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The United States is no longer the biggest driver of revenue for the App Store.
According to mobile analytics company App Annie, over $1.7 billion in iOS revenue was generated in China in the third quarter of 2016. The majority of this revenue was attributed to games, although video streaming and entertainment apps are increasingly popular.
China’s App Store third quarter revenue means that the U.S. has lost the top spot for the first time since 2010.
The data backed up a prediction that App Annie made earlier this year that China would dethrone the U.S. as the largest market for iOS apps by the end of 2016. China is now leading the U.S. by over 15%, with Chinese consumers spending five times more in the App Store than they did two years ago, App Annie said.
And this trend is set to continue.
App Annie said China will have the largest revenue growth for any country by 2020.Games will still be the prime factor—75% of all revenue came from games in Q3 2016—but revenue from non-gaming apps will increase as consumer behavior matures.
“As we identified last quarter, games have driven the lion’s share of this growth and China’s lead in iOS games revenue has widened over the U.S. in Q3,” said App Annie. “However, the emergence of diversified revenue streams—like in-app subscriptions—have led to significant movement throughout the App Store.”
Away from games, entertainment apps were the winners in the last financial quarter in China. Indexed revenue for this category rose by 3.5 times with video streaming apps such as iQIYI, Tencent Video and Youku all increasing market share. This figure is even more impressive when you consider that global leader Netflix has all but given up on trying to crack the Chinese market, CNN reported.
Video streaming is also making inroads into social networking apps. Social networks have grown rapidly in China, which means that there is an opportunity to incorporate streaming into apps. App Annie said that live streaming is expected to be a $5 billion market in China by the end of 2017.
On a global level, entertainment apps had a successful Q3 2016.
Revenue has grown over both app stores, with the App Store (again) taking the lion’s share. Entertainment apps are second to social networking by revenue in the App Store and only trail social and communication apps in Google Play. Entertainment apps were also the second most downloaded app in the App Store in the last quarter, said App Annie.
“With revenue more than tripling across both app stores since Q3 2014, it is clear people are not only using their mobile devices to stream content but also as a common form of payment,” the report said. “This represents a significant shift from traditional broadcasting and television structures where users typically enter into a contract with a cable provider. Consumption habits have changed and mobile is truly the first screen.”
The App Store Still Doubles Google Play Revenue
Worldwide, the App Store maintained its revenue gap over the Google Play Store. According to App Annie’s data, iOS apps generate double the revenue of Android versions (around 100% more), although the Google Play Store can boast 115% more downloads.
Source: App Annie Index Market Q3 2016
The United States is the leader when it comes to combined—i.e. App Store plus Google Play—revenue, narrowly beating Japan.
In terms of downloads, the U.S. also comes out on top, but it is worth noting that nearly every other country—China and Japan excluded—opt for Android apps. The fragmentation of the Android ecosystem is the likely explanation for this, although app store revenue cannot be generated through Google Play in China.
“China earning the #1 iOS market by revenue is a huge milestone for the app ecosystem,” said App Annie. “As an app publisher or marketer, if China wasn’t a key priority in your app strategy, it should be now. Understanding how to enter this market by learning the complexities of local infrastructure and unique cultural preferences is crucial to your app’s success.”
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