Report: 80% Of Mobile’s Value In Physical Goods And Services, Not In-App Purchases Or Advertising

Apple’s app ecosystem enabled $519 billion in commercial activity in 2019, the company suggested in a third-party report released today. Only $61 billion of that was digital goods and services, like games, e-books, and apps, and $45 billion of it was in-app advertising.

The lion’s share, $413 billion, was physical goods and services.

And 54% of that was China.

Essentially, we’ve had an iceberg problem in mobile. It’s relatively easy to see how much revenue is made in app sales, in-app purchases, and streaming media subscriptions. That’s visible in annual dollars-we’ve-paid-to-developers announcements that Google and Apple have made. It’s also relatively easy to see how much is spent on advertising, as we can get regular reports from mobile measurement companies like Singular, AppsFlyer, or Adjust on how much money is flowing through mobile ad networks. (Full disclosure: I do some consulting for Singular.)

But we haven’t been able to see the retail sales.

I’ve said for years that in-app purchase and ad revenue is a fraction of the total value of the Android and iOS ecosystems. For instance, we’ve known for a long time that Amazon is huge in e-commerce, owning as much as half of all U.S. digital retail sales … but it hasn’t been clear how much of that was mobile.

While we still don’t have per-retailer numbers, we now have good insight that physical goods and services account for 80% of all commerce conducted on mobile devices.

And if Apple facilitated $413 billion in 2019, Google must have done something similar or larger, since its ecosystem is many times Apple’s. We also know that 2020 must be trending even larger right now, as Adobe data shows that COVID-19 accelerated e-commerce growth by four to six years, giving us Christmas holiday-like sales in May.

The report, paid for by Apple but completed by Analysis Group, also shows us how far China is ahead of the U.S. in digital commerce.

“We estimate that China accounted for $246 billion, or 47%, of total global billings and sales facilitated by the App Store ecosystem in 2019, while the US accounted for $138 billion, or 27%, of the global total,” the report says. “Europe, Japan, and the rest of the world accounted for 10%, 7%, and 9%, respectively, of the global total.”

Those numbers would look different in 2020.

Online commerce has been eating offline retail with 50% and larger jumps, thanks to physical distancing and COVID-19 shutdowns.

Interestingly, ride sharing such as Uber and Lyft makes up $40 billion of the total $519 billion in ecosystem value, and it’s mostly concentrated in the hotly contested U.S. market.

Travel is significantly higher, at $57 billion, but that would be down this year with Coronavirus. One category that would be up: Grocery, which has jumped up to 110% higher. Gaming would also be significantly up, as that category has seen record revenue due to COVID-19 shutdowns.

The Apple report says it’s actually conservative, and the $519 billion in ecosystem impact is a low end of the scale.

“For example, we do not include any benefits companies derive from providing free apps that work with, and improve, their products or services,” the report says. “These ‘companion apps’ raise the value of the goods or services. Popular examples include banking and finance apps, airline apps, smart home apps (e.g., Nest, Ring), and health apps, among others.”

The full report is available here.