Yes; the business of smartphone apps is a total disaster

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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.

and

..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.

and

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.

8 comments

  1. The Whole Article Contains Lots Of Truths.

    There Are So Many Apps On The Mobile Platforms That, Differentiating Yourself In Any Category Is Tougher Than Tough.

    Coupled With App Piracy, Developing General Purpose Mobile Apps For Direct Sales Would Be More Of A Hobby, Than A True Vocation.

    On Android, For Instance,You Have Really Really Good Apps Being Listed For Free, And You Just Wonder What The Motivation Of The Authors.. Is.

    Imagine Trying To Make.Money Writing Apps In Categories Like File Browsers, Web Browsers, Launchers, Keyboard Apps, Contact Management, Etc. There Are Numerous Ultra Capable Apps Existing, For Free.

    The Competition In The Apps Sector Is Probably Fiercer Than What Exists On The Hardware Front.

    Just Like In The Case Of WPS Office (Formerly Kingsoft Office) Made By The Xiaomi Folks In China, Perhaps The Motivation For App Development Has To Transcend Direct Income From The App Sales, Itself…

    You Probably Have To Write Apps To Complement Your Hardware.

    It Then Follows That You Probably Have To Be In BOTH Hardware And Software Directly (Or Through Collaboration) To Make Any Headway..

  2. “Ori bobo Ahonen yii kpe gaan..!”

    Interpreted as: This Ahonen guy’s has a correct head on his shoulders!

  3. I still think there’s money to be made developing apps for smartphones if proper research is made before going into development. Developing apps with just a minor improvement to a category that’s already saturated like file managers, keyboards and media players won’t really help much.

    Developers need to delve into uncharted territories with relatively difficult business logic behind them. It took some time for other developers to emulate what Swype did with their first gesture typing keyboard which has also seen massive improvement from them and other third party developers, while some big name developers like Swiftkey Keyboard are still struggling to get the algorithm(s) right in the gesture typing department.

    There are other areas still that can be venture into but if the idea behind any particular app is too easy to replicate, the original prime movers won’t have much time to benefit from their idea before other developers jumps in with probably better working alternatives and in some cases in a bid to pull the crowd can afford to offer such better alternatives free of charge.

    The sole reason while it is difficult to make it in app development today is because of the share number of developers in the business, fewer areas/ideas to channel development effort, development tools that lower the entry barrier greatly to the point that even people without coding skills can easily come up with apps like farting and torchlight applications to the punt that there are over 300 torchlight applications in the Apple iTunes Store. Apps like games takes serious coding techniques to realize and that’s why that segment is not bastardized, especially the graphics intensive ones.

    And yes, some of the numbers quoted and used in this analysis by Tomi include apps from non-developers making use of such simplified app development tool to knock up half-baked apps and in some cases utter rubbish that no one wants to download or use.

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