The US dropped to second place in terms of app revenue generation last year for the first time ever, supplanted by the new dominant player whose smartphone market is beginning to snowball, Japan.

Mobile app intelligence and metrics tracking specialist App Annie has released a detailed breakdown of the complex Japanese market, shedding some light on how difficult a nut it is for western developers to crack.  

Smartphone uptake among the Islands’ population progressed at a leisurely pace until recently, especially given the hi-tech nature of feature handsets that were ubiquitous in the country over the last decade.

Only 23% of devices were smartphones at the end of 2011, with hi-spec feature phones continuing to dominate the market. This is no surprise; given that by influencing device manufacturers and limiting access to content, mainly games, local mobile operators exert a considerable amount of control over the Japanese mobile industry.

However, this situation is changing rapidly, with Android and iOS devices reshaping the Japanese mobile landscape to such a degree that experts predict feature phones will be virtually non-existent in the country within five years.

The market is an exceptionally tough environment for western developers. Gaming is by far the largest category of demand among a user base that’s very well catered for locally. The top five publishers represent nearly a third of all app revenues in the market, and the top 20 represent over half.

Without local connections Western developers face an uphill struggle to gain anything resembling a foothold in the market. Even familiar global names such as Electronic Arts, Zynga and Rovio don’t even get a look in.

What’s more, many developers in this list are publically traded companies with the scale and resources to cover the vast amounts of ad spend required. Western firms trying to wedge their way in need an overnight hit or a hefty marketing budget.

Alternatively, some developers, such as EA, have pursued local partnerships with some of the highly influential domestic social gaming platforms like GREE, Mobage DeNA) and LINE, which can afford access to potentially millions of users.

App Annie are exhibiting at Apps World in San Francisco on 7-8 February 2013, to find out more about how you can attend, please visit: http://www.apps-world.net/northamerica/