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Mobile will grow in 2018, but developers face new challenges

by Lewis Leong on Jan 2, 2018

Over the past couple of years, there were worries about slowed smartphone sales and what it meant for app developers. However, looking back at the data in 2017, we can clearly see that smartphone sales and app installs continue to trend upward for 2018. Mobile still has plenty of opportunity to grow

One of the most heartening statistics for app developers is that consumers dropped nearly $200 million on apps on Christmas Day alone, according to a report from Sensor Tower, a 12.3% increase from Christmas Day 2016. Non-gaming revenue grew the most with entertainment apps nearly doubling its revenue year-over-year. Sensor Tower also noted that the subscription model is a new monetization trend for mobile apps, which isn’t surprising with the boom in the entertainment category.

Sensor-Tower-Christmas-2017-app-revenue

App Annie predicts that consumers will spend 30% more across mobile app stores to exceed $110 billion in 2018. Furthermore, China, India, and Brazil are the top markets to watch with China offering huge potential for growth, as its consumers lead in App Store spend. Vietnam is also a market to watch, especially for mobile gaming since its low cost of media results in high return on ad spend after 90 days, according to AppsFlyer.

Mobile gaming in 2018

For mobile gaming specifically, there is still more room to grow, even in top markets where there’s a fear of mobile game saturation. According to an AppsFlyer report, user acquisition (UA) activity in the US grew by 5.5%, which is 60% more than the global average, with iOS leading the way. The report also found that in order for mobile games to succeed, developers will need to rely on both organic and non-organic traffic. Non-organic traffic is crucial for both controlling and scaling user growth but it’s the organic traffic that shows significantly more “stickiness,” which helps to keep a mobile game profitable.  

AppsFlyer - global non-organic growth 2017

AppsFlyer: Global non-organic market growth

This makes sense as getting discovered in a saturated app store is nearly impossible at this point. Apple finally did something about its App Store discoverability problem this year and redesigned the App Store for iOS 11. However, it appears Apple’s App Store changes have actually made app discoverability more difficult as it relies heavily on editorial content and focuses more on the user experience. For this reason, non-organic UA will continue being crucial for mobile games and is expected to grow in 2018.

Focusing on quality instead of quantity

We’re going to start off with some bad news first: media costs have increased 28% year-over-year according to AppsFlyer. While this means it’ll cost more to acquire users, it shows that the mobile industry is maturing and focusing on quality versus quantity. This also means that big studios with big marketing budgets will dominate, especially in mobile gaming.

However, this bad news is tempered by the fact that mobile marketers are increasingly better at monetization. Average revenue per user (ARPU) has risen 40% year-over-year, proving that mobile marketers are shifting their budget from driving cheap installs to focusing on monetizing quality users.

Another area where mobile saw an improvement year-over-year is in user retention. Last year, we finally saw Google Play change its store rankings to take into account engagement (Apple did this in 2013). As a result, mobile marketers are working to increase their app’s engagement, rather than focusing strictly on downloads.

Following the data, AppsFlyer found retention increased 15% across the board in 2017, with non-organic traffic growing a whopping 22%. One big reason for this jump in retention is that retargeting in mobile apps has gotten more sophisticated with deep linking. This means developers can re-engage users with push notifications that feature deep links, allowing personalized ads to take customers to specific landing pages within an app.

Looking at the data, we can see that mobile marketers are becoming savvier with optimizing their ad spend in 2017. More and more data is now available for mobile marketers to analyze, target, and test, leading to continued mobile growth. 2018 will continue to bring new challenges to mobile app developers but the potential for growth is undeniable.

Lewis Leong is AppLovin's Content Marketing Manager.

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