Publication

INTRODUCTION

Korea is one of the leading technology countries in the world. By some measures, Korea’s manufacturing sector is more diversified and complex than U.S. manufacturing.

In this report, we focus on one aspect of Korea’s technological strength: the App Economy, which reflects the employment of workers to develop, maintain, and support mobile applications. The global App Economy expanded rapidly during the pandemic. Individuals and businesses were suddenly dependent on the internet, their smartphones, and their mobile applications for critical daily activities like work, shopping, and communication with loved ones. The App Economy, already important, became an increasingly indispensable part of the real economy.

In Korea, the pandemic was much more controlled compared to the United States and Europe. Still, almost overnight, huge swathes of economic activity that relied on face-to-face interactions were forced into virtual mode. In Korea, time spent on mobile applications rose from 4.1 hours in 2019 to 5.0 hours in 2021, the third highest in the world.

Even as the pandemic enters a milder stage largely due to vaccines, many jobs and economic interactions are still remote, placing an increased premium on mobile communications. After a slow start because of government regulations, Korean health organizations have learned about the usefulness of telemedicine apps. Korean financial companies like Toss and Kakao Bank are increasingly doing transactions through their mobile apps. Delivery apps are also still experiencing booming business.

In Korea, as in other countries, the increased prominence of the App Economy is reflected in the growing number of jobs that required App Economy skills. We did our first report on Korea’s App Economy in 2018, using detailed data on job postings as our major tool for analysis. In this 2022 report, we update our previous estimate, finding that Korea has 516,000 App Economy jobs as of July 2022, a number that is highly competitive globally. We end with a brief discussion of policy.

MEASURING THE APP ECONOMY

As the App Economy grows in significance globally, it becomes essential to have a consistent set of App Economy job estimates so that policymakers can compare their country’s performance with that of other countries. However, official economics statistics do not provide an easy way to measure the size of the App Economy. In response, PPI developed a methodology based on a systematic analysis of online job postings. In particular, we look for job postings that call for app-related skills such as knowledge of iOS or Android. We issued our first App Economy report for the United States in 2012. Since then, this methodology has been applied to a wide variety of countries, languages, and economic environments.

Our goal is to produce a set of globally-consistent and credible estimates for App Economy employment by individual countries, by broad geographical regions, and in some cases by major cities. The ultimate objective is to be able to track the growth of the App Economy globally, and to see which countries are benefitting the most. Ideally, we should be able to link App Economy growth to policy measures implemented by governments. For this study, a worker is in the App Economy if he or she is works in:

• An information and communications technology (ICT) related job that uses App Economy skills — the ability to develop, maintain, or support mobile applications. We will call this a “core” App Economy job. Core App Economy jobs include app developers; software engineers whose work requires knowledge of mobile applications; security engineers who help keep mobile apps safe from being hacked; and help desk workers who support use of mobile apps.

• A non-ICT job (such as human resources, marketing, or sales) that supports core App Economy jobs in the same enterprise. We will call this an “indirect” App Economy job.

• A job in the local economy that is supported by the income flowing to core and indirect App Economy workers.

These “spillover” jobs include local retail and restaurant jobs, construction jobs, and all the other necessary services.

To estimate the number of core App Economy jobs, we use a multi-step procedure based on data from the universe of online job postings. Our first observation is that online job postings typically describe the skills and knowledge being sought by the employer. For example, if a job posting requires that the job candidate have experience developing apps for iOS or Android, then we can reasonably conclude that the posting refers to a core App Economy job. The methodology section at the end of the paper describes the procedure in detail.

RESULTS

Table 1 presents an estimate of App Economy jobs in Korea. We estimate that Korea has 516,000 App Economy jobs as of July 2022. This figure includes a conservative estimate of spillover jobs. Our methodology also allows us to estimate the relative share of mobile operating systems in Korea’s App Economy. We find that the iOS ecosystem includes 252,000 jobs, and the Android ecosystem includes 379,000 jobs. The two numbers sum to more than the total because many App Economy jobs belong to both ecosystems.

These figures are 23% to 25% higher than our previous 2018 estimates for Korean App Economy employment. Because of improvements in the implementation of the methodology, the number are not directly comparable. Nevertheless, this increase across the pandemic years is similar to what we see in other countries.

Table 2 compares Korea’s App Economy with the United States, Germany, and the United Kingdom, three large technologically advanced countries (we currently do not have a public estimate for China or a recent report for Japan). Korea has roughly the same number of App Economy jobs as Germany, somewhat less than the U.K., and much fewer than the U.S.

However, a better measure for comparing the App Economy of countries of different size is “App Intensity.” We define App Intensity as the number of App Economy jobs divided by the total size of employment. We see from Table 2 that Korea’s App Intensity of 1.8% is higher than the U.K., the U.S., and Germany.

Another way of assessing the strength of Korea’s App Economy is to look at the nationality of the companies who are doing well in terms of downloads and consumer spend. In 2021, measured by number of downloads, 9 out of the top 10 companies are headquartered in Korea, led by NAVER, Kakao, and SK Group. Measured by consumer spend, 8 out of the top 10 companies are Korean.

It’s useful to compare Korea with Germany’s App Economy. The two countries have roughly the same number of App Economy workers. But in Germany, only 3 out of the top 10 companies measured by downloads are headquartered in Germany, and only 2 of the top 10 by consumers spending. Five are headquartered in the United States, two are headquartered in the U.K., and one is headquartered in China.

POLICY AND CONCLUSIONS

Korea’s App Economy has entered an interesting period of development and regulation. Up to now, the Korean App Economy has been a sizable contributor to national employment. But notably, it was based on a system where much of the cost of building, maintaining, and supporting the Korean app infrastructure has been provided by non-Korean firms, Apple and Google. At the same time, these companies received a share of download fees and in-app purchases. In effect, Apple and Google were getting a financial return on investing in the Korean App economy.

Korea implemented new regulations on the Apple App Store and Google Play as of March 2022, which required Apple and Google to give developers more choices for in-app payment systems. In response, the two U.S. tech companies reduced their commission somewhat for developers who used alternative payment systems. In addition, Apple required developers to provide a separate binary for Korean iOS apps that use non-Apple payment systems. That’s one step toward a globally fragmented internet.

The group of Korean companies that monetize their apps through download fees and in-app purchases — many of which are gaming and entertainment companies — would prefer that Apple and Google charge even lower commission rates. However, there is a much larger second group et of Korean companies whose apps do not charge significant download fees or make heavy use of in-app purchases. This second group would likely prefer the current system, because they benefit from distribution and malware screening services for virtually no cost. This second group would include banks, retailers, manufacturers, providers of telemedicine services, providers of travel apps, and virtually any app connected with the physical economy.

Security and privacy concerns will also be important for policy going forward. Apple and Google follow different mobile app development and distribution strategies, with Google taking more of an open approach and Apple restricting app downloads to the App Store. Nevertheless, both companies devote huge technological resources to scanning apps uploaded to their official stores for malware. These investments have helped fuel the success of the Korean App Economy, which has been built on trust that downloaded apps will be safe. Regulators who underestimate security and privacy concerns run the risk of undercutting consumer trust in the mobile app ecosystems, and making it more difficult to use apps for key functions such as banking and health.

Finally, there is a broader issue as well. As one of the most technologically advanced countries in the world, Korean companies sell products and services globally, including cutting-edge chips, which embody large amounts of investment and intellectual capital. The question is whether Korea should be in favor of a global regulatory regime which intervenes in new technologies and significantly reduces the return on successfully-invested capital. That’s not the way to achieve global growth or national success.

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