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18 February 2016

Mobile gaming continues to crush consoles, worth $74 billion by 2020

The mobile gaming market continues to dominate in the smartphone and app store era, as it accounted for 85% of all app revenues in 2015, reaching $34.8 billion of the $41.1 billion global market, according to a report from app analytics firm and market researcher App Annie.

Key findings from the forecast shows the global app market figure will reach $51 billion by the end of this year and $101 billion by 2020, of which mobile gaming will represent an estimated $41.5 billion in 2016 and $74.6 billion in 2020.

Smartphone adoption in emerging markets will see global mobile app store downloads rocket in the coming years, hitting 284 billion by 2020, according to the report. China currently tops the list for the most app downloads of any country, at around 1 in every 3 apps being downloaded – App Annie says it expects China to retain top spot despite India’s soaring app store downloads.

The increasing adoption of smartphones in developing countries will be headed by Android devices, and the report states that as a result, the combination of Google Play and third-party Android stores will have a higher gross revenue than Apple’s iOS App Store by 2017.

App Annie’s Usage Intelligence shows that total time spent in apps increased by 63% on Android phones from 2014 to 2015 globally. This can be attributed to the advancement of in-app services and more engaging interfaces, as well as more widely available and faster network technologies.

The App Annie Mobile App Forecast: The Path to $100 billion, states, “Time spent in apps from categories like Social, Shopping and Transportation strongly suggests that advertising and commerce will form a significant proportion of economic activity in the app ecosystem beyond the $101 billion we are projecting in store sales.”

In comparison, tech advisor Digi-Capital forecast in January that mobile gaming will grow from $35 billion in 2016 to just $48 billion by 2020. Digi-Capital also predicts shrinkage in the game console and PC gaming markets by 2020, primarily down to increasing mobile gaming, as well as the presumption that VR gaming will rise in popularity by 2020 and grab a chunk of the market. Another market researcher, EEDAR, says that console software and hardware market revenues totaled $44 billion in 2015, and a separate report from Jon Peddie Research forecasts global PC gaming hardware sales to increase from $24.6 billion in 2015 to $30 billion in 2018.

The success of mobile gaming is simply down to two key revenue generating models. The first is the Freemium model in which most games are offered for free and hope to convince players to spend small amounts of cash on in game virtual bonuses. These micro-transactions are a core part of the Freemium business model, which hopes to entice gamers through the door with no upfront charge and then make a few dollars here and there as players are subjected to the increasing difficulty or longer waiting times to replenish either abilities or lives/credits that are inherently built into the games to encourage micro-transactions.

The second approach to game design is to charge nothing for the game but to insert advertising into the experience, usually in the form of banner ads at the bottom of the screen (conveniently near to key buttons to encourage accidental click-throughs, some would say) or to put adverts on loading screens. Viral sensation Flappy Bird cost nothing for gamers to download but was so popular that the single hobbyist developer was reportedly making tens of thousands of dollars each month in ad revenue before he pulled the game from the app stores due to the overwhelming response.

Both the Freemium model and ad-supported model are simple and effective monetization methods, and with apps becoming increasingly easy to build, no wonder everyone is doing it.

Mobile gaming could soon reach a new level of experience altogether, according to the Ecosystem Director of chip giant ARM, Nizar Romdan, at the Casual Connect conference in Amsterdam this week, who said that in just two years ARM’s mobile graphic chips will have the processing clout to deliver an equally impressive visual experience as delivered by the market’s top consoles, the Playstation 4 and Xbox One. ARM’s mobile chips are created in partnership with Nvidia, Samsung, and TI, and its CPU core designs are embedded in the majority of modern Android devices.