The rise of app ecosystems has put the US in the front seat of the mobile industry, a place once held by Europe with its strong pedigree in mobile technology. However, Europe continues to be a major force in mobile app ecosystems, with its contribution to the global app economy being second only to the US. With competition from high-growth markets rising, Europe needs to become a global hub for mobile startups in order to maintain this position.
The economic crisis that has plagued Europe for the past few years, has had and continues to have a major impact on the labour market, particularly in the South. Unemployment rates in Southern Europe exceed 25% with youth unemployment surpassing 50%.
Yet, the app economy has been expanding rapidly; as indicated in our latest report, the European App Economy 2014 commissioned by ACT4apps and co-authored with Plum Consulting, Europe is a major force in the global app ecosystem and is directly responsible for over 500,000 jobs in the EU28 region. The report was hailed as a “wake-up call” for the EU by European Commission vice president Neelie Kroes, who is responsible for the EU digital agenda.
Europe responsible for over a quarter of the app economy
While the EU economy has been under pressure since 2008, the EU app economy has been growing exponentially over the same period. We estimate that global revenues from the app economy reached $56B in 2012 with over a quarter of these revenues being generated in Europe.
We estimate that around 530 thousand jobs that are directly related to the app economy (e.g. in development) have been created in EU28 countries alone while thousands more jobs are being created in adjacent industry sectors such as healthcare, education and finance as a result of mobile apps.
Currently, the majority of jobs within the direct app economy are technical jobs (e.g. developers and engineers); however, as the EU app economy matures and startups grow, they add dedicated roles in sales, marketing, customer relations, finance and HR. Verticals are also embracing app ecosystems, which are now at the core of their digital strategies.
More than 150,000 people in EU28 are contributing to the app economy as a side project or as a hobby, exploring future opportunities in this space. Several of the existing success stories have started this way, with developers experimenting with new ideas and then developing them to fully-fledged businesses with a positive contribution to GDP and the labour market. Download the report for more info.
The wider impact of app ecosystems
Apart from the direct financial benefits that apps bring to developers and stakeholders in the app economy, the social and economic benefits associated with apps stretch much further and wider. These include but are not limited to:
Productivity gains within enterprises mobilising their assets and workforce
Lower friction communication between users and businesses
Mobile health services that improve lives and bring healthcare savings
Travel services & updates that save time and money
Automation and monitoring services at a significantly lower cost to using proprietary software and hardware
The list of benefits is limitless. Smartphones and app ecosystems have opened up possibilities and enabled use cases that had not even existed before the first iPhone was launched, driven by increasingly lower barriers to app development. The value of the app economy grows exponentially as more users and services are added to app ecosystems.
Driving growth in the EU app economy
In our App Economy Forecasts report we estimated that the app economy will be growing at a 28% CAGR between 2012 and 2016. The fastest growth regions are Asia and Latin America where smartphone adoption is still quite low but rising fast. In Europe, smartphone adoption is among the highest globally at around 50%, although there is significant variance between countries, particularly on the East-West axis.
Smartphone adoption will continue to create opportunities and generate economic growth in Europe, but there are a number of factors that may affect the growth rate of the European app economy:
Capturing market share in the fast-growing regions (Asia & Latin America)
Attracting talent and creating the right environment for tech startups to flourish
Diffusion of high-speed connectivity such as LTE, enabling new app use cases
The European App Economy 2014 report identifies a number of steps that policymakers can take in order to reduce friction points in the app economy:
Facilitating access to government data for developers, e.g. mapping, meteorological and real time public transport data as well as information on community level services.
Enhancing connectivity by making more spectrum available for wireless services.
Advancing the European single market in intellectual property and communications.
Embracing app-driven innovation across all sectors, e.g. health, education, enterprise, lifestyle.
Ensuring a flexible and supportive business environment for startups and entrepreneurs.
The app economy knows no boundaries
The app economy is, by its nature, international, crossing national and regional barriers. This fact represents both an opportunity and a threat to regional app economies: the barriers to expand globally are low compared to traditional international trade and allow developers and entrepreneurs to reach globally. At the same time however, competition is also global allowing large incumbents to compete with early-stage startups.
The ability of a nation or region to compete globally in the app economy, depends on its ability to create a suitable environment for app businesses, with easy access to talent, funding and mentoring opportunities and at the same time adopting policies that minimise regulatory or legal barriers that may come in the way of establishing and growing tech businesses.
Europe has established itself as a leading force in app ecosystems, second only to North America. However, the rapid diffusion of smartphone technology and app ecosystems in developing regions across the world, fuelled by low-cost Android phones, suggests that Asia and Latin America will become major consumers of apps in the future. In order to maintain its leading position, Europe will need to capture a significant share of this demand.
Comments? Feedback? We’ll be happy to hear from you – and don’t forget to download the report.
– Andreas (@pappasandreas)