Games, Apps & Social Media OVERVIEW
In the history of the world of business, very few industries have enjoyed the stellar growth that we have seen in electronic media and entertainment over the past few decades.
This spectacular growth has included electronic games, mobile apps and social media, but the meteoric growth in these three fields has been possible only because of underlying technology trends.
There is every reason for continued optimism regarding future growth of games, apps and social media due to three basic factors: 1) booming growth in the number of people around the world who use the Internet on a regular basis, whether by fixed means, wireless devices or both; 2) continuing improvements in the speed and reliability of Internet access; and 3) the continuing and dramatic evolution of electronic platforms, particularly smartphones and tablet computers.
Game consoles also continue to improve on a steady basis.
Eventually, virtual reality may take games and entertainment to an entirely new level.
Embedded, wearable and ubiquitous computing will be the next underlying technology advance that will further drive apps and social media, and to a lesser extent electronic games.
Specifically, personal electronics have been evolving in the following order: 1) First, there was sometimes-on (think dial-up and Internet service providers like the original AOL.com).
2) Then we progressed to always-on, thanks to the rapid adoption of fixed broadband, whether via DSL or cable, along with ever higher Internet
In the history of the world of business, very few industries have enjoyed the stellar growth that we have seen in electronic media and entertainment over the past few decades. This spectacular growth has included electronic games, mobile apps and social media, but the meteoric growth in these three fields has been possible only because of underlying technology trends.
There is every reason for continued optimism regarding future growth of games, apps and social media due to three basic factors: 1) booming growth in the number of people around the world who use the Internet on a regular basis, whether by fixed means, wireless devices or both; 2) continuing improvements in the speed and reliability of Internet access; and 3) the continuing and dramatic evolution of electronic platforms, particularly smartphones and tablet computers. Game consoles also continue to improve on a steady basis. Eventually, virtual reality may take games and entertainment to an entirely new level.
Embedded, wearable and ubiquitous computing will be the next underlying technology advance that will further drive apps and social media, and to a lesser extent electronic games. Specifically, personal electronics have been evolving in the following order:
1) First, there was sometimes-on (think dial-up and Internet service providers like the original AOL.com).
2) Then we progressed to always-on, thanks to the rapid adoption of fixed broadband, whether via DSL or cable, along with ever higher Internet access speeds.
3) More recently, we evolved to always-with-you, thanks to the proliferation of mobile devices, particularly smartphones.
4) The coming leap forward in computing will be always-around-you, where, to a rapidly growing degree, the advent of pervasive computing devices and remote wireless sensors will connect us to, and collect data from, an astonishing array of objects, ranging from automobiles to appliances and air conditioning systems, to monitors that record our individual health statistics. This step will include wearable computing devices and embedded computing that enables rooms to recognize you when you enter and automatically configure nearby devices to your personal preferences. It will also include devices that know which types of entertainment, games or social media we habitually use at certain times of day, and therefore push those services to you seamlessly and automatically.
Globally, as of 2016, there were approximately 7.5 billion wireless device subscriptions in a world of 7.4 billion people, along with more than 3 billion people worldwide who were Internet users. (Some users have more than one wireless service subscription.) The base of people around the world who adopt smartphones will continue to grow, and they will use them to access the Internet, games and mobile apps in massive numbers.
Three extremely important sectors of this evolving personal communications and media world include electronic games, apps and social media (GASM), and the lines between these three sectors frequently blur. For example, multiplayer online games encourage communication between communities of players, while social media like Facebook are often the platforms that support the most popular games. Meanwhile, apps are rapidly becoming the tool of choice for launching a wide variety of communications tools, entertainment and Internet sites, including games. Users seamlessly let their online access flow from one segment of GASM to the other, and often use all three at once.
Games: The global video games industry is so vast that it far surpasses the categories of adult and children’s books in terms of total revenues. Estimates of the total size of the global electronic games market (including hardware, software and subscriptions) vary from one analyst to another, but it is likely that the market will grow to $100 billion or more by 2017. (Games tracking firm Newzoo forecast that the 2017 market will be $106.5 billion.)
The advertising industry has jumped into the GASM field in a massive way, as the number of hours spent by consumers accessing GASM daily has become much too large to ignore. Likewise, media, professional sports and entertainment corporations have entered the field with great enthusiasm. The fastest-growing advertising media in the world include the largest social media site: Facebook.
Historically, gaming was largely an industry driven by players on dedicated consoles, such as the PlayStation and Xbox. Manufacturers of consoles continue to compete fiercely to introduce the best new features and garner market share. Game console makers have been able to develop massive numbers of fans who pay monthly subscription fees. Microsoft’s Xbox Live has more than 48 million paying subscribers and Sony’s PlayStation network has more than 110 million. Once logged in, subscribers can both play their favorite games and control their favorite media and entertainment. For example, they can log into NetFlix to watch streaming movies on their consoles. However, retail sales of game software designed for specific consoles are slowly becoming of less importance. Game consoles offer exciting features, but may become less relevant to the overall market as many gamers rely on their smartphones and the cloud for play.
The popularity of mobile games played on smartphones has been soaring. Gartner puts mobile gaming revenues at $21.6 billion for 2015. Newzoo forecasts this market will reach $40.8 billion in 2017. Mobile gaming has, to a large extent, become an industry of its own, with startup firms such as Ubisoft and GungHo showing stunning growth in this field.
Apps: Mobile apps, including those for magazines, information services such as health site WebMD, games, newspapers, catalogs and ebooks, to name but a few of the tens of thousands of uses, didn’t really exist before the introduction of the iconic iPhone smartphone (although online “widgets,” which offer similar features, had been around for quite some time). The Apple iTunes App Store launched in July 2008 with only about 500 apps available. By 2016, Apple had more than 1.5 million apps for sale or free download. Apple reports that its App Store sales grew to more than $20 billion in total revenues for 2015 alone, of which about $14 billion was paid app developers that year.
Gartner estimated in 2014 that 94.5% of downloaded apps are free, and that apps sold for a fee generate only modest revenues on average, with roughly 500 downloads daily per average app. App fees tend to be in the $3.00 range. Paid apps usually are free of ads.
Meanwhile, vast numbers of apps are also available for the Android mobile phone operating system (the world’s leading smartphone platform), as well as for Windows phones and other devices. Android is the mobile operating system developed by Google.
App developers that want their products to be in broad distribution are forced to develop at least three versions, one each for Apple, Windows and Android. There are other operating systems to consider as well. Over the mid-term, wide adoption of an advanced Internet markup language known as HTML5 will make it easier to develop apps that will run on any device, and may eliminate the need for multiple app editions. Mobile Internet browsers have become much more complex, making them capable of running advanced programs directly on the smartphone rather than in the cloud.
On all platforms, the most popular apps include games such as Angry Birds; tools such as Google Maps; and entertainment- and media-related apps, such as those for Pandora Internet-based radio. At the same time, apps provide tools for business people, travelers, students, hobbyists, wine drinkers, people who like to cook, job seekers, children, sports fans, shoppers, car enthusiasts and myriad other special interest niches.
The number of apps on the market has become so massive that consumers are less likely to be willing to sort through app stores to find useful tools. Instead, to a growing extent, they rely on recommendations from friends, emails from trusted sources and magazine reviews in order to find new apps to download. Many smartphone users have downloaded a large number of apps, but only use a few of them on a regular basis.
Since the development of apps requires extensive programming and creative services, the app industry encompasses revenues and fees far beyond app store revenues. For example, corporate spending on app development has been soaring. Also, a large number of software companies have achieved success in selling app development tools and platforms to software coders. A study published in January 2016 called Unleashing Innovation and Growth by the Progressive Policy Institute estimated that mobile apps had spawned 1.66 million current U.S. jobs, including jobs that could be described as direct, indirect and spillover employment. Apple stated in 2016 that the ecosystem involved in its iOS apps has also created 1.2 million jobs in Europe and 1.4 million jobs in China.
Social Media: Since most social media accounts and activities are free of charge, the challenge for social media firms has been to monetize their vast user bases. By mid-2016, Facebook had roughly 1.65 billion monthly users (the majority are on mobile devices) and LinkedIn counted more than 433 million, while Twitter had more than 310 million. LinkedIn, for example, has quite successful in generating revenues. It not only sells advertising, but also sells subscriptions to account upgrades for users who are interested in deeper services. Since LinkedIn, largely aimed at business professionals and job seekers, is a popular way for salespeople to initiate conversations with potential customers, and for corporate recruiters and human resources managers to seek new hires, the site has had significant success in generating recurring revenues. LinkedIn revenues totaled $3.0 billion in 2015, up from $2.2 billion in 2014. In May 2016, LinkedIn agreed to be acquired by Microsoft for about $26 billion.
Facebook, with a vastly larger audience, reached $17.93 billion in revenues for 2015, up from $12.47 billion one year earlier. In fact, Facebook has rapidly become one of the most successful of all the world’s advertising platforms. Both Facebook and LinkedIn have made it extremely easy for small to mid-size businesses to design and initiate their own ads on social media, where these advertisers have the option of carefully targeting their ads to select groups of users by interest, occupation, education, geography or habits. At the same time, these sites have broad appeal to major national advertisers.
While Twitter has not been as successful as Facebook and LinkedIn in generating revenue growth, it has nonetheless carved out a unique position in global communications. Many celebrities and politicians tweet daily—perhaps several times a day. For example, the tweeting activity of 2016’s U.S. presidential primary campaigns was notorious, and avidly read by millions of Americans daily. Elsewhere some organizations are finding Twitter to be the most effective way to instantly communicate with their customers. Some airlines, for example, encourage passengers to tweet their comments, questions and concerns to airline representatives in order to obtain immediate answers. Jun, a small city in Spain, has been closely watched due to its great success in using Twitter as a means of communicating with, and serving, its population of 3,500. The city’s various departments tweet out their plans and projects, and in many cases, residents may use tweets to request services or report problems, as a fast, simple alternative to filling out paper forms. The tiny police force receives daily tweets about local problems that may need attention, such as bad drivers, domestic violence or suspicious behavior. These tweets reach the city’s police instantly. The practice has been described as making police assistants out of all residents.
A newer service of great interest is Pinterest, a virtual pin board on which users post photos, recipes, notes, lists or anything else pertaining to hobbies, projects and other interests. Pinterest has firm plans for building advertising revenues.
While the social media pioneers were largely U.S.-based, and the audiences of leading sites like Facebook are global, many nations can boast of their own local social media success stories. This is particularly important in China, where the government limits access to many of the outside world’s most popular sites such as YouTube and Facebook. One of China’s leading social media firms, Renren.com, has tens of millions of users, and it launched an IPO in 2011. Additional popular Chinese services include 51.com, Weixin/WeChat and Kaixin0001.com. Moreover, Ushi.cn is a Chinese service targeted at the LinkedIn-type of professional user.
The security of user data and customer privacy remain significant concerns in the GASM business, particularly after Sony suffered a major hacking of millions of its Sony Online Entertainment network accounts in early 2011. Elsewhere, customer privacy issues have been major points of concern at Facebook and other social media services. Customers want to play games online and they want to interact on social networks, but they also want to control and protect their own personal data, and they certainly want to feel their credit card information is secure.
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