The app economy: Europe’s next big source of jobs?

Thursday, 13 Feb 2014 | 7:56 AM ET

The app sector in the European Union (EU) could add 63 billion euros and nearly 5 million jobs to the economy of the 28-nation bloc by 2018, according to a new report presented in Brussels on Thursday.

Today the EU's app economy employs 1.8 million people, but this is set to rise 167 percent, to 4.8 million by 2018, a study, carried out by GIGAOM for the European Commission showed.

EU buyers and advertisers spent 6.1 billion euros ($8.34 billion) on apps in 2013, which is set to grow to 18.7 billion euros in 2018. This will be driven by spending on paid apps, which although set to decline, will be offset by in-app purchasing such as buying additional content for games.

Further consumer spending along with increased advertising and contract work could lead to 63 billion euros in annual revenue for the app sector within five years, up 260 percent from 17.5 billion euros today, , the report says.

(Read more: Can Europe compete with U.S. tech startups?)

"In the face of increasing youth unemployment, these figures give me new hope," Neelie Kroes, the EU's digital affairs commissioner said in a press release. "The app sector is one area of the digital economy where Europe can really lead."

Technology 'fragmentation'

Kroes has been pushing the digital single market in Europe over her tenure as digital affairs chief, but many still question whether Europe can compete with the U.S. technology sector.

The EU app sector has had some major successes with game developers leading the charge. Twenty eight leading EU companies created 40% of the top 100 grossing apps in the EU and U.S., with Angry Birds maker Rovio, from Finland, and Candy Crush producer King.com, from the U.K., among the top five companies.

But skills shortages and technical "fragmentation" still pose a problem to the EU's app economy, according to the report. Over a third of app developers said EU companies had difficulties competing with U.S. salaries, while a quarter said there are not enough developers.

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(Read more: App economy to get a big boost this holiday season)

In addition, the study found developers are frustrated at the slow pace at which 4G internet is being rolled out across Europe. The study also reports that developers are affected by their over-reliance on U.S. platforms such as iTunes, which are losing them revenue through cuts taken by the likes of Apple.

"The apps may be European; but the big platforms are not," Kroes said in a speech in Brussels on Thursday.

"The giants, so far, are American: Apple, Google, Facebook. Platforms on which most developers are, in practice, totally dependent. Which means that, in spite of our strength in development, our balance of trade is still negative. That's an area where Europe could still be stronger."

—By CNBC's Arjun Kharpal: Follow him on Twitter @ArjunKharpal


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