How Japan became the biggest and most lucrative app market in the world

December 16, 2013

    iOS App Store vs Google Play Monthly App REvenue
    Smartphones are everywhere. Approximately 20% of the world’s population (roughly 1.5 billion) own one; a percentage on par with the number of people who own a personal computer. As one can imagine, this makes the mobile app market a very lucrative business opportunity. However, app developers are still struggling to monetize their applications in a manner that allows them to make a lot of money without alienating a large percentage of their user base.

    Of course, there are many strategies and schools of thought regarding monetization. The age old model of employing a dual pronged approach by offering a free app with a paid version has proven to be successful for some – but not for all. Advertising has made some game developers like Rovio (Angry Birds) a lot of money. Now, in app purchases are taking hold and are proving to be more lucrative than any prior method. The problem revolves around finding that delicate balance between offering in app purchases and not making consumers angry.

    The problem revolves around finding that delicate balance between offering in app purchases and not making consumers angry.

    Though, it appears that Japanese app development firms have cracked that code. Over the last year, their mobile app market has literally exploded with success. So much so in fact, that Japan is now the biggest app market in the world. Applications there are being downloaded by the millions and the apps themselves are highly rated. So, the question is simply this: how did they do it?


    The facts

    iOS App Store vs Google Play Monthly App Revenue Japan

    Before we go off the deep end, let us take a look at some stats surrounding the Japanese smartphone and app market so we can see what’s going on.

    • In October 2013, Japan surpassed the United States to become the market with the highest app revenue. That’s for iOS and Android combined.
    • Japan’s smartphone penetration increased from 28% to 42% in 2013. Their population is 127 million which means ~17.78 million more people are now using smartphones in Japan than last year.

    Annual Mobile Phone Penetration Japan vs United States

    • That percentage is expected to grow from 42% to 62% in 2014 which will be a faster smartphone adoption rate than pretty much everyone else.
    • The mobile space in Japan was already quite successful. From 2009 to 2012, the mobile market went from approx $4.9 billion to $8.2 billion. Most of which was digital content purchased on feature phones. Smartphones didn’t make their first meaningful dent until 2011 and 2012.

      Games downloaded on iOS devices in Japan make three times the global average and games downloaded on Android devices make six times the global average.

    • Japan is the only country where Google Play Store revenue has caught up to iOS app revenue. That’s how explosive the growth has been.
    • Game growth in Japan is outpacing everywhere else in the world. There are 3.9 times as many games now than there were in 2012 for Japanese consumers, compared to 2.7 times as many for everyone else.
    • The big app and game developers in Japan outspend the competition in terms of advertising.
    • The most important stat. Games downloaded on iOS devices in Japan make three times the global average and games downloaded on Android devices make six times the global average.

    You can find the source for all these stats here.


    app market rage of bahamut

    Developers have tweaked the beginning tutorial in Rage of Bahamut to make it more appealing for new gamers.

    How did they do all that? Part 1 – adoption

    First and foremost, some of the success can be attributed to the growth in smartphones. As stated above, the smartphone market grew 14% from 2012 and that has no doubt helped bolster sales of applications in the smartphone app market. It also helps that people were spending hundreds per month on their feature phones already for digital content. When they switched to a smartphone, they just started spending hundreds per month on their smartphone instead of their feature phone which would account for feature phones making less and smartphones making more.

    they just started spending hundreds per month on their smartphone instead of their feature phone

    There have been other, smaller factors in the adoption of smartphones in Japan, and in the creation of thriving mobile ecosystems to boot. Google worked to establish carrier billing in early 2011 in Japan, making it very easy for consumers to get paid apps. This allowed people to purchase apps and simply pay for them later on their phone bill. The added convenience definitely helps.

    Last is the adoption of the app market for developers. There are simply more games and content to buy than ever before. As the numbers go, there are nearly four times as many games for Android and iOS in Japan than there were last year. This has saturated the app market with plenty of nice things to purchase and outpaces the rest of the world by quite a large margin.


    app market Puzzles and Dragons

    The hit game Puzzles and Dragons earned $4.1 million per day during October 2013. It has a paltry 1 million downloads outside of Japan.

    Part 2 – adaptation

    The biggest stat to pay attention to is how much more the big developers in Japan have grown. In October 2012, the top five publishers were making about $500 million per month. By October 2013, that increased to about $3.9 billion per month. That’s a very dramatic increase.

    iOS App Store vs Google Play Japan vs Rest of the World

    The key lies in the statistic that mobile games on iOS devices in Japan make three times the global average and the astonishing fact that Android games make six times the global average. Simply put, Japanese developers are getting a lot more money out of their apps per download than anywhere else in the world. The reason why this is so is because of an unprecedented habit of adapting to consumer trends.

    Pretty much all of the biggest players in the Japanese app market use IAPs (in-app purchases). This should be no surprise as the IAP business model is gaining a lot of momentum and developers around the world are doing it. We’ve talked about IAPs before so we won’t go into that rabbit hole right now but we will discuss how Japanese developers are doing it differently and how that’s making all the difference.

    Japanese developers have become exceptionally adept at finding where people stop liking their game and then fixing it so that people like the game again

    Instead of focusing on getting people to download the apps and games, developers instead focus on what happens after the download. They believe that if people play their games long enough, they will eventually buy something. Thus, Japanese developers have become exceptionally adept at finding where people stop liking their game and then fixing it so that people like the game again. This translates to a superior gaming experience that actually makes people want to spend money.

    Developers also focus on making the games difficult without being too difficult. Hironori Tomobe, who has a Ph.D. in computer science and works for DeNA, explains it the best.

    The sweet spot is to keep games just hard enough so that players will pay money for items that help them get ahead--yet not so hard that they feel taken advantage of, or get frustrated and give up.
    Hironori Tomobe, Ph.D.

    When you combine all of these thought processes into one product, you get a great game that is constantly improved with a targeted, dynamic IAP system. It requires a lot of work and there are many games outside of Japan that use tactics like this. That said, if the world wants to catch up to Japan, a higher quality development cycle and more dynamic IAPs are about the only way they’re going to do it.

    Japanese firms have been wildly successful, and now the world must wake up to the fact that there is a new undisputed leader in the global app market. The immense growth of these firms has led many of them to draft further plans for global expansion. It’s possible that we will see mergers, strategic partnerships, and the like as things get more competitive in this space. There have already been examples of this as Supercell (developer of Clash of Clans) recently sold half of their company to Softbank/GungHo Entertainment and experts expect more to happen.

    We’d like to know what you think. IAPs are a thing of contention among consumers but people in Japan don’t seem to have the same problems with IAPs that the rest of the world does. Do you think it’s possible to find an IAP system that people actually like? Let us know in the comments!

    Comments

    • Jayfeather787

      Japan’s making money like a boss.

      • http://www.AndroidAuthority.com/ Darcy Alexander LaCouvee

        I believe this image sums up the current state of affairs nicely:

      • Mike Reid

        Umm, this must be an article about Japanese dev companies making money. By selling to fellow Japanese in Japan.

        Not about how to sell in Japan from outside.

        IMO Japanese app buyers buy Japanese apps from Japanese companies. The Japanese are like that (not unlike some other Asians); they rarely buy products that are available made in Japan from outside Japan. I’d guess Sony pretty much reaps the hardware business in Japan.

        Japan is hardly in the stats for my app sales and for Audio/Video apps they are only at 4.66% overall. Though I admittedly have no translations for Japan or any language, that hasn’t stopped my app from selling well in Europe.

        I see the same lack of Japanese, and most other Asian, involvement in custom ROMs, at least on XDA and similar English language sites, though India may be an exception.

        • OzJason

          Some huge generalisations about Japan in there… where do you get that the Japanese rarely buy products from outside Japan? (is that what you were trying to say?) That has been true re the mobile phone handset market which was a closed shop of almost exclusively Japanese phone manufacturers for years, but that has changed with iOS and Android devices surpassing the technology available in the old proprietary Japanese phones. Samsung and Apple are huge in Japan..

          I’ve lived in Japan so I understand the Japanese reasonably well and I think you can put down lack of participation on XDA to language mainly… sure the Japanese learn English to some extent, but they’re not confident using it.. and to be honest, XDA isn’t the friendliest forum and would be a pretty cold place for someone not confident with using English. There’s a lot of Japanese contributing to localisation of apps and custom ROMs… you’re just not seeing that on XDA.

    • h4m

      Wow, games really sell so well in Japan. There are even CMs for them.

    • endy

      I think Japan was wowed by iOS which taught people that having a smart phone meant having to spend lots of money to buy apps.

      So now their whole culture thinks they still have to spend money with their Android phones. Ahm, how do you say “dumb” in Japanese?

      (Sorry you devs…you go to town in Tokyo!)

      • abazigal

        I don’t see anything wrong with spending money on apps and content. If anything, I see it more as an investment. Spending $X lets you do this on your smartphone which you couldn’t do before, netting it extra utility. If you feel you would benefit by spending $20 to get omnifocus on your iPhone, then do it by all means.

        Why, is there some prize to be gotten for not spending an extra cent on your smartphone after you have paid for it?

        • APai

          buying at a fixed price tag is one thing. but changing into a model where whoever has a weaker mind ends up paying more ? that’s exploitation. a quote ” a fool and his money are easily parted” comes to my mind. having an upper limit on IAP is also ok.

          IAP is a scourge.

          • JosephHindy

            So does this mean you don’t buy DLC from video games at all? No map packs in Halo, no new quests in Skyrim? They charge you $60 for the game and then $10-$20 again for extra maps, levels, and quests.

            It’s the exact same thing, but no one complains when Bethesda games does it ;) just when apps do.

            • APai

              I did not mean that at all. you know that clearly, having seen so many discussions, surely ? I clearly meant the preying/ cunning strategy where everyone designs the game where only super human thumb abilities or extreme patience can avoid paying. I’m in favor of paying the developers. but not things like the $50 for a single IAP ?!!! that too on angry birds ? that’s borderline criminal!

            • JosephHindy

              I’ve written before about how that is one of the predatory methods that some developers use and how it’s unacceptable. I also said that each app needs to be judged individually and you’re making sweeping statements about the platform as a whole, which is wrong. There are thousands upon thousands of games with reasonable IAPs that don’t require “super human thumbs” to enjoy. Angry Birds is one of them. The option to drop $50 on a car is there but you don’t need it to beat the game. If you don’t want it, it’s easy to ignore. In other words, you’re making a mountain out of a molehill. The landscape as a whole isn’t nearly as bad as you’re trying to imply.

            • APai

              yeah, but isn’t the whole industry changing to this new model, when there were games like angry birds selling at a buck and making plenty ? arguably the development cost of angry birds (until go) would be way lesser than NFS – most wanted. There have been plenty of other games too which have been block busters and which needed only a buck to sell because they sold in the tens of thousands. if the development cost is high, relying on ads alone wouldnt work, in which case it makes sense to go for IAP.

              I did not also attack blindly and shoot with a blunderbuss, i was specific in saying they are preying in on the weak minds – by changing gameplay – making it repetitive and pushing people towards buying those upgrades. obviously it can be inferred in many ways. but, I was pressing my point of pushing the money spend like how credit card companies do. the model is twisted, and everyone including already successful gamehouses are also doing it, dropping their existing model in favor for easy money. sweeping change!

    • Tyler

      What about having a culture where many more people are commuting on public transportation per day and usage habits and how they contribute to the numbers?

      • JosephHindy

        I mentioned a few time that the culture of selling mobile content was already a thing in Japan. Once in Part 1 and once in the facts section :)

        • Tyler

          Ok fair enough; I know i’m not knowledge to know the cultural differences well enough to correctly explain why mobile content in Japan was already more widely accepted and I don’t know how I could expect you to know also. I do want to add that I enjoyed the read and hope to see more well written thoughtful or analytic articles.

    • APai

      “The sweet spot is to keep games just hard enough so that players will
      pay money for items that help them get ahead–yet not so hard that they
      feel taken advantage of, or get frustrated and give up.”
      sounds like exploitation. having a fixed price tag is one thing. this is like getting criminal, preying on the weak mind

      • JosephHindy

        It’s a business strategy just like any other. People blocked ads with advertising and pirate downloaded apps. IAPs solve both of those problems.

        If people had been a little more honest, this probably wouldn’t have happened ;) ad block and piracy are to blame, not any shady business dealings by app developers :)

        • APai

          here’s an upvote for you:)

          I agree that people haven’t paid up when they could. I’m saying that this new model right either, it makes it worse for paying customers. I pay a flat fee for a game 1-3-5-10 whatever, but that’s about it. but IAP is worse, there’s apparently no limit to how much you can spend on the game. This isn’t a parallel scenario – but comes in my mind nevertheless: It’s ridiculous for the people who bought the discs to see an anti-piracy message on their BD/ DVD. so now, the impulsive people are paying up or funding the game for the clever or more determined gamers :)

      • number29

        It’s called capitalism. Welcome to the world!

    • PeterBlood

      Yeah, lucrative app market for Apple in Japan where the top 9 selling smart phones are iPhones and top 3 phones here in the States. Sorry about that guys. A lot less people want to buy 32-bit Antique Dealer Android phones. You guys got a long wait for 64-bit. There goes any bragging rights! (Oh wait you have the Galaxative Gear stupid watch – BWAHAHAHA!!!) In 2014 bigger iPhones are coming, a real smart watch, etc. and the Android Emperor will really have no clothes, just be buck naked. But then Android was always the phone for cheap chumps.

      • Jayfeather787

        Android is still better. GTFO Apple fanboy.

        • PeterBlood

          Only to dimwitted clods, cheapskates and freetards. Apple users know better. People who buy Android ain’t really usin’ ‘em. Statistics bear this out. Apple users really use their devices while Fandroid just don’t. Android has peaked and on its way down. 2014 will see a wave of defections with larger 64 bit Apple devices.

          • Laurentiu

            “In 2014 bigger iPhones are coming”

            :))
            Keep dreaming PeteBoy.
            If Android would not exist you’re still having 3.5″ 4:3 display (remember this is the best size for a phone display in Apple vision), no notification, no quick settings. It will take Apple another 5 years to update the iOS apperance.
            But you can still give away money to poor Apple for their low spec – high price devices. In the end you are a good person. Using the horse glasses your will never see the true even in front of you… but you keep dreaming.
            The word Samsung used refering to person like you describe best your mentality: iSheep.

            • Jayfeather787

              Agreed.

            • PeterBlood

              Said like the true disingenuous lying historically inaccurate sSheep Fandroid moron you and others of your ilk are. Android is a copy of iPhone number one. It would not have the UI it has without Eric Schmidt copying it when he was on Apple’s Board. The things you are talking about would have been on IPhones if Android did not exist. Don’t flatter the malware ridden platform. Apple has given so much more to the smart phone big picture than Google could ever hope for. And continues to, which gnaws in your gut. You are the dreamer, it’s extremely amusing to see people like you who have it all figured out in your village idiot way. Apple now sees Android in its rear view mirror and the real deluded souls like yourself can be stuck with third rate mediocrity. I almost feel sorry for you but will satisfy myself with a cruel chuckle instead.

            • Jayfeather787

              Shut the fuck up, you don’t know crap. Android betas came before Apple, and the status bar was copied by apple, and a lot of other things, like control center. Apple would still have a 3.5 inch screen, like Laurentiu said, if Android phones did not have larger screens. Apple said 3.5 was the perfect size, and shot themselves in the foot by making a 4 inch phone.

            • PeterBlood

              Featherbrain you should stop embarrassing yourself and shut your own piehole and yapper, it’s just spewing misinformation and bull pucky. Ever see pictures of what Android looked like before the iPhone? I rest my case! Oh yeah Apple would just sit on phone size in perpetuity per if not for Android’s desperate steps to be larger. Nobody shot anyone’s foot except for you. Are you this silly in person? Put on your Tech Dunce Cap and sit ion the corner and be quiet.

          • Jayfeather787

            Apple users don’t know shit. Apple is for users that don’t know a thing about computers, and buy iphones just because they have an apple logo on the back. Apple and Android users also may use their phones for different things. One of the things use my androids for is flashing roms, because it is a lot of fun. I would say that I use my Android phone a lot. No body buys a phone just to have it. Apple users and Android users buy phones to use them to play, make phone calls, text, etc. Also, Android is getting better and better with every Android version, and is on its way up. Also 64-bit is not really twice as fast. ART vs. Dalvik is much more effective. Again, this is an Android website, go to some ifag website and join you own kind.

            • PeterBlood

              Jayfeather787 has feathers for a brain. What a dip. Completely unknowledgeable. I work in visual effects and many Macs and PC’s are used. The Mac is no toy unlike what country bumpkins like you like to drool out. Visual effects professionals are demanding and most of my VFX associates and digital artist friends prefer Macs. There’s a difference between (Mac) easier to use and (PC) klunky. Macs are for professionals who want to get work done. PC’s are for kludgy chumps who want to build them since they don’t have girlfriends or friends in general. PC’s are still heavily used in the business but it isn’t pretty.

              Android users like you are truly living in Shiteland. Uhh yeah the 64bit iPhone IS twice as fast. I know you don’t bother to inform yourself as it would burst your sSheep balloon. You must get all your information from fandroiddelusion- dot- com. Apple makes the superior product in all categories. PC sales are tanking. 35 million fewer PC’s sold YOY. Mac sales last year were even, this year increasing by some 29%. You are a complete imbecile if you are going to try to say Macs are toys or anything less than the best computer and OS out there. Windows 8? Don’t make me laugh. A resounding failure, loathed by most. Microsoft’s CEO is being replaced because the company is tanking. Android is junk and soon to be an also-ran.

              Flashing ROM’s? You ARE a homophobic geek loser.

            • Jayfeather787

              First, look at http://thenextweb.com/apple/2013/09/10/what-the-iphone-5s-64-bit-processor-means-in-plain-english/#!p8UIT, especially where it says “So to get the books it requires three bicycle trips (but we can just call them cycles, so three cycles). However, if the librarian had 64 assistants, it would only take two cycles. There would be a dramatic speed boost, but NOT double, since there would still be one trip where only one assistant was needed, while the others are there but unable to make it go faster.” So really, it is not twice as fast
              Second, HOW DARE YOU SAY I AM A HOMOPHOBIC GEEK LOSER. I HAVE A BETTER FUCKING LIFE, EDUCATION, AND FAMILY THEN YOU WILL EVER HAVE YOU PATHETIC SCUMBAG. THERE IS A SPECIAL PLACE IN HELL FOR PEOPLE LIKE YOU, AND YOU BELONG THERE. I DO NOT HAVE FEATHERS FOR A BRAIN. DON’T YOU DARE INSULT ME AGAIN BITCH.

            • PeterBlood

              You’re a loud boorish bore who protests too much. A FAIL as a human being. Just listen to yourself and it’s obvious you must live in a van down by the river. Also, what does your reference to an ifag website mean to YOU Mr. Homophobe? You’re a crude neanderthal who doesn’t have a clue about anything. You’re life is none of the above. Just put your damn hairnet on and get to work loser.

              It would be incredibly easy to pull lifestyle rank on you but you would just mock it in a jealous weak defense in juvenile fashion as you do here. Needless to say I will be walking the red carpet at a famous awards show while you are eating microwaved chili dogs at 7-11. There’s a special place for you too in the nearby mental hospital nut ward for the cluelessly technically inept. So long featherbrain!

            • Jayfeather787

              Fist yourself then die in a hole bitch. I hope you get fucked with a cactus. Also, Nexus 5 is faster than iphone 5shit 2.3 GHz ( overclockable to 3 Ghz) and 2 gb of RAM.64-bit is only useful if the device has over 4 gb of RAM.So long Peter slut.

            • PeterBlood

              You must be a delight to your friends and family. Oh wait, you have no friends and your family has disowned you. As a human being you are a gigantic homophobe FAIL. Clueless in matters of class or technology. Take your Android phone and shove it where the sun don’t shine, the same place it came from. Those who use products from criminal copying companies like Shamdung are immoral and soulless. Sad & truly pathetic.

            • Jayfeather787

              You know, this has been going on for 2 days. I will submit to you, and let you win this argument. Just can we please stop? Its kinda annoying. Sorry for the inconvenience. Sincerely – Featherbrain. Love than nickname.

            • PeterBlood

              Cool Daddyo. Hey maybe you aren’t so bad after all. :) No problemo. You and yours have a fine holiday season and Happy New Years!

            • Jayfeather787

              You too :)

    • Kwadwo Firempong-Boakye

      that’s amazing

    Popular

    Latest