Apple Inc. (AAPL) Will Lose Its App Store Crown to Android

Android's collective app stores will overtake Apple in revenue, but it doesn't matter

A new report has been released with comprehensive stats for the global market for mobile apps. App Annie says that Apple Inc. (NASDAQ:AAPL) served up a fraction of the downloads of Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google Play for 2016, yet continued to dominate the revenue side of the business.

Apple Inc. (AAPL) Will Lose Its App Store Crown to Android
Source: Apple

Apple’s App Store revenue is predicted to continue topping Google Play as the most lucrative through to 2021. It’s expected that all Android app stores combined will overtake Apple’s App Store sales at some point this year.

Report on Mobile App Downloads and Revenue

App Annie is a firm that tracks global app downloads and app store revenue. A detailed report — which was made available on AppleInsider — sheds light on what’s currently happening in the mobile app market, along with forecasts to 2021.

According to App Annie, AAPL’s App Store revenue is about to be surpassed for the first time by the combination of Google Play and third party Android app stores. While Apple remained on top for 2016, with $34 billion in app sales versus a combined $27 billion for Android, in 2017 the lead is expected to shift. Apple App Store revenue is pegged at $40 billion, while Android app stores are on track to book a combined $41 billion.

Apple continues to be on top as the single largest app store by sales, with its $40 billion for 2017 expected to nearly double second place Google Play’s $21 billion. Apple’s iOS also stays firmly in the lead as the platform where users are most likely to pay for apps. Apple’s $40 billion in revenue is expected to come from 30 billion downloads. Google Play’s $21 billion will come from 114 billion downloads, making Apple’s App Store a much more lucrative prospect for developers.

The App Annie numbers show that Android’s sheer numbers advantage, however, is once again showing results.

Apple App Store Revenue Explains Super Mario Run

One of the best recent examples of how the difference between app downloads versus app purchases plays out was Nintendo Co., Ltd (ADR)’s (OTCMKTS:NTDOY) Super Mario Run.

This was Nintendo’s first full-fledged foray into mobile gaming. Built around one of the most recognizable Nintendo characters of all time, smartphone owners salivated at the chance to play.

When the game was released in 2016, if one platform was going to have an edge at getting Mario first, sheer numbers would say it should have been Google Play. With more than double the downloads of the Apple App Store, Google Play would have put Super Mario Run onto a lot more devices. But Nintendo chose to make Super Mario run an iOS exclusive instead.

Despite there being far fewer iPhones out there than Android smartphones, AAPL’s App Store revenue shows that those iPhone users are far more likely to pay for a game. Android users had to wait until last week to finally get their hands on the title. And that’s been the model that many premium app developers continue to follow, despite Google Play’s numbers lead.

If it’s a high-profile app that cost a lot to develop and you expect people to pay for it, the Apple App Store tends to get it first — if Google Play gets it at all.

Will the Shift to Android Dominance Hurt Apple?

Services — which includes App Store revenue — has become an increasingly important division for AAPL. It posted the highest growth of any of Apple’s divisions last year and AAPL netted $3 billion in revenue from app downloads last December alone.

Is that revenue in jeopardy? That shouldn’t be the case, for three reasons.

First, the Apple App Store is expected to remain comfortably on top as the single largest app store for revenue through 2021.

Second, a huge chunk of the revenue growth on the Android side is coming from third party Chinese app stores. These tend to be focused on that market, and don’t compete against the West.

Third, every year it gets more difficult and more expensive to develop and support apps for Android. There are so many versions of the operating system in use and so many different smartphones running it that testing and ensuring a good user experience — something that’s critical for premium apps — is time consuming, costly and still doesn’t guarantee results.

Bottom Line on Apple’s App Store

Apple has weathered a number of negative milestones as a result of the sheer numbers of Android users. In 2011, the number of Android smartphones leapt past the number of iPhones in the American market. In 2013, Google Play took the lead in the number of app downloads for the first time. And in 2015, the Apple App Store was surpassed by Google Play for having the most apps available.

Despite the dominance of Android smartphones, App Store sales continue growing at a healthy pace, and it’s expected to keep doing so despite the latest stat. According to App Annie’s predictions, that means growth to $40 billion in revenue this year and $60 billion by 2021 (compared to $78 billion combined for Android). Not bad for a platform expected to see app downloads at that time outnumbered 7-to-1 by the competition.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/03/apple-inc-aapl-will-lose-its-app-store-crown-to-android/.

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