Here we go: Europe’s thriving app economy

May 11, 2016
app economy

Lately we’ve seen more attention on the mobile app economy. Rightly so. During the last weeks, two large studies have been published, quantifying the relevance of the app economy for Europe. The main findings are striking: 1.64 million people in the EU are employed by the larger app economy, and 8.75 billion Euros, or 30 % of the global app revenues flow to Europe and its startups. We thought this is reason enough to highlight some aspects about the mobile economy and apps in a flourishing and healthy ecosystem.

European startups see the app economy as a huge opportunity, at least every third startup benefits from the app economy. This is great news for Europe and shows the strength and quality of European startups in this field. If the DSM is promising startups to access and scale on a 510 million market, the app-economy is already a step ahead. Everyone can develop and spread an app worldwide through platforms such as Playstore or iTunes. Runtastic, for example, the Austrian tracking app for fitness and health achieved a staggering 25 million downloads during the last year and provides an app in 18 languages and employs 108 people in 22 countries.

A new mobile revolution

The number of smartphones sales sparked to 350 Million annually and by 2020 50% of the world population (and 90% of Europeans!) will own a smartphone. We also spend more time on smartphones and apps as opposed to desktops and websites. This results not only in 1.5 million apps that are available through app stores but also great hardware developments happening in Europe. Payment solutions are becoming faster, smaller and more secure e.g. by iZettle, a Swedish startup evaluated at 500 million. Other examples are smart home devices such as Tado or companies that turn smartphones into medical devices such as Mimi or CardioSecur. This is not at least thanks to the fact, that the 2016-iPhone 6S has 85x the CPU performance of the first iPhone released in 2007.

Online platforms in this regard play a crucial role because they enable what politics has been promising but not yet been able to achieve. A single marketplace lowering the distribution cost for developers, enabling startups to be easily discovered by their consumers. A uniform solution for payments, terms and conditions, VAT, shipping and consumer protection. From a consumer side, using an app store rather than direct downloads provides a single point of contact, transparency and trust through reviews and security standards.

Most app developers and startups are multi-homing, i.e. their app runs on at least two platforms + sometimes a web based browser version. This includes some challenges for their teams which are necessarily larger to cover the different platforms but finally offers an even better service for the consumer. Each platform, might this be Android, iOS, Tizen OS, Firefox OS or Sailfish OS is under constant scrutiny and pressure to provide what is best for the consumer which creates an interesting competition amongst platforms.

Looking at the different platforms, there are are differences from a startup-perspective: Android for examples gives developers more options than most other platforms. As an open source software, it allows users to unlock the developers functionalities to use the mobile phone’s full capacity is great for startups. A startup providing a secure identity on- and offline can use the NFC capacity of a phone to read id cards, this works only on Android. Same for a payment startup or in the e-health sector.

How can a startup reach customers with a new app?

Advertisement happens best where the customers are, i.e. the niche or sector the startups is active or through direct ways of advertising such as adwords, Facebook or StumbleUpon. It is hard to pin your desired user to a specific phone, so preloading an app is probably costly and a bad decision for a startup to grow and reach customers. Startup will get new users by providing an excellent and innovative product.

In Europe, smartphones manufacturers like Samsung or HTC are preloading an average of 40 apps on their devices, including Google, Microsoft, Amazon and the device manufacturers apps. Being one of them will not do the job and will not mean that users will exclusively use these apps or won’t download any competing apps. Right out of the box, each device is offering different choices to the consumers, and most of them are downloading and customising their devices in the coming minutes following activation. The way for startups to reach their customers is simply to convince through excellent, innovative service and user experience. App companies are able to compete on merits, and Europe has many examples of good success stories in the app ecosystem. Let’s think about Spotify and its 100 million users, Shazam and its 2 billions followers. Several European gaming apps like Candy Crush saga, Clash of Clans or the Gameloft apps have been downloaded hundreds million of times. Most of them are not preloaded and are a real success!

Europe can be proud of such a rich and thriving app economy, growth perspectives are exciting and will attract innovative entrepreneurs to create more startups, developers to launch new apps and youngsters to study computer sciences.