Every fifth person on Earth already has a smartphone. The majority of these people live in economically developed countries. For example, people in the United States own 13 percent of all the smartphones in the world while only accounting for 4% of the global population. At the same time, India, with a population of 1.27 billion, has just 63 million smartphones, a mere 5 percent penetration.

This is changing fast. With a 50 percent annual growth rate in smartphone ownership, India is expected to overtake the States in the total number of smartphones by 2016. China already has. Many other countries — such as Russia and Brazil — are closing in. While smartphone penetration in the emerging economies has been relatively low so far, the adoption of new smartphones in these countries is significantly outpacing that of the Western markets.

A booming, cost-conscious market

How can people in relatively low income economies afford smartphones that cost hundreds of dollars? The answer is: they can’t. Device manufacturers have realized this and are shipping lower-end smartphones that can cost less than $50 unsubsidized. Competition to grab a share of these growing markets is tough and local manufacturers are doing surprisingly well. In India, local OEM-s such as Micromax and Karbonn are almost as popular as established global brands like Samsung. Even Morocco is manufacturing its own smartphone, Sapphir Concept.

Are Western app developers ready for the massive growth of smartphone users in Asia, Latin America and Africa? According to SuperDataResearch, global digital gaming revenue is estimated to reach $43 billion in 2013. 55 percent of this is already being made outside the US and the EU. With smartphone ownership exploding outside of these markets, spending is likely to follow.

However, app developers cannot expect to capture revenues from these markets simply by switching on a new country in iOS App Store or Google Play and waiting for the money to pour in. For one thing, both of these app stores are primarily credit card based, whereas only every fifth mobile phone owner in emerging markets has one.

Mobile carriers are the conduit

Mobile operators are also under pressure to find new revenue streams. Their bandwidth consumption is growing yet they are not getting much from the sale of apps and digital goods through Apple’s or Google’s app stores. This has resulted in many of them setting up shop to provide their users content on their own platforms. Mobile operators also have the luxury of being directly connected to their customers, and in many countries, they are the most trusted brand for consumers to get all kinds of mobile content, including apps. There are already dozens of alternative third party, operator and OEM Android app stores available to end-users, many of them doing very well. In China, as much as 95 percent of all app distribution happens by 3rd party, mobile operator and OEM app stores.

2014 will be a pivotal year for emerging markets — due to impressive growth in smartphone penetration, demand for digital entertainment is growing faster than ever before. Local developers — such as ‘Facebook for Africa‘ or ‘Netflix for India’ — already have a head start. For Western developers, the choice is whether to remain complacent in markets that they know well, or to join the battle for hundreds of millions of new users looking for entertainment on their freshly purchased smartphones.

About the Author

Rain has been involved in the mobile payments industry for 13 years, being one of the early pioneers while co-founding Fortumo’s parent company Mobi Solutions back in 2000. As a founder of Fortumo, Rain deals with strategy, new products and key partnerships. Rain holds an MBA in Technology Management. He is one of the founders of Garage48 Foundation, a non-profit focused on motivating young people to start their own companies. Rain shares his time between San Francisco and Estonia.

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