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August 27, 2014



Great Information! Many Thanks!


I had long suspected that the apps economy was skewed, but never thought it was that bad.

Regarding the "peak app" concept: there are a couple of indicators that should be straightforward to compute and throw some light on whether we have reached the peak or not.

1) Assuming you have the total number of apps N for Year and Year-1, as well as the total income I for Year and Year-1, compare the growth of income to the growth in the number of apps. A sound economy should have (Iy - Iy-1)/Iy-1 > (Ny - Ny-1)/Ny-1. Otherwise, it means that the average income is decreasing -- an ominous sign given the skewness of the statistics. Decreasing income is also a sign that a sector is entering the second half of its life-cycle.

2) The evolution of live apps is given by:

Ly = Ly-1 - Zy-1 + Ay-1

i.e. live apps at Year-1, minus apps getting abandoned and zombified, plus new apps added to the app stores.

We have Ny, and Ly = 30% of Ny.

If we have Ny-1, then simply Ay-1 = Ny - Ny-1.

We can then compare Ly and Ay-1, thus giving (Ly-1 - Zy-1) = Sy-1, or the "surviving apps", those older apps that were not abandoned by their developers. If Ay-1 is a very large compared to Sy-1, then this is a bad sign: there is a high rate of attrition of apps, and the economy maintains itself only by churning a massive number of new, but ephemeral, apps.

New Start

Is the app economy really that bad compared to something else?

There are even less companies making money from SMS. A business opportunity with SMS for a start up company, where is that? How many small companies are really making that much money with SMS? Spending on SMS advertising is not the same thing as making money with it.


@New Start:

Yes, the app economy really is that bad. If you don't have a title with some genuine demand or some good brand recognition or the ability to cross-promote from other apps with any of these properties, it's a complete waste of time to offer them. Nobody will find them in the flood of garbage that gets submitted to the app stores. My former employer which I left two years ago, thought, just by making a good product, they'd automatically make money. They failed spectacularly because they were unwilling to advertise.

In order to create awareness you have to spend money on ads. And these spendings will eat a good part of your revenue and if your product fails to become a huge hit you lose - and most developers cannot survive that. I see a good part of the app economy imploding over the next 2-3 years because the smaller outfits simply run out of money.

And here's the fun part about the term 'ecosystem': In a real thriving ecosystem everybody will benefit. But in these poison ponds all the real money gets scammed off by Apple and Google. How is that supposed to create a sustainable business model?


Premium SMS . . . 6,000 M (active users, total potential 7.1B but then illiteracy etc)

Wait... How many target users? Your older stats said that there were 5.2 Billion mobile phone handsets in use globally, in hands of 4.3 Billion unique users. By that metric the absolute cap for reach is 4,300M. It serves no value to send same message twice to same

Slight correction needed? :)


Yes, the app economy is like the web...only better. Like the web in that ANYBODY can put up a site/app. Like the web in that "getting seen" is the number one problem because EVERYBODY in the whole world is your computer.

Better than the web in that the app economy is far easier to monetize. Once you get past that "get discovered" part. Whether it's paying for apps, or the freemium or ad supported model...Apple has ushered in the age where people are paying for content. UNLIKE the web where everything is expected to be free.

Mobile is bigger than the PC centric web. Far bigger. You have to have an app strategy or just write off the 2 billion mobile users.

And don't even start with the web on mobile. Not unless you are prepared to compare how dismal the monetization is to apps. Yeah yeah...some day this and some day that and everyone will just write browser apps. That days isn't now, isn't tomorrow and may NEVER come.

Just like the web, there are FAR more uses that never show up in the revenue column. FB is a free app. None of the billions facebook makes from it's app count in the app sales column. Nor does facebook use anybody else's ad platform that would allow tallying up the revenue that way.

My bank doesn't charge for it's app. They make the app because mobile is where their customers want to be.

Same for ebay. You don't pay for the app. But the app drives sales from the mobile platform.

Same for almost any corporate app.

Mobile is the new computer. Apps are the new web.

Tomi T Ahonen

Hi b99, E, New and Rotten

B99 thanks

E - loved it!! I already told my Twitter followers about you and those formulae to come read your comment. Brilliant!

New - nothing is certain. Every venture is a gamble to some degree. But in books, movies, videogaming etc you have a 1 in 10 chance, now we have the math to see, in apps it is 1 in 100. If a given industry is not growing strongly then the odds are stacked further against you but mobile is growing massively. It is by far the fastest growing of the Trillion-dollar sized industries and has been in the past 2 decades the fastest-growing giant industry of all time. So of anything you could do, start a restaurant, launch a magazine, produce an indie moview, whatever tickles your fancy, mobile as an industry was the most lucrative opportunity in recent past, and will continue into near future.

So I've been incredibly frustrated here on my blog, for 5 years now, as I've watched the hopeless toil of the app-makers in the - waht was Rotten you called it, poison ponds haha yes, excellent term. There ARE huge opportunities in mobile, obviously. But the apps ecosystem is not it. You asked about SMS. You are actually wrong. There are hundreds of companies that have launched businesses essentially from their garage that were powered by SMS. Yes the carrier/operator takes a big cut out of premium SMS especially in markets that are not very mature (including USA) but yes, even then, it is FAR FAR easier to make money there than in apps. Good example was just now minutes ago in my TW stream that Square the payments provider has added SMS to their portfolio to send money to such American consumers who don't have their app.... Brilliant. I have thoundands of recent examples of SMS innovations from literally around the world. The beauty is that everyone knows how to use SMS and its already 'pre-installed' on everyone's phone

Rotten - thanks and that was funny! poison ponds.

Tomi Ahonen :-)



"Apps are the new web."

Are you on drugs or what?
It's clear that you don't have even the slightest clue about the whole matter.

Let's be clear: Apps are NOT the new web. Aside from a few utilities they are mostly an abomination - an extremely inefficient way to do things. Like this blog suggests and what I can confirm myself, the cost to benefit ratio of apps is bad - no, not jut bad, it's abhorrent.

The entire app market is in for some major shake-up - and once that's done, most app-makers will be gone. Period. There's just not enough money to be made here, from a purely cost-driven standpoint, the WWW is magnitudes more efficient and it's inevitably that things will gravitate back to it.

The problem with apps is obvious: You cannot target everybody, and on top of that even most of those who you could target, may not even thing about downloading your app, especially if it's a first grade space waster (like I've seen too many of.) And even if you make an app, you make one for iOS and depend on Apple's whims - then you need an Android version and have to deal with Google - but - oops! - what about the rest of the computing world, those who are still on a real PC or on some other mobile OS? You also want to target these so what do you do? Yes, right! You have a WWW website made! Thinking about it - this website can also be used by iOS and Android users, so why waste the money on creating apps that need constant maintenance and more investment, whereas with a website you only have one code base - which unlike your apps is written in a high level scripting language and doesn't have to contend with the idiosyncracies of the various mobile OSs and their ongoing changes.

It's simple economics that sooner or later will put an end to the app craze.

Of course I'm not surprised that some Apple puppet is trumpeting this nonsense, as Apple is clearly the company profiting most from apps, as Tomi's numbers clearly show.


Mobile apps have passed PC web browsing:

Rising time spent with mobile applications over the past year means that Americans now spend more time on a monthly basis with apps than they do accessing the internet from desktops, says comScore in new data. That threshold was passed for the first time in January, per the data, when Americans spent 46.6% of their total internet time with mobile apps, compared to roughly 45.1% spent accessing the internet from a desktop and the remaining 8.3% using mobile browsers.

Another article show that apps increasing and web decreasing on mobile

Another article but using the same to studies written by a VC:

Moreover, there are signs that it will only get worse. Ask any web company and they will tell you that they value app users more than web users. This is why you see so many popups and banners on mobile websites that try to get you to download apps. It is also why so many mobile websites are broken. Resources are going to app development over web development. As the mobile web UX further deteriorates, the momentum toward apps will only increase.

Henry Sinn

I think AppleTurfer and a suite of others can't take their fingers out of their ears / blinkers off their eyes...

Apps are not the path - especially if you want to sell something.

Imagine a world where you had to download an App to check something out / engage with a company, brand, offer - this would be insanity redefined. We don't. We won't.

I currently work for a company that's moved $4,5b (last year) of retail sales through its systems and Apps aren't on any radar..

The path to ongoing cash in the draw / new business is the net/web (on any device).
I've been saying it for years and the wheel is turning faster and faster..... Every day, more and more businesses are getting mobile (Web) friendly - not the other way around..

abdul muis

Hi Tomi,

Great article... as always..Thnx.

I was wondering...

"1 . . . . . Premium SMS . . . 6,000 M (active users, total potential 7.1B but then illiteracy etc)
2 . . . . . WAP . . . . . . . . . . 5,400 M
3 . . . . . MMS . . . . . . . . . . 4,900 M
4 . . . . . HTML . . . . . . . . . 4,400 M"

As far as I know only Mobile Phone Carrier or big corporate can make money from this, how can a student like Dong Nguyen ( can make money with Premium SMS, WAP, MMS, HTML. My point is, apps is NOT comparable to this SMS/WAP/MMS/HTML. You were comparing orange to apple


@abdul muis

Comparing apples and oranges is the whole point of a scientific approach: how do those fruits differ in terms of vitamins, pectin content, shelf life, seasonal availability, etc.

Same here. Tomi has been comparing monetization and profitability of apps. To (coarsely) summarize his conclusion adjusted by your comments:

1) Web/SMS: close to 100% penetration via mobile phones; most developers can develop for it; only medium to large size firms can monetize; perhaps 10% of developers/services are profitable.

2) App: about 30%-40% penetration via mobile phones; most developers can develop for it; everybody can monetize, but two giant app store owners capture 25% of monetization and 69% of the profits; of the developers/apps, only 1.3% are truly profitable.

Telecom operators act as gatekeepers for SMS and Web services similarly to Google and Apple acting as gateways to app distribution. However, you will never see two operators capturing 69% of profits in that area, leaving crumbs for developers except the 1.3% lucky ones.

The comparison shows that the app economy is so much more skewed in its monetization structure than other content selling domains that it fundamentally throws its sustainability in doubt. This is the message by Tomi.



Stop posting this nonsense. If you post some numbers, better think about them first before deriving the wrong conclusions from them.

The rise of apps for the most inane stuff is just a symptom of some bad developments in recent years. The process of fixing those is underway but not yet fully complete.

Leaving aside stuff that genuinely benefits from running in native mode because it makes certain things more flexible (e.g. social networking stuff), apps suffer from several major problems:

1. developing apps costs a lot more than developing a functional website.
2. maintenance of apps is a lot more costly
3. you get to suffer from major platform lock-in.
4. apps cost storage space on your phone that is lost for everything else.
5. you only get to offer your service to people who actively download the app (and as Tomi's numbers point out, that's a small minority of mobile users!)
6. most potential users of your service thankfully pass if they visit your website and get redirected to the app store to first download an app. Downloading apps costs time and bandwitdth, both of which tends to be conserved when not being connected via WiFi/WLAN, as most providers have a data cap on their contracts.
7. you STILL need your website to serve the platforms and customers that fall through the cracks.

How does that fit in with those strange reports you cite?
Well, actually, the numbers aren't strange, they are just meaningless in this context.
Just look at the chart of the Flurry page you linked. What kinds of apps are being used?

Well, here it is:

32% gaming
28% social networking
4% YouTube

- nothing of which has any value to a service provider that must decide whether to use apps or a web service. We can immediately discount these 64% as irrelevant as decision metric for mobile service providers. I said before, these are special cases from which you cannot derive and useful information for the general case. These are also just a handful of big players.

12% productivity and utilities

- that mostly has nothing to do with web use (like using your phone as a music player or photo viewer, etc.) Another 12% taken down

4% News

- again: Interesting for news services, but irrelevant for the general public. Plus, I wonder what news services get used here - most phones come with preinstalled ones.

14% web browsers

... and now that we have cleaned out all the noise, we are left with:

4% Entertainment (Other)
3% Other

... and it's a fraction of these 7% that may be interesting for 'other' app makers, not the inflated 86% this page trumpets. Unfortunately this chart doesn't distinguish between apps that are based on web access or just some things that are being done locally on device.

The simple truth here is not that apps outclass web browsers but that most mobile users predominantly do other things with their phone than surfing the web. That some of these services need to access the web to get their data is beyond the point.
The numbers clearly show that for any service that's not a game, not a social network, not YouTube, not a news service, - and that's the vast majority of them - it is pointless to create an app.


Thanks you for your article Tomi. What you are describing is perfectly logical and I think the app industry follows many other industries. Musical artists for example. There are a myriad of people who wants to be musical artists but only very few of them will be able to make a living doing only that. The absolute top make a fortune while a majority will only try once and then move on. Probably those who can barely keep a tone or play an instrument.

The medium quality of the apps is pretty low so which justifies your statistics even more. There must be some kind of fierce competition here otherwise it wouldn't be good for the consumers or the app industry as a whole.

Also what is obvious here is that the content providers (Apple, Google ...) are the real winners. They can make a lot of money with very little effort and their cuts are really high. I can see why Ballmer wanted to copy Apple, he just had to destroy everything else on way.

Mark Wilcox

I wrote the VisionMobile report used extensively here. Please don't butcher our numbers.

The developers who are not interested in revenue we removed are almost entirely those doing it for fun (we ask developers about their motivations too) and it's reasonable to exclude them from the app economy. The main effect they have is increasing competition and driving down prices for those who do want to make money.

When it comes to revenues, you've only counted direct revenues from app stores and in-app advertising. Those are the most popular revenue models but there are lots of other developer revenue models we track and they all work better for developers than the ones you've included. Developers who primarily aim to make direct revenue from app stores and in-app advertising are called Hunters in our segmentation and only make up 24% of all developers. That's not to say that your general thesis is entirely incorrect but you've skewed the numbers to make them even worse than they really are.

The main reason app stores are a really bad bet for making money is the winner-takes-all nature of the discovery mechanisms. You have not presented any evidence to suggest the distribution of outcomes is better for those following your preferred options of Premium SMS, MMS and WAP/HTML. Our data shows most of those targeting the mobile web (particularly if you exclude those building enterprise apps with web tech) make less than those building apps. Whilst I'm certain some people are making fantastic money from premium messaging services it's not at all clear it's a great technology to start a business around today.

abdul muis

@E. Casais

"Comparing apples and oranges is the whole point of a scientific approach: how do those fruits differ in terms of vitamins, pectin content, shelf life, seasonal availability, etc."

Good word!!!

I understand the point Tomi's trying to make here. i.e Apps rush is like Gold rush, the SMS/WEB/MMS/WAP is much greener pasture, but I think Tomi missing out on the entry barrier for apps is so low that school student like Dong Nguyen can make a great money. I know... I know... it's kind a lottery like what Tomi said..... but in the SMS/MMS/WAP, can anyone with an idea do the service really do it? How much money they need to invest for the equipment for SMS/MMS server?? Ring back tone server / SS7 server?? How much money to do the initial investment??? In Apps, at least for person like Dong Nguyen, the Flappy bird inventor, he can use a US$400 machine to do the work. A guy can create an apps from his computer from some basement, or maybe homeless. But to do what tomi's suggest the SMS/MMMS/WAP/(?RBT?) it needs to bet his house........... So, I think Tomi's doing a wrong comparison.

But Tomi's article is good, If I had a million dollar, I should invest in the better business instead of apps.


"I think the app industry follows many other industries. Musical artists for example. There are a myriad of people who wants to be musical artists but only very few of them will be able to make a living doing only that."

If the app industry behaves in a way similar to the music industry, then this only reinforces the argument that it is not self-sustaining.

There are interesting aspects in the music industry, beyond the extremely skewed reward structure (a few stars get millions, many musicians almost nothing):

1) Total sales of music (i.e. CD, vinyl, iTunes, streaming, etc) is globally diminishing (-3.9% in 2013 according to RIAA and IFPI).

2) Common wisdom has been that artists would go back to organizing concerts to make money. The problem: this is not self-sustaining either. For instance, since 2011 no festival in the UK has been able to make a profit in excess of the corporate sponsorship which it had received (i.e. without sponsors, you go bankrupt).

What it means is that music can no longer live from sales to the public, but requires sponsors, or side-activities that have nothing to do with music, to survive. For instance, in Brazil, famous bands no longer bother too much with CD and the like; they organize concerts that are actually giant fiestas where they make their profit from the sale of food, beverages, t-shirts -- and drugs.

This also seems to be the case for app developers: "sponsorship", i.e. working as subcontractor for a corporation that wants to have its own branded app, seem to be the most common way for them to make a living. This confirms the remark by Mark Wilcox that app store and in-app purchases do not work well, and therefore as such do not constitute a sustainable economic model for independent software vendors.

abdul muis


Game and music industry both fall under entertainment category.


@abdul muis

Actually, you do not need anything very special to set up a WAP or mobile Web service -- the same infrastructure as for the normal Web (i.e. Apache/PHP/MySql and a domain name) will do. There are plenty of ISP offerings for that -- but of course, the more scalable you want it, the more you pay. But you can start cheaply at something like 5€/month.

For SMS/MMS, you do not need to have an SMSC or bother with SS7. There are providers of SMS/MMS gateways to operator infrastructure. You subscribe to a certain number of SMS/MMS per month for all operators in your country of preference, and the service provider gives you the interface to send and receive messages, and manage service numbers -- transparently, without having to bother with CIMD or SMPP, or entering complex agreements with operators. It is usually more expensive than WAP/Web ISP, though.

On the whole, I already agreed with you: the barrier to entry in the app business is lower than in the SMS/Web business. It is just that the perspectives for success are much, much lower as well.

New Start

@Rotten Apple

Pretty much any business will fail without marketing or advertising. Someone may think that apps are somehow different but why should they be?


The illusion about books happens because f the publishers refusing to publish so many books. There are an incredible number of "indie" book authors who never get published and therefore never get any profits. I don't think those are included on that 1:10 figure.

if there are hundreds of companies making money from SMS it's still so many less than companies making money on the apps business. It's actually a fraction of the companies making money on the apps.

"So of anything you could do, start a restaurant, launch a magazine, produce an indie moview, whatever tickles your fancy, mobile as an industry was the most lucrative opportunity in recent past, and will continue into near future."

I was speaking about SMS in this particular example and I fail to see how making money with SMS has anything to do with that. Promoting those services can be done with SMS but it's not the same as making money with SMS. Revenues based on similar promotional apps are not included on the revenues you have about apps and when compared to SMS they shouldn't be there either.

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