According to a recent report from Deloitte, smartphone owners’ appetite for new apps is declining with almost one third of respondents not downloading a single app in a typical month. The study which looked at users in the UK (considered to be early adopters) also indicates that almost nine in 10 smartphone owners never spend money on apps or other smartphone content.
At the same time King Digital Entertainment which owns top ranking games such as the massively successful Candy Crush Saga is experiencing a faster than expected decline in downloads whilst its other apps are failing to make up the difference.
What’s going on here? Has the app economy hit a ceiling? What can the industry do to stimulate growth? We asked the mobile community for their thoughts. Here’s what they said.
Matt Collins
Global Director of Applications and Partner Marketing
Microsoft
Matt Collins, Global Director of Applications and Partner Marketing, Microsoft
Given that apps represent more than half of the time we spend with digital media, it might be tempting to think of customers who aren’t participating in the app economy as being “wrong.” That would be a mistake.
Operators have an opportunity to talk to these consumers, especially first-time smartphone buyers who are not digital natives, about how apps improve their ownership experience. OEMs can approach older and first-timers as a substantial, untapped market that may just need a nudge in order to become app users.
Developers and brands can seize on the moment to revisit their assumptions about how best to serve a mobile audience: if older smartphone owners are slow or reluctant to discover, download and use apps, what impact would that have on other aspects of their mobile strategies, including websites, advertising, social and video?
How might they design, develop, and monetize apps differently in order to convince older consumers to engage? Transforming this segment into a growth market might just require a change in mindset to start. The results should be lucrative for those who succeed.
Silvio Kutic
Founder and CEO
Infobip
Silvio Kutic, Founder and CEO, Infobip
The app economy is so new it’s still unstable. But one thing is certain, neither smartphones nor apps are going anywhere. Smartphone penetration is growing steadily around the world, causing new products to be launched and different ways of monetising mobile content to be developed. Some monetisation techniques, in fact, are proving very successful.
The ‘freemium’ model is one of the most popular ways for developers to grow revenues, as it has the benefit of easily attracting new users. Several other models exist, however there is no one-size-fits-all approach. Success ultimately depends on the quality of content, combined with smart targeting and intelligent engagement strategies. Unfortunately, many developers forget these important steps.
What we’ve seen is that many app developers focus entirely on app development. This is essential in the start-up phase, but less so when it comes to distribution, user acquisition, engagement and retention, especially when attempting to break into the already heavily saturated major app stores. Direct distribution is no longer enough; app developers need to try something new to stimulate growth.
Fortunately alternative distribution channels are emerging, as well as innovative recommendation systems and tools that can help boost engagement. Monetisation tools now exist that work across the globe and allow developers to bring their content to new growth markets like Asia, where in-app purchases are extremely popular. App developers don’t need to handle everything from creation to monetisation themselves. By working with specialist partners developers can still find see a big return on investment, even in today’s hyper-competitive saturated app market.
Jodi Wadhwa
VP Marketing
Arxan Technologies
Jodi Wadhwa, VP Marketing, Arxan Technologies
In 2013 consumers downloaded over 83 billion mobile applications and despite this new research from Deloitte, it is still expected that by 2017 this will increase to over 200 billion downloads per year. Therefore, I think the application economy is not only thriving, but we are seeing that it’s driving new app-centric products and services across multiple industries.
In addition to innovation in B2C applications including mobile banking and payments, digital media, healthcare or gaming, mobile apps are integral to the Internet of Things ecosystem with new services in infotainment, home automation, wearable’s and many more. However, one reason for the observed decline in app downloads, paid or free, is because consumers are cautious of negative publicity on how apps may be subject to attack with personal data, unauthorised access or compromised features at risk. Freemium apps are also at risk as the no cost stimulus encourages app downloads with in-app upgrades for more functionality and content. The aspects of secure payment and delivery will be integral to this model. Paid or free, the need for the need for on-going scrutiny and maturity of the state of security in the App Economy is clear.
An unfortunate reality is that app security sometimes becomes an afterthought. As mobile applications continue to grow, and without protection they become an increasingly lucrative target for hackers.
Application revenues are in the billions and leading app developers understand that security needs to be built in from the ground up. Innovative mobile app developers are embedding self-defending and tamper resistance attributes within the app itself to regain user confidence and grow innovative services.
Charlie Faulkner
Director of Business Development
Manage
Charlie Faulkner, Director of Business Development, Manage
With the competition for app success the highest that it has ever been, major developers are turning to programmatic advertising as a first port of call to drive both user acquisitions and in app revenue. Manage.com alone generates over 70,000 installs a day for more than half of the top ten apps on iTunes and the majority of top grossing app developers on Google Play store.
Programmatic advertising involves the automated buying and selling of media opportunities on digital platforms. Through the data analytics that programmatic provides, developers can be highly sophisticated at reaching their target demographic typically through in app banner or video advertising. They can then offset the costs of user acquisition advertising against the returns from installs in a performance based model.
Rather than spending blindly across a multitude of publishers, advertisers can quickly identify where the value exists. Of particular focus is the ability to identify high value users or ‘whales’. Using sophisticated data analysis, developers can sift out publishers that drive click throughs and conversions which yield high value users. With virality key to app success, high value users also raise the likelihood of influencing and drawing interest from other target consumers.
Jim McCall
MD
The Unit
Jim McCall, Managing Director, The Unit
The explosion of apps on to the mobile scene was an event that was quite stunning to behold. Having taken a couple of decades to get used to computer technology, in contrast it has taken us just 7 years since the launch of the first iPhone, to not only get our heads around using our mobile devices, but to push the boundaries and constantly adapt them to fit into our everyday lives. Now with the launch of 4G browsing we are moving into a world where consumers are accustomed to having constant internet access. With fast speed internet connection available anywhere, London Underground has even introduced Wi-Fi in certain stations, the value of offline apps is starting to diminish and attention will eventually turn back on to web browsers.
It is no longer enough for brands to create a static app; consumers rely on real-time information to be communicated immediately. Take Starbucks as an example, they are currently trialling an app that allows consumers to pre-order their drinks and collect in-store. It has got to the stage where we expect our portable devices to replace human interaction and save us time in the process. Brands will have to move their attention to ensuring they create an all-purpose and fully-responsive site that can be deployed across multiple platforms. Whilst the style and design of the app may continue to remain, ultimately this could be the death of the app as we know it.
Cathal McGloin
CEO
FeedHenry
Cathal McGloin, CEO, FeedHenry
Phil Barnett
VP and General Manager EMEA
Good Technology
Phil Barnett, VP and General Manager EMEA, Good Technology
The ’if in doubt download it’ attitude to consumer apps is clearly on the decline. The number of smartphone users who do not download any apps has reached 31 per cent.
As we have become accustomed to how the smartphone operates in our home lives, we become more selective and resist the urge to turn to the ‘download’ button. On the flip side, the Q2 Good Mobility Index Report highlights a 20 per cent increase in enterprise app activations. Developers and businesses building in-house app stores need to learn from the consumer downturn and ensure they focus on usability. If not, they will end up in the trash can with the rest of the app one hit wonders.
Gary Calcott
Technical Marketing Manager
Progress
Gary Calcott, Technical Marketing Manager, Progress
For businesses, demand for mobile applications development has never been stronger. The increasingly mobile nature of the modern workforce means that employees are increasingly demanding the means to be productive ‘on the go’, which means that mobile applications have become more of a necessity than ever. The problem arises where the onus is on specific individuals within a department to provide the productivity-focused mobile applications that are required. As a result, bottlenecks can occur with the result that, despite the increase in demand, fewer of these mobile applications are able to be deployed. Indeed, a recent Vanson Bourne survey highlighted that more than half of all organisations see the increased mobility of their workforce as a driver for ‘mobile first’ application development. Despite this, only 22% of new applications created in-house are being built as ‘mobile first’, primarily as a result of these bottlenecks.
What’s needed is for organisations to enhance their in-house mobile application development platforms to allow more business users without niche coding skills to be able to develop their own mobile applications. By using ‘drag-and-drop’ technology, and ‘ease-of-use’ orientated user interfaces, it’ll be easier for users to develop their own productivity applications, regardless of their background.
The age of the mobile application, at least as far as business users are concerned, is far from dead. However, in order to stimulate more growth in this area it’s clear that more investment is required. By providing development platforms that can allow users to develop their own applications, instead of having to rely on ISVs, or somebody in the IT department, mobile applications can be deployed in line with demand from users.
Sean Ginevan
Director of Business Development
MobileIron
Sean Ginevan , Director of Business Development, MobileIron
Has the app economy hit the ceiling? At MobileIron, we’re seeing the opposite. We help enterprises deploy time-saving mobile apps to employees, and the demand has never been greater. Companies are starting to move beyond mobile email to issue a broad range of internally-developed and App Store Apps to employees.
What I believe we’re seeing now is that quality matters. Developers can’t hack together a simple app and expect to make millions like in the early days when there were fewer apps and thus it took less to stand out from the pack. Apps, whether designed for consumers or businesses, must provide a really great experience and actually be useful. There are certainly growth opportunities within enterprises. Mobile has the opportunity to revolutionise the way processes get executed in a business in the same way technologies like CRM, business process automation, and eCommerce did.
Most organisations are just now scratching the surface of figuring out how to make smartphones and tablets truly useful for employees, beyond e-mail. The challenges, however, are twofold: 1.) Enterprise apps have to have the same fit and polish in terms of user experience as the best consumer applications. We’ve seen from our customers that, if the app’s user experience isn’t great, the app won’t get used. 2.) Most business process-oriented apps tie to complex, and sometimes proprietary, back end systems. So an app developer needs to be able to drive a great experience that can integrate within an enterprise’s existing IT infrastructure. That creates a more daunting the development task for developers, but the good news is that enterprises are willing to pay a lot more than $.99 for it.
Craig Palli
Chief Strategy Officer
Fiksu
Craig Palli, Chief Strategy Officer, Fiksu
The sky isn’t falling: the app economy is simply evolving and maturing. Mobile usage keeps hitting new peaks – with apps leading the way. ComScore’s recent US Mobile App Report reports that the majority of all digital media consumption—52%—is now in-app. When it comes to new device shipments, mobile devices are outpacing laptops and desktops by almost a factor of 7– 2 billion to 300 million.
And app developers continue to introduce new apps: over 350,000 between May of 2013 and June of 2014, or over 900 apps per day. Increasingly, major companies are talking about how their app business is increasing: Groupon, Zillow, Walgreens, and many more. This dynamic could be part of the changing picture in mobile that some are interpreting as a slowdown.
As consumers change their usage habits away from TV, radio, and the desktop web to mobile devices, larger companies are taking notice. They’re bringing larger budgets to app development and promotion, changing the mix of app players from one dominated by startups and new ventures to one that features more large brands and established businesses alongside the startups.
While it may be rocky for some players, this kind of maturation is good for the app industry overall. It leads to better apps, more of them, and more recognized brands being represented. For many of those brands, success will be all about brand awareness and engagement – not direct spending in-app.
Justin Cooke
UK CEO
Possible
Justin Cooke, UK CEO, Possible
Many are claiming that the app gold rush is over but that’s understandable after a period of exponential growth. The reality is that we will still see 30-50% annual growth for the foreseeable future which is hardly a recession.
Where, how and who benefits from this evolution is where it gets interesting. There will undoubtedly be a consolidation of consumer interest and revenue around fewer apps (although the long-tail of niche apps will continue to thrive), we will see a shift from paid and freemium models to in-app purchases and revenue from new markets with different pricing models will also start to evolve.
The freemium model is evolving into the in-app purchase model (IAP) and there is no doubt that the IAP will rapidly become the dominant model for app commerce. The real opportunity for brands is to create and develop apps that are relevant, timely and helpful for the consumer and utilize push technology to help the consumer at that perfect intersection of time, location and decision making.
Nishat Mehta
EVP Global Partnerships
dunhumby
Nishat Mehta, Executive Vice President, Global Partnerships at dunnhumby
Before hitting the panic button over reports of the declining app economy, let’s remember these same things are being said about the greater internet – users are shopping at fewer retailers and most internet users do not pay for content. Yet, the internet economy continues to grow through e-commerce (Amazon and others), advertising (digital advertising is nearing TV spend) and subscription revenue (the New York Times has 500K+ digital subscribers).
As with most customer goods, as apps improve, they engender customer loyalty, which, by definition, results in users using fewer apps, but more heavily. Second, for the 9 in 10 smartphone owners who never spend money on smartphone content, they are still using their smartphone more than ever, but have chosen, as most internet users, to use ad-supported content. As mobile apps deliver higher CPMs, better targeting, and fantastic opportunities for native ad units, even users that never pay still benefit the app economy. Finally, with the upcoming onslaught of new hardware sensors (health, home, auto, Internet of Things, etc.), apps and app usage related to these areas will similarly explode.
That being said, app discovery remains the biggest issue holding it back. Today’s app store search algorithms are analogous to the internet search engines of the late 1990’s. Google’s search breakthrough came when they allowed pages to be ranked by how many times others linked to them. A similar crowd-sourced app discovery engine would increase app usage while increasing diversity by empowering smaller developers without large marketing budgets. If only the maker of a popular search engine had the ability to impact an app store…
In other words, Deloitte’s study confirmed that the app economy is maturing. But, I’m not ready to bet against it.
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