The Historic Shift: Apps > Games
Something remarkable happened in 2025 that most people missed: for the first time in mobile history, non-game app revenue surpassed gaming revenue.
According to Sensor Tower's State of Mobile 2026 report, worldwide app IAP revenue hit $85.6 billion—a stunning 21% year-over-year growth—while games grew just 1% to $81.8 billion. This isn't a temporary blip. It's a fundamental shift in how people spend money on mobile.
The question isn't whether this trend will continue. The question is: what's driving it, and how can builders capitalize on it?
The AI Factor
The answer, unsurprisingly, is AI.
AI-powered applications are transforming what's possible on mobile. Tasks that once required desktop software, professional skills, or significant time investment can now happen in seconds on your phone. Photo editing, video generation, writing assistance, code completion, language translation—all powered by AI models that get better every month.
But here's what's interesting: the most successful AI apps aren't building their own models. They're wrapping existing ones.
The "Wrapper" Opportunity
The term "AI wrapper" sometimes carries negative connotations in tech circles—as if building on top of existing AI APIs is somehow less legitimate than training your own models. This perspective fundamentally misunderstands where value is created.
Consider the facts:
- OpenAI, Anthropic, Google, and others are spending billions on model training and infrastructure. They're competing on raw capability.
- Mobile developers compete on user experience, distribution, and solving specific problems elegantly.
These are complementary, not competing, activities. The best mobile AI apps combine world-class AI capabilities with exceptional user experience, deep understanding of specific use cases, and native mobile optimization.
This is exactly what Apple did with the iPhone. They didn't invent touchscreens, ARM processors, or cellular networks. They wrapped existing technologies into an experience that felt magical. The value was in the integration, not the components.
Why Mobile, Why Now
Several factors make this moment uniquely opportune for AI-powered mobile apps:
1. Model APIs Are Commoditizing
Two years ago, accessing GPT-4 required waitlists and enterprise agreements. Today, you can integrate Claude, GPT-4, Gemini, and dozens of specialized models through simple API calls. Prices have dropped 10-100x. The barriers to building AI-powered features have essentially vanished.
2. Mobile AI Infrastructure Is Maturing
On-device models are getting smaller and faster. Apple's Core ML, Google's ML Kit, and various optimization techniques mean you can run inference locally for many use cases—reducing latency, costs, and privacy concerns.
3. Users Are Willing to Pay
The 21% growth in app revenue isn't coming from free apps with ads. It's coming from subscriptions and in-app purchases for tools that provide genuine value. Users have been trained by Netflix, Spotify, and countless SaaS tools to pay monthly for software that works.
4. Distribution Advantages
The App Store and Google Play provide distribution to billions of devices. Unlike web apps, mobile apps can leverage push notifications, home screen presence, and native capabilities to maintain engagement. AI features give users reasons to return daily.
What Makes a Great AI Wrapper App
Not all AI apps are created equal. The ones that succeed share common characteristics:
Specific Problem Focus
Generic "AI chat" apps struggle. Apps that solve specific problems—video editing, meal planning, language learning, fitness coaching—can charge premium prices and build loyal user bases. The AI is the engine, but the value is in the solution.
Native Mobile Experience
AI apps that feel like web views wrapped in a native shell will lose to apps that leverage the full power of the platform. Camera integration, on-device processing, widgets, shortcuts, system integrations—these create experiences that feel magical.
Thoughtful UX Around AI Limitations
AI models hallucinate, misunderstand context, and sometimes fail. Great AI apps design around these limitations—providing feedback mechanisms, graceful degradation, and appropriate user expectations.
Sustainable Unit Economics
AI API costs can quickly eat into margins. Successful apps carefully balance model selection, caching strategies, and pricing to ensure profitability at scale.
The Window Won't Stay Open Forever
Right now, many AI app categories are still up for grabs. The "AI video editor" space, for example, has no clear dominant player. Neither does "AI fitness coach" or "AI cooking assistant" or dozens of other niches.
This won't last. As the market matures, winners will emerge and establish network effects, brand recognition, and distribution advantages that make them nearly impossible to displace.
The developers building today will be the ones capturing value tomorrow.
Our Approach at Space Apps
At Space Apps, we're betting heavily on this thesis. Our upcoming app, XORA AI, is designed to make AI-powered video generation accessible to everyone on mobile. We're not building our own video generation models—we're building the best possible mobile experience around existing ones.
We believe the opportunity in AI-powered mobile apps is generational. The shift from games to apps as the primary revenue driver on mobile is just beginning. AI is the catalyst, and native mobile development is the differentiator.
The next great mobile apps won't just use AI. They'll be built around it from the ground up, designed for a world where intelligent assistance is the baseline expectation.
The window is open. It's time to build.