Why Google Play Will Fragment into Hundreds of App Stores
To many people, Android Appstore would just mean Google Play, as did AOL or Yahoo! meant the Internet back in the day. For the Internet, that’s not the case anymore as new vertical destinations attracted younger generation who learned what and how to surf. Similarly I believe the time is ripe for app stores to evolve into multiple, specialized ones that better suit different customers’ demands. Indeed that is already happening in several countries. At least on Android, anyone can be a distributor of APK selections of their choice, as opposed to on iOS which is a closed walled garden.
In China, there are multiple choices for Android appstores as Google is banned to start out with. Customers are used to choosing whatever option that makes the most sense for their needs. Top four stores have about average 21% market share each (The Ultimate Cheat Sheet to China’s Android App Stores). What is interesting to note is that many of these appstores don’t even require customers to install the appstore itself. Customers can simply download apps from the appstore’s website on browser.
In Korea, the country’s No.1 messenger app Kakaotalk spurred a unique app distribution platform. This has changed the mobile gaming industry entirely and thereafter boosted Google Play’s global revenue significantly. As of now, more than half of Korea’s Top Grossing apps are associated with Kakao. Moreover, Korea is the No.3 country in terms of worldwide revenue contribution to Google Play. And this is about to change again. On April 1st 2015, Kakao opened its own games store which also just works as a web app on browser. Developers can get more favorable revenue share from Kakao compared they did from Kakao and Google before. Customers can download games directly from their favorite messenger and get additional 10% cash back to spend further in in-app purchases.
In many emerging countries, lack of the payment solutions is one of the biggest barriers for global Internet brands in penetrating the market. App stores are facing a similar issue. Only allowing credit cards has not worked. While the major US players such as Google Play are searching for solutions, local competitors have been moving faster to provide alternatives. For instance, Mobogenie, an alternative Android appstore, highlights how they provide better payments coverage to local customers as illustrated below.
In sum, the value propositions of different Android appstores could be their better distribution mechanism, better payment conversions, better margin to developers, or even better curated selections. What if Facebook offers its own appstore leveraging marketing muscles such as Instagram, Messenger, and Whatsapp? Or LINE does the same using its distribution power in Japan and Asia? What if Alibaba offers appstore that is economically more favorable to developers based on its own Alipay payments? What if Steam, Twitch, or whoever that is relevant to core gamers launch appstores with the best core games curation? The list can go on and on.
So what does this mean to Google? Well, don’t get me wrong, Google Play is still winning in terms of volume due to the power of Android OS being the default. That being said, customer migration can still happen in the long term. Customers can proactively choose better options for various reasons I have described above. That will in turn lower Google’s app customer ARPU, which is already pretty low when compared to iOS (Apple’s users spend 4x as much as Google’s). Such further decrease in ARPU would happen regardless as Google goes after more emerging countries to expand Android. With increasing ARPU discrepancy between iOS and Google Play, developers have to deal with prioritization even more — first iOS and second whichever Android store including Google Play that gives the greatest ROI.
At the end of the day, Google may not care too much as long as all the Android audience is monetizable via ads. And for customers, more competition will be better as always.
Thanks to Sandi MacPherson, Andrew Chen, and Eunice Rhee for reading drafts of this.
Opinions expressed here are solely my own and do not express the views or opinions of my employer.