January 28, 2021

The Economic Impact of Software Developer Kit (SDK) Releases in the iOS and Android Ecosystems

By Data Catalyst Institute

Analysis demonstrates new SDKs have positive market effects on app creation, smartphone sales, early-stage venture investment, and tech industry hiring

WASHINGTON, Jan. 28, 2021 — An analysis published by the Data Catalyst Institute (DCI) for Data Privacy Day 2021 reveals a strong connection between releases of software developer kits (SDKs) and growth in mobile ecosystems, measured at various levels. It also highlights the tremendous economic value that technology platform companies provide via the “raw materials” that software developers use to build the myriad digital tools and services that are revolutionizing our world.

This technical report is authored by Dr. Jin-Hyuk Kim, Associate Professor of Economics, University of Colorado – Boulder, Yidan Sun, Stuart School of Business, Illinois Institute of Technology (Chicago, IL), and Dr. Liad Wagman, Professor of Economics, Stuart School of Business, Illinois Institute of Technology (Chicago, IL). The report is the result of an economic and statistical analysis of an expansive dataset covering granular iOS and Android app market metrics.

“SDKs are a crucial component of mobile app ecosystems, and there are numerous SDKs provided by technology platforms that support millions of apps. Yet the market contributions of this important technology layer have received little attention from researchers, primarily due to data availability,” said Professor Wagman. “Our aim here is to take a first step towards understanding those contributions.”

The analysis utilizes a rigorous statistical framework to identify positive effects of SDK releases on app development, which in turn increase smartphone sales in both the iOS (Apple) and Android (Google) ecosystems. In addition, SDK releases appear to be associated with increases in early-stage startup funding, as well as in high-tech sector employment. Finally, the analysis demonstrates that billions of dollars in consumer surplus are generated annually from mobile app ecosystems.

Key findings include:

A one standard deviation rise in quarterly SDKs released is associated with:

An increase in the number of new apps created of more than 38% for iOS apps, and over 100% for Android apps, over the next few years from the date of such technology releases.

Increases in early-stage startup financing of almost 200% across iOS and Android platforms over the next four years.

Increases in employment in a relevant industry sector (NAICS Code 518, “Data Processing, Hosting, and Related Services”) of over 30% over the following six years.

Smartphone users directly benefit from the availability of mobile apps, to the tune of billions of dollars in consumer surplus per year:

iOS users’ annual consumer surplus is estimated to be $1.33B in the U.S., $2.85B in the five largest Western European economies (France, Germany, Italy, Spain, and the United Kingdom (“5EU”)), and $10.5B worldwide.

Android users’ annual consumer surplus is estimated to be $1.41B in the U.S., $1.14B in the 5EU, and $12.2B worldwide.

These estimations are, in a sense, lower bounds, since they do not incorporate additional consumer surplus gains from other market efficiencies apps facilitate.

“Today’s economy is rooted in the flow of data – data that companies generate for themselves, data that can be obtained from governments and other sources, and data that can be mobilized, operationalized and monetized,” said Dr. Mark Drapeau, Head of Research at the Data Catalyst Institute and Chief Research Officer at Catalyst Research, which supported the project. “This novel analysis by Drs. Kim and Wagman and their graduate student Yidan Sun is an original contribution that estimates the actual value of data flows via SDKs in terms that both businesspeople and policymakers can understand – product sales, startup funding, and job creation.

Altogether, this DCI technical report illustrates how smartphone and app ecosystems provide significant economic benefits to both consumers and broader markets around the world.

About the Data Catalyst Institute:

The Data Catalyst Institute (DCI) is a non-profit organization working to inform and shape data privacy policies that provide both meaningful protection and promote economic and social good. DCI works with governments, academics, and industry partners to realize the benefits of a data-driven world made possible by a more integrated regulatory approach. To support that integrated approach, DCI provides policymakers with empirical analysis, topical research, and most importantly, access to the small businesses directly affected by their policies.

About Catalyst Research:

Catalyst Research solves problems from a different perspective. We leverage traditional and innovative research techniques to gather and shape information, build sustainable strategies, and transform outcomes. Catalyst Research mobilizes data to drive advocacy, improve communications, and empower our clients. Data changes everything.

More Insights

Shaping the Future of Personal Finance: How the U.S. Can Learn From the UK’s Open Banking Experience

American consumers could benefit greatly from the country's upcoming open banking regulation, provided regulators learn from the UK’s open banking experience.

By Dan Morgan

Flex Economy: Research Shows Most Gig Work Supplements Other Income Sources

New research from the Mercatus Center shows that workers with app-based gig jobs make up <10% of the independent contractor workforce.

By Mark Drapeau