German app market projected to exceed €1 billion in 2015

German app market expected to reach €1.3 billion in 2015

“…more than 70% of the projected €1.3 billion app revenue is coming from In-App-Purchase (IAP).”

This is one of the results of a recent project commissioned by Bitkom and undertaken by research2guidance projecting the German app market revenue in 2015.

The results of a recent project conducted by research2guidance project app market revenues to exceed €1 billion in 2015; evidence that the demand for apps in Germany continues to grow. These projections represent a 41% increase since 2014.

The reason for this increase in app revenue can be loosely attributed to the growing number of smartphone and tablet users. Also the increasing number of wearables and tracking devices have placed apps back in the centre of the mobile ecosystem.

However one should not consider this increase in revenue as evidence that all app publishers are experiencing success in the app market. The majority of companies fail to capture a sizeable market share. Their apps often belong to the ‘long-tail’ of apps and fail to generate significant impact within the app market. For example, results from our recently published Health Insurance App Benchmarking Report 2015, shows that the majority of health insurance companies after 5-6 years publishing apps, have failed to generate a significant impact in the market. One reason for this is because they have failed to apply best practice standards to their apps.

In regards to how app publishers are generating their revenue, more than 70% of the projected 1.3 billion Euros app revenue is coming from In-App-Purchase (IAP). IAP is the purchase of virtual goods made within the application and which is managed by the app store. This can be further broken down into 3 constituent parts:

1. In-App-Purchase Consumables: An app consumable is an item or feature that can be used in the app and expires after being used e.g. the app Carrot Fit allows users to purchased workout costumes for their avatar.
2. In-App-Purchase Currency: App currency is digital currency that has value in the app but no value outside the app e.g. The app BattleSuit Runner allows users to modify their character’s suit by using “iridiums”, which is a currency used within the app.
3. In-App-Purchase Extra Content: In addition to selling all additional features for a one-time fee in the form of an upgrade each extra item can be sold separately.   Users might for example purchase only content/features in which they are interested. This strategy applies to sales of training/diet plans, exercise packages etc. E.g. the app 7 Minute Workout Challenge offers users additional workout packages as an in-app purchase ranging from $0.99 to $1.99.

The remaining revenue is generated largely through the app purchase price, and advertising together accounting for €193 million and €150 million respectively.

What is clear is that the German app economy continues to grow, evidenced by the increase of revenue generated via apps year-on-year. However, one must approach the market with caution and humility, simply publishing apps will not generate over-night success. App publishers must be aware of best practice standards, and the many different roles that are available to them in the app market, if they stand a chance of being successful.