iPad to Kick-start an $8B+ Tablet App Market: Report

50 Comments

Apple, with the iPad, has lit the fuse on an entirely new category of mobile devices: the tablet. Everyone from gamers to developers (even, ostensibly, dead communist leaders) are pondering its possibilities — especially publishers and media barons, who see a savior when it comes to helping readers find, consume and buy media.

At the heart of this opportunity lies the app. With a significant number of the 150,000 apps in Apple’s App Store set to be available on the iPad from day one, the market for paid tablet apps alone is expected to top $8 billion within just five years.

It wasn’t too long ago that the term “app” conjured up images of fried finger food, not software. But that all changed when Apple introduced its App Store for the iPhone and ushered in the modern day mobile app economy.

And now that economy is set to grow even larger with the launch of the iPad. As I’ve detailed in a new report on GigaOM Pro (sub req’d), tablet app downloads and consumption will be significant.

How big do I forecast the market for tablet apps will be?

  • The paid web tablet app market will grow to top $8 billion by 2015 from just $183 million in 2010
  • Downloads of paid apps will represent a bigger percentage of the overall app pie as compared to those for phones. In 2011, 179 million paid apps will be downloaded, and by 2013 that number will reach 630 million.
  • Downloads of apps (both paid and free/ad-supported) will grow to total more than 12 billion by 2015 from 272 million in 2010

And remember: That $8 billion is only for paid apps on tablets. When you consider that other forms of app monetization will include advertising (why Apple bought Quattro Wireless) and free apps tied to content subscriptions (think Netflix Watch Instantly) or content downloads (such as, say, a Kindle app), the web tablet app economy will actually be much bigger.

Will this market be Apple’s alone? Of course not. In fact, I expect both Google and Microsoft to offer strong alternatives. That said, I forecast Apple and the iPad to be the web tablet market share leader throughout the forecast period. By 2015, I expect the web tablet market to be a 43-million-unit-per-year market.

Web Tablet App Forecast — GigaOM Pro
View more presentations from Gigaom.

Read the full report here.

50 Comments

Paul Calento

There is an additional opportunity around extending enterprise apps to the Tablet form factor, which typically appear within an enterprise software license and not as an app download. The business market for the device and related software may be greater than expected. There was a mobile survey released this week by Zogby Intl that showed that half of respondents to an iPad question revealed they expected to use it for business use (http://www.bit.ly/cLErXF). The iPhone showed that consumer-first marketing leads to business pick-up. Perhaps, the iPad will be even greater, providing replacements for not only some smartphones, but also thin clients. About Me – http://www.bit.ly/amSW5Y

iptiam (iPad, Therefore I am)

“Will this market be Apple’s alone? Of course not. ” – but i think its fair to say, Apple stands to benefit substantially from this revolution.

I think the difference is, what percentage of the economy is tied to the device – competition might emerge – but how many devies will be (perceived) as good as the iPad?

Armando

I’m not trying to be a troll here, but here is my take on the situation: I couldn’t disagree more with the figures you’re presenting. While I agree that we haven’t yet seen the top of the crest for app purchases, the inevitable decline and eventual disappearance of the app model is really the only thing we can be sure of. The only reason we have apps at all is because the browser capability of current smart phones is far behind the desktop equivalent. However, while it will take several years for our phones to catch up, the gap on slate computers, like the iPad, won’t be nearly as noticeable, and with the hardware boost of a slate, there will be even less need to purchase apps. Apple knows this, that’s why they don’t allow Flash. You have to ask yourself: would I pay for an app when I can get the same functionality for free through a web browser? The answer in almost all cases is “No.”

Michael Wolf

Sure, HTML5, browsers, become more app-like, but marketplaces and “apps” as an approach to sell, monetize content, media, software isn’t going away. You can sell an “app” even if its a pure in-browser destination “service”, or a mix of native app and browser-based service.

Bottom line – consumers have grown used to “markets” for acquiring apps and services and content on their devices, and that isn’t going away. Native app or “browser app”, these markets are going to be around and consumers will use them for a long time.

Shawn Ames

TTTT, I think the tablet may have an even larger App market (as well as market in general for the device) than the iPhone does. The reason why is that there are way, way more applications for a screen of that size in publishing (content providers), medicine, gaming, education…and virtually every industry around let alone for consumers.

Chris K

The iPad could easily be a worse gaming system. There’s alot of question as to whether it would be too heavy to hold and too awkward to use for games.

There’s also the knock that it only has a touchscreen. There’s no buttons, dpad or analog stick.

While I can definitely see some games working well on it, like puzzles games, I don’t see alot of others working nearly as well.

Also not sure many like the games on the IPhone/Touch or the game prices.

Sony should definitely be worried since they billed the PSP as a multimedia device and the Touch absolutely kills it in that regard. And is the same price with the side benefit of also having a ton of apps and internet etc.

Nintendo less worried since they also develop almost all the big hits on the DS and their device has many more unique features and a lower pricepoint and a big part of their audience is younger.

Chris K

Yeah this is just reading tea leaves. We don’t even know if the iPad will take off or not. And hey I pre-ordered one.

But let’s not get ahead of ourselves.

The Ipad has to compete with the netbooks, cheap laptops, smartphones and e-ink ebook readers for consumer eyeballs and wallets.

A misstep or two or just outright rejection of the form factor and it doesn’t take off.

Michael Wolf

@Chris K – I think it competes with all these devices as some level, and that’s what the total potential addressable market is so big. Sure, they need to execute, which is never a sure thing, but early reviews are positive enough on the form factor, UI, etc, that I expect that v1.0 will do well, and any successive versions should address shortcomings.

Will consumers embrace a tablet? I think it’s time they will. Most consumers understand and accept (and even want) multitouch now and the applications that excel under such a form factor have proliferated.

Chris K

“Potential” big market except keyword is “potential.”

“Reviews” are positive except there are no reviews.

“Most” consumers want multi-touch except most customers don’t own a multi-touch device let alone a multi-touch tablet. Most consumers want something easy to use and convenient. I don’t think particularly care about the underlying tech.

Multi-touch apps have “proliferated” except not on a tablet.

It’s still a big question mark whether this device is even accepted by the masses. I’m pro-iPad and yet I know I could very well change my mind after using it for a few weeks or months.

Michael Wolf

Bottom line, Any time you forecast/analyze markets – you make assumptions. I have made mine clear in trying to size up the market – but clearly things could go a different way.

Will they? I highly doubt it :)

Chris K

WEll that’s why I say this all just reading tea leaves.

Iphone/Touch sold. People like it. There’s alot of apps. IPad is bigger Touch. Netbook replacement. Extrapolate.

Constable Odo

Yeah, but I’m only interested in how much of that $8 billion is Apple going to take. Forty to fifty percent would be great.

I can see Android tablets getting some decent market share, but I just can’t imagine how those Windows 7 tablets are going to get any market share. I really don’t see any reason for Windows 7 users to jump from a netbook to a tablet that will likely cost more.

Charles Edwin

Michael,

Do you think the iPad will offer a version of iTunes that will make it easier to navigate through the multitude of apps? With a larger screen and more place to tap, it is logical that Apple could offer more innovative ways to find apps. Thanks for your answer.

Michael Wolf

@Charles – App discoverability, recommendation and search is going to be an ever bigger challenge as the number just keeps growing. I think tying app markets to social circles for friends and recommendation is one way they could go (friends recommendations is, after all, how we find things we like in the “real world”). It’s an important area where they will need to keep the eye on the ball.

Rob

The predictions sounds reasonable, and possible understated. I would double all the numbers. Wish I could get the full report, this sounds very interesting.

Lastly, I think Bill Gates was right, tablets will be bigger than PCs in 5 – 10 years. And I am glad Apple is leading this “revolution”.

NickMMI

I think the number of Apps for sale on ‘opening day’ for the iPad is going to be a big indicator of how the iPad is going to received. When the iPhone arrived there weren’t that many Apps around – my guess is the iPad is going to launch with a large number already available, and more on the way. Apple is pushing developers by email to get Apps in by 27 March for the launch. I for one have been busy the past 4 days on a 1 App in 7 Days challenge (http://mmisoftware.co.uk/weblog).

Michael Wolf

@NickMMI – agreed – Apps available on day one will be important – both those written specifically for the iPad and the large number of iPhone/Touch apps that will be available for iPad.

The tough part for you and other developers, at this point pre-launch, is you don’t have an actual device to test it on!

Bob

“Apple, with the iPad, has lit the fuse on an entirely new category of mobile devices: the tablet.”

Apple may, and probably will, make them more popular. But tablets have been around for most of the past decade.

Michael Wolf

@Bob – yes, you are right. They have been around – but the real “fuse” being lit around this market is the iPad; the tablet market today isn’t a volume market, but will soon be.

Brian S Hall

TPS reports lives!
Look, I already ordered my iPad. Love my iPhone and all its apps. Assume apps will be a big deal.

But — we didn’t even have iPhones 5 years ago. I am not seeing anything in your presentation that isn’t 100% speculation.

Why not just say $5 pajillion.

Michael Wolf

Brian – any forecasting of future markets is somewhat speculative, but we have some data on usage, downloading and monetization of apps from smartphone apps markets, and we can make assumptions – as I did – around usage of apps, frequency of downloads, percentage of paid apps, etc based on existing models.

I think if people said 2 years ago 3 billion apps would be downloaded on the iPhone, you would have said same thing. At least now we know how consumers consume apps, and can make some reasonable assumptions around how things may be with the iPad and web tablets app usage.

Sanjay Maharaj

Some bold prediction on the revenue side for the ipad in terms of the sales from the apps. I see most of the success coming from subscription from newpapers and magazine on the ipad, it just makes so much sense and as the media print really dives down to a hault, I can see users subscribing to newpapers on the ipad.
Apple will for sure reinvent the tablet market as it has reinvented other sectors
What a great and innovative company

Michael Wolf

@Sanjay – I think you’re absolutely right about iPad doing well for newspaper and magazine subs – many of which won’t see direct up-front monetization through a paid app, but rather on the backend through subscription fees and even sell-through of other premium content through the app.

Still – there is alot of room for paid apps outside of magazine/news. The game market alone will be a big one, as I think you’ll see a signficant number of so-called “AAA” titles go to the iPad and tablets, and the ones who should be worried in that regard are Nintendo and Sony, who probably own the vast majority of non-casual gaming revenue for the mobile/non-home console market.

Nicholas

I can think of two scenarios where this scenario could be met and exceeded. Value added information in vertical markets are ripe for these devices. Secondly, applications on such devices will be more costly. Look at iWork, and think of Office applications. Microsoft could easily charge $99.

The value proposition is larger on tablets for all the obvious reasons.

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