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Europe’s “app economy” is still growing robustly and is expected to reach $16.5 billion in 2014, but its share of the global market has fallen to 19% in 2014 from 24% in 2012, according to a new research brief published by London-based Vision Mobile.

Vision Mobile expects app revenue in European Union nations to grow to $16.5 billion this year, compared to $13 billion in 2012, which is the equivalent to a 12% annual growth rate. But the app economy’s global growth of 27% is double what the EU is seeing.

EU app economy

It’s not like Europe’s app economy is stagnant — it’s growing quite well, and some people are even having a bit of trouble keeping up with demand. But the markets in Asia are growing much faster, so if European mobile tech companies want to contribute more, they will need to focus more on Asia, according to the report.

Asia accounted for approximately three times as many smartphone sales as Europe in 2013, with a large share of sales to new users. India and China alone are expected to add over 400 million new smartphone users in 2014, according to Vision Mobile. This is the kind of momentum that fuels the app marketplace.

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Despite these challenges, the EU app economy is robust and in some ways stretched, as a shortage of developers limits potential. “Demand outstrips supply with every self-respecting CIO or brand manager commissioning their own apps,” says the report.

Some other findings of the report:

  • App contracts are big: App developers in the EU are more focused on contract development compared to developers elsewhere, says the report. It estimates that 31% generate revenues via contract development, making it the top revenue source. This indicates strength in demand for commissioned apps. The EU governments should take action to restrict talent flight and create a supportive startup environment, says the report.
  • Enterprise growth: The business and enterprise apps market is expected to grow to $58 billion by 2016. Demand for contracted apps from EU verticals is driving this activity. Businesses will play a more important role in the growth of the app economy in the region as smartphone growth slows. Vision Mobile expects this market to reach $58 billion globally by 2016. This makes the enterprise app sector more attractive for growth and development than the consumer sector.
  • Engine of job growth: The app economy contributes a total of 1 million jobs in the European Union, according to the report. It estimates that there will be 670,000 jobs directly related to the app economy in 2014, representing an increase of 26% compared to 2013. But the number of jobs is higher if “Hobbyist” and “Explorer” segments are added, which means an additional 255,000 developers.
  • Startup barriers and talent flight are big risks: The report points out that startups in the EU have higher bureaucratic and labor barriers than some other regions. The failure rate of startups is very high, and many European entrepreneurs are moving to the San Francisco Bay Area to start up or expand their business. Policymakers in the EU will need to create better tax, labor, and immigration policies to incentivize startup investment.

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