China dethrones U.S. as its iOS app revenue hits record $1.7 billion in Q3

China has dethroned the U.S. to become the largest market in the world for iOS App Store revenue, earning more than $1.7 billion in the third quarter, according to market researcher App Annie. Games are the lion’s share of that revenue at 75 percent.

The U.S. had been the No. 1 iOS market since 2010. As App Annie predicted in Q1, China’s phenomenal iOS revenue growth rates have driven it to be the No. 1 iOS market by revenue well before year’s end. Not only has this proven true, but China is leading the U.S. by over 15 percent. In Q3 2016, Chinese consumers spent more than five times the amount they spent just two years prior on the iOS App Store.

Revenue growth is expected to continue, with China projected to drive the largest absolute revenue growth for any country by 2020. New revenue streams such as in-app subscriptions have generated significant growth. As consumer behavior matures, non-game revenue is expected to become a bigger proportion of the overall pie by 2020. In China, non-game apps are led by entertainment, social networking, books, photos, and videos. Those categories tripled this year.

Above: The top categories for app revenue on iOS.

Image Credit: App Annie

Entertainment apps showed the largest absolute gains after games, with video streaming apps like iQIYI, Tencent Video, and Youku leading the charge. Video streaming apps are shaking up the traditional television market by broadening their reach beyond the mobile screen. In September, iQIYI invested $23 million in smart TV brand Coocaa, a move that expands its distribution and influence into traditional television viewership. Furthermore, its investment in original content suggests that content streaming is an important piece of Baidu’s growth strategy.

As an app publisher or marketer, if China wasn’t a key priority in your app strategy, it should be now, according to App Annie. Understanding how to enter this market by learning the complexities of local infrastructure and unique cultural preferences is crucial to your app’s success. In order to succeed, publishers will need a tailored go-to-market strategy, App Annie said.

Meanwhile, App Annie said that video streaming has become huge. Both short and long videos are becoming a big part of messaging apps such as Snapchat and Live.me. In China alone, livestreaming is predicted to be a $5 billion market by the end of 2017.