MOBILE CONTENT MARKET IN FINLAND NOVEMBER 2013

Transcription

1 MOBILE CONTENT MARKET IN FINLAND NOVEMBER 2013

2 Preface Contents This report looks at the mobile content services market in Finland with a broad scope. The market size and drivers for mobile content services, mobile marketing and mobile device base are studied in the report. Market size for mobile content services is presented mainly for the years ; some statistics may also cover earlier years. The market data for the years are actual figures based on data gathered for this and earlier reports. Years are forecasts based on market analysis and up-to-date information available on the market. All the market figures and other content in this report are based on analysis by Idean s consultants and represent their views and opinions. The report is commissioned by Teleforum ry and funded by Tekes. This report is part of a larger project in which Teleforum is looking for ways to help the Finnish mobile ecosystem to create the next mobile success stories. 4 Introduction 6 Summary 10 Key trends and observations 14 Total market 17 View on the global market 20 Application stores 26 Installed apps 28 Application stores & device bases 30 SMS Services 32 Premium rate calls 34 Device base 38 Smartphone penetration 40 Mobile marketing 42 Interviews & Steering group The purpose of the report is to provide an overall view of the mobile content market dynamics in Finland. The report aims to help players in the mobile content market to develop services based on up-to-date market data. The focus of the report is in mobile consumer services. The report is carried out as a combination of desktop and interview study between August and October The report s findings are based on in-depth interviews with players in the mobile content market and other market experts as well as Idean s database on mobile content services. A steering group was formed to bring industry expert input and feedback to the report. The members of the steering group included leading Finnish experts working in global and national companies. All this data has been complemented with publicly available sources. The author of the report is Kalle Snellman, Senior Strategist at Idean. Idean s designer Lauri Lankinen has done the editorial work and created the visual layout. The author would like to thank all the interviewees and steering group members for devoting their time and effort in contribution to this report. 2 3

3 Introduction Mobile services have been topical since the late 1990 s. During the first ten years mobile commerce was dominated by a handful of players specialized in mobile content. Now the situation has changed, as an increasing amount of the total online consumption is moving into mobile devices. This trend affects practically all organizations from different industries. Many of the companies and authorities that have ignored or taken only minimal steps in the first phase of mobile services, have now implemented mobile services or have serious plans for implementations. In fact, all organizations have become more or less technology oriented and dependent. The current media coverage on mobile issues draws a picture of mobile application dominated mobile commerce. Mobile applications, however, represent only a small share of the total mobile originated content revenue. The majority of the revenue is still delivered by premium rate calls and SMS based services. On the other hand, only a part of the mobile services are expected to bring direct revenues. The author of this report has acknowledged that mobile is increasingly difficult to define. The distinction between mobile and desktop usage and services used to be rather clear as there used to be separate SMS based services and mobile sites for mobile devices. Today an increasing number of online services are designed for both mobile and desktop. Moreover, a growing number of services and interfaces are becoming hard to define as either of these, making it difficult to draw a line between mobile and desktop. Definitions Mobile content market value Represents end-user spending on mobile services within the addressed distribution channels. The spending is divided into domestic and export markets. The domestic market is further divided into four main categories; SMS based content services, premium rate calls, application stores and other. All of these categories are then analysed separately. Also media spending on mobile marketing channels is included in the market value. Mobile advertising market value The market value of mobile advertising consists of expenditure on mobile media. In other words, the money spent on SMS traffic, search and banners in a mobile media space. Mobile site design and other similar costs related to mobile marketing are excluded from the market value. Smartphone A smartphone is a mobile phone built on a mobile computing platform with more advanced computing abilities and connectivity than a feature phone has. One of the most significant differences is that the advanced application programming interfaces (APIs) on smartphones for running third-party applications can allow those applications to have better integration with the phone s OS and hardware than typical feature phones. Currently smartphones include devices with the following operating systems: ios, Android, Windows Phone, Symbian, BlackBerry OS, Bada and Meego. Feature phone A feature phone is defined to cover all other mobile phones than smartphones in this report. Consequently the report looks at those aspects of mobility that are possible to measure. The focus of the report is on the mobile content service revenue in Finland. Additionally the mobile device base is covered in the report. These aspects will give an overall picture of the mobile market in Finland. The aim of the report is to give service providers relevant, up-to-date and consistent information regarding the mobile market so that they can make solid and wellreasoned business plans and decisions. 4 5

4 Summary The mobile content services market revenue is booming in Finland, when looking at the combined revenue from domestic market and export. The total market for mobile content grew 31 % in 2012 to 404 million euros. In 2013 the market growth is anticipated to accelerate and the total revenue to exceed one billion euros, which is a 154 % upswing over The majority of the growth in 2013 is generated by mobile content export. During the past couple years and in the near future the growth has been and will be dependent on a couple of leading mobile companies in Finland. For example, the growth in 2013 was almost solely due to Supercell s spectacular revenue growth. Figure 1. Total mobile content revenue in Finland (M ), including mobile content export The mobile content services market revenue is booming in Finland, when looking at the combined revenue from domestic market and export. The Majority of the growth in 2013 is generated by mobile content export, which has been exploding due to Supercell s spectacular success % % % % % % % % 2016 The mobile content export grew from couple of million is 2010 to 164 million euros in In 2013 the revenue is forecast to reach 790 million. Concurrently the domestic market sales reached 240 million euros in 2012 and is forecast to decrease couple of percent to 234 million euros. The revenue trends in the domestic market vary sharply by mobile content category. The overall market is shrinking due to declining sales of premium SMS and premium rate calls. At the same time the mobile application, marketing and other mobile services are growing sharply. Together these three categories will surpass the combined domestic SMS and premium rate call revenue in The total domestic market revenue starts to grow again in 2014 despite the decreasing SMS and premium rate call revenue. Current media attention seems to focus on the competing mobile platforms and the fight between mobile application stores. All this leaves an impression that mobile application stores are huge revenue generators. This is not the case at least yet and in Finland. Mobile application store revenue represented approximately 4 % of the total domestic mobile content market revenue. SMS and premium rate calls bring vast majority of the domestic revenue today. Another interesting trend is that a growing share of the mobile application spending is going through alternative channels to application store billing. For example most Figure 2. Domestic mobile content market revenue by service category (M ) Mobile content demand is strongly shifting to new forms of services. Other mobile services category is showing the strongest growth in the coming years. It consists of estimated mobile spending on various services, including subscription services such as Spotify or Netflix. Mobile marketing Other mobile services Application stores Premium SMS Premium rate calls

5 6 029 of the leading subscription services, such as Spotify and Netflix, are invoicing customers directly via credit card. This revenue is considered in the other mobile services category The mobile device user base is changing rapidly in Finland. The majority of mobile phone users have smartphone and a tablet device was in every fourth household in Finland in the fall of This trend is projected to continue as smartphones and tablets dominate the sales charts. In 2013 there will be three smartphones sold per one feature phone and it seems likely that soon the smartphones will be the only option available in stores. Tablet devices exceeded laptop unit sales in the first half of 2013 in Finland. At the same time there are several new device categories emerging, such as smartwatches, different smart wristbands, glasses and other wearable computing devices. Feature Phones Smartphones Tablets Figure 3. Smartphone, tablet device and feature phone population in Finland (in thousands) Feature phones are gradually disappearing from stores and our everyday life. Tablets and smartphones are becoming consumers primary internet devices. 8 9

6 Bio authentication is growing mainstream Walled gardens rule the current world, but the future is open Despite the array of choices there are only few dominating services per business area Can legacy businesses keep up with the mobile development? Key trends and observations In Idean s opinion biometric authentication will be the most significant disruption in the foreseeable future. Our everyday life is full of physical practices where personal access is required in one way or another. For example we have car and house keys, bank accounts, credit cards, concert tickets not to mention all the online and mobile services that require a username and password. A bio authentication could change all of these current practices. Take for example usernames and passwords. We could forget all the hassle with dozens of passwords if we could have bio authentication. As a sign of this development Apple introduced a fingerprint authentication in its latest iphone. Even more interesting developments are bubbling under. It seems likely that one practical way of executing authentication would involve dedicated devices. For example, a Canadian company called Bionym is developing a wristband named Nymi that makes an authentication based on the user s heart wave. The wristband is then connected to one s device and app to complete the intended task. It will take a while before these solutions are integrated into our front door locks and bank accounts. But once they start to spread, we might be surprised by the speed. Mobile app ecosystems by Apple, Google, Microsoft and other likes, try to lock their customers in walled gardens, where all the data transfer and monetary transactions occur inside the same ecosystem. A customer would rather not let move between ecosystems. This is not the first time we are living a walled garden era in mobile content. Operators had a similar attempt a good decade ago. However, nothing seems to be shaking the growing influence of the current ecosystems. Nevertheless, the history has proven that there will always be a new disruption that shakes the current status quo. What this will be and when it will happen is not clear. However, there seems to be a growing sentiment against the currently leading ecosystems. Mobile game providers are perhaps the happiest with the current ecosystems, but many others are discontent on for example their visibility in the stores, customer data processes and the revenue sharing policies. Successful services are concentrated in select business area. For example Spotify is dominating music subscription services, Netflix is dominating video, Ilta-Sanomat and Iltalehti command media and Facebook rules social media. The other players in the same business areas are defenders. In the long run the list of dominating players might change, but the general set-up remains. On the other hand, some business areas are more inclined to this kind of set-up than others. Moreover, the consumer services market seems to live in 5 to 7 year cycles, where new practices appear and replace the existing ones. For example, currently the most successful business model in mobile gaming is free to play combined with in-app purchases, whereas a couple of years ago the best selling games were paid ones. Consequently the only goal in these kinds of markets is the pole position. The fundamental problem with online, and especially mobile services, is how to successfully introduce a new service for the target audience. Many users are typically following the masses and using the services that are already popular. Mobile technologies provide a potential to change legacy business processes and they certainly have done it. Take for example Uber, which is changing the way we use taxi services or Netflix that is transforming the way we use TV. All this raises concerns regarding traditional companies ability to respond to these new challenges. Quite often the traditional companies rely on a legacy business model and introducing a mobile service would potentially cannibalize its current revenue streams. Changing completely to a new business model would be risky and could probably lead to decreasing revenue. At the same time there are newcomers in the market that apply new business models and decrease the legacy company s market share. Many traditional companies are stuck on this kind of dilemma. Which is better, to maintain legacy business with decreasing revenue or to jump into a new business model with high risks and decreasing revenue? Additionally there is a competence gap for developing new services in traditional companies. All this leads to cautious service development and traditional companies seem to lag behind in the service development

7 Sensors accelerating the mobile revolution TV set has become the second screen Wearable computing is taking its first steps to masses Analog customer will disappear Big data hype has peaked Adjust home heating, lightning. See who is ringing your doorbell. Control your car. Monitor your sleeping baby. Follow your health. Make fitness plans. Sensors will enable many of these actions, whether they are stand-alone or embedded into our devices. Today the sensors are not mainstream in our homes and other environments, but they will most likely quietly sneak into our everyday life. All of a sudden the next lamp we purchase may have a motion sensor or our insurance company requires a moisture meter into our bathroom for getting discount in insurance fee. There has been an on-going debate on the so-called second screen, which typically refers to the use of a mobile device while watching television. So far the traditional TV manufacturers have failed to provide solid experiences that would combine TV set and other appliances in a manner that would appeal to large masses. Instead the mobile devices have become the primary screen for many users and the TV set is seen as the second screen. The primary attention is focused on the more interactive device, which is at this moment a smartphone or a tablet. Smartwatches are available in the stores and smart glasses are expected to hit the market soon. There are many who are more or less suspicious about the success of these product categories. Equally there are strong believers for their future success. Either way, it seems inevitable that the number of smart devices and sensors around our bodies will grow whether they are embedded in our clothing or separate devices. The consequences may be difficult to predict, but they surely have many, even dramatic effects on interfaces, business models and our everyday life. In the foreseeable future it will become harder and harder to create and keep a customer relationship without some kind of digital aid, whether it is mobile app, some sort of analytics and big data. This concerns all sorts of industries and size of businesses. The need for analytics and data collection is one of the corner stones in the design of the modern mobile services today. Big data has been well represented in various keynotes and press articles. It is said to be the vital for today s marketing, sales and other business. In the reality there are only a handful of companies that utilize big data in a large scale for driving their business operations. However, companies are increasingly aware on the benefits of analytics and the general know-how is increasing in companies. Key trends and observations Business models favor subscriptions and in-app purchases accompanied with analytics Open API is becoming an increasingly critical asset for digital services Phablets are about to break through The services will know an increasing amount of facts about you Devices will be less visible in everyday life Today s most successful global mobile revenue generators are gaming companies that provide free-of-charge downloadable games with premium priced in-app purchases. The gaming experience is continuously developed and adjusted according to the gathered customer data and analytics tools. This seems to be the current secret sauce of success, at least for the mobile games. Open API (Application Programming Interface) has been the key enabler in application stores and leading social media platforms success. This model is being copied into other industries in an accelerating pace. Most notably the governments are providing access to many of their data assets. The average screen size of the smartphones is closing the smallest tablets. These devices are sometimes called phablets and they have experienced phenomenal growth in shipments across the Asia-Pacific region. This trend is expected to hit also Finland. Mobile services provide another extension for gathering more information about us and whether we like it or not, our ability to control privacy is diminishing. All sorts of personal and other customer information are aggregated from different sources in order to offer us personalized services. There are two sides in this coin. At its best we will be better served. At worst our personal data is misused. At the same time people are increasingly aware how much their personal data there is out in the services. The demand for accessing their personal data is increasing. This is a major political and legal issue that cannot be solved by individual country legislation, which complicates the potential resolution to this problem. Smartphone and tablets are with us at homes, workplaces, bus stops, cafes and other places. In the long run these physical devices will be less visible as wearable computing and various kinds of sensors develop and spread. The services will become more automated and they serve us without having a device in our hands. Moreover, the service design in general is moving towards services that anticipate our intentions and thus making many of the current practices unnecessary

8 Total market The mobile content services market revenue is booming in Finland, when looking at the combined revenue from domestic market and export. The total market for mobile content grew 31 % in 2012 to 404 million euros. In 2013 the market growth is anticipated to accelerate and the total revenue to exceed one billion euros, which is a 154 % upswing over The Majority of the growth in 2013 is generated by mobile content export. During the past couple years and in the near future the growth has been and will be dependent on a couple of leading mobile companies in Finland. For example, the growth in 2013 was almost solely due to Supercell s spectacular revenue growth. The future projections for the years are speculative considering the heavy influence of a few individual companies and the unpredictable nature of their business environment. Here we have predicted rather stable market growth, but in practice the export market may prove to be rather volatile. The domestic market development has proven to be less volatile. Finland has had the fortune to host a couple of the most successful mobile gaming companies. Their impact in the total market revenue is substantial. Without Rovio and Supercell the growth rate of the total market would not have been so rapid. Media attention is practically fully focused on mobile applications as far as mobile content is concerned. Still, premium rate calls and premium SMS services bring the vast majority of the domestic industry revenue today. The mobile content service market in Finland roots back to the early 1990 s, when premium rate calls emerged. The first SMS based logos and ringtones were delivered over the mobile networks in the latter part of 1990 s. Approximately ten years later application stores for smartphones appeared. All these markets co-exist today and will continue to do so in the near future. The demand for premium rate calls and premium SMS services has saturated and is gradually declining. At the same time the overall usage of mobile services is growing strongly. Mobile applications and browsing are among the fastest growing mobile services. This doesn t necessarily translate to revenue since a major share of the applications and browsing are free of charge, except for the data transfer costs billed by mobile operators. More specifically, an increasing number of services apply business models that are not aimed at bringing direct revenue. Figure 4. Total mobile content revenue in Finland (M ), including mobile content export The mobile content services market revenue is booming in Finland, when looking at the combined revenue from domestic market and export. The Majority of the growth in 2013 is generated by mobile content export, which has been exploding due to Supercell s spectacular success. Figure 5. Total market divided into domestic and export revenue in Finland (M ) Mobile content export has exploded recently and is going to overtake domestic market revenue in However, the domestic market development seems far more predictable than the volatile export At the same time as the application stores grow at the expense of SMS and premium rate call revenue, the focus Domestic % % Export % % % % % %

9 TOTAL MARKET VIEW ON THE GLOBAL MARKET of the whole business is moving from national to global. Traditional SMS and premium rate call payments have been and still are very much locally controlled by domestic operators. Application stores are global and have hardly any operations on a country level. This doesn t mean that it would be impossible to make a successful service with a national single country focus. Great opportunities lie in the global market, however. On the other hand, the best selling mobile services with a domestic focus in Finland beat Rovio s or Supercell s domestic revenue. Take for example Fonecta s SMS and premium rate call based directory services that are still bringing tens of millions in revenue annually. At the same time Supercell s and Rovio s combined revenue in Finland is a couple of million euros. The vast majority of their revenue is global. There have been several global success stories in the mobile application market, but Rovio and Supercell have definitely been among the most spectacular success stories. Rovio and its Angry Birds was one of the first games that made a significant breakthrough in the Apple App Store. Supercell is the most successful application provider using free-to-play model so far. Differences between Rovio s and Supercell s business models illustrate the fast pace of the changes in the market. Angry Birds revenue model was originally predominantly based on paid downloads. This was the secret sauce for success in in mobile apps. Supercell s games are based on a free-to-play model, meaning the game is free to download but the user can make in-app-purchases to speed up progress in the game. Mobile applications have made the world smaller for mobile service providers. Today it is possible to reach global masses with just one contract with an application store. This certainly differs from the SMS based mobile business environment, where it was costly, risky and difficult to do business internationally. The SMS based mobile business was more national in its nature. Another difference is the selection of competing services. In the SMS era there were roughly a dozen of ringtone service providers. These same players also dominated the mobile games and logo business. In today s application stores there are almost endless numbers of competing services and service providers in the most popular application categories. New success stories appear constantly in the application market and hardly any of them have a legacy in SMS based mobile services. The list of the most successful mobile application players include companies such as Supercell, Electronic Arts, King, Kabam, Gameloft and Rovio. Many of these companies have become significant in their industry in a matter of a couple of years. On the other hand, it should be remembered, without undermining their success that the scale of their revenues hardly bring them anywhere close to global fortune 500 company lists. The mobile application market is highly volatile and the winners may quickly turn into losers. It resembles billboard charts in the music industry, where hit songs typically climb quickly to the top but fall down equally fast. On the other hand there have been signs of opposing developments. A couple of the current top revenue generating services in Apple s App Store have remained at the top for a surprisingly long period. For example Supercell, the publisher of Clash of Clans and Hay Day has had two games among the top ten best selling applications in the App Store for over 12 consecutive months in many countries. King, the publisher of Candy Crush Saga, has also been at the top in multiple countries since Both of these companies are applying a free-to-play model

10 VIEW ON THE GLOBAL MARKET The application stores publish top chart lists on a national level. The list of the top 5 grossing applications in Finland and in the US looks similar. the Same applications top the charts in both countries with a few exceptions. Facebook 391 Global application stores typically take a 30 % revenue share from the purchases made in the stores. Typically the purchases are made with a credit card. Google Play and Windows store allow also purchases through the mobile phone bill. Apple App Store (Apple s 30% cut) Supercell Apple s App Store takes 30 % revenue share from all the application purchases in the store. The App Store is the globally leading application store in terms of revenue. Apple has not published the App Store s revenue, but it has sporadically stated how much developers have been paid. For example, according to a press release in May 2013 Apple had paid developers 9 billion dollars (6,8 billion euros) since the launch of the App Store. Based on the earlier announcements one can calculate that in 2012 the total App Store revenue was approximately 4,3 billion dollars (3,2 billion euros). Apple s 30 % cut of this sum was roughly 1,3 billion dollars (1 billion euros) in In 2013 the total revenue is forecast to exceed 7 billion dollars (5,3 billion euros). Apple has also other mobile revenue, such as mobile advertising and itunes, not included in this report. Electronic Arts Kabam Gameloft Zynga Glu Mobile Supercell is the fastest growing company among the ones studied in figure 6. In fact it might be among the fastest growing companies ever globally, especially when considering profitability. It is probably also the top selling mobile company in the App Store in In October 2013 the company released Clash of Clans for Android, which will likely bring another revenue stream for the company. King is probably the second best selling company in mobile apps market. According to press articles it has filed an IPO in the US. Emerging growth companies such as King can use a secretive IPO registration process in the U.S. and the financial details were undisclosed at the time this report was written. Figure 6. Estimated global mobile revenue of selected companies (M ) Rovio M 300M 500M 1 000M 1 500M M Companies mobile revenue has been extracted from their total revenue, and their mobile revenue for 2013 has been estimated. Facebook s revenue is mainly from mobile advertising and Apple s App Store stands for Apple s cut on the total App Store revenue. Other companies in the chart are gaming companies forecast Sources: Facebook, Supercell, Electronic Arts, Zynga, Rovio, 2011 & 2012; Estimates by Idean,

11 Application stores The mobile applications market value in Finland was ten million euros in 2012, including revenue from App Store, Google Play, Windows Marketplace and Nokia Store. Apple s App Store was the largest in revenue among the ones mentioned, with approximately 80 % share of the total revenue in Due to application stores global nature only a small portion of the domestic revenue was generated by Finnish companies and remained in Finland. The growth was due to an increased smartphone user base as well as greater supply of applications. There is also a growing amount of Finnish applications available, which has been followed by increasing marketing activity related to them. In the following years the growth rate is forecast to slow down despite the on-going growth of installed base of smartphone and tablet devices. The future user base growth is anticipated to come from less active mobile service user segments as the most active early adopters already have smartphones and tablets. Moreover, many of the major content players are expected to introduce services based on alternative billing mechanisms for application stores. For example browser-based services, where service providers can choose between a large selection of different billing methods. In 2016 the total application store revenue is forecast to be approximately 36 million euros. Figure 7. Total application store revenue in Finland (M ) Application store revenue is forecast to show healthy growth in the coming years. However, the growth could be even greater if some of the leading subscription service providers, such as Spotify or Netflix would charge their services via application stores % % % % % % 2016 Apple s App Store is the largest application store in Finland, when considering the combined iphone and ipad revenue. In 2012 Apple App Store sales represented 81% of the total application store revenue. Google s application store has as of yet failed to generate considerable revenue. It has been less efficient in attracting users to buy than Apple s. However, Google Play is forecast to show the fastest growth in the coming years and to bypass Apple s revenue in Finland. This is mainly due to Android s growing dominance in the device population and consequently service providers growing interest around Android. On the other hand, ios also remains attractive due to its solid device range compared to high fragmentation of Android devices. Recently the growing Windows Phone device user base has attracted Finnish mobile service providers to create services for Windows Phones. Finland probably has en exceptionally wide selection of Windows applications dedicated to the domestic market when compared internationally. Now the situation might change after the Nokia-Microsoft deal, if the Nokia brand disappears from Windows devices. Part of the success of Windows Phones has certainly been based on patriotism and the strength of the Nokia brand in Finland. Apple has made it difficult for application providers to use any other billing channel than App Store s own channel for Figure 8. Application store revenue by platform in Finland (M ) Apple s App Store has dominated the application store revenue in Finland and globally. Google Play will challenge its pole position in the future thanks to fast growing Android device population. The growing installed base of Android devices will be followed by increased developer interest. Windows devices are well represented in the Finnish market. However, their application sales suffers from smaller developer interest and application range. Windows Marketplace Google Play Apple App Store Other ,6 1,6 3,4 4,9 4,4 0,3 0,9 3,5 8,2 14,8 17,1 0,9 3,5 8,1 10,6 13,3 14,7 14,7 0,6 0,6 0,5 0,4 0,2 0,1 0,1 1,5 4,4 10,0 16,0 25,1 34,6 44,

12 APPLICATION STORES App Store Finland App Store Finland App Store Finland App Store Finland paid downloads or in-app purchases. However, not all successful mobile application providers are invoicing through application stores. For example international publishers that have a strong presence in Finland, such as Netflix or Spotify, invoice their customers via other channels. These services are mainly billed via credit cards. In addition companies in the traditional media business are often utilizing alternative billing channels. The reasoning for using alternative channels is in the revenue share models; application stores take a 30 % cut of the sales compared with credit card companies couple of percent cut. Global application stores should be put into context in order to understand their current magnitude. For example Netflix s global revenue in 2012 was $3,6 billion (2,7 billion euros) and Apple s App Store s total revenue approximately $4,3 million (3,2 billion euros) according to Idean s estimate. Apple s 30 % cut of the revenue in 2012 was roughly $1,3 billion (1 billion euros). In other words, Netflix s revenue was almost three times Apple s cut. 5 Angry Birds - Rovio 8 Tvkaista - Delta Vee 10 Sieniopas - Mobiteos 15 ReittiGPS (Reittiopas iphonelle) - Essentia Solutions Oy 17 Viiniopas - Monkey Experience Oy 25 ForecaWeather - Foreca Ltd. 46 Karttaselain - AccelBit 54 Finnish-English Translate Dictionary - Kangas Bros. Innovations 78 FinnBirds - Kari Kulmala 1 Sieniopas - Mobiteos 4 booxtv - Booxmedia Ltd 5 Karttaselain - AccelBit 10 Angry Birds - Rovio 15 Angry Birds Seasons - Rovio 18 ReittiGPS (Reittiopas iphonelle) - Essentia Solutions Oy 31 Angry Birds Rio - Rovio 80 TVkaista - Delta Vee 85 Älypää - Sanoma Entertainment 86 Fatcat Rush - Tomodomo Oy 95 HS - Helsingin Sanomat - Sanoma News 98 Finnish-English Translate Dictionary - Kangas Bros. Innovations 1 Clash of Clans - Supercell 3 booxtv - Booxmedia Ltd 7 Karttaselain - AccelBit 9 Hay Day - Supercell 20 RainMan (Ilmatieteen laitos) - Ilmatieteen laitos 22 ReittiGPS (Reittiopas iphonelle) - Essentia Solutions Oy 26 TVkaista - Delta Vee 30 Sieniopas - Mobiteos 39 Angry Birds - Rovio 41 Amazing Alex - Rovio 48 Autorekisteri.fi - Nelumbo Oy 73 Angry Birds Seasons - Rovio 92 Rasmus Nalle - Egmont Kustannus 1 Clash of Clans - Supercell 2 TVkaista - Delta Vee 5 Karttaselain - AccelBit 6 Hay Day - Supercell 7 booxtv - Booxmedia Ltd 18 Sieniopas - Mobiteos 21 HS - Helsingin Sanomat - Sanoma News 22 ReittiGPS (Reittiopas iphonelle) - Essentia Solutions Oy 26 Nautics Sailmate - Nautics 40 E-kontakti.fi - Suomen suurin deittisivusto sinkuille - Intodate International AB 92 Angry Birds Friends - Rovio Top Finnish application publishers Application stores publish top charts by country and the lists are further divided into different application categories. In this report Idean has looked at the overall category for the top 100 grossing iphone apps in Finland and in the U.S. Both lists identify Finnish publishers to illustrate where they in the ranking. The lists in this report represent only one day from each year. Moreover, only the apps for iphone have been reviewed. The aim of this particular exercise is to give an overview of the state of the market, not to provide a full analysis of all stores. Finnish publishers have been identified within the top 100 charts in order to understand the effect and scale of the Finnish mobile business. Interestingly, there are many applications in the Finnish language, which are not published by Finnish players and are thus excluded from the Finnish application publisher lists. The distribution of applications by nationality of publisher reveals the global nature of the application store channel. Finnish companies or organizations publish only a minority App Store U.S App Store U.S App Store U.S App Store U.S Angry Birds - Rovio 5 Angry Birds - Rovio 3 Clash of Clans - Supercell 4 Hay Day - Supercell 17 Angry Birds Seasons - Rovio 38 Angry Birds Rio - Rovio 12 Clash of Clans - Supercell 42 Hay Day - Supercell 46 Angry Birds Space - Rovio 57 Angry Birds - Rovio 36 Hill Climb Racing - Fingersoft Sources: AppAnnie; Idean, 2013 Figure 9. Finnish publishers in the Top 100 grossing iphone apps in Finland and in the U.S. Apps by Finnish companies and organizations have been identified from both Finnish and U.S. top charts. The number of Finnish apps in the Top 100 has remained rather stabile over the years with an average of 9 and 13 apps by Finnish publishers. A couple of Finnish apps have made it to the U.S. Top 100 great achievement in such an important market

13 APPLICATION STORES of the top 100 grossing applications in Finland. Without Rovio and Supercell, the share of Finnish publishers would be even smaller, especially in the top 10 charts. The total number of domestic publishers in the Finnish iphone App Store has varied between 9 and 13 during the period discussed here. The U.S. market is a good reference market. It is among the most challenging markets to break into the top 100. Within the timeframe of the reviewed dates there has been only Rovio and Supercell in the top 100 charts with the exception of Fingersoft in There may have been other Finnish apps in the top 100 had we reviewed the entire history of the App Store. Average number of applications in different countries Figure 12 illustrates the installed number of mobile applications and usage in smartphones in selected countries. The data is provided by Google is based on smartphone user interviews in different countries. Approximately 1000 interviews were carried out in each country annually. Smartphone users were asked how many applications they currently have in their mobile, how many of them are paid and how many applications have they used in the past 30 days. Finns are among the least active application downloaders and users among the benchmarked countries. On average, there were 20 apps installed per smartphone in Finland, of which four were paid applications. A total of eight applications were used within the past 30 days. These numbers are rather modest compared to other Nordic countries. For example in Sweden, the corresponding figures were approximately double in each of the viewed metrics. There could be several explanations for this. Perhaps the most significant explanation is the difference in smartphone device population. Symbian is still strongly represented in the Finnish smartphone market and Symbian users are on average less active in application downloading. There are fewer applications available for Symbian devices and the marketplace has not become as popular as those for iphones and Androids Jan Feb Mar Apr May Jun Jul Aug Sep Jan Feb Mar Apr May Jun Jul Aug Sep Figure 10. Top 5 grossing iphone apps in the U.S. in 2013 The figure illustrates the top five chart in the U.S. during each month s first day. Apps that occur more than twice have been highlighted. A handful of apps are dominating the top 5 lists. Clash of Clans and Candy Crush Saga head the lists in both countries illustrating how international the trends are in the application market. Sources: AppAnnie; Idean, 2013 Figure 11. Clash of Clans Minecraft Candy Crush Saga Hay Day Pandora Radio MLB.com at Bat Modern war Top 5 grossing iphone apps in Finland in 2013 A total of 15 different applications have been in the top five in the given dates in both countries. The top three chart has been stable; only 6 apps have made it to the top in Finland compared to 8 apps in the U.S. top three, suggesting that the top positions are less windy than previously. Or more specifically, the top players have learned how to remain longer in the top. Sources: AppAnnie; Idean, 2013 Clash of Clans Candy Crush Saga Hay Day Whatsapp messenger The Simpsons 24 25

14 INSTALLED APPS 40 Free Apps Paid Apps BRA 7 apps used in the last 30 days IND 8 FIN 8 ESP 8 HUN 9 RUS 9 ITA 9 CHN 10 GER 11 GBR 10 CAN 12 FRA 12 AUS 12 DEN 13 NOR 12 USA 12 JPN 8 SWE 13 KOR 11 Source: Google, 2013; Illustration by Idean Figure 12. Mobile application usage metrics in selected countries, Q Finns are among the least active application downloaders and users among the viewed countries. On average, Finns had twenty apps installed in their smartphones, of which four were paid apps. Perhaps the most significant explanation is the difference in smartphone device population and more specifically, Symbian s strong position in the Finnish market

15 APPLICATION STORES & DEVICE BASES 13,3 M 14,7 M 14,7 M Platform total revenue 8,1 M 10,6 M Apple ios ARPU per device and year ( ) App Store 12,0 App Store 15,0 App Store 15,8 App Store 16,5 App Store 17,4 ios Device Base ( 000) iphone 497 iphone 646 iphone 775 iphone 930 iphone 977 ipad 345 ipad 617 ipad 732 ipad 653 ipad 537 Total units 842 Total units Total units Total units Total units ,1 M 14,8 M 8,2 M 0,9 M 3,5 M Google Android ARPU per device and year ( ) Google Play 0,9 Google Play 2,3 Google Play 3,4 Google Play 4,4 Google Play 5,7 Android device base ( 000) Android Smartphone 875 Android Smartphone Android Smartphone Android Smartphone Android Smartphone Android Tablet 84 Android Tablet 258 Android Tablet 464 Android Tablet 720 Android Tablet 914 Total units 959 Total units Total units Total units Total units ,6 M 1,6 M 3,4 M 4,9 M 4,4 M Windows Phone ARPU per device and year ( ) Windows Marketplace 1,3 Windows Marketplace 2,0 Windows Marketplace 3,0 Windows Marketplace 4,5 Windows Marketplace 6,7 Windows Phone device base ( 000) Windows Smartphone 455 Windows Smartphone 933 Windows Smartphone Windows Smartphone Windows Smartphone Windows Tablet 0 Windows Tablet 10 Windows Tablet 41 Windows Tablet 80 Windows Tablet 119 Total units 455 Total units 943 Total units Total units Total units

16 SMS SERVICES % 1 % 1 % Others Figure 13. Premium SMS services revenue in Finland (M ) SMS revenue has gradually started to decrease. The total market revenue in 2016 will represent only half of the revenue in Many of the current SMS services will migrate to application based services. Some of the current services will cease to exist. There are hardly any new mobile service providers that would take SMS as their selected technology. -11 % -12 % % % % Chat & communities Weather Ringtones Classifieds Interactive TV services Vehicle registry inquiries Public transportation Directory services The premium SMS market value is gradually decreasing while facing growing pressure from mobile apps. Two major forces are causing the shift; users have smartphones and are choosing more versatile application services. At the same time service providers prefer to invest in mobile applications, sometimes even at the expense of currently lucrative SMS services. Moreover, the mobile operators have adopted tighter policies in accepting current and new services and cleaned the SMS market from unwanted services. All these factors together have caused a sharp drop in total market revenue. The only growth areas left in SMS services are public transport and vehicle registry inquiries; all of the other categories are facing decreasing demand. Some of the service categories have disappeared of which some have been replaced by corresponding mobile applications. Ringtones, which once were the king of premium mobile services, have melted away almost entirely as a business. Directory services in turn, are shifting to mobile apps and a different business model. SMS loans are no longer available due to new legislation. At the same time hardly any new premium SMS services have been developed. The SMS market is dominated by a few large players and followed by dozens of other service providers. Operators role is mainly in the delivery and billing services, less in service provision. Fonecta continued as the largest service provider by revenue in 2012, followed by HSL. Together these two players represented close to a half of the total market revenue. Most of the remaining revenue is going through aggregators that host a number of service providers. Others Ringtones Chat & communities Weather Classifieds Interactive TV services Vehicle registry inquiries Public transportation Directory services Figure 14. Premium SMS revenue in Finland by major service category, (M ) 22,4 22,7 26,7 30,4 25,5 21, ,1 12,7 8,3 7,1 4,6 3,5 2,1 0,9 0,3 0,1 0,0 5,0 3,1 2,5 2,2 2,0 1,8 1,3 0,8 0,4 2,0 2,0 2,1 2,1 2,0 1,5 1,4 1,2 1,1 2,6 3,3 3,3 3,0 2,1 1,9 1,7 1,5 1,4 2,7 2,7 2,4 2,2 0,7 0,8 0,8 0,7 0,6 3,5 3,7 3,8 3,8 4,1 4,2 4,2 4,3 4,3 6,4 6,7 6,9 6,9 7,3 7,6 8,0 8,4 8,8 16,5 17,9 17,2 16,3 16,8 15,0 10,5 7,3 5, Almost all the SMS service areas are facing decreasing revenue trend. The only exceptions are public transportation services and vehicle registry inquiries that have been resistant for the trend and will stand out as the leading SMS services in

17 PREMIUM RATE CALLS Other -3 % 0 % 0 % 143 Entertainment Adult entertainment Interactive TV services Mobile payments 124 Customer care Figure 15. Premium rate call revenue in Finland (M ) Premium rate call market revenue is gradually declining after a 15 years of strong performance. The development resembles premium SMS market development. The developer interest on both of these platforms has dramatically decreased. The current smartphone application platforms and browsers have replaced the need of these traditional platforms. -17 % -13 % % % 82-9 % Taxi Directory services The premium rate call revenue dropped 17 % in 2012 to 143 million euros. Still, the premium rate call revenue represents over half of the total domestic revenue in Finland. The market is forecast to decrease steadily in the coming years. Most notably the demand for the two leading service categories, directory services and taxi orders is decreasing. The directory services due to shift in business models and migration to other channels. The shrinking taxi service revenue is mainly due to slowing demand for taxi services in general followed by the current economic recession. The market for premium rate calls has a long and successful history, which has been unfairly overshadowed by the more hyped markets, such as SMS based and mobile application market. Premium rate calls is currently and is forecast to remain the leading mobile content service category throughout the forecast period in this report. The total market revenue is highly dependent on the success of two leading services, directory services and taxi orders. Their revenue is forecast to decline in the coming years and the total market revenue trend will follow. The market consists of a large variety of services. In addition to directory services to taxi orders there are for example TV show voting, horoscopes and mobile payments for soft drink and snack vending machines. The two leading services represented together almost three quarters of the total revenue in All of the premium rate call service categories are expected to face decreasing demand in the coming years. Other Entertainment Adult entertainment Interactive TV services Mobile payments Customer care Taxi Directory services Figure 16. Premium rate call service revenue in Finland by category (M ) 12,5 11,8 11,2 10,7 10,1 9,6 9,2 8,7 8,3 6,0 6,0 5,5 5,1 4,7 4,0 3,4 2,9 2,4 6,0 6,0 5,9 5,3 4,8 4,3 3,9 3, ,7 4,7 5,1 5,5 3,3 3,6 3,1 2,6 2,2 6,4 6,4 6,6 7,9 7,7 7,4 7,2 7,0 6,8 9,0 9,0 9,4 9,2 9,3 9,4 9,3 9,2 9,1 31,5 28,9 30,3 31,3 27,2 25,0 24,0 23,1 22,1 100,8 98,8 97,8 96,9 75,5 60,4 46,5 32,6 27, All of the premium call rate service categories are facing declining demand. The dropping use of directory and taxi services is particularly influential for the total market value. Mobile payments and customer care service categories are least affected by the current trend