Tomi Ahonen has provided detailed statistics to prove what himself and a few of us have insisted on for years: despite all the hype and the proliferation of apps, the smartphone apps business is a disaster. The article is a long read, so I have taken the pains to provide a condensed version for your convenience.
Here are a few quotes from his article: The Comprehensive App Economics Blog 2014 – Yes Peak App is apt name – Sheer disaster industry with only one sector making money:
The smartphones apps business is more like a lottery. Only very rare winners emerge and they collect massive income. That distorts the average number.
..half of all app developers earn less than 400 dollars, half earn more than that. 400 dollars does not even cover the cost of the development tools and software that the app developer needs.
3.8% of smartphone app developers are able to turn some profit. Yes over 96% of smartphone app developers lose money on the project. Only 1.3% of developers have a hit product. This is essentially 10 times worse than normal hits businesses. Your chances of success are nearly as bad as 1 in 100. You are better off learning to rap or writing a book.
A quick rundown of key points:
- half of all app developers earn less than 400 dollars
- only 3.8% of smartphone app developers are able to turn some profit
- of the 3 million apps in existence, 70% of them are zombies (that’s 80% for Apple App Store)
- the smartphone apps opportunity is not like so-called ‘hits businesses’ like books, pop music, movies and video games; failure rate is much worse with apps: less than 1 in 10
- 85% of downloaded apps are deleted after one use
- the average app that doesn’t get deleted is used only 14 times per month
- most smartphone owners do not download even one app monthly
- most users binge-download apps when their smartphone is brand new and then stop
- gaming is a very healthy app category with the 10 biggest revenue-earning apps in 2013 being games
Where is the money then?
Surprise: SMS. Despite all the noise about the death of SMS, it is still a huge money spinner. Surprisingly, so is MMS. No; they are not as glamorous or as exciting, but if you are a business man looking to make money, do look in those directions.
So, let’s ditch apps; shall we?
Not exactly. That is not my message. When I point out issues, my goal is not to discourage, but to enlighten and provide information so that individuals who are interested know exactly what they are up against. That way, they can be realistic about expectations. So, do feel free to develop apps. Just don’t be ignorant of the reality on ground.
Here is what Tomi says too:
I don’t mean to stop developing your app strategy but please consider where the real money and profits are in mobile, except for games, they are not in apps.
See? Tomi isn’t out to discourage app development either.
As I have always advised too, Tomi recommends that those targeting emerging markets need to focus on Premium SMS and WAP/mobile web as primary platforms, and then java and apps following.
You might be interested in my 2013 article, How many developers really earn a living from app stores?
If you want to dive into Tomi Ahonen’s very detailed article, grab a Coke and some popcorn, and hit the link: The Comprehensive App Economics Blog 2014 – Yes Peak App is apt name – Sheer disaster industry with only one sector making money.