The Next Horizon of Emerging App Markets

The Next Horizon
of Emerging App
Markets

© App Annie 2016 | Do Not Distribute

The Next Horizon of Emerging App Markets

Table of Contents
1. Introduction
2. The Forefront of Growth: BRIC Markets
3. The Next Wave: Mexico, Indonesia and Turkey
4. Future App Frontiers: Vietnam, Thailand, Egypt and Argentina
● Vietnam: A Gaming Giant in the Making
● Thailand: Infrastructure Developments Spur Future Growth
● Egypt: Apps Revel in Meteoric Smartphone Growth
● Argentina: A Rising Force in the Latin American App Economy
5. Succeeding in Emerging Markets
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© 2016 App Annie 1


1. Introduction
The global mobile app industry continues to grow and evolve as the advent of cheaper
and better mobile devices connect new audiences. Publishers in an ever-widening
range of sectors are recognizing the potential of apps to transform their industry, and
are leveraging their borderless nature to tap into new markets. As a result, app
economies in emerging markets continue to exhibit high growth rates despite the
recent slowdown in the global economy.
Brazil, Russia, India and China (BRIC) have been instrumental in driving download
growth for some time. This continued unabated in 2015 as the four markets together
posted approximately 80% year over year growth in combined iOS and Google Play
downloads.
Meanwhile, rising smartphone penetration, improvements in infrastructure and huge
populations also brought Mexico, Indonesia and Turkey into focus over the past year
for many app publishers. Continued development and increasing competition are likely
to have publishers looking for more opportunities in 2016; we believe Thailand,
Vietnam, Argentina and Egypt are the top markets to watch from across the globe.
App store revenue also continued to climb, and while developed markets such as the
United States and Japan continue to dominate, Chinese-speaking markets (including
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China, Hong Kong and Taiwan) and Middle Eastern markets (including United Arab
Emirates, Saudi Arabia and Qatar) showed considerable gains in 2015.
This report outlines the trends in emerging markets throughout 2015 and explores
opportunities for app publishers who are looking to expand into these markets. It
highlights the continued growth and enormous potential of the BRIC markets, as well
as reviewing the meteoric rise of Mexico, Turkey and Indonesia in 2015. Lastly, we take
an in-depth look at each of the countries representing the next horizon of emerging
markets spanning the key growth regions of Southeast Asia, Latin America and the
Middle East: Thailand, Vietnam, Argentina and Egypt.
2. The Forefront of Growth: BRIC
Markets
For years, the BRIC markets have been a focal point for investment. Home to nearly
half of the world’s population, these markets remain among the fastest-growing in
terms of mobile adoption. The mobile-first nature of internet access makes them highly
attractive to app publishers seeking user base expansion and monetization
opportunities for their apps.
The mobile app industries in BRIC countries shined brightly in 2015. Combined, the
BRIC countries held approximately 30% share of worldwide downloads last year.
According to Store Intelligence, China, India and Brazil in particular are showing no
signs of slowing growth; we therefore expect them to remain at the forefront of
worldwide app market growth in 2016.
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China
China remained the undisputed app powerhouse among developing markets. It
continued to experience healthy growth in downloads, and last year overtook the US to
become the world’s largest market by iOS downloads.
However, the bigger story lies with China’s revenue growth in 2015, which doubled
from the previous year. China is currently the third-largest market by iOS revenue.
However, many would bet it could surpass Japan to take second place behind the US in
the not-too-distant future. With phenomenal growth in both downloads and revenue,
China is an enticing prospect for publishers and investors in 2016.
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India
For many in the industry, however, India is the key market to watch in 2016. Not only
does India have the brightest economic outlook of the BRIC markets, but smartphone
adoption is progressing rapidly with plenty of runway to grow. Its population is also
young and increasingly mobile-savvy. All of these factors culminated in close to 50%
growth in app downloads year over year.
As a result, India’s mobile-first companies are thriving and attracting substantial
venture funding. Some of the biggest success stories can be found in India’s
sensational mobile commerce growth, resulting in considerable investment for leading
companies such as Flipkart and Snapdeal. Such companies are well-positioned for
revenue growth as the market continues to expand and may provide an indication of
the types of successes that may arise as other emerging markets grow.
Brazil
Brazil is another market that saw heavy increases in app adoption, and its government
is stoking investor interest by increasing spending to spur the economy. Opportunities
are abundant as smartphone penetration remains low within the region. Although its
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economy has stalled recently, Brazil’s mobile app industry is poised to continue
growing as the value provided by apps have ensured that it is a segment of consumer
spend that is relatively well-insulated from such macroeconomic factors.
3. The Next Wave: Mexico, Indonesia
and Turkey
App Annie previously highlighted 4 markets to watch in 2015: Mexico, Indonesia,
Turkey and Vietnam. The first 3 now place comfortably in the top 10 countries
worldwide by downloads, while Vietnam continues to charge up the ranks.
Mexico
Mexico’s unique relationship with the US helped it take advantage of the stronger US
dollar through growth in exports, which led to an increase in jobs. Downloads, revenue
and engagement with apps all climbed alongside increased consumer spending as a
result of these new jobs, particularly on Android devices and Google Play. Usage
Intelligence shows that a surge in device ownership, combined with increasing
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engagement with apps, resulted in a 75% increase in total time spent in apps by
consumers in Mexico from 2014 to 2015.
Turkey and Indonesia
While Mexico remains the larger market, Turkey and Indonesia also made rapid gains in
2015. The app market in Turkey was buoyed by rapid smartphone adoption and
consumer demand for digital content. Indonesia’s rise to prominence as a high-growth
mobile market resulted in a surge of interest from technology investors and hardware
manufacturers and roughly 40% growth in app downloads.
The Next Wave’s Top Growth Sectors
Mexico, Indonesia and Turkey all saw over 85% of downloads in 2015 coming from
Google Play, signifying the importance of affordable Android smartphones in these
markets. Within Google Play in these countries, Tools became the second-largest
Google Play category by downloads after Games following strong growth in 2015.
Utility apps like Clean Master, 360 Mobile Security and CM Security enjoyed a
successful year as users in emerging markets sought to boost the performance and
security of their phones.
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Just like in India, mobile commerce is expanding rapidly in Mexico, Indonesia and
Turkey, driven by the increasingly mobile customer base, improvements in security and
greater ease of transactions. With the m-commerce segment in these countries still in
its infancy, a number of homegrown retail app publishers seized opportunities to
expand their customer base. In Indonesia, the sustained increase in mobile transactions
fuelled incredible growth for marketplaces such as Tokopedia and Bukalapak in 2015.
The same is happening in Turkey, where local retailer Hepsiburada.com has been
reporting significant increases in mobile traffic that have contributed to the success of
their mobile app.
With their sizeable and young populations, wider availability of smartphones and
expanding telecommunications infrastructure, it’s clear that Mexico, Indonesia and
Turkey are solid investment options for technology investors and app publishers.
4. Future App Frontiers: Vietnam,
Thailand, Egypt and Argentina
The breakneck speeds at which apps are rising has widened the spotlight further. In
2015, markets such as Thailand, Vietnam, Argentina and Egypt made major strides and
now represent the next frontier for mobile app growth. In terms of downloads and
revenue, these frontier markets posted soaring growth rates from 2014 to 2015.
Download growth rose as high as 60% year over year in Vietnam and Egypt, while
revenue growth ranged between 30% to 40% across the four markets.
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The greater availability and affordability of smartphones, as well as the ease and cost of
acquiring users, will have profound implications for app publishers that expand to
frontier markets.
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Vietnam: A Gaming Giant in the Making
Vietnam was the standout emerging market in 2015. Economically, Vietnam is
accelerating, helping the government fund infrastructure development and boost
consumer spending power. This no doubt helped increase mobile data consumption to
enable app downloads and revenue to soar in 2015.
While game downloads and revenue tend to be an early indicator of a booming app
economy in most emerging markets, the gaming sector stood out in Vietnam in 2015.
Mobile games are undoubtedly a big part of Vietnam’s culture, commanding close to
50% share of downloads on both Google Play and iOS in 2015. The opportunity for
monetization also showed promise as gaming revenue accelerated across both
platforms.
Scorching download and revenue growth aside, the country’s local developer
community has thrived and helped it to stand out from its Southeast Asian
counterparts. Its biggest success story, 2014’s viral smash hit Flappy Bird, was so
popular that its developer pulled it from the app store. Within the local market, social,
entertainment and games publisher VNG leveraged local knowledge for a string of
successes, including card and casino games ZingPlay - Tiến lên and ZingPlay Tá Lả. As
publisher of Vietnam’s most-downloaded messaging app, Zalo, it will be interesting to
see if VNG will attempt the full platform route on messaging as overseas equivalents
such as Tencent have.
Vietnam’s growth isn’t all about games, though, as a number of sectors saw big gains.
Although it remains a smaller category, Google Play’s Shopping category gave a
glimpse of the country’s m-commerce potential with 200% year over year growth. Local
brick-and-mortar electronics retailer The Gioi Di Dong led the category in downloads in
© 2016 App Annie 10


2015, and other local apps including Cho Tot.vn (customer-to-customer [C2C]
marketplace) and Sendo (e-commerce retailer) performed strongly. However, local
m-commerce apps face strong competition from large regional players, including
Lazada (e-commerce retailer) and Shopee (C2C marketplace). The relative success of
local and regional companies in 2016 will be one to watch closely in a sector that is
proving to be key in most emerging markets.
Thailand: Infrastructure Developments Spur Future
Growth
Considered an “upper-middle income economy” by the World Bank, Thailand fared well
economically against the backdrop of political instability and natural disasters in recent
years. Government spending on mobile infrastructure continued and bore fruit, as its
mobile users demonstrated a real appetite for apps. Downloads have been steadily
increasing and, in 2015, the country surpassed Germany in the list of top countries by
annual Google Play downloads.
While the market in Vietnam is shaped in part
by homegrown messaging and game publisher
VNG, Thailand stands out in the frontier
markets for the notable influence of Japanese
leader LINE. Thailand is a key market for LINE,
as evidenced by the recent release of LINE
MUSIC in just two territories — Japan and
Thailand. In 2015, the LINE app led combined
iOS and Google Play revenue in Thailand, in
contrast to the other markets profiled in this
report where games consistently led revenue.
Facebook also maintained a huge presence in
social networking in Thailand.
LINE’s platform-focused approach also helped
it grow in other categories in 2015, with LINE
TV, B612 (LINE’s selfie app), aillis (formerly
LINE Camera) and LINE MUSIC all appearing in
Thailand's top 20 apps in 2015.
The company
1
1 By combined iOS and Google Play downloads outside of Games, Thailand, 2015.


also made a mark in gaming, contributing 2 of the top 10 games by combined iOS and
Google Play downloads and revenue. The growth of Thailand’s app market may
therefore be pivotal to LINE’s expansion outside of Japan.
Photo apps also remain a key part of Thailand’s app economy. The Photography
category trailed only Tools in Google Play downloads outside of games in 2015 and
grew 25% year over year. Although LINE has a strong presence in this sector,
competition for downloads is led by Chinese app publishers PinGuo, Meitu, Fotoable
and Cheetah Mobile.
With smartphone penetration heading toward 50% and further expansion of 4G
networks in 2016, major international publishers are increasing focus on Thailand’s
high-value app market and more are expected to follow.
Egypt: Apps Revel in Meteoric Smartphone Growth
Egypt is another frontier market witnessing exciting developments in mobile
technology proliferation. Although it doesn’t rank highly when it comes to
infrastructure readiness, the rapid adoption of smartphones has contributed to
substantial growth in the app market over the past year.
Like many Google Play-dominated markets across the globe, growth in Egypt’s
downloads in 2015 was driven primarily by apps in the Tools category. This is a
category strongly dominated by Chinese publishers, demonstrating their ability to
rapidly capitalize on the demand for such apps created, in particular, by lower-end
Android devices. Leading publishers include heavyweights such as Cheetah Mobile,
Qihoo 360, Holaverse and Baidu.
Outside of the Tools category, messaging remains a key component of the app market
in Egypt. While most markets are dominated by a small number of messaging apps, the
competitive landscape in Egypt remains relatively open, with 5 messaging apps in the
top 12. Facebook Messenger and WhatsApp Messenger led the way, but Viber has a2
strong presence in Arabic markets and remains near the top in Egypt. LINE, with a
proven record in emerging markets, is also in the race. Lastly, imo showed exceptional
gains in 2015 to join the top contenders. The proliferation of multiple messaging apps
is likely an indication of the early stage of growth in Egypt’s mobile market, but as it
develops further in the next year or two we expect a clearer picture of the eventual
winners to emerge.
2
By combined iOS and Google Play overall downloads, Egypt, 2015.


As with many other emerging markets, m-commerce is a smaller sector but shows
exceptional promise in Egypt. The current leaders in the space are regional
e-commerce retailers such as Souq.com, Jumia and C2C marketplace OpenSooq. These
companies have invested heavily to register incredible growth in 2015 but will now
have to stave off increasing competition from foreign rivals as well as up-and-coming
startups.
As Egypt increases its embrace of the mobile platform, its burgeoning app market is
definitely one to keep an eye on.
Argentina: A Rising Force in the Latin American App
Economy
The large populations of Brazil and Mexico ensure that they are the dominant mobile
app markets in the Latin America, but Argentina is experiencing a rapid transition to
smartphones that gave it higher smartphone penetration than its larger neighbor,
Brazil. Additionally, Usage Intelligence for Operators reveals that Argentina witnessed
60% growth in data consumption per active user from December 2014 to December
2015 as consumers benefited from improvements in telecommunications
infrastructure and improved mobile connectivity. With a large number of smartphone


users consuming increasing amounts of data, Argentina is certainly worth watching
alongside its larger regional neighbors.
App downloads in Argentina are dominated by Google Play, and 2015 saw strong
double-digit download growth across many app categories. Similar to Thailand, 2015
was a strong year for camera apps in Argentina. Again, LINE’s B612 app was a key
contributor, highlighting the value of its diversified app portfolio that provides a
notable presence in emerging markets even where its primary messaging app is less
influential. Dating apps also found traction in Argentina in 2015, as happn recorded
remarkable growth in downloads to challenge Tinder at the top of the charts.
It's not just foreign app publishers that are cashing in on Argentina’s mobile
developments. Local publisher Etermax initially struggled to build traction for Trivia
Crack, but with a few feature tweaks, the app went on to become the country’s #1
game in 2014 and its success continued into 2015. Not willing to rest on its laurels,


Etermax used the game’s success in Argentina as a platform to expand internationally
and penetrate major markets, reaching #1 in 16 markets including the US.
With an improving economic outlook and increasingly mobile-oriented market, both
local and foreign app publishers should feel encouraged to invest in Argentina, as many
more growth opportunities exist across all app categories.
5. Succeeding in Emerging App
Markets
As the mobile sphere expands, emerging markets will continue to lure app publishers
with global ambitions. Smartphone adoption in these markets is increasing rapidly and
due to heavy investment into mobile technologies, many consumers have moved from
being mobile-aware to mobile-first in their thought processes and actions. This has
many implications for app publishers and advertisers. Savvy advertisers are increasingly


prioritizing mobile as an advertising channel, which creates vast opportunities for
publishers to market new apps and explore a variety of monetization strategies.
Additionally, Google’s move to retool Google Play pricing options in emerging markets
should have a positive impact on revenue growth if publishers take advantage of the
opportunity to maximize paying customers.
However, expanding into emerging markets is not always a simple task. Infrastructure
and information frameworks remain nascent and underdeveloped, so apps must be
designed to perform on minimal bandwidth. Additionally, each country has its own
unique cultural and behavioral characteristics that need to be understood. Localization
remains critical, and it will be important to get to know customers and establish
alliances with key ecosystem stakeholders to mitigate risks and maximize
opportunities.
Ultimately, the mobile-first nature of emerging markets will create a solid platform for
experimentation with new ideas, and the rapidly growing user base means the cost of
missing out could be enormous.


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The Next Horizon of Emerging App Markets

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