013 | www.DeveloperEconomics.com

The considerable levels of Intentshare for Windows Phone (47%) and BB10 (15%) indicate that there is still developer interest in a viable third app ecosystem.

21
© VisionMobile 2013 | www.DeveloperEconomics.com

Multi-platform developers are better off 74% of developers use two or more platforms concurrently

74% of developers use two or more platforms concurrently. At the same time, developer platform choices are now narrowing. On average mobile developers use 2.6 mobile platforms in our latest research, compared to 2.7 in 2012 and 3.2 in our 2011 research. The Android-iOS duopoly in smartphone sales is gradually creating a concentration of developers around these two platforms: 80% of respondents in our sample develop for Android, iOS or both, making them the baseline in any platform mix. Developers that do not develop for one of these two platforms generate, on average, half the revenue of those developers that do, leaving little doubt as to the concentration of power within these two major ecosystems. In our Developer Economics 2013 survey of over 3,400 developers we found that 49% of developers use just one or two mobile platforms concurrently and 75% use up to three mobile platforms. The number of platforms developers use depends to some extent on which is their lead platform. In mobile development, loyalty to one platform is not something that pays off. Our research shows that the revenues are higher when using more platforms. For example, an iOS developer porting an app on Android is likely to experience some growth in revenue. At the same time, for developers working on four or more platforms, higher revenues are probably the result of extending an already successful app to more platforms. Obviously, this is not something that all developers can afford to do; it is a strategy more suited to large publishers or commissioned developer teams that are large enough to support a number of platforms.

22
© VisionMobile 2013 | www.DeveloperEconomics.com

iOS vs Android shoot-out iOS is the best platform for generating revenue but Android provides a better learning curve and lower cost

With iOS and Android forming the baseline for mobile app development, the obvious question is: which is best for app discovery, learning curve, cost and revenue potential? The shoot-out between the platforms favours iOS, which was ranked higher on four out of the seven platform aspects, with a clear advantage on app discovery (50% iOS vs. 23% Android) and revenue potential (66% iOS vs. 12% Android). The perception that iOS provides better monetisation opportunities is well established with developers as evidenced by our survey data. The iOS platform also leads, but with a smaller margin on development environment and documentation. On the other hand, Android has a clear advantage on cost (32% Android vs. 14% iOS) and a small lead on learning curve. For most developers, the platform perceptions boil down to a decision about which platform to prioritise, or which of the two platforms to develop for first, where iOS clearly comes on top with 42% against 31% for Android. Several other factors may come into play when making a decision on the “lead platform”, such as prior experience or regional platform mix, but it is fair to say that iOS comes out as the winner in developer perceptions.

23
© VisionMobile 2013 | www.DeveloperEconomics.com

Most mobile developers are iOS-first 48% of iOS developers prioritise Apple against all other platforms. They are followed by Android and BlackBerry developers

In our survey of over 3,400 developers, we compared platform preference, by asking developers which is their main platform among all the platforms they are using. iOS emerged as the highest priority platform, with 48% of iOS developers using it as the lead platform among all others. Among Android developers, 44% use it as a lead platform. BlackBerry developers also tend to prioritise their platform: 38% of those using BlackBerry, use it a their lead platform. Together iOS, Android and BlackBerry constitute the lead platforms. Besides lead platforms, Windows Phone and HTML are seen as a main platform by about a quarter of all developers that use them. We call these extension platforms, as they are typically used by developers to extend their app footprint into customer segments or regions that are not adequately covered by their lead platform. At the tail end of developer preference are Symbian, Qt, Flash and JavaME , which we call “gap fillers”. These are mainly older-generation platforms that are now used to address all remaining mobile market niches, but cannot survive as lead platforms on their own. Symbian for example, still has a large installed base, almost double that of BlackBerry, but given the expiry date set on Symbian handset production, few developers will invest much effort on the platform.

24
© VisionMobile 2013 | www.DeveloperEconomics.com

HTML5 trades off capability for portability HTML5 wins in code portability and low cost development but needs a better dev environment and native API access to compete with native

HTML5 is becoming a viable alternative to native development across a number of app categories. In Developer Economics January 2013 we found that HTML developers mainly focus on specific app categories such as Business & Productivity (42% of HTML developers), Enterprise (32%) and Media apps (28%). On the other hand, Games are not a common category among HTML developers (12%). We asked developers that use or are planning to use HTML about the reasons for platform selection. The majority indicated code portability as the main incentive for using HTML5. Low cost development is the second “Multi-platforms development is a driving force for HTML5 adoption, highlighted by major challenge. For a solo 51% of developers. developer there is so much they HTML is still an “extension platform” as we saw need to look at. You can use crossearlier. We asked developers that use, have used or platform tools like PhoneGap but are planning to use HTML what they think HTML5 it’s not that simple, there is a lot of needs to compete with native platforms. Access to tweaking to be done. Going native native APIs comes top challenge with 35% of can also be hard, it takes a lot of developers indicating this as a critical success time and patience. HTML5 will help factor. HTML5 will always be a step behind in things go in the right direction.” support for native APIs, given that platform Glenn Stein vendors are always a step ahead of cross platform Java developer and
Maker of PhraZapp

25
© VisionMobile 2013 | www.DeveloperEconomics.com

tools and browser vendors. In addition, the HTML5 development experience is subpar, with developers indicating that a better development environment (34%) and better debugging support (22%) are needed. More importantly, optimised HTML5 devices were not as seen as important as the native API access or dev environment. This leads us to conclude that HTML proponents such as Facebook, Mozilla and Google should focus on cross-platform tools and development environments on at least equal levels as they focus on full platform efforts like Facebook Platform, Firefox OS and Chrome OS.

26
© VisionMobile 2013 | www.DeveloperEconomics.com

Tablets go mainstream, TV apps still niche 64% of developers now develop for tablets, while HTML is equally used across smartphones, tablets and desktop

The majority (86%) of 3,460 developers in our survey develop on smartphones, while a large share of them also develop on tablets, led by iOS developers (76%) indicating the attractiveness of the iPad as a development and monetisation platform. Despite the rise in Android tablet share during 2012, we did not observe a significant increase in the share of Android developers targeting tablets (64% vs. 62% in our Q1 2012 survey) although we believe this is likely to change in the near future. HTML developers take a more platform-agnostic approach, as they develop across smartphones, tablets and PCs almost equally, according to our survey, a testament to the use of HTML as cross-screen app development technology. At the same time, HTML limitations, such as lack of support for native APIs, tooling and device optimizations, prevent it from “The next 6 months will be about the becoming a swiss-army knife for cross-platform tablet war. As cheaper models enter development. the market, consumption of both the TV development remains niche, at the same levels reported in Developer Economics 2012, as the hype cycle around the “Smart TV” experience is yet at a very early stage. This seems in line with findings from research firm NPD, who reports that only 15% of Smart devices and the apps that run on them will increase tremendously.”
George Karavias Developer and CEO Anlock

27
© VisionMobile 2013 | www.DeveloperEconomics.com

TVs are connected to the internet, limiting their appeal to app developers. It is also worth noting the trend of using phones or tablets as a remote control for other smart, connected appliances in home automation, in-car entertainment, health monitoring, retail, logistics and even industrial monitoring.

28
© VisionMobile 2013 | www.DeveloperEconomics.com

Advertising is the most popular revenue model Advertising used by 38% of developers but is the monetisation model with the least revenue per app

Advertising has increased in popularity over the past year and has now overtaken pay-per-download as the most popular revenue model, used by 38% of mobile developers in our survey. Advertising is particularly popular on Android and Windows Phone, used by 45% and 53% of developers respectively. This is consistent with the view that consumer spending on Android is generally lower than on iOS, leading developers to select alternative means for monetising their apps. However, advertising lags behind all other revenue models when it comes to monetisation, bringing on average of around $1,000 per app-month, considerably lower than other revenue models. Advertising is particularly popular in Asia (50% of developers in Asia), in Africa (42%) and South America (41%). These are mainly emerging economies where direct consumer spending on apps may be lower than more affluent regions. Pay-per-download (PPD) remains popular, used by 34% of the developer population in our survey. However, it is still the dominant revenue model on BlackBerry and iOS, with 53% and 38% of developers of those platforms using it. In terms of revenue, PPD fares better than advertising, generating about 30% more revenue per app-month,

29
© VisionMobile 2013 | www.DeveloperEconomics.com

however it comes second to last among all revenue models. PPD is more frequently used by developers in Europe (33%) and the US (32%). In-app purchases and Freemium are on the rise, having grown by 50% compared to our 2012 survey and are now used by more than a quarter of the developers in our survey. In-app purchase is now the second most popular revenue model on iOS, with 37% of developers using it, falling slightly behind PPD. After subscriptions, IAP brings in the highest average app-month revenue at $1,835. IAP and Freemium are used much more widely in Asia than in any other region (30% and 31% respectively, of developers in Asia). Subscription-based models, while not very popular (used by just 12% of developers), come out on top in terms of revenue per app-month, at an average of $2,649. As mentioned in our previous Developer Economics report, while the subscription model is more lucrative than other revenue models, it is not a model that any developer can use as it requires significant investment in ongoing, engaging content that consumers will pay for an a regular basis.

30
© VisionMobile 2013 | www.DeveloperEconomics.com

Revenue haves and have nots For developers interested in making money, 67% earn less than $500 per app per month and are below the app poverty line.

Around 18% of 3,460 respondents in the Developer Economics 2013 survey indicated that they are not interested in making money from apps. Nevertheless, out of the vast majority of developers that are in it for the money, 67% are not making enough to sustain them or their business, i.e. they are below the “app poverty line” of $500 per app per month. For the majority of developers, app development is not financially rewarding. Overall, less than 1 in 5 Blackberry developers make more than $500 per app-month. The situation is almost as challenging on Windows Phone where just 19% of developers generate more than $500 per app-month, with 61% below the poverty line. The findings of our survey are somewhat better for Android and iOS although these platforms too, are far from a developer paradise: 55% of iOS and 54% of Android developers are below the poverty line. Excluding developers that are not interested in profit, 62% of iOS developers and 67% of Android developers are not making more than $500 per month per app.

31
© VisionMobile 2013 | www.DeveloperEconomics.com

HTML seems a surprise here with just 45% of HTML developers under the poverty line, far lower than any other platform. However, there are fundamental differences between HTML and native platforms which are responsible for the differences observed here: developers using HTML for web development have access to a much larger user base comprising desktop and mobile users, irrespective of platform. Among HTML developers, subscription-based revenue models are much more popular than on native platforms pointing to established online content or service businesses that have expanded on to mobile.

32
© VisionMobile 2013 | www.DeveloperEconomics.com

The steep learning curve of app entrepreneurship 49% of developers build apps they want to use themselves, but end up generating the least revenue

Almost half of developers (49%) in our survey decide which apps to develop based on their own needs. Those same developers end up generating the least amount of revenue per app per month, indicating that they have a lot to learn in how they plan their app business. Naturally, planning a business based on own needs may yield a good customer understanding, but lacks the rigor of market research or of extending proven app recipes into new countries or verticals. We find it remarkable that only 24% of developers in our sample plan their apps based on discussions with users, a figure which does not change with development experience or proficiency. This indicates that the bottleneck of the buildmeasure-learn cycle of lean development is the “measuring”, or listening in to user needs. This highlights the need for a frictionless 2-way feedback channel between developers and users, much like what GetSatisfaction pioneered for web apps, and which now HelpShift is pioneering for “The developer learning curve is far steeper on the business side than on the coding side, and its getting steeper.”
George Karavias Developer & CEO Anlock

33
© VisionMobile 2013 | www.DeveloperEconomics.com

mobile apps. To decide which apps to build, a sizeable share of developers uses market research and competitive intelligence. Market research and competitive intelligence are well-established practices in business development and we expect that the increasingly business-savvy developer population will, in the near future, invest more effort in these elements when designing a product strategy.

“Competitive analysis is the key when it comes to decide what app to develop next.
Jai Jaisimha CEO Open Mobile Solutions

Developers that publish more apps per year tend to make decisions based on different criteria than those publishing only a few apps per year. For developers publishing 16+ apps, the decision mainly lies with clients or management - these are mostly professional developers that work on commissioned apps or as employees of larger publishers where the decision on which app to work on is mainly based on a defendable business case. Developers publishing more apps also tend to rely on market research more, whether that is purchased research or own research through app store monitoring and analytics services. The most successful strategies are those that extend an app into markets, either into verticals or different geographies. To some extent these strategies rely on an already established and successful business: these are apps that have been tried and proven in at least one market and are generally less risky options or “low hanging fruit” for developers.

34
© VisionMobile 2013 | www.DeveloperEconomics.com

35
© VisionMobile 2013 | www.DeveloperEconomics.com

CHAPTER TWO

The Developer Tools Landscape
The cogs and gears of the app economy
App developers have witnessed many, radical changes since the creation of the apps economy. In 2008, app developers were the engineers and geeks experimenting with new mobile software platforms. In the next two years to 2010, developers transitioned from engineers to entrepreneurs, and the mobile industry moved from “developers will come to us” to “we must go to them”. Developers moved from being coders, to innovators, entrepreneurs, designers and marketers. Today the developer is not just an engineer, entrepreneur, designer or marketers - developers are a prized customer for the 100s of firms making up the SDK economy, part of the bigger B2D (business to app developer) market. Developer needs have grown, too, to cover the entire lifecycle of an app, across planning, development, reach, monetisation and customer support. The focus of developer attention has moved from coding to marketing and to supporting customers. We model developer needs based on “jobs to be done”, from the seminal work of Harvard Professor Clayton Christensen in understanding user incentives as a way to design products. Developers are called to answer key questions such as: How do I select a platform? How do I identify my target market and which devices are my customers using? How do I monetise my apps? What is the best way to promote my apps? How do I beta test with real users? How do I go about setting a pricing strategy? How do I get user feedback and manage reputation in the marketplace? All these questions correspond to the numerous “jobs to be done” for developers, mapping to the needs that developers have to address along the app lifecycle. These same jobs create opportunities for SDK and tools vendors. The jobs to be done and opportunities for SDK vendors are best illustrated by the Developer Journey, a concept we first introduced in our Developer Economics 2010 report, shown on the next page. The structure of the Developer Journey hasn’t changed much in the last three years; what has changed is the flurry of startups that emerged to cater to those needs, making the developer journey concept a compass for opportunities in the SDK economy. This SDK economy, popularised by the likes of Appcelerator and Zong, has emerged to support the diverse and growing range of developer needs. App developers today have over 500 third party tools (APIs, SDKs, components) to choose from, catering to every stage along the

“Tool and libraries significantly changed the way apps are developed today. Primarily saving time on coding and influencing the way one decides about features (based on availability of libraries) and new capabilities.”
Shai Levy Freelance Android developer Israel

36
© VisionMobile 2013 | www.DeveloperEconomics.com

developer journey. These tools lower barriers to entry, reducing development costs, smoothing the learning curve, multiplying go to market channels and streamlining marketing. Developer tools, from ad networks to user analytics SDKs are a core part of the Android and iOS platform economics. Such tools augment the networks effects present in platform ecosystems by accelerating app creation and reducing developer costs and risks. At the same time, lack of such tools on competing platforms like Windows Phone or HTML is a serious handicap making competition with the incumbent duopoly even harder. While leading platforms like Apple often divide and conquer among SDK vendors with changes to API or app store policies, follower platforms like Windows Phone often subsidize and bundle developer tools within their marketing campaigns. Developer tools have become a major platform differentiator and a developer attractor. Developers today have at their disposal an abundance of tools including app store analytics, user analytics, crossplatform tools, crash analytics, marketing and monetisation tools, all of them with zero entry-level pricing. We have been researching the SDK economy for the past few years, and have been tracking a growing “Searching for developer tools on Google isn’t effective – it’s not the results, I just don’t know how to describe the tools I am looking for.”
Raj Singh Founder & CEO Tempo AI, Inc

“Having presence in 12 countries meant that localisation has been a real challenge during app development. Adapting content and ensuring that everything is right for the particular audience required significant effort.”
Alexander Löffler Senior Product Manager (mobile) Yelster digital

37
© VisionMobile 2013 | www.DeveloperEconomics.com

number of (currently) over 20 developer tools categories. For detailed tool listings see our developer portal on build.DeveloperEconomics.com.

Table: Developer Tools and Services
Name A/B testing tools Description Allow developers to measure user reactions and performance when introducing new app features. Technology platforms for buying and selling online ad impressions Ad networks connect advertisers to in-app inventory. Tools to facilitate discovery of mobile apps through search or recommendations. Code-free, visual design tools for easily building mobile applications, aimed at noncoders Tools to analyse app downloads and sales Mobile application testing and certification services. Cloud services providing data storage, user management and messaging services Platforms facilitating app testing by end users Tools for app crash analytics, bug tracking, beta distribution, performance analysis. Tools to create applications for multiple platforms from almost the same codebase or design tool. Ad networks, or promotion channels that allow the promotion of apps within other apps Streamlined customer feedback and support Allow developers to monetise by in-app selling of additional content, features or virtual goods Tools monitoring and managing the app performance and availability Tools & services used to manage app development projects, both for agile and traditional structured methodologies Enables pushed message to be sent to an app as part of notifications or marketing campaigns Configuration management and code collaboration tools, either self-hosted or cloud-based Translation services and localisation tools for apps Tools to prototype the user interface of an application Tools that track app usage in order to optimize user engagement. Example of vendors Pathmapp, Swrve, Amazon A/B Testing

Ad exchanges Ad networks App discovery services App factories

Inneractive, MobClix, Burstly AdMob, InMobi, Leadbolt AppCarousel, Appsfire, Chomp (now Apple) Mobile Roadie, Appflight, Red foundry, iBuildApp Distimo, App Annie, AppFigures Apkudo, TRUSTe, uTest Parse, CloudMine, Sencha.io TestFlight, The Beta Family, Mob4Hire

App store analytics App testing & certification Back-end as a Service Beta-testing tools

Crash analytics tools Cross platform tools

BugSence, TestFlight, Crittercism PhoneGap, Appcelerator, Adobe Air

Cross-promotion services

Tapjoy, Flurry, Chartboost

Customer support In-app purchase tools

HelpShift Boku, PapayaMobile, Fortumo

Performance management Project management

Soasta, New Relic (web), Compuware Microsoft Project, Basecamp, Pivotal Tracker, Assembla, Redmine warp.ly, Urban Airship

Push notifications

Source code management

Git, Mercurial, SVN, GitHub, BitBucket, Kiln

Translation / localisation tools UI prototyping tools User Analytics

Transifex, Applingua, Localeyes Balsamiq, InVision app Google, Flurry, Apsalar, Tapstream

Source: VisionMobile

38
© VisionMobile 2013 | www.DeveloperEconomics.com

In Developer Economics 2013 we surveyed six developer tools sectors: advertising, back-end as a service, crossplatform tools, cross-promotion networks, user analytics and voice services. We ‘ll be taking a closer look at these sectors next.

“Marketing has been a steep learning curve for us. When we started we knew nothing about it.”
Duncan Steele Co-Founder at Valetta Ventures

We picked the key players in each sector and ranked them by their popularity among developers. We also asked developers about the reasons they selected each service and identified the top decision criteria for each tool and sector. Finally, we found out how popular each tool sector is and how its usage varies across the major mobile platforms. In the next section we present our key findings for most of these sectors. We will be dissecting these results even further on our developer portal at build.DeveloperEconomics.com providing more detailed information on individual tools, and what developers think about each one of them.

39
© VisionMobile 2013 | www.DeveloperEconomics.com

Advertising is the most popular developer service 34% of developers integrate an advertising service within their app but only 14% use a back-end service

As part of the Developer Economics 2013 research, we found that 90% of the 3,460 developers we surveyed use at least one 3rd-party tool or service, with an average of 1.47 tools used concurrently. Among the top mobile platforms (Android, iOS, HTML, BlackBerry and WP), iOS developers tend to use third party tools and services more frequently, followed closely by Android, indicating the higher maturity of tools in the two main ecosystems. Usage of third party tools and services is highest among developers working on media apps (including news, sports, weather, magazines) and games developers, using on average 1.80 and 1.75 tools respectively. Use of third party tools and services rises with the number of apps developed and therefore the scale of the organisation which developers work for. Developers who have worked just on one app during the past 12 months use, on average, 1.27 of the developer tools in our survey, rising to 2 tools for developers working on 10 or more apps. However, usage does not increase with the number of apps for all the developer tools surveyed. For example, cross platform tool (CPT) usage is stable for developers working on 2+ apps. On the other hand, usage of advertising services rises with the number of apps a developer is working on.

40
© VisionMobile 2013 | www.DeveloperEconomics.com

Developers below the poverty line (less than $500 per app per month) use on average 1.55 tools; this creates a negative feedback cycle where revenue expectations can’t justify an investment in tools to improve the app development or marketing process. More affluent developers are using 1.94 tools on average, which indicates that they are more sophisticated in their marketing and development process. Among those developer services that we benchmarked the most popular is ad networks and exchanges, reflecting the widespread popularity of advertising as a revenue model. Advertising is the most popular revenue model but developers also use it as a promotion channel that facilitates app discovery. The next most popular tool category is user analytics, i.e. tools that track usage of and user behaviour within an app. Visibility into user behaviour is essential for developers that want to decide which modules and features are used most by end-users and optimise their app accordingly. User analytics services also help developers understand their user-base and improve user targeting. Cross-platform tools are almost as popular as user-analytics overall, used by 27% of developers. Crash analytics services help developers identify bugs in live apps by generating crash reports and sending them to the developer. Despite the profound benefits that such services can have on the quality and user experience, our survey shows that just 17% of developers use crash analytics or bug tracking services. A sector that has been on the rise lately is the Backend-as-a-Service, providing services such as user management, remote data storage and push notifications to developers. 14% of developers in our survey employ BaaS services. Coming next in popularity are cross-promotion networks, only used by 7% of our sample. It is important to note that some of the developer tools we benchmarked compete directly with services available by native platforms. For example, iOS provides crash reporting and sales analytics, while Google provides user analytics. However native platform services usually lack in terms of features or flexibility compared to dedicated 3rd party developer tools.

41
© VisionMobile 2013 | www.DeveloperEconomics.com

Cross Platform Tools PhoneGap and Appcelerator lead developer mindshare across tens of CPTs

Cross-platform tools (CPTs) address real challenges for developers. Cross-platform tools allow developers to create applications for multiple platforms - usually mobile, but increasingly tablets or TV screens - from almost the same codebase or from within the same design tool. CPTs reduce the cost of platform fragmentation and allow developers to target new platforms at a small incremental cost. More importantly, cross-platform tools allow software companies targeting multiple platforms to reuse developer skills, share codebases, synchronise releases and reduce support costs. CPTs can be used to develop native, hybrid and web apps and come in several technology flavours: JavaScript frameworks, App factories, Web-to-native wrappers, Runtimes and Source code translators. There are over 100 CPTs that we identified in our Cross Platform Tools report published in February 2012. Developers most often use several cross-platform tools; on average CPT developers will use 1.91 CPTs, confirming the lack of maturity and niche nature of cross platform tools

42
© VisionMobile 2013 | www.DeveloperEconomics.com

much like we observed in our dedicated CPT survey just over a year ago. Moreover, we found that one in four developers will use more than three cross platform tools. The lack of a one-size-fits-all and immaturity in the CPT landscape is what is stalling cross platform tools from shifting the balance of power in the iOS / Android duopoly towards alternative platforms. Cross platform tools are most popular for developers focusing on HTML development, with 38% of of them using CPTs for development. CPTs and particularly JavaScript frameworks and web-to-native wrappers (e.g. PhoneGap), provide a relatively smooth transition to mobile apps for web developers: in our Cross-Platform Developer Tools 2012 report we found that 60% of developers using CPTs have over 5 years experience in web development. Usage of CPTs is popular among iOS developers, while usage among Windows Phone developers is much lower, presumably due to historical lack of support for the iOS platform from CPT vendors and Microsoft’s financial incentives for the creation of native apps. PhoneGap tops CPT rankings, used by 34% of developers, followed by Appcelerator and Adobe Air with 21% and 19% developer mindshare respectively. With over 100+ cross platform tools available, the choice of which is “the right tool” for developers can be a daunting challenge. Choosing between CPT technologies is not straightforward (i.e. whether to go for a web-to-native wrapper or a JavaScript framework). Moreover, developers need to try out a cross-platform tool to see if it aligns with their needs in terms of performance, learning curve, access to native APIs or look & feel. It’s never a black or white decision. The most important selection criterion for CPTs is their availability across platforms. Due to their deep platform integration, CPT tools support iOS/Android platforms first, and others secondly. Beyond cross-platform availability, 38% of developers using CPTs select their tools based on development speed and 33% based on the learning curve. Since CPTs aim to expedite and facilitate development across platforms, they should provide a clear advantage over native platforms when it comes to speed and ease of development to justify their use. Amidst differentiating features for CPTs are access to native APIs, performance optimisation and the ability to reproduce native UI elements on each platform.

43
© VisionMobile 2013 | www.DeveloperEconomics.com

Ad networks and mediation engines AdMob dominates ad networks (65%) and Inneractive leads among ad exchanges (12%)

With advertising being the most widely used revenue model among developers, advertising services attract considerable developer interest taking the top spot among the developer tools that we benchmarked. Providers of ad services monetise their service by taking a direct cut of advertising revenue generated by developers through revenue models like cost-per-click, cost-per-impression or cost-per-action. With 100+ ad networks and exchanges, there is intense competition, regional specialisation and vertical-oriented solutions. In spite of this diversity, several ad services are not profitable. The ad services we benchmarked are either advertising networks that provide direct access to their own pool of ads, or ad exchanges (also known as mediation engines, but excluding real-time bidding exchanges) that act as aggregators, automating access to a large number of individual ad networks. Ad exchanges offer some flexibility to developers by allowing them to select “Selecting an ad network is a lottery. It’s easier if you have a regional-centric app, but it’s a challenge if you have a global app, as there’s no best-performer globally.”
John Cooper Founder Pyxis

44
© VisionMobile 2013 | www.DeveloperEconomics.com

between multiple ad networks through a single SDK offering better fill rates and eCPMs. At the same time, ad network SDKs often provide access to more features available, than the generic features available through an ad exchange.

“We're reviewing and changing the ad-networks we work with on a monthly basis to get the best deals available.”
CTO Games industry

Our survey of 3,460 developers indicates that, among developers using ad services, 27% use an exchange and on average use 1.59 ad services providers. There is a large variance in the number of developers using ad services depending on the scale of development: those developing less than 5 apps per year tend to use ad-services much less than those developing more than 5 apps per year. Among developers that develop more than 16 apps per year, most likely working for large publishing houses, software services companies or agencies, about 60% use ad services in their apps. Ad services are most popular with those who develop primarily on Windows Phone and Android (46% of WP developers and 43% of Android developers), and less so on iOS and BlackBerry (35% and 31% respectively). This is in agreement with our findings on revenue models being used on each platform, with developers on Android and Windows Phone relying heavily on advertising to monetise their apps. AdMob, a service acquired by Google in 2010 is clearly the dominant platform in mobile ad services, adopted by 65% of developers that use ad services. AdMob has recently expanded to ad exchange services, a move that aims to counter the threat that ad exchanges pose for Google. Second runners, each used by 12% of developers, are Inneractive, an ad-exchange/mediation service and InMobi, an ad network growing out of India to become a major player in emerging markets: InMobi’s mindshare is 17% in Asia and 33% in Africa according to our survey. Apple’s iAd service comes fourth overall with 11%, and despite being quite popular among iOS developers, AdMob is the leading ad service on iOS, used by 66% of iOS developers that we surveyed. Ad exchanges are complementary to ad networks. For example, developers will use one service with high eCPM but low fill rate and another with lower eCPM but nearly 100% fill to plug the gaps in the better paying service. When selecting an ad network or exchange, availability across platforms comes on top in both cases. Ease of integration is also very important, particularly so for developers using ad networks. Supported ad formats, revenue potential and fill rate are secondary selection criteria, and therefore constitute differentiation factors across advertising services.

45
© VisionMobile 2013 | www.DeveloperEconomics.com

User Analytics The user analytics duopoly: Google (69%) and Flurry (49%) are well ahead of competition

User analytics services are becoming increasingly important as competition for app users continues to rise. The ability to track how users interact with apps is extremely valuable for app developers, designers and product managers alike, and to some extent acts as a proxy for user feedback. The absence of a direct two-way communication channel between developers and users means that user analytics often provide the only feedback channel from user to developer. Our survey of 3,460 developers shows that 28% of developers use user analytics services overall, and the usage rises with the number of apps developed, reaching 39% among developers working on more than 10 apps per year. User analytics services are significantly more important for iOS developers that developers of other platforms - used by 39% of iOS developers in our survey vs. 28% for Android, 25% for WP and 15% for BlackBerry. Usage of analytics serves as an indicator of the level of competition among developers on different platforms. The greater the competition, the higher the need for insights on user

46
© VisionMobile 2013 | www.DeveloperEconomics.com

behaviour provided by user analytics services. The red ocean competition in the iOS App Store pushes developers towards increased sophistication in tracking and improving user engagement and retention efforts, and therefore greater use of user analytics tools. In comparison, among the top platforms, user analytics tools are the least popular with BlackBerry developers (15%), indicating lower levels of competition among developers on this platform. The picture in user analytics services is quite telling with two services dominating: Google and Flurry. Google has traditionally been strong in web analytics but it has now extended its stronghold on to mobile platforms commanding a 69% mindshare among developers employing user analytics services. Its dominance is mainly observed among HTML developers. Runner-up Flurry, is used by 49% of developers employing user analytics services, particularly on iOS (64% vs. 58% for Google). Flurry, being one of the pioneers in user analytics is the de-facto analytics platform for developers reaching over 700 million devices each month. Beyond these two services, there are numerous smaller players vying for third place, currently held by Testflight Live, a service recently acquired by ad mediation service Burstly. Note that user analytics are a distinct tools sector to app store analytics (e.g. AppAnnie, Distimo), which provide analysis of app sales and downloads. User Analytics services are mostly used in media and entertainment apps (36% of developers). Google analytics is stronger overall across all these categories, with the exception of Games where both Google and Flurry are equally strong. Developers opt for analytics services that are easy to integrate within their apps or that are available across several platforms as indicated by 51% and 49% of developers using user analytics services, respectively. Optimising analytics comes as third priority, with 31% of developers using user analytics services being concerned with the depth of analytics, and 13% being interested in real-time reports. Cost is also a deciding factor as pointed out by 28% of developers employing user analytics. “Mobile analytics help you understand how users interact with the apps and what customers really want. They are ultimately useful to UX specialists to help them find out where to aim, how to give real value to the user, which features to offer, and how to improve the overall experience.”
Dimitris Makris Co-Founder and Head of Mobile Trebbble

47
© VisionMobile 2013 | www.DeveloperEconomics.com

Backend-as-a-Service Parse leads with 28% but competition for second spot is heating up as BaaS rises in popularity

As mobile apps become more sophisticated, so the need increases for back-end features like managing users, introducing social features, or synchronizing data with the cloud. App design and development is usually the focus of the initial app efforts, with backend features lacking sophistication or scalability, until the very time when they are mostly needed. Off-the-shelf mobile Back-end-as-a-service (BaaS) services can save considerable time for developers that need backend support for their apps. At the very basic level, mobile BaaS services offer a managed, cloud-hosted database that scales as the user base grows. BaaS services provide additional functionality on top of this base layer that usually includes user management, push-notifications, social features and large-file cloud storage. Our survey of 3,460 developers indicates that backend services are currently used by 14% of developers, and more frequently by developers working on 16+ apps per year (25%). Backend services are used slightly more on iOS (18% of iOS developers) than on

48
© VisionMobile 2013 | www.DeveloperEconomics.com

Android or WP (15%), while BlackBerry developers use these services much less (9%), as a result of limited support among these tools for BlackBerry. The undisputed mindshare leader in mobile BaaS is Parse, used by 28% of all BaaS users, followed by enterprise-focused CloudMine (11%). Sencha.io and ACS, both commanding a 10% share among developers using BaaS, are solutions that are well “Startups usually fail in the back-end integrated with their corresponding because they are more likely to go viral development frameworks (Sencha and very quickly and might not be able to scale Appcelerator) and therefore do not directly their back-end fast enough. People don’t compete with services such as Parse or perceive a failure of a back-end as a backStackMob. The Backend-as-a-service market is end failure. They say that the game is too in early stages, crowded with over 30 vendors slow or doesn’t work pretty well.” that strive to differentiate by constant Toli Lerios innovation and additions to their feature sets Engineer (backend development) but we have yet to see any service dominating Facebook the sector to the extent observed in other developer tools sectors, such as ad services or user analytics tools. Although core features are common among most BaaS providers, there are differences between them that make the selection easier. For example, the ability to export data is not offered by all services. Developers often find BaaS restrictive for their app requirements, which has led to BaaS providers such as Parse, StackMob and Kinvey to enable developers to implement custom business logic. At present however, our data shows that developers frequently opt for a custom-built backend solution rather than a BaaS for greater flexibility. The main BaaS selection criterion for developers is, as in most third-party developer services, availability across platforms. However, the richness of the feature set is almost equally important, as is the flexibility of the service, e.g. the ability to implement custom business logic. Ease of integration and use, stability and performance are important to 25% of developers using backend services. Another important aspect of backend services is pricing flexibility, i.e. the way costs scale with usage. Developers whose apps experience a sudden surge in user base may find it challenging to scale their costs as usage grows. We also asked developers using backend services to highlight the most important BaaS feature. 28% of developers using backend services indicated data management and 18% indicated user management and authentication. Next most important features are push notifications and content management, followed by e analytics (9%), file storage (7%), cloud code (custom logic) (6%) and social graphs (3%). The backend service sector is relatively young and expected to grow as developers familiarise themselves with such services and realise their potential. At the same time, there is much room for improvement as BaaS providers better understand and adapt their services to developer needs such as flexible and customisable business logic. The need for flexibility and relative feature parity points to the opportunity for an open source back-end service that can be monetized like Github.

49
© VisionMobile 2013 | www.DeveloperEconomics.com

Cross Promotion Networks TapJoy (53%) is the leader in cross-promotion promotion, with Flurry (20%) and Chartboost (18%) following behind

Cross-promotion networks (CPNs) are used by developers both as a means for promoting their apps and monetising apps. When used for promotion purposes, there are numerous revenue models, some offering free traffic exchange between apps, enabling developers to run low cost or free promotions. However, several CPNs operate on a cost-per-install basis, with developers paying for each user acquired. A special case of cross-promotion is incentivised installs, where the user gets rewarded for installing an app, a practice that Apple has been trying to restrict on the App Store. Used by 7% of developers overall, usage of cross-promotion services is not very high and does not vary significantly by platform. Usage is higher among developers that develop games (13% of all games developers) and higher than average among developers working on comms & social networking apps (9%), entertainment apps (10%) and music & video apps (10%). Overall, developers using CPNs will use 1.7 CPNs on average.

50
© VisionMobile 2013 | www.DeveloperEconomics.com

Cross promotion network usage increases with the number of apps developed, rising to 15% among developers who work on more than 16 apps per year. For developers working on several apps it makes sense to cross-promote within and across their app portfolio, a strategy widely practiced by Facebook games market leader Zynga. Based on our survey of 3,460 developers, TapJoy is leading in the cross-promotion space, used by 53% of developers that use CPNs. Flurry AppCircle and Chartboost, follow at some distance and are competing for second spot (20% and 18%), while there are numerous other providers with over 5% mindshare. In the competition among cross-promotion networks, the three most important selection criteria are the number of users reached, cross-platform availability and ease of integration. For developers who use CPNs for promotion purposes, cost is also important. We found that, on average, the typical CPI (cost-per-install) was $0.60 among iOS and Android developers in our survey, with no notable difference between these platforms. When used as a revenue source, the revenue potential becomes important, as indicated by 25% of developers using CPNs.

51
© VisionMobile 2013 | www.DeveloperEconomics.com

Voice Services Skype (39%) is leading, with Twilio (31%) following

Voice APIs allow developers to integrate voice-call functionality within their apps, bypassing the telco services that traditionally provided these capabilities. Developers use voice services to enable a number of use cases such as voice calls, conference calls, video calls, voice transcription and voice portal services. Telcos are reacting to this trend for enabling use cases beyond classic telephony by opening up access to their services via APIs. The latest AT&T Call management API, powered by Voxeo Labs’ Tropo Platform, allows users to link their mobile number to over-the-top voice services provided via AT&Ts API, avoiding the need for a new phone number. AT&T has also partnered with Twilio as part of their “Advanced Communications Suite” allowing businesses to manage a host of comms services, including SMS shortcodes and teleconferencing via the Twilio API. While voice services cater to a number of different use cases, their use is relatively low among developers due to lack of awareness. We believe that voice services are still tied to the developer perception of telephony, and have a long way to go to the future voiceenabled apps where voice will become a third medium for in-app user interaction

52
© VisionMobile 2013 | www.DeveloperEconomics.com

beyond keys and touch. Voice-enablement leaders Twilio and Voxeo have seen much popularity within web developer circles, with Twilio rising once in late 2011 to a top-10 API ahead of Facebook, as tracked by ProgrammableWeb. Yet these voice services are yet to make a major impact in mobile apps. The voice services surveyed cater to a diverse mix of use cases, and therefore do not often compete against each other. Developers integrating voice services in their apps tend to use them primarily for enabling voice call capabilities within their apps, including conference calls (33% of developers utilising voice services), outbound calls (29%), and inbound calls (24%). About a quarter of developers using voice services, are interested in speech recognition while 20% use them to implement voice portal applications or callback functionality. Skype leads in developer mindshare when it comes to voice services, used by 39% of developers that integrate voice services within their mobile or web apps. Skype does not provide services through an API but rather through URIs that allow developers to initiate Skype calls and chats directly from their websites, desktop and mobile apps. Developers using Skype use it primarily for conference calling (55% of developers utilising Skype in our survey), video calls (43%) and outbound calls (37%). Twilio follows at a short distance, utilised by 31% of developers implementing voice services. Twilio APIs allow developers direct access to voice services within their apps. Twilio users mostly use the service for outbound and inbound calls. Microsoft Voice services, used by 27% of developers using voice services, use it mainly for speech recognition and speech transcription. Telco APIs such as those provided by AT&T and Verizon are less popular (17% and 10% of developers using voice services). The AT&T API is mainly used for conference calls and callback (36% and 32% respectively). Tropo is used by 5% of developers using voice services and is mainly used for Conference calls (50% of developers using Tropo), speech recognition (41%) and voice portal functionality. Most developers (39% of those using voice services) highlighted performance and quality as a top selection criterion for voice services. Voice quality is not guaranteed on mobile data networks but is critical in most use cases where voice services are used, particularly in real-time voice such as conference calling. While network quality is often out of the direct control of voice services providers, there is still a lot that can be done on the service providers’ side such as optimising encoding algorithms and scaling the architecture of their voice infrastructure. Ease of integration and availability across platforms are the prevailing selection criteria among all third-party tools and services are also important when selecting voice services, as highlighted by 35% and 34% of developers using voice services, followed by cost (27%).

53
© VisionMobile 2013 | www.DeveloperEconomics.com

54
© VisionMobile 2013 | www.DeveloperEconomics.com

CHAPTER THREE

Rise of the mega-SDK vendors
The developer tools land-grab
Since 2007, the app economy has gone through three distinct phases: the experimentation phase, with the first iPhone and Android models, when developers experimented with the new platforms and saw the very first examples of successful apps hitting the mainstream tech media. The second phase was about “celebrity apps” - Angry Birds, Cut the Rope and the many overnight successes inspired hundreds of thousands of budding entrepreneurs and developers bored with their day job. The tech media became preoccupied with finding the next success story to write about. The VCs took notice too: investment in mobile applications has steadily grown since 2009 and reached 15% of total VC funding in H1 2012, according to investment bank Rutberg & Co. The third and current phase is the establishment of apps as an economy. An era of developers as entrepreneurs, designers and marketers, rather than coders. As developers strive to create a sustainable app - whether consumer, enterprise, and whether standalone, a web extension or a brand extension - new needs emerge along the journey of app planning, development, design, reach, monetisation and support. Those needs have spawned the creation of an SDK economy beneath the surface of the app economy. This is the market of developer tools which form the cogs and gears of the app economy. The gold rush to develop apps has triggered a second gold rush to create services to cater to developer needs. Today there are around 500,000 app developers (incl. publishers) and 500 developer tools companies. For every 1,000 app startups, there is a developer tools startup. One of the very first developer tools to emerge was app store analytics, catering to the developer need for tracking app downloads and sales. Mobile Ad networks also emerged early in the smartphone era, providing a solution to the monetisation problem for developers. Ad networks, including ad exchanges form one most heavily supplied developer tools sector, with 100s of companies participating. For example, Smaato, a popular ad exchange, connects to over 90 ad networks and 35 DSPs. Cross platform tools followed soon after, helping develop apps for more platforms, from a single code base. Led by PhoneGap and Appcelerator, the supply of CPTs has exceeded 100 vendors, many of which were covered in our Cross Platform Tools 2012 report, practically making this area of the tools economy a red ocean. “Some tools are real pain killers – for example, we pay for things like customer support, beta testing and crash management tools. Many tools will struggle as they are too vertical and I find they keep undercutting each other as a way to acquire customers..”
Raj Singh Co-Founder and CEO Tempo AI, Inc

55
© VisionMobile 2013 | www.DeveloperEconomics.com

These days developers have hundreds of “Consolidation is coming upon 3rd party tools to choose from, catering to every services fast: One SDK to rule them all. You stage along the developer journey have to be big and relevant to be successful: planning, developing, reaching, it's going to be a one-stop shop is the future.” monetising and supporting apps. These Panos Papadopoulos range from UI prototyping and app Founder discovery tools to localisation and BugSense customer support tools. The full list of developer tools categories is listed in the introduction to Chapter 2. These tools allow developers to dramatically cut costs and effort in creating, marketing and monetising apps. More importantly, the tools have lowered barriers to market entry, enabling smaller developers to do much more than they would be able to do without them. A solo developer or small independent team is unlikely to be able to justify the investment required to roll their own analytics, advertising or user management platform, or get to market in reasonable time building apps for multiple platforms simultaneously. In other words, the SDK economy has lowered the entry barriers and as such accelerated the growth of the app economy. The Business to Developer (B2D) market, has seen a continual expansion in the last three years, with a flurry of startups emerging to address the ever increasing developer needs. Besides the expansion, there is consolidation taking place in parallel. Consolidation is observed in two ways: Via organic expansion. For example Papaya started as a social SDK for games and expanded to a virtual currency enabler, cross-platform games engine and more recently a cross-promotion network. Flurry, a leader in user analytics launched AppCircle, a cross-promotion network. AppsFire, a leading app discovery tool, expanded into a cross-promotion network, push notifications and app store analytics. Via mergers and acquisitions. For example Appcelerator (a cross platform tool) acquired Aptana (IDE), Cocoafish (back-end-as-a-service) Particle Code (HTML development) and Nodeable (big data processing). Apigee, a leader in API management acquired Usergrid to expand to BaaS and Instaops for user analytics. Ad mediation engine Burstly acquired TestFlight. Flurry acquired Trestle, a back-end-as-a-service company. Consolidation of developer tools is driven by four factors: integration challenges, end-to-end performance monitoring, discovery bottlenecks and the tough B2D economics. The Developer Economics 2013 research found that ease-of-integration is a top-2 reason for tool selection, across the majority of tools that we researched. By offering multiple tools in one, vendors reduce the integration overheads for developers. Secondly, consolidation is driven by the need for end-to-end app performance monitoring. It’s not enough to understand the download patterns of an app, but to understand which ad network and channel led to that download, and which of those downloads have resulted in engaged users. Here, consolidation alongside the developer journey make sense, as in the case of app store analytics vendor Distimo expanding organically into user analytics. The benefits of expanding the range of services offered

56
© VisionMobile 2013 | www.DeveloperEconomics.com

across the developer journey, also serves to deepen the developer profile information held by the vendor.

Table: Mergers and Acquisitions in the Developer Tools space
Company Aptana Metismo TapJS TapLynx RhoMobile Particle Code Nitobi Strobe Usergrid Product & type Development environment Bedrock Java-to-native source code translator Game hosting platform and API App factory Rhodes enterprise apps framework HTML development tools Makers of PhoneGap Web app framework and app management platform Backend-as-a-Service Acquired by Appcelerator Software AG AppMobi Push IO Motorola Solutions Appcelerator Adobe Facebook Apigee Date Jan-11 May-11 Jun-11 Jun-11 Jul-11 Oct-11 Oct-11 Nov-11 Jan-12

Cocoafish Worklight Chomp TestFlight Trestle Appstatics Instaops Cabana Nodeable

Post-download app services Enterprise app platform App store search and discovery Beta testing Back-end-as-a-service App performance tracking service User analytics A tool to turn Facebook pages to mobile apps Big data processing

Appcelerator IBM Apple Burstly Flurry Appsfire Apigee Twitter Appcelerator

Feb-12 Feb-12 Feb-12 Mar-12 Jul-12 Jul-12 Aug-12 Oct-12 Nov-12

Source: VisionMobile

Thirdly, consolidation is driven by the increasing maturity of the B2D market. Tool discovery by developers is as challenging as app discovery is by consumers. There is still no search engine or developer tools directory that we are aware of besides our own Developer Economics portal. Vendors with a first mover advantage such as Flurry, or with a desktop dominance advantage like Google analytics usually survive the tools discovery bottleneck. As a result, many developer tools sectors are showing trends of consolidating around a single or two players: Google and Flurry in user analytics, App Annie and Distimo for app store analytics, Parse in back-end-as-aservice, Google (AdMob) in ad networks, Tapjoy and Flurry in cross-promo networks. Finally, consolidation is driven by the tough economics of the B2D sector. Developer services have always had zero barriers to entry, meaning that developers should have a zero cost, minimum effort experience in adopting a new developer tool, a trend that’s been inherited from the PC/Internet market for developers. Developer tools startups

57
© VisionMobile 2013 | www.DeveloperEconomics.com

usually have a reach-first, revenue-second strategy and need to drop SDK prices to zero in order to acquire users, well before they can charge for services. As such, bootstrapped tools vendors find it hard to compete with VC-funded startups, and soon give up or get acquired. As the market matures, only the vendors with the strongest financials will survive. We expect the trend of expansion and consolidation of the tools landscape to continue unabated until 2015, six years after the B2D market for apps was born. At the same time, this should not be a reason for developers to delay a decision to adopt a new tool. A business-as-usual dictates, developers should be carrying out a due diligence before selecting a tool, to avoid pitfalls where the vendor might disappear out of lack of market traction. Consolidation will give rise to a new class of Mega SDK vendors that will integrate the most popular types of tools along the developer journey. We see this consolidation format around two types of tools: marketing tools and enterprise mobile services. It’s not just that these two sectors are popular; it’s that they can command direct developer revenues, and therefore have a greater chance of survival. Mobile marketing will only increase in importance as the app discovery bottleneck persists. Today’s developers must be not just coders, designers and entrepreneurs, but more importantly astute marketers, to turn ideas into awareness and money. The discovery bottleneck will only worsen as we go from 1.5 million to 10 million apps, and while the Apple and Google stores dominate app distribution. The traditional approach to app marketing has been mobile advertising, which is estimated to be a $11.4bn market in 2012, according to Gartner. This space is crowded with 100s of ad networks and ad exchanges. Yet, there are a few clear winners, like Google, a traditional online ad network that acquired AdMob to extend their service to mobile and allowed out-of-box integration with Android apps. Enterprise Mobile services is another category that has emerged out of the need for enterprises to mobilise their intranets, and to allow employees to bring their own device (BYOD) to work. Unlike the consumer apps space, enterprises have a substantial IT budget per employee, and very stringent requirements for data security, identity management, backend systems integration, and support level agreements. The first Mega SDK vendors in this area will likely emerge in the form of cross-platform tool vendors like Appcelerator, IBM (acquired Worklight) and Xamarin who are now “The consumer app space was mostly driven positioning themselves as mobile enterprise by hypes and fancy hero apps. In the application platforms (MEAPs) by incorporating enterprise world, you have to convince the entire develop-deploy-manage workflow. business people of the ROI. It’s not about click-and-buy. It’s a longer sales process, but With over 500 tools or SDKs on offer for app with a more scalable & profitable business developers, it’s becoming increasingly hard to model.” find a blue ocean - an untapped market – amidst Louis Jonckheere the red, highly competitive, ocean of developer Co-Founder, Showpad tools. First mover advantage is now extremely rare to establish, with very few sectors - such as customer support and customer ratings

58
© VisionMobile 2013 | www.DeveloperEconomics.com

management - left unexploited. Many B2D startups are hoping for acquisition before organic monetisation. Meanwhile several tools sectors are becoming undifferentiated making it hard to compete for nonintegrated players, i.e. those that do not offer added services on top of their core service. The consolidated Mega SDKs by Appcelerator, Flurry and Google are increasing barriers to entry. At the same time, consolidation is good news for developers, as the choices are stabilising and the B2D market is maturing. Whether we like it or not, building and marketing an app is becoming business as usual, following in the footsteps of website development and software development before it.

59
© VisionMobile 2013 | www.DeveloperEconomics.com

distilling market noise into market sense

60
© VisionMobile 2013 | www.DeveloperEconomics.com

Sign up to vote on this title
UsefulNot useful