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Is It Worth It To Build And Maintain A Mobile App?

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Is It Worth It To Build And Maintain A Mobile App?
[ Business]

If you want to make money in today’s market, you’re going to have to make a mobile app. That’s at least what it seems like when you look at financially successful apps like Angry Birds and Minecraft: Pocket Edition. As it turns out, however, these are anomalies in a market full of mobile apps that make little to no money. A new report out today says the number of apps that make nothing is only going to increase going forward.

Gartner published a report on Monday that found consumers are increasingly turning towards friends, social networks and recommendation engines to find apps. That means less consumers are browsing the Apple Appstore or Google Play looking for apps that may interest them and that means less apps are getting the exposure necessary to make money. As a result of this, Gartner predicts that only 0.01 percent of all mobile apps will be considered a financial success through 2018.

“The vast number of mobile apps may imply that mobile is a new revenue stream that will bring riches to many,” said Ken Dulaney, vice president and distinguished analyst at Gartner. “However, our analysis shows that most mobile applications are not generating profits and that many mobile apps are not designed to generate revenue, but rather are used to build brand recognition and product awareness or are just for fun. Application designers who do not recognize this may find profits elusive.”

Will you be building a mobile app in 2014? Will it be free or paid? Let us know in the comments.

Gartner notes that mobile app developers are hurting themselves as many developers now offer their apps for free. This severely limits their ability to make money as the only way to do so is through in-app transactions. That being said, app developers will be in good shape if they only want to get their name out through said free app.

“There are so many applications that are free and that will never directly generate revenue. Gartner is forecasting that, by 2017, 94.5 percent of downloads will be for free apps,” said Mr. Dulaney. “Furthermore, of paid applications, about 90 percent are downloaded less than 500 times per day and make less than $1,250 a day. This is only going to get worse in the future when there will be even greater competition, especially in successful markets.”

It’s not all gloom and doom though. Sure, mobile apps are making less money, but that doesn’t mean mobile is slowing down. In a new report from Flurry Analytics, overall mobile app usage grew by 115 percent in 2013. That signifies a healthy market for apps, but it’s even better for messaging and social apps whose usage grew by 203 percent in 2013.

Here’s the full chart:

Gartner: Mobile App Development Is Becoming Less Profitable

Flurry says the above chart makes them question whether social and messaging services are just that or if they could evolve into a platform of their own. The analytics company seems to think it’s the latter as they point to a few examples of how messaging apps can change how businesses sell products.

For instance, Xiaomi launched a new smartphone through Tencent’s WeChat with an offer to buy the new device through the service. The result was 150,000 devices sold in under 10 minutes. Another messaging app – LINE – announced in early 2013 that it had helped its gaming partners reach 100 million downloads in just three months.

So, what does this all mean? If 2014 is anything like 2013, you might want to be getting into the communications app market. There’s already plenty of competition, but there’s always a way to differentiate yourself. SnapChat proved that to be the case in 2013 when it became one of the biggest threats to Facebook.

Of course, usage does not automatically mean revenue. In other words, just because somebody is using your app doesn’t mean that you’re making any money off of it. Building a popular app is the easy part – monetization is crucial and monetizing apps is getting harder as consumers demand more apps and services to be free.

What’s a business with an eye on the app economy to do? The most obvious monetization strategy is to turn your app into a platform for advertisers. With enough users, selling ads can turn an app into a successful product. Without those users, however, you’re stuck with an app that can’t function as an ad platform. In lieu of ads, you could always just sell your app as a premium service, but paid apps rarely do well. If the Gartner report is to be believed, they won’t be doing well in the future either.

In the end, it all comes down to what you want to accomplish with your app. If your business is wanting to turn your mobile app into a revenue stream, you either have to go free or paid. Neither avenue shows much promise. You can also use mobile to supplement your core business by attracting users to your product through mobile. A free app that directs users to your products either through simple games or communication features could be an effective marketing tool.

The big takeaway from all of this is that app usage isn’t going to die down anytime soon. The potential revenue from those apps is already on the decline though. When developing an app, you will have to be mindful of both. The app economy is more competitive than any other and less than 1 percent is going to find any success. It might as well be you, right?

Do you think it’s worth your business’ time and money to develop a mobile app? Will you be developing an app in 2014? Let us know in the comments.

Image via Google Play

Is It Worth It To Build And Maintain A Mobile App?
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  • http://Agrotising.com Chris Agro

    Very interesting take on the future of mobile apps. It seems that from a marketing perspective mobile apps are now all the rage since there is clearly a rise in mobile use year after year. I would apply Jay Baer’s position – use apps for business in the form of Youtility ( http://www.convinceandconvert.com/integrated-marketing-and-media/is-youtility-the-future-of-marketing/ ). If done correctly, this approach will lead to increased awareness, brand loyalty, and revenue.

  • http://www.e-grammar.org Petr Kulaty

    “The most obvious monetization strategy is to turn your app into a platform for advertisers.”

    Do you really think that all the websites with integrated advertising systems are a financial success? No, they are not. Only the most successful websites with thousands of visitors make money.
    And it will be the same with your “most obvious monetization strategy” if everyone provides their apps for free.

  • http://404i.com Tim Brown

    It seems to me that mobile apps are much the same as web pages were at the end of the 1990s – back then people thought they could monetize web sites when the reality was very few ever did make money.

    I would suggest stopping charging for apps and use them for marketing, brand awareness etc… The idea that apps are software products like Office or Photoshop is not true any more – I think HTML5 web apps are the future and what will appear are better tools for low tech expertise to build them (remember FrontPage?).

  • http://karistech.blogspot.com benaiah

    Yes i want to develop mobile apps free and paid

  • Shane Hoevelman

    I plan to build an app as a platform for my company SOP for new hires. It will not be intended to generate revenue but rather a just a convenient and user friendly way to learn your job.

  • http://keyideasglobal.co.uk/ Krish

    Nice! article its really informative

  • http://www.Trivia4Friends.com Larry P

    Yes, we have just launched a free trivia game mobile app (www.Trivia4Friends.com) and plan to add additional paid apps in 2014 using the same interface. We are trying to apply many of the things this article points out in that we are providing a social based game app that has communication features built-in.

  • http://www.joppar.com Ashli

    I’ve had two top apps in the App Store and have been featured by Apple, Mashable, CNET, etc. and I can tell you that mobile app developers will win IF they consider the purpose of making their mobile apps.

    If you are a small indie developer and your business is mobile apps, I’d suggest not making a free app so you can actually pay your rent. You just won’t win with a free app, here’s an article about why the numbers don’t work for indie developers: http://joppar.com/should-my-app-be-free-or-paid/

    As for as brands using mobile apps to improve customer engagement, acquisition, or a tool that extends the functionality of their product/web app, you can really win big in the app store.

  • http://www.mkonnekt.com Seshu

    We always felt and still feel that most of the apps out there are built with out a proper business model/revenue model in place and hence most of them are for FREE. Even apps with multi million downloads have the problem of monetization – you would not have the million downloads if it is not for FREE (in most of the cases). So when coming up with an app, one has to answer the very fundamental question – what is that the proposed app is trying to solve (customer pain point) and what are the alternatives? Also from a business perspective we suggest that do not develop an app (for most small businesses it is just waste of resources) as your customers do not want to download an app just because they come to your restaurant/dry cleaning store every week.

  • Jason

    Let’s be real, apps are growing as the culture and demand grows for convenience. Problem is nearly every app builder is creating a free app culture, STUPID IS AS STUPID DOES!

    Ultimately app builders at the end of the day have a revenue dream of some type, no!

    Keep dreaming if this continues, it’s my thought as the demand and culture hungers now is the time to start swinging the consumer pendulum the other way for 2014 before it’s too late.

    Silly little games for free, fine and even for a small cost should be. However services that hold solid value to consumers will pay and gladly as well as other marketing they see through your app. Wake up and stop basterdizing your own dreams if you’re looking to make money at the end of the day.

    What’s $0.99 or 29.99 for a year, 2yr, 5 yr. or lifetime subscription for a service that offers the consumer incredible resources or value? Would I pay $0.99 or $29,99 for a year, 5 yr. or lifetime subscription to Waze and never look back for a TOMTOM Gps is a no brainer.

    I have been using Waze now for two years and love it, got it free and still free with no advertising ever, WOW. Questions is, if I wake up one day and there’s a message asking me to buy now as I have been cultured of the glorious FREE services, it might put a bad taste in my mouth.

    Who knows how we all respond once we are given things for free and in an instant taken away for a cost doesn’t work well in most cases!

    WAKE UP App builders, businesses! TOMTOM GPS didn’t wake up one morning and say let’s give millions of free GPS units to everyone who owns a car in the world, did they! Appa’s are products and consumer will buy, stop giving away the boat.

    Oh ya, is it free to build a professionally design custom app or do you pay for a service in one way or another to have your app out there in the cloud or on a server I ask!

    I think we know they answer, stop loosing money and start making money, Good Luck everyone!

    JL.

  • Hyperlink Infosystem

    That was a really easy and quick look at the important aspects of mobile app development scenario.

    A Mobile App Development Company will find a lot of recognition if it keeps in mind that people that aren't all that techsavy need to briefed about the different types of categories of Mobile apps that they can get developed according to the nature of their idea and budget. http://hyperlinkinfosystem.com/

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