AppsFlyer’s annual Global App Install Ad Spend* projection expects continued robust growth in spend from $57.8 billion in 2019 to $118 billion in 2022, as hundreds of millions of people in the developing world come online, and as apps increasingly rely on marketing to drive installs.
Mobile devices connect over 3.5 billion people to the internet — almost half of the global population — with continued growth expected in the coming years, according to GSMA.
Although annual unit sales have been dropping since 2017, the majority of the population in the developing world still does not own a smartphone. India, China, Indonesia, and a host of countries in Africa will lead the charge, adding hundreds of millions of connected users by 2022.
As a result, the number of mobile app downloads is also rising: from 204 billion in 2019 to an expected 258 billion in 2022, according to App Annie. App revenue is increasing as well, with consumer spend in the app stores alone estimated at $120 billion in 2019, more than double the spend in 2016.
However, the success of native apps has also attracted millions of developers to the stores, creating a hyper-competitive environment. In such an environment, apps must increase their marketing budget to draw attention to their app.
Indeed, almost 60% of downloads of apps with marketing spend in 2019 were driven by app install campaigns — up 15% compared to 2018 and almost 30% since 2017.
The dynamics of app install ad spend are therefore generating heightened interest as an increasingly important and growing subset of overall mobile ad spend.
According to eMarketer, mobile advertising, which includes massive search and brand budgets, totaled $241 billion in 2019, and is expected to reach $368 billion in 2022. The share of app install ad spend will therefore grow by 30% by 2022 to reach almost a third of mobile ad spend.
The fact that the share of budgets directed to acquiring new app users will increase faster than the increase in mobile search or brand budgets attests to the growing role performance app marketing plays in mobile marketing.
As marketers increase their spend in mobile, specifically app install campaigns, and as more apps turn to marketing to drive discovery, the growth trajectory of app install ad spend is robust.
Despite slowing down, year-over-year growth will remain significant through 2022:
APAC: China lifts region above all else
With mega markets of China, India, Indonesia and Japan, Asia-Pacific commands the lion’s share of app install ad spend with over half of global budgets through 2022. The region is expected to grow by 27% year-over-year through 2022 (although cooling off from 32% in 2020 to 22% in 2022).
In China, an additional 100 million users will be connected to mobile internet by 2022, reaching a staggering 900 million people. Although it is home to the largest number of connected users, the fact that Google Play does not operate in the country, but rather hundreds of 3rd party Android stores, makes app install measurement a significant challenge.
The good news is that advances in market measurability have given us increased confidence to include China in the model for the first time despite the existing limitations in measurement. A conservative estimate has China app install ad spend reaching $15 billion in 2019 and over $22 billion in 2022.
India is also expected to add more than 100 million mobile internet users by 2022. However, despite its sheer size, India has less of an impact on APAC’s overall app install ad spend because of the extremely low cost of media in the country (only $0.25-$0.28 per install). We estimate that app install ad spend in India in 2019 was approximately $1.2 billion — a small piece in the $30 billion spent across APAC.
Indonesia is another market experiencing hyper growth, with 106 million mobile internet users in 2019 and a predicted 126 million in 2022. A relatively low cost of media (about $0.70 per install) means app install spend is not as high — approximately $800 million in 2019.
In contrast, the high cost of media in Japan ($3.2-$3.5 per install), and a large connected user base with a high lifetime value, places the country as 2nd to China in app install ad spend in APAC with a total of $2.7 billion in 2019.
North America: User quality and scale drives competition and high spend
As a highly developed region, the North American user base of connected mobile users will only grow by 5% by 2022. However, the high lifetime value of the average user in the region, in addition to its size, is highly attractive to mobile marketers.
The market’s scale and high cost of media (nearly $3 per install) make it the region with the second highest app install spend worldwide. In the coming years, we forecast that the market will continue to generate heightened demand and will grow 25% year-over-year to reach $27 billion in app install spend in 2022.
EMEA: Fragmented region presents exciting opportunities
The average year-over-year growth in app install spend in Europe, Middle East and Africa will reach almost 30% through 2022. Between Germany and the UK, Russia, Saudi Arabia and Nigeria, the region is extremely fragmented.
While Europe will add 16 million connected users by 2022 (only a 6% growth rate), Africa and MENA (Middle East and North Africa), will add no less than 60 million connected mobile users — growing at 20%, with Africa expected to grow twice as fast as MENA.
Like India, an extremely low cost of media (especially in Africa) means the impact on spend is relatively marginal, despite a 2x growth in budgets expected to pour into the region in the coming years.
In Western Europe, the UK and Germany led the way with approximately $1.8 billion and $1.4 billion spent on app install ads in 2019, respectively. A relatively high cost of media in these countries (approximately $2 per install), drives total spend upwards.
When it comes to Central and Eastern Europe, Russia stands above the rest. In fact, the country increased its share in the global app install pie in 2019 by 21% — representing the largest increase among the top 10 app markets. However, because of a low cost of media ($0.6-$0.7 per install), the impressive number of installs doesn’t translate into massive spend — approximately $750 million in 2019.
Across mature and developing markets in EMEA there are many opportunities for app marketers in the coming years, with overall app install ad spend predicted to reach $22.9 billion in 2022 — up 116% compared to 2019.
LATAM: Brazil’s success propels region forward
Latin America has experienced significant growth in smartphone penetration in recent years. Since 2014, the adoption rate almost doubled to reach 66% of the population.
Driven by economic growth and the sheer size of the population, Brazil accounted for more than half of app install ad spend in the region in 2019 — $1.8 billion. The sum is relatively low because the cost of media in the country is only around $0.75 per install.
Despite an expected slowdown (only 8% growth in number of connected users by 2022), app install ad spend will remain robust at over 30% year-over-year growth through 2022 to reach almost $7 billion.
Which factors drive growth in app install ad spend?
There are a number of trends which lend themselves to the increase in mobile ad spend. We’ve highlighted a few of the most prominent below:
Native app experience: The native mobile app is the ultimate consumer touchpoint with the most time spent, best user experience and highest ability to foster long term loyalty (via a home screen icon, the use of push notifications, etc.). This realization goes beyond mobile-driven companies to include traditional brands.
Broken organic app discovery: The odds of the average app being discovered organically in the app stores is almost non-existent. A marketing investment is therefore required to generate demand.
Data confidence: The sophistication of data-driven campaigns is constantly rising (whether optimized by a person or a machine), giving marketers increased confidence to invest in marketing and drive returns.
Gaming explosion: Gaming claimed approximately 40% of the total app install spend pie in 2019 — a 30% increase since 2017. Game subscriptions through Apple Arcade and Google Play Pass will drive additional growth as new revenue streams open up to gaming apps. The development of 5G infrastructure will also propel gaming forward.
Competition in developed countries driving cost up: Competing for the same eyeballs has intensified, increasing the gap between demand and supply, especially quality supply. As a result, the cost of media and ultimately ad spend spike.
Pressure to meet massive demand in developing countries: As millions more become connected mobile users, marketers are pressured to meet this demand and demonstrate continued growth.
Programmatic rising: The use of in-app advertising is increasing for both gaming and non-gaming apps, making in-app bidding a hot topic. But limitations in the app environment have prevented widespread adoption.
This is rapidly changing as mobile Demand Side Platforms and mobile ad networks built sophisticated solutions to enable buying in-app inventory at scale, while adapting real time bidding protocols between web and app.
For more information on the what, why, and how of programmatic set up, watch the video below:
Fraud protection: The rate of app install fraud has been declining, indicating stronger protection is a deterrence to bad actors. Marketers therefore are more confident that their spend is not wasted on fraudulent installs. Having said that, as there is more money on the table, and advertisers are still losing billions of dollars to fraud, vigilance must be exercised to detect and prevent newer forms of attack, especially in-app fraud.
Revenue stream proliferation: Since the share of paying users in apps is low (5%-10%), marketers are seeking other revenue streams to drive income in a freemium-driven economy. The rise of in-app advertising and subscription revenue helps apps increase average user lifetime value, allowing advertisers to spend more on media while increasing scale.
The predictive model is primarily based on AppsFlyer’s own data, which included over 30 billion non-organic installs, $48 billion in ad spend, and 72K apps in the 2017-2019 sample. We also used other parameters, such as 3rd party mobile attribution market share data, cost per install prediction per region, number of apps in the app stores, and the number of installs.
The entire set was divided into the following two categories: the attribution market share of non-organic installs (excluding Firebase and Facebook analytics for apps) and the non-attributed market (marketing-driven installs that were not measured through a mobile attribution provider). Note that this division was not shown in the report above, but was a factor in the overall methodology.
*App install ad spend is the amount of money invested in direct response advertising campaigns that are aimed at driving users to the app stores to download an app. It is a subset of overall mobile ad spend, which comprises mainly of and includes mainly search, brand and video display budgets aimed at driving non-organic app installs.
Sources used in the report include: