Recently, I have started writing a number of posts on market size.Why? To bring context into discussions of attractive technology segments. If you are given an opportunity to invest, where will you? How much do enterprises spend on IT? How much do consumers spend on IT? How much do consumers spend on the internet?
My first post was on US Business IT Market which is a $749B market. My second post was on Online Advertisement Spending which is approximately a $22B market. Now, did you ever wonder how much US consumers spend on software? i.e. PC software and Mobile applications combined. Take a Guess!
It’s a meager $5.7B market in 2010. My best estimate for the PC software market is $4.1B. Add the Yankee mobile application spending estimate of $1.6B to that.
How did I come to the PC software market estimate?
According to this forrester study, an US online adult with a PC at home spent on average $101 in 2007. I don’t expect this has changed significantly in the last few years. Add to that, this study which says there is 82% penetration of PCs among US households. Now, multiplying 82%x50Mx$101 = $4.1B market. The forrester study also says that US online adults buys software twice a year and most of the software packages have long shelf lives. Majority of this market is dominated by Microsoft, Apple and Adobe.
Now, according to Yankee, US mobile application market in 2010 is $1.6B. There will be 6 billion app downloads (I presume around 75% of the downloads will be primarily in US) globally with majority of the downloads attributed to Apple:
While total downloads will grow, revenues will decline by 2012, the effect of market forces continuing to drive prices lower. In addition to falling costs, ABI predicts that more “must have” apps will be available in free or ad-supported versions, as well as provided in handset bundles.
With 4 billion app downloads in US and a $1.6B market, the per app download revenue comes to around 40 cents. Think 65,000 applications all fighting for this small market, it will be be extremely cut-throat.
So now you see my argument, which I have propounded many many times on this blog: Building a business model around consumer paying for services online or offline is not prudent since it is a small and competitive market. And building a model on advertisement revenues, after taking out Google’s share, is just a $11B market. All the big sharks are fighting for its share – Where’s the attractiveness?
Filed under: technology, consumer software, mobile apps
[...] $100 in 2007, which makes this a US $1.6B market primarily controlled by Microsoft and Adobe. (http://rajsarkar.wordpress.com/2…) Though the article says that Facebook will use credits etc. to generate revenue I don't [...]
[...] $100 in 2007, which makes this a US $1.6B market primarily controlled by Microsoft and Adobe. (http://rajsarkar.wordpress.com/2010/05/12/consumer-software-spending-2010/) Though the article says that Facebook will use credits etc. to generate revenue I don’t [...]
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