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:
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.
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