There is no doubt that mobile devices are getting ubiquitous. You see it when you are commuting or when at social events, a large part of those that are around you have smartphones or tablets. Suppose you are the Product Manager of a mobile app and you have to estimate (a) the size of the market in terms of devices (b) the market size in terms of potential revenues for specific countries.

Here follow 5 easy steps to answer these points.

(1) First of all you have to determine the amount of people owning a smartphone. The most common metric is smartphone penetration on total population (sum of people with smartphone/total inhabitants of a country). This info is usually public and easy to find. Spain for example has a very high penetration rate (66%), higher than Germany (51%) and the UK (64%). At first glance, Spain seems to be the country with the highest appeal.

Smartphone penetration on total population for selected EU countries (%)
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(2) The second step is to transform the percentage on the total population into real units (number of devices). Multiplying the penetration rate with the total population of each country gives you the total amount of people owning a device. If you consider the total number of devices in use Spain is less appealing than Germany (don´t forget that Germany has 80mln inhabitants).

Smartphone users for selected EU countries (mln users)

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(3) The third step is to calculate the market share for a specific operating system in each geography. You can find reliable data on http://www.thinkwithgoogle.com for the main countries in the EU and North America.

Market share of Android and IOS operating systems (% of total market)

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(4) A further step is needed to calculate the number (in units) of mobile devices using Android devices in each geography (Total smartphones multiplied with Android market share). Looking at Android only Germany is the most appealing market, followed by the UK in terms of total Android devices.
Android users in selected countries (mln users)

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(5) The last step is to determine the % of total Android users that are going to download the App – your market share (e.g. 2%). To have a proxy you can calculate the total sales your last product had you or you can estimate the total downloads of similar apps in the Google Play market (at this stage the level of rivalry is key, if you have strong competitors, having a pie in terms of market share is more difficult).

Finally once you have the potential market share you should calculate the average revenues per user – ARPU (e.g. €3 – for purchasing the app).

  • In case you have a business model based on PPC advertising you need to estimate the daily/monthly number of active users to determine actual volumes. Finally you have to estimate the click through rate (% of users that click on a link) of customers (1-2% is a good proxy).
  • If you plan to collect users data (socio-demographics), these can be valuable as well for generating your sales leads or those of a third party. To estimate this value you will need to calculate your (or third party) cost of acquistion on other campaigns and the average margin per users (to make sure you land up with a positive ROI).

In the most simple case (only a fixed fee for a download) the revenues have to be multiplied with the total Android users that you expect will download your app (your market share). For example, in Germany the app could generate >€3mln in revenues if 10% of Android users download your app.

To sum up, knowing the size of your market is key for setting expectations. In the end not planning is the beginning of failure.

However a final remark, there are other variables that have not been calculated in this example that could influence the final outcome: price elasticity, purchasing behavior and brand awareness in each country.