The United States fell to second place in app revenue last year for the first time, overtaken by an emerging leader whose smartphone market is rapidly accelerating: Japan.
Mobile app analytics and market intelligence firm App Annie has published an in-depth analysis of Japan’s complicated mobile market, highlighting how the smartphone surge has forced domestic carriers into new and sometimes precarious strategies.
Until recently, smartphone adoption across the islands grew slowly, despite the country’s long history of advanced feature phones. At the end of 2011, only 23% of handsets in Japan were smartphones, with high-spec feature phones continuing to dominate. This was largely driven by the strong influence of local mobile operators, who historically guided device makers and tightly controlled access to content, particularly mobile games.
That balance has shifted quickly. Android and iOS devices are redefining Japan’s mobile landscape, and many experts now expect feature phones to become virtually extinct in the country within a few years.
As a result, carriers are racing to adapt to the inroads made by the two global smartphone platforms. Longstanding, profitable business models—once centered on carrier-controlled content and services—are under threat. Japan’s largest carrier, NTT DoCoMo, faces particular pressure as its traditional role as a content gatekeeper is eroded.
DoCoMo’s strategy differs from some rivals: instead of partnering with Apple, it has aligned more closely with Android, aiming to preserve some influence over domestic handset makers who produce Android devices. By contrast, rival operators KDDI and SoftBank have embraced Apple’s ecosystem, accepting reduced control over content in exchange for the strong consumer demand for iPhones and iPads.
In the near term, that bet appears to be paying off for KDDI and SoftBank. DoCoMo has reported higher customer churn than its competitors, while SoftBank logged the largest net increase in mobile subscribers over the past year as users moved to acquire Apple devices.
However, DoCoMo’s position is more nuanced than it may appear. While the carrier supports Android hardware, it still wants to retain content-based revenue. To that end, DoCoMo is encouraging customers to use its own app stores and content services rather than relying solely on Google Play, hoping to preserve valuable service income.
Tellingly, iOS app revenue in Japan significantly surpasses Android revenue, even though Android devices outnumber iOS devices by roughly two to one. This contrast underscores how device market share does not directly translate into app-market earnings.
Japan’s mobile market remains highly complex, shaped by cultural preferences, long-established carrier relationships, and localized content models. These nuances suggest that operator-provided content and proprietary channels could retain unexpected popularity among certain user groups.
For now, industry observers will be watching closely to see which carrier strategies for content distribution and platform partnerships ultimately succeed in maintaining revenue and customer loyalty.
App Annie will be exhibiting at Apps World in San Francisco on 7–8 February 2013. For details about attending, please visit: http://www.apps-world.net/northamerica/