The global app economy slowed for the first time last year, when consumer spending on apps fell 2% to $167 billion, according to a recent annual report released by data.ai. At the same time, downloads grew 11% year over year — a seemingly positive indication that app adoption is still happening, especially fueled by emerging markets. But a deeper analysis of the fourth quarter suggests that download growth has slowed recently in a season that’s typically a boon to the app ecosystem. The holiday season typically brings new phones and more free time for consumers to try new apps and games, making these new numbers all the more surprising.
According to app intelligence firm Sensor Tower, mobile app adoption on the App Store and Google Play Store leveled off in the fourth quarter of 2022, declining slightly year-on-year by 0.1% to 35.5 billion new installs in the quarter.
The analysis is per user, ie additional downloads of an app by the same person on different devices are not counted towards the total number. It also doesn’t count app reinstalls to only show new download growth. However, the figures are only estimates.
While fourth-quarter trends weren’t enough to pull down overall download growth metrics year-over-year, this appears to be another signal of a sluggish app economy – one that’s no doubt recovering from outsized growth during Covid and one yet to come normalized that continues to be impacted by overall macroeconomic forces, which also play a major role in app marketing spend.
But there’s another argument here, too, and that’s that years of high-priced commissions for app sales and in-app purchases in the global app stores have finally started to impact innovation in the broader app ecosystem. When businesses have to split up to 30% of their revenue just to push their apps and games to a mobile audience, it’s harder for them to weather a storm like an economic downturn. And entrepreneurs may be less inclined to build for mobile, especially when other areas of the market are less restrictive. For example, look at developments around crypto and Web3 – they couldn’t fully extend to mobile devices due to app store policies and the need for platforms to benefit from in-app purchases. With so much pressure on app innovation, it’s no surprise that downloads and spend are suffering.
This trend is not only reflected in the key figures for stagnating app installation rates and falling expenses.
Another example of ecosystem failure can be seen in Apple’s editorially-picked top app of 2022. In an award meant to reflect the opportunities that building for mobile devices offers, the Cupertino-based company singled out Gen Z social networking app BeReal as “App of the Year.” While it’s arguably a resounding success with younger people , it’s also an app whose daily active users have fallen far short of their download numbers, and one that currently has no business model – the app isn’t generating any revenue yet. Its continued existence is fueled by VC funding, not the ability of app stores to provide a platform where new ideas can be easily monetized. And its developers are struggling to figure out what kind of subscription or in-app purchases they could convince their young users to pay for — the result of an app marketplace that spent years convincing consumers of the idea that mobile software should be free.
Then there are the apps that are at the top of Sensor Tower’s most downloaded apps list for Q4 2022 – these are the apps from tech giants like Meta and ByteDance battling each other for the top spots. Newcomers have rarely made their way onto this list for years, and that’s true in the fourth quarter as well.
Globally, Instagram ousted TikTok at #1, and Meta’s other apps found a spot in the top 10 (Facebook at #3, WhatsApp at #5, Messenger at #8, and WhatsApp Business at #9). .) ByteDance’s CapCut, an extension of TikTok’s workflow, is #4. Other top apps are the usual suspects like Snapchat, Telegram, Spotify, Amazon, Flipkart, Twitter, and more big names.
As for games, Subway Surfers was #1, followed by Garena Free Fire, Stumble Guys, Roblox, FIFA Mobile, Ludo King, and Candy Crush Saga. Subway Surfers ended the year with nearly 292 million installs, a 48% increase over 2021. Newcomer Stumble Guys came in third with over 184 million downloads, which is notable given that it only launched in 2021, while the other top five apps were released in 2017 or earlier – a bright spot in the otherwise quarterly decline in Mobile game installations.
Game downloads on the App Store fell 6.9%, while on Google Play they increased by just 0.6%.
Still, the gaming category continues to drive app installs. In the App Store, it accounts for nearly three times as many installs as the No. 2 category, Utilities, the report found. But worryingly, the App Store’s games category fell below 2 billion for the first time since the first quarter of 2019.
On Google Play, the gaming category drove more installs (11.7 billion) than all App Store categories combined (8.1 billion), but the non-gaming categories on the Play Store fell 1.5% year-on-year to 15 .8 billion installed back.
It’s too early to say whether or not current trends represent a definitive cooling off of the app store gold rush given how far-reaching economic forces are clearly at play here in app adoption and spending. Also, new app markets are coming online, which means more people will be downloading apps for the first time. But for now, the trend is a signal that there is some saturation in the top app markets, and suggests further innovation and growth may need to be spurred by forcing app stores to face increased competition to deliver.