The Comprehensive App Economics Blog 2014 - Yes Peak App is apt name - Sheer disaster industry with only one sector making money

Welcome to the Definitive App Economics Blog. All the stats and facts. So. Did you read the news recently? Smartphone and tablet app store downloads will jump 65% from last year and pass 102 Billion in 2014. Thats 60 apps downloaded per smartphone user ie 5 apps downloaded per smartphone per month on average. Over 3 million apps have been created already and 40,000 new apps are released every month. The apps ecosystem employs 2.1 million developers globally and will make 35 Billion dollars in revenues this year. Thats up 67% from last year. Apps already are bigger than the global music industry and this year the apps economy becomes larger than total cinema box office revenues worldwide. Smartphone users now spend over 2 hours on apps every day. So isn’t this an awesome eldorado of a business opportunity? No. While all that is true, the business of smartphone apps is a total disaster. 

There is some good news. Some companies do actually make money and even profits in this struggling industry. But lets be very clear. When total developer-revenues (after Apple or Google has taken its cut) are divided by total apps in circulation, we get an average earned revenue of 5,250 US dollars per app that exists. Thats pretty pathetic when the average app development costs are about 25,000 dollars. When we remove the ‘zombie’ apps (ones that have been abandoned by their developer and aren’t updated anymore) then for currently supported ‘modern’ apps the average revenue per live app is $17,500. That sounds pretty good doesn’t it as everyone can't be a winner. Or is it?

Yes it sounds good. If you were still under the illusion that the smartphone apps opportunity is like so-called ‘hits businesses’ like books, pop music, movies and videogames - where roughly 1 in 10 titles is a hit, and by deploying a portfolio of titles, producers can play the numbers and become profitable - then it sounds promising yes. Many think smartphone apps business is like that and we hear it from time to time from so-called experts who don’t understand the mobile industry. But the real experts on smartphone apps business know now what I said from the start. It is not like the other hits businesses. The success rate is nothing near 1 in 10. The smarphones apps business is more like a lottery. Only very rare winners emerge and they collect massive income. That distorts the average number.

 

Let me illustrate with simple example. If a rural village has 100 people each earning 100 dollars a month, their average earned is 100 dollars. Then lets say one villager wins the lottery and earned now 1 million dollars. the town income is 1,010,000. Divide that by 100 and the ‘average’ income by each of the town villagers is 10,100 dollars. In reality one earned 1,000,100 and the others still earn only 100 dollars. Median is still 100 dollars meaning the mid-point. You can see where some exceptionally affluent members of such a statistical group can massively distort the math. Average is a misleading number when analysing the smartphone and tablets apps industry. It is vastly over-rating the reality.

So lets use median. Median is that person at the mid-point, literally half of all developers earn more, and half earn less than him (or her). Here is the truth. The ‘median’ developer earns a whopping 400 dollars per year out of the smartphone app-generated revenues. That includes all sources including payments from the app store (after Apple or Google has taken its cut). That includes advertising revenues. And it includes in-app purchases. Yes. Median revenue earned by a smartphone or tablet app developer out of the app itself is 400 dollars. That means literally, that 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. Thats before considering programming time used.

 

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.

 

I said when smartphone apps became the latest iHysteria six years ago that this was mostly hype and most app developers won’t be able to make money. I was right. I also said that there will be some hits that will be celebrated and they will in turn lure more sheep to the slaughter. And I was right. I have been writing occasional deep and detailed app store economics articles on this blog to try to help the industry. Last time when I did this a couple of years ago, I said games would make money. I was right. I also said then that gaming revenues would be increasingly made with virtual goods sales (now-called ‘in-app purchases’ by the industry). I was correct. And I warned that apps will not become a big advertising medium. And I was right again. I do know this industry and how it makes its money. So now its time to do the most comprehensive analysis of the 35 Billion dollar smartphone apps economy for 2014. What is the state of this industry.

And before you quarrel with me that what does Tomi know about this apps business, I wrote literally the world’s first book about apps and services for mobile (the world’s bestselling mobile industry book for several months in 2002). Then to follow that, I wrote literally the world’s first business book for the mobile data industry (worlds’s bestselling mobile industry book several months early in 2003). I am the most published author in mobile, 12 books and counting, and I am referenced by my peers in over 140 books they have written. This blog is the largest collection of free statistics on the mobile industry with numerous exclusive stats that no other analyst releases into the public domain. I do this blog totally free with no advertising and no registration and I don’t collect your data to spam you later. A decade after this blog started its still here, its not for sale. We’ve had 5 million visitors to this blog and over 40,000 comments have been left here. Its no wonder Forbes ranked me the most influential expert in the mobile industry.

 

APP ECONOMY BASE METRICS

So lets start with the big picture. This blog is analysis by my company. TomiAhonen Consulting, on smartphone apps data published into the public domain by the major analysts who report on smartphone and tablet apps data. Some of the sources include Distimo, ComScore, Vision Mobile, Statista, Mobile App Jungle, Knicket, Abi, Crispy Codes, Gartner, Strategy Analytics, Juniper, Digi Capital, Compuware etc. And of course TomiAhonen Consulting. This is how I see the size of the industry now, all data is for full year 2013 and includes both tablets and smartphones, globally:

APP ECONOMY BIG PICTURE 2013
Total apps . . . . . . . . . 3 million [TomiAhonen Consulting]
Total downloads . . . . 102 billion [Gartner]
Total smartphones . . .1.4 billion at mid-year [TomiAhonen Consulting]
Total developers . . . . 2.1 million [Vision Mobile]
Source: TomiAhonen Consulting on published industry data Aug 2014
This table may be freely shared

All numbers keep growing. The snapshot is at end of December 2013 except for the smartphone number which is half-year so we can divide with it for full year data

ACTIVE APPS 2013
Total apps . . . . . . . . . 3 million [TomiAhonen Consulting]
’Zombie apps’ . . . . . . 70% [Adjust]
Maintained live apps . 900,000
Source: TomiAhonen Consulting on published industry data Aug 2014
This table may be freely shared

There are a rapidly increasing proportion of all apps in app stores that are so-called ‘zombies’ ie they still exist but are not really alive. Their creators have abandoned them, they are no longer updated for newer operating system versions and no maintenance is done but they still lie around cluttering the crowded stores. I will be providing related analysis both of ‘total apps’ counting all including Zombies, and data based on ‘live’ apps only when Zombies are removed. That is the currently relevant number.

APP DOWNLOADS 2013
Total downloads . . . . 102 billion [Gartner]
Total apps . . . . . . . . . 3 million [TomiAhonen Consulting]
Total smartphones . . .1.4 billion at mid-year [TomiAhonen Consulting]
Downloads per app . . 34,000
’Zombie apps’ . . . . . . 70% [Adjust]
Maintained live apps . 900,000
Downloads/live app . . 113,300
Downl/smartphone . .  73
Source: TomiAhonen Consulting on published industry data Aug 2014
This table may be freely shared

The average smartphone owner downloaded 73 apps in 2013. The average app had 34,000 downloads if all apps are counted but when counting only live apps after zombies are removed, the live apps got 113,300 downloads on average. Remember, these averages are far above the median levels because of well, Angry Birds, Facebook and Skype...

SMARTPHONE APPS ECONOMICS

 

So now lets talk about the money! Revenues. What kind of money is in the industry and who gets it and how. So now lets explore those numbers...

SMARTPHONE APP REVENUES 2013
Total revenues . . . . . . 21.0 billion dollars [Strategy Analytics]
In-app Advertising . . . . 3.5 billion dollars [Juniper]
App store income . . . . 17.5 billion dollars [TomiAhonen Consulting]
Commission 30% . . . . . 5.3 billion dollars paid to Apple, Google etc [Apple, Google]
Paid out to developers . 12.3 billion dollars
Developer revenue . . .  15.8 billion dollars
Source: TomiAhonen Consulting on published industry data Aug 2014
This table may be freely shared

Revenues have grown far more gradually than most promised. The advertising revenue growth has not kept up with total app growth numbers. Apple and Google and other app store owners take their cut of course. Developers got to keep 15.8 billion dollars out of the app store economic opportunity in 2013.

SMARTPHONE APP REVENUE RATIOS 2013
Developer revenue . . 15.8 billion dollars [TomiAhonen Consulting]
Total apps . . . . . . . . . 3 million [TomiAhonen Consulting]
Total downloads . . . . 102 billion [Gartner]
Total smartphones . . .1.4 billion at mid-year [TomiAhonen Consulting]
Total developers . . . . 2.1 million [Vision Mobile]
Dev rev per app . . . . . 5,250 dollars
Dev rev per live app . . 17,500 dollars
Dev rev per downl . . . 15 cents
Dev rev per smartph . . 11.25 dollars
Dev rev per dev . . . . . . 7,500 dollars

Source: TomiAhonen Consulting on published industry data Aug 2014
This table may be freely shared

So when we remove the iTax and gTax we get revenue paid to developers. That revenue is 5,250 dollars per all apps including zombies. In terms of live apps, the developer revenues are 17,500 dollars in 2013. When we divide total developer revenues by total downloads, the average download is worth 15 cents. If we allocate the revenues by number of smartphones in use, each smartphone in use generates 11.25 dollars of developer revenues. And each developer’s cut out of the developer revenue pie on average is 7,500 dollars. As the median developer only gets 400 dollars, obviously there is a fortune then available for the few uber-rich.

SMARTPHONE USERS AND APPS

So then lets look at the smartphone user and what they do with the apps. Even as they download tons, they don’t really use all that many.

SMARTPHONE USER APP STATS 2013
Total downloads . . . . 102 billion [Gartner]
Total smartphones . . .1.4 billion at mid-year [TomiAhonen Consulting]
Downl/smartphone . .  73
Free as % of downl..... 80% [Statista]
Deleted after 1 use . . . 85% [Compuware]
Apps left to be used . . 11
Pre-installed apps . . . . 20 
Of those in use . . . . . . 10
Total apps used . . . . . . 21
Apps uses daily . . . . . . 10 [Flurry]
Daily uses per app used 0.5
Monthly use ave app . . 14 times
Source: TomiAhonen Consulting on published industry data Aug 2014
This table may be freely shared

So yes, we use Facebook many times per day. But 85% of downloaded apps are deleted after one use. Of the 11 apps that remain, and the apps on our phone that we actually use, the average app gets less than one use per day. 0.5 uses per day. Or the average app that didn’t get deleted, is used only 14 times per month. This is the average across the total smartphone user base. Serious gamers can easily use an app (game) 50 times per day...

We just heard that most smartphone owners do not download even one app monthly. Why is that if the download numbers are so big and essentially all smartphone users do download apps. Its that we binge-download apps when the smartphone is brand new. We love the new phone, we want our fave apps onto it what we had before (or if its the first smartphone, what we may have been wanting to get) and thats when we also discover some other interesting apps. That happens in the first month of ownership. Then most smartphone users stop and the phone stays like that most of the way. There may be an occasional need to download something but we don’t go back to the store just to shop. We do that only when the smartphone is new. The next time we do that, is when we get our next smartphone.

This pattern will also get a level of ‘learning’ where at the first time we do a lot of experimentation of new especially free apps. Then after a couple of newer phones, we don’t bother to download all the bloatware we got previously when we know we didn’t use those apps that much to begin with. And we settle into our couple of fave apps that we’ll install to the next smartphone. Odds are that several of our favorites are pre-installed on that smartphone already.

SMARTPHONE DEVELOPER FINANCES

So then lets look at the smartphone app developer labor force. This part of the analysis is almost exclusively based on the excellent global app developer survey by Vision Mobile. I have sorted out some of the more cryptic numbers in their report, and then applied it across the total industry metrics as in the above. I have also re-integrated the part they cut out - those developers who are not trying to making money out of the downloaded app. That on the surface may seem counter-intuitive, why then make the apps but in reality there are many who are like this. Many corporate branded apps are utilities to let you use your smartphone to do something with their tech, from car apps to hotel key apps to accessories to our phones etc. So the app is not intended to be a ‘profit center’ but rather an enabler. The owner/company/brand makes its money on the main business and the app is only an accessory to get you connected. Similarly there are many ‘hobbyist’ developers who are in it for the fun or to get the experience coding, not to try to make money. Vision Mobile removed those developers and reported on stats only on the developers who try to make money. I have now re-integrated those developers back as this is a comphrehensive survey of the economy. Their numbers are needed in any case.

THE RICH IN APPS ECONOMY 2013
Total revenues . . . . . . 21.0 billion dollars
Apple & Google tax . .  5.3 billion dollars (25%)
Top 1.3% developers . . 27,300 developers
Top 1.3 earn . . . . . . . . . 11.8 billion dollars
Top 1.3 earn . . . . . . . . . 56% of all revenues
Top 1.3 earn . . . . . . . . . 75% of developer revenues
Average per dev . . . . . . 432,700 dollars
Left for rest of devs . . . . 3.9 billion dollars (19%)
Source: TomiAhonen Consulting analysis on Vision Mobile survey Aug 2014
This table may be freely shared

MIDDLE CLASS IN APPS ECONOMY 2013
Revenues left . . . . . . . . 3.9 billion dollars
Next 2.5% developers .  52,500 developers
Next 2.5% earn . . . . . . . 2.1 billion dollars
Next 2.5% earn . . . . . . . 10% of all revenues
Next 2.5% earn . . . . . . . 14% of developer revenues
Average per dev . . . . . . 40,500 dollars
Left for rest of devs . . . . 1.8 billion dollars (9%)
Source: TomiAhonen Consulting analysis on Vision Mobile survey Aug 2014
This table may be freely shared

LABORERS IN APPS ECONOMY 2013
Revenues left . . . . . . . . 1.8 billion dollars
Next 7% developers . . . 147,500 developers
Next 7% earn . . . . . . . .  1.4 billion dollars
Next 7% earn . . . . . . . .  7% of all revenues
Next 7% earn . . . . . . . .  9% of developer revenues
Average per dev . . . . . .  9,400 dollars
Left for rest of devs . . . . 400 million dollars (2%)
Source: TomiAhonen Consulting analysis on Vision Mobile survey Aug 2014
This table may be freely shared

SLAVES IN APPS ECONOMY 2013
Revenues left . . . . . . . . 400 million dollars
Next 48% developers . . 1,029,000 developers
Next 48% earn . . . . . . .  1.4 billion dollars
Next 48% earn . . . . . . .  2% of all revenues
Next 48% earn . . . . . . .  3% of developer revenues
Average per dev . . . . . .  421 dollars
Left for rest of devs . . . . 0 million dollars (0%)
Source: TomiAhonen Consulting analysis on Vision Mobile survey Aug 2014
This table may be freely shared

HUDDLED MASSES IN APPS ECONOMY 2013
Revenues left . . . . . . . . . .  0 million dollars
Bottom 39% developers . . 819,000 developers
Bottom 39% earn . . . . . . .  0 million dollars
Bottom 39% earn . . . . . . .  0% of all revenues
Bottom 39% earn . . . . . . .  0% of developer revenues
Average per dev . . . . . . . .  0 dollars
In above numbers:
Beggars failed to earn . . . . 400,000
Hobbyists don’t care . . . . . 250,000
Branded utility app devs . . 170,000
Source: TomiAhonen Consulting analysis on Vision Mobile survey Aug 2014
This table may be freely shared

So the rich class is the 1%. They earn on average about half a million dollars from their app. There are about 27,000 app developers in that group (but remember average will be misleading metric. Median will be lower and again the hyper-millionaires will skew this with their high earning). Another coupla percent are able to survive on apps but aren’t visiting the car dealership. The vast majority, almost ‘the 99 percent’ or in reality 96% of developers do not recover the development costs of their app. The median revenue earned by developers is only 400 dollars per year.

And did you notice the iTax and gTax. Apple and Google combined slice up 25% of the total apps economy. (The reason its not 30% is advertising... developers can make some money bypassing the app store revenues). They are clearly the two biggest boys in this race. Its like in Las Vegas, the gamblers mostly lose, some win big, but the House Always Wins. This is like an unlicenced gambling operation run by the nice iFolks and gFolks for us, and poor saps run in with their wacky app ideas and 96% lose their shirts.. but the House Always Wins.

(NOTE added 3 Sept - Please note, Mark Wilcox who represents Vision Mobile, has posted a critical comment to this blog, where he argues that one should look at the picture of the apps developers from the perspective of those who actually attempt to make money rather than all app developers as a whole. He acknowledges that the theme of this blog is in line with their view but Mark says I present a picture more severe than it really is. I have of course responded to Mark in the comments as well. But his point is well made and please note, that if you go to Vision Mobile's survey data, you will get the info sliced the way he prefers. It was not my intention of this blog to focus only on a selected slice of about one quarter of all app developers but rather to provide a comprehensive global survey of the total apps economy, all apps, all platforms, all developers, all revenues, all profits and losses. Not just a slice of the developers.)

So yeah, the term ‘Peak Apps’ is quite apt. The hype and hysteria of smartphone and tablet apps is now starting to turn into a sour reality. The horrid state of most developers means that the level of app development is not sustainable. Now its not me anymore saying that, it is also what Vision Mobile said after they did their huge global developer survey and the math of developer income levels. It is also a reason why there are so many Zombie apps, the developers have just given up after they were demoralized that their app was not the next Angry Birds or Instagram or Uber.

There is definitely some use and need for apps. Most of that use is non-profitable apps, utilities and branded media apps etc. Facebook doesn’t need to make money on FB app downloads, they just want everybody to become guinea pigs onto their various weird behavior ‘studies’. Business and enterprise apps have their own niche which is far more healthy than the consumer apps space. And within consumer apps there is one area that can make money.. gaming.

So. Lets now separate the viable business part away from the junk and look at apps by type. And I will take one short view to this related topic

TABLETS ARE NOT MOBILE

So yeah, tablets. The smartphone app stores are used to sell apps to smartphones and tablets. When the iPad arrived I was among the first to point out, that a tablet is not ‘mobile’ in how we identify this industry (of cellular phones). Tablets are ultra-portable PCs. Many especially PC industry-based and US based analysts looked at tablets as ‘just being larger iPhones’ and thought a tablet is a mobile just like a smartphone. A little bit bigger smartphone. No, it looks like a larger smartphone but behaves quite differently. I was among the first to argue they were separate beasts and I used my standard test of ‘is it a mobile’ ie the ‘ringing in the pocket’ test. This same test is how we can see that a PDA is not the same device as a smartphone, neither is a Playstation Portable or an iPod Touch. They are pocketable digital gadgets but they are not ‘mobiles’. We do not carry them everywhere, we don’t sleep with them and take them to the toilet, like we do with our mobiles (smartphones, dumbphones). Ringing in the pocket test means it has to be small enough to fit into our pocket. A phablet fits in a pocket. a tablet doesn’t. And to ring there, ie to alert us anywhere, even while sitting in a speeding taxi, an iPod Touch with WiFi connection doesn’t connect continuously everywhere, but our mobile phones do.

Now increasingly that view is accepted in the tech industry and more and more experts and writers are teaching that beware, a tablet behaves differently from a smartphone. There is of course overlap but you should know how your device is used and optimize for it. The tablet is a different beast. For example Gary Schwartz in his latest book Fast Shopper Slow Store teaches us that tablets immobilize people. When we take out our tablet, we stop walking, we want to sit down, use both hands, sit at a Starbucks etc... Smartphones don’t make us stop. We can use our smartphones while we walk... So yeah. Tablets schmatlets.

Tablets are exciting for the PC industry which sees its traditional hardware sales in serious decline. The tablet came just in time to help rescue that industry. But in scale the tablet is a trivial bit of noise compared to the huge industry of mobile phones. And now we are seeing some of the first research about how the gadgets compare, out of where else Japan, the world’s leading nation in terms of mobile (all of Japan has already migrated to speeds of 3G or faster, Japan will launch 5G at the Tokyo Olympics). The just-released CIAJ consumer survey was the first to inquire about tablets as either first or second gadgets. About a third of Japanese smartphone owners carry a second device, and increasingly, they are now making a tablet that second device. But none in Japan consider the tablet the first device with the smartphone in second place. If you go out tonight, you’ll leave your tablet at home and only squeeze your mobile into some pocket of your evening outfit (or your purse). Tablets will sell more than laptops this year at about 250 million units. Smartphones growth this year alone exceeds that number! Yes, smartphones will add more than 250 million new sales this year increasing the gap between the two. Smartphones outsell tablets at roughly 5 to 1. Tablet sales will peak somewhere in the several hundred million range in some years from now. Smartphone sales will penetrate 2 billion units annually before this decade is done. This blog is about ‘mobile’ not about the PC industry. Tablets are ultra-portable PCs. I include them in the above numbers as they are included in the various stats, but now lets separate them from mobile apps and get serious.

TABLET REVENUES OUT OF APPS REVENUES
Total revenues . . . . . . . 21.0 billion dollars [Strategy Analytics]
Tablet revenue . . . . . . . 35% [Abi]
Tablet revenue . . . . . . . 5.5 billion dollars (out of developer revenues, after iTax & gTax)
Tablet apps all . . . . . . . 1.1 million [TomiAhonen Consulting]

Tablet apps live . . . . . . 315,000 [TomiAhonen Consulting]
Tablet app downloads .  35.7 billion [TomiAhonen Consulting]
Revenue smartphones .  10.2 billion dollars

Apps for smartphones .  1.9 million
Live apps smartphones . 585,000
Smartph app downl . . . . 66.3 billion [TomiAhonen Consulting]
Source: TomiAhonen Consulting on published industry data Aug 2014
This table may be freely shared

I am not going to analyze the above further, so those who are in the tablets or PC space, feel free to do a deeper analysis of the tablet apps industry. Now lets move to the far larger opportunity, smartphone apps:

APPS FOR SMARTPHONES WHEN TABLETS REMOVED

So now we get to the mobile opportunity. Tablets are good for education, for many magazine and media titles, and of course gaming etc. Mobiles are with us all the time so they are better for things we do while moving about, so for example payment related things, and alerts, and utility services like opening locks or say related to our identity, our ID cards and loyalty cards etc etc etc. And of course we will still also watch videos, play games, do our Twittering and Facebooking etc on our smartphones as well. So when the tablet apps business is removed, and we focus now only on smartphones, this is what it looks like:

SMARTPHONE APP SECTOR OUT OF APPS ECONOMY
Total apps revenues . . . . . . . 21.0 billion dollars [Strategy Analytics]
Smartphones only revenue . . 15.8 billion dollars
Revenue smartphones .  . . . . 10.2 billion dollars (developer revenue, after iTax & gTax)
Apps for smartphones . . . . . .  1.9 million
Live apps smartphones . . . . . . . 585,000 (after zombies removed)
Smartph app downl . . . . . . . 66.3 billion [TomiAhonen Consulting]
Total smartphones . . . . . . . .  1.4 billion at mid-year
Source: TomiAhonen Consulting on published industry data Aug 2014
This table may be freely shared

So yeah, these are just repeating numbers we had before, collected into one chart. Now lets do some analysis

 

SMARTPHONE APP SECTOR METRICS 2013
Developer revenue . . .  10.2 billion dollars

Live apps smartphones . 585,000
Smartph app downl . . . . 66.3 billion [TomiAhonen Consulting]
Total smartphones . . . . . 1.4 billion at mid-year [TomiAhonen Consulting]
Downloads per live app . 113,300
Downloads per smartph . 28.8
Revenue per download . . 15 cents
Source: TomiAhonen Consulting on published industry data Aug 2014
This table may be freely shared

Now lets split this up by enterprise/corporate smartphone sector and the consumer sector. Note the BYOD (Bring Your Own Device) development at the workplace makes these stats somewhat distorted but should still be reasonably good for the split out so we can then focus on the larger consumer market.

SMARTPHONE ENTERPRISE APP METRICS 2013
Developer revenue . . .  .1.1 billion dollars [TomiAhonen Consulting]

Live apps smartphones . 47,000 [TomiAhonen Consulting]
Smartph app downl . . . . 5.2 billion [TomiAhonen Consulting]
Total enterpr smartph . . . 90 million at mid-year [TomiAhonen Consulting]
Downloads per live app . 113,300
Downloads per smartph . 35.9
Revenue per live app . . . 24,500 dollars
Revenue per download . . 22 cents
Source: TomiAhonen Consulting on published industry data Aug 2014
This table may be freely shared

SMARTPHONE CONSUMER APP METRICS 2013
Developer revenue . . .  . 9.1 billion dollars

Live apps smartphones . 538,000
Smartph app downl . . . . 60.9 billion
Total consumer smartph . 1.3 billion at mid-year
Downloads per live app . 113,300
Downloads per smartph . 28.5
Revenue per live app . . . 16,900 dollars
Revenue per download . . 15 cents
Source: TomiAhonen Consulting on published industry data Aug 2014
This table may be freely shared

Now we can turn to see how those gaming revenues do, and compare to the ‘rest of consumer apps’ and now the truth becomes blatantly obvious.

SMARTPHONE GAMING APP METRICS 2013
Developer revenue . . .  . 8.2 billion dollars [Vision Mobile]

Live apps smartphones . 135,000 [Vision Mobile]
Smartph app downl . . . . 26.5 billion [Digi Capital]
Total consumer smartph . 1.3 billion at mid-year [TomiAhonen Consulting]
Downloads per live app . 197,100
Downloads per smartph . 12.4
Revenue per live app . . . 60,900 dollars
Revenue per download . . 31 cents
Source: TomiAhonen Consulting on published industry data Aug 2014
This table may be freely shared

SMARTPHONE NON-GAMING CONSUMER APP METRICS 2013
Developer revenue . . .  . 900 million dollars

Live apps smartphones . 404,000
Smartph app downl . . . . 34.5 billion
Total consumer smartph . 1.3 billion at mid-year [TomiAhonen Consulting]
Downloads per live app . 85,400
Downloads per smartph . 16.2
Revenue per live app . . .  2,300 dollars
Revenue per download . . 3 cents
Source: TomiAhonen Consulting on published industry data Aug 2014
This table may be freely shared

This is the massacre. This is how smartphone makers fail. This is the endless pit of despair. Let me put this into a carnage table so we can compare gaming apps vs non-gaming consumer apps in 2013.
 
CARNAGE TABLE: SMARTPHONE CONSUMER APPS BY TYPE 2013
Item . . . . . . . . . . . . . . . . Non-gaming apps . . . . . . . Gaming apps
Developer revenue . . .  . 900 million dollars . . . . . . 8.2 billion dollars

Live apps smartphones . 404,000 . . . . . . . . . . . . . . . 135,000
Smartph app downl . . . . 34.5 billion . . . . . . . . . . . . 26.5 billion
Downloads per live app . 51,900 . . . . . . . . . . . . . . .  119,800
Downloads per smartph . 16.2 . . . . . . . . . . . . . . . . .  12.4
Revenue per live app . . .  2,300 dollars . . . . . . . . . .  60,900
Revenue per download . . 3 cents . . . . . . . . . . . . . . .  31 cents
Source: TomiAhonen Consulting on published industry data Aug 2014
This table may be freely shared

You can see the dramatic difference. Gaming is quite a healthy app category, with plenty of profit potential. In fact the 10 biggest revenue-earning apps in 2013 were all games said App Annie. Most of the millionaires in apps are from gaming. But look at the opposite end on that table, the despair if you don’t do games or enterprise apps. Then its hopeless. 75% of apps are in this category of misery. And remember now, these are still averages, the median is always worse for these... If the median for all app developers was 400 dollars and the difference between game developers and the rest is this stark, the median income for the non-gaming developers must be under 100 dollars but I don’t have enough data to be able to calculate that at this point.

SMARTPHONE APPS INDUSTRY PROFITS

So.. Now as the real interest is not download or users or even revenues, it is profits. How much profit is there, hidden in the overall apps desolation? We do have profits. The uber-rich do make profits and I used some industry metrics of development costs and updating costs and number of developers per app created and arrived at this kind of split:

PROFITS EARNED IN SMARTPHONE APPS 2013
Apple . . . . . . . . . . . . . . . . 2.8 billion dollars (46%)

Google . . . . . . . . . . . . . . . 1.4 billion dollars (23%)
Rich 1.3% developers . . . 1.9 billion dollars (31%)
Total profit earned . . . . . . 6.1 billion dollars
NOTE: losses by rest of industry greater than 6.1 billion so overall 21 billion dollar apps ecosystem in 2013 was unprofitable
Source: TomiAhonen Consulting on published industry data Aug 2014
This table may be freely shared

So there you have it. Last year the biggest profit earned in smartphone apps space was Apple with a nice 2.8 billion dollars. Google came in second with 1.4 billion and the rich app developers split another 1.9 billion dollars in profits amongst themselves.

How do apps earn their money? It is now almost totally by the in-app purchases as I promised way back when. I called it sale of virtual goods. This is how the revenues split by type of revenue earned (across all apps, including tablets)

REVENUE SPLIT BY TYPE IN APPS ECONOMY 2013
Total revenues . . . . . . 21.0 billion dollars [Strategy Analytics]
App store income . . . . 17.5 billion dollars
Commission 30% . . . . . 5.3 billion dollars paid to Apple, Google etc
Paid out to developers . 12.3 billion dollars
In-app purchases . . . . . . 9.8 billion dollars (62% of developer revenue) [Distimo]
App purchase fees . . . . . 2.5 billion dollars (16% of developer revenue) [Distimo]
In-app Advertising . . . .  3.5 billion dollars (22% of developer revenue) [Juniper]
Developer revenue . . .  15.8 billion dollars
Source: TomiAhonen Consulting on published industry data Aug 2014
This table may be freely shared

Thats what the app store economics look like. Do you think this is an opportunity? For games, yes. But that was true long before there was an iPhone or the App Store. I’ve been using games as my primary example of what part of the apps vs web argument works best for mobile, for more than a decade now. Gaming apps are easily a ‘hits business’ and roughly speaking one in ten gaming apps is a hit. And they can be huge hits, they can easily sustain that part of the apps economy where other games will of course fail. Its like music or movies or books or, indeed videogaming. No surprise.

The rest of apps? There is some health in enterprise/corporate apps but thats a long slug and the sales cycle is long, so get some investors with deep pockets. But in the consumer space, after a handful of social networking services, beyond the gaming side, there is a barren desert. No revenues, no profits, no water, just death.

PLATFORMS FOR SMARTPHONE APPS

So then the platforms. Where should you develop? Good question. Answer is Android. Yes, iPhone too if you develop for the Industrialized World but not for the Emerging World. If you develop for the Emerging World then its Android and Java. Windows Phone is dead, Symbian is dead, bada is dead, Blackberry only lives in the enterprise. Here are the stats:

SMARTPHONE INSTALLED BASE SUMMER 2014:
Rank . . OS Platform . . . . Units . . . Market share

1 . . . . . Android . . . . . . . . 1,336 M . . . 72 %

2 . . . . . iOS . . . . . . . . . . . . . 359 M . . . 19 %

5 . . . . . Windows Phone . . . . 53 M . . . 3 %

4 . . . . . Blackberry . . . . . . . . 44 M . . . 2 %

3 . . . . . Symbian . . . . . . . . . . 41 M . . .  2 %

Others . . . . . . . . . . . . . . . . . . 10 M . . .  1 %

TOTAL Installed Base . .  1,833 M smartphones in use at end of Q2, 2014

Source: TomiAhonen Consulting Analysis 15 August 2014, based on manufacturer and industry data

This table may be freely shared

WHERE IS THE MONEY?

Mobile is the fastest-growing giant industry on the planet. Our industry hits 1.7 Trillion dollars in annual revenues this year according to Chetan Sharma and he says the golden era of mobile is only dawning now (similar to what I’ve been saying). Let me just draw your attention to two lucrative technologies, neither of which is as exciting as smartphone apps.

SMS text messaging is not dead. Its not dying. 6 Billion people on the planet use SMS text messaging today, even as the heavy users have shifted most of their messaging traffic to OTT messaging platforms like Whatsapp. Even they are not abandoning SMS. I am not suggesting you try to do person-to-person messaging. I mean using premium SMS. Premium SMS was worth 55 Billion dollars last year according to Juniper (more than twice the total revenues of smartphone apps) and is used in everything from news headlines to jokes to coupons to television voting to alerts to reminders to weblinks to security confimations. 55 Billion dollars in the ‘business’ side of SMS. Who knew? (My readers knew..). And yes, premium SMS is still growing! 6 Billion active users of SMS is of course nearly 4 times more than all smartphones in use. You can use SMS also for all sorts of activation and engagement and reminder uses with apps.

Beyond that is what I often call the super-messaging for media. MMS. What you may think of as the stupid picture-messaging feature that you of course do not use. Except that MMS is far larger than all apps revenues.. yeah. That MMS. The ‘failed’ MMS that generated 31 Billion dollars in 2011 year according to Portio and is still growing. Far more than half of MMS is now media content not pictures by consumers. Media content like what? News. Video clips of TV shows. Ads. Movie trailers. Jokes. Offers. Tickets. So yeah. 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. MMS works on over 85% of all phones in use on the planet, well past 3 times more than all smartphones in use. Here is the table putting the various platforms into context:

MOBILE DATA PLATFORMS SUMMER 2014
Rank . . Platform . . . . Units . . . Market share
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
5 . . . . . Java . . . . . . . . . . . 3,900 M
6 . . . . . Android . . . . . . . . 1,336 M

7 . . . . . iOS . . . . . . . . . . . . . 359 M
8 . . . . . Tablets (all OS) . . . 275 M

9 . . . . . Windows Phone . . . . 53 M

10 . . . . Blackberry . . . . . . . . 44 M

11 . . . . Symbian . . . . . . . . . . 41 M

Source: TomiAhonen Consulting Analysis 15 August 2014, based on manufacturer and industry data

This table may be freely shared

If you develop for the Emerging World markets, you do Premium SMS, WAP as your primary platforms. You add Java, HTML and Android as the specialized premium services and thats it. Remember about a quarter of phones in the region are second-hand phones ie older premium and mid-range Nokias and Samsungs.

If you develop for the rich Industrialized World, you do Android and iPhone. You also add Premium SMS, MMS and HTML. Your premium effort then goes to the advanced side in Augmented Reality, NFC etc.

 

Windows Phone, Symbian and bada have died. Blackberry only lives now in the enterprise sector and is sinking even there.

Yes, the hype stage of smartphone apps is starting to be over and we are approximately at ‘peak app’ point in time, soon the new production of apps will stall and settle and perhaps even decline. And many who now do apps development will tire of the chore and move on. There are far easier ways to make money in mobile than apps.


ADDENDUM 3 SEPTEMBER

As I return from vacation I found over 60 comments and very lively and detailed discussion it he comments thread. In it some argued that its not possible to use SMS for such services as Uber or Facebook or Twitter etc. I understand this view but it is not based on facts. Pakistan's most used social network is called SMSall which has over 10 million users and mimicks Facebook and Twitter functionality from likes to hashtags. Like Facebook and Twitter, SMSall in Pakistan is free to regular users on 'normal' volume of social media activity (typical for say a family user or a student). It is not primarily funded by advertising, but it pays for SMS traffic to the networks - it operates on all Pakistani networks and works obviously on all phones not just smartphones. Because every message is paid for by SMSall, the carriers/operators love it. The service was not launched by a big media brand, it was launched by a couple of smart university students and its launch was very literally a 'garage' start-up business. Its now expanding abroad.

Same for just about any major apps-based consumer idea, it can be done on the mobile web or often even with MMS or SMS. Look at Uber. Then go to India and see what is Autoraja or Autowale or mGaadi. They are all Uber clones but all done with SMS. This is not limited to the Emerging World, just last week we heard that Square is now adding SMS functionality to its USA based mobile payments platform, so that American Square users can send money to those Americans who don't use Square or don't even have a smartphone yet (one third of US mobile phone users). This is what Peggy Anne Salz was just teaching in her latest video and book about how smartphone app developers can build better engagement with their audiences - by using SMS. I totally undrestand that the knee-jerk reaction to Tomi saying 'SMS' is to respond that you can't do Facebook on SMS or you can't do Uber on SMS or you can't send money via SMS etc. That is simply not true. My mission here on this blog is not to perpetuate myths but rather to expose the facts and try to help my readers to find the best chances of success in mobile. Its a rough enough game as it is, without taking the most difficult path. MMS alone is twice as big in revenues than total smartphone apps industry globally, and MMS works on 3x more phones than the bestselling smartphone app platform, Android. And SMS, not total person-to-person SMS, just premium SMS alone (media content etc via SMS) is worth more than 4 times the total global smartphone apps revenues and reaches 5 times larger installed base of devices than all smartphones in use worldwide. Can you understand why I mention the reailty of SMS or MMS or hte other major platforms when people push the hype of smartphone apps.


All of the tables and stats in this story may be freely shared and used in any way you want including creating tables and infographics, quoting in print, using in slides etc. Please mention this blog and link to this article if you write about these stats somewhere online.

For those who want deeper data on handset industry my TomiAhonen Phone Book statistical volume is updated every 2 years in the summer. the last edition was 2012, the new 2014 edition is coming soon. If you buy the 2012 edition now, you will receive both for the same low price, the 2012 edition immediately and the 2014 edition as it is released in some weeks from now. To see what kind of info it contains, see this link TomiAhonen Phone Book.

Comments

[David Mercer]

And the gaming app numbers (on tablet and smartphone) are skewed even more because of the sheer magnitude of number 1, Minecraft. Tens of millions of installs at US$7 a pop skews the averages a lot. It also proves that you can make your money in games by charging up front rather than with in-app purchases if its something people really want to play.

[AppleTurfer]

Mobile apps are the new web. Every type of web-on-pc use case, you have a corresponding mobile app use case...and even more due to...MOBILE.

So, you can try your hand at creating a money making website ala EBay, Amazon, Facebook. It's very difficult and a few companies made billions. Far and away most made no money at all. Same with apps.

You can use the web to make corporate apps that run in a browser. You can do this both as a commercial web developer...or as internal corporate developer. Same with apps. The money for this use case is vast, and uncounted by app store or add revenue or in app purchasing metrics. Want to make money as a web developer...you work as an employee of a corporation or an employee of a company that makes and sell such web sites. Same with apps.

You can do all manner of hobby, vanity projects on the web. Put up a blog. Put up a home page. Build your own solution to a problem that a handful of people might use. You can't make money this way...but that's not why you do it. Same with apps.

You can be extending your brand or support to customers via web sites. You are a bank, you are an advertising firm, any company that is building a relationship with it's customers via the web. Same with apps. These apps are given out for free and have huge financial benefits to the companies that create them, but they don't appear in any of the app revenue metrics.

There is nothing different from web sites and mobile apps when it comes to "the likelihood you can make lots of money". You can even make web apps that work on mobile phones. But the metrics are clear. ON MOBILE....it's APPS that rule. By a country mile.

Before you buy into the ludicrous analysis Tomi just put forward....consider whether you think it ever mattered to build for the internet. And they whole "mobile app vs. mobile web site" is NOT A FACTOR as it relates to this analysis by Tomi. There is nothing in his analysis to say "if you build a mobile web app, all the stuff I said about how there is no money in apps goes away". No, you are stuck with "don't build anything for smartphones at all, not apps, not websites". The only industry worth your time is SMS/MMS.

[RottenApple]

@Baron95:

It'd be nice if you a) quit your American tunnel vision and b) wouldn't try to distort the facts.
So...

"Would Angry Birds if made as a flash Web Page game make more money than as an App?"

Games are not made as websites, neither on PCs nor on consoles, so logically the same holds true on mobile. The entire idea of marketing a game wouldn't fly as a web site so they are hardly an indicator here.

"Would Spotify make as much money from mobile if it was Web only and no App?"

Depends entirely on the service's quality. But this also is an app on desktop - so again wrong use case!

"Would GoPro sell as many cameras if it did not have a GoPro app to control it, and instead just had a Web Site?"

Third bad use case. Again, we are clearly with a 'utility' app that needs to run locally to do its work well (and guess what: so it does on desktop PCs!)

"Apps are a step change in usability and engagement on a mobile device, on a tablet, and yes, increasingly on the PC - see Apple Mac App Store and Microsoft Windows 8 Apps."

Indeed. I am not questioning this part. But the reality is, many apps on mobile are just equivalent to software on PC, not to websites, and that's perfectly legitimate.
What I criticise is AppleTurfer's nonsense about apps being the 'new web' which clearly shows a fundamental lack of understanding between a web site and native software. That distinction has always been there and will never go away, it's different solutions for different use cases - just some idiot journalists don't seem to get it and plant such insane ideas in some people's heads.

"Most independent app developers don't make money the same way as most writers don't make money, most Web sites don't make money, most painters don't make money, most music bands don't make money, most Internet videos don't make money, etc."

Also, most stuff you mention here is not SUPPOSED to make money, again you are missing the criticism. What has been said is that the chance of making money by selling apps for the purpose of making money is extremely slim, to make a living off it even slimmer - and some people still promote this as a future gold-mine.

"We live in a "few winners take most economy", and in some areas it is "winners take all". Only Apple and Samsung make money on mobile handsets. Only Google and Microsoft make money on search. Only Coke and Pepsi make money on soft drinks. The top 20 Hollywood movies make over 95% of the industry's profits every year. The top 9 banks in the world make over 90% of the profits. Less than 0.001% of basketball players makes money, Etc.
"Nothing here in this article is remarkable. It is basically arguing that you shouldn't write apps because most don't make money. Well, then no one should sing, paint, write, make movies, create web sites, etc either."

Yeah, yeah, blah, blah, blah. And what does that have to do with Tomi's analysis? It just confirms everything he said, the thing is, he's one of the first to spell it out this clearly while some idiots (one even here on this blog!) unquestionably praise the viability of apps as some piece of salvation.

BTW, most of the things you list are art. Art is mostly made for the joy of making it, not for profit. If someone can make money off art, even better, but I guess no artist will take that for granted.
As for the rest: Sure web designers make money, at least the professional ones, that's their job after all, let's ignore hobbyist web sites here that just exist for private reasons. Those are never supposed to make money.

But now we come to the most glaring difference to apps:

Most apps that are SUPPOSED to make money, don't do it! That means, most developers who hope to make a living off making apps, DON'T!
Of course those, who do it as a paid job for others, can make a living off it, but look at Tomi's numbers: They are a small minority among app developers! (That's 170000 paid devs, 80000 profitable ones and 1.4 million who thought apps were a viable business and failed completely. That's the real problem. No, it's not surprising that this happens but it is surprising that the public awareness is so low.

@AppleTurfer:

"Mobile apps are the new web. Every type of web-on-pc use case, you have a corresponding mobile app use case...and even more due to...MOBILE."

No, NO, NOOO!!!

This bullshit makes my head hurt, sorry.
No, apps are not the new web, only some clueless tech-illiterate trying to push an agenda would claim that. Even Baron95 could only produce use cases where an app makes sense, that translate 1:1 to desktop PCs. And that is fine, since the smartphone is a pocket computer, it sure should be usable as one.
But apps cannot be the new web because their development is infinitely more costly across their entire lifetime. So making an app, just for the sake of making an app won't help any business, it will only cost money.

You better ask yourself what's the purpose of an app. And no, it cannot and should not be to remove the mobile web from the equation.

Oh, and BTW, I *AM* making money from developing apps - but by now I know the certain failure cases - even if I get them as contract work. I won't complain as ling as I get paid but with these corporate customers you have to be prepared for them to act up once they realize that an app cannot give them what they really want and refuse to pay. I've seen it happen more than once. They give us a crappy concept and expect it to be turned into magic. And you know what? Many of these apps get assembled from a toolbox because they do not contain any sophisticated content. But even with the toolbox, maintenance is far, far more work intensive than a website (mostly thanks to app store submission guidelines), without adding any benefit whatsoever, and once the customers realize this - guess what - they cancel their apps and improve their web presentation.

So:

If you got a compelling service that would benefit from some accompanying software that exceeds the capabilities of a web site - yes, an app is not only fine, it's a fundamental requirement - but never dare to alienate the desktop users and leave them out. They want their app, too! And make sure you got some competent developers, of course - they don't come cheap!

If you want some interactive gimmick app to promote your product, you will make some developers very happy by paying them, but make damn well sure that it presents your product well and gives the user at least something that may be superficially useful.

If all you want an app for is because 'apps are the new mobile web' you already have failed to understand what apps should be about, this is a certain fail case that's going to alienate users by being an uncomfortable crutch. Such apps have no inherent use that may tie users to them.

But still, we already see on PCs that some use cases that were formerly strictly local (like word processing, spreadsheets and other office work) are moved into the cloud, something that would have been laughed at 10 years ago, so what makes you think that this won't happen on mobile? In the end economics will prevail - and if they tell that for the same quality of service a web site only costs 10% of ongoing maintenance work compared to an app, a web site it will be!
And I consider these 10% realistic - if not even too high. For ongoing maintenance the cost of a web site will be far lower than these 10%.
With a web site, if you need a minor change you task a web dev to make the change, test it locally and push it to the server, that's a work of a several minutes to a few hours and it's done.
Whereas an app needs to be tested thorougly on a local device, then needs to be checked for altered submission guidelines, then needs to be submitted to the app store, and a few days/weeks later it'll go online (provided that it doesn't fail the submission process) - but wait! - there's another catch! You now have made a change to one platform, say iOS, you now need to do the same shit to your Android version - and your Windows Phone version - and (if you target desktop as well) the Windows desktop version - and the Mac version. Instead of investing a few minutes/hours, we are now talking several WEEKS! Making app submissions is a nightmare if you have multiple targets, it costs endless amounts of time and nerves to get through it. Been there, done that all, it's really no fun and it's a first grade time killer to be locked in submission hell for a single release.

"But the metrics are clear. ON MOBILE....it's APPS that rule. By a country mile."

Guess what: On desktop it's the same, most time is spent outside the web browser. But just like on mobile you have to lump everything together to get these results, INCLUDING all non-web use. See, I have taken those numbers apart in a previous post which clearly PROVE that, if you discount those apps that present a clear offline use case or some special service, your claim is simply wrong. Apps are not being used in place of a web service but as a substitute of equivalent software on a real desktop PC, you just derive the completely wrong conclusion from it - but my guess it that was the whole point of these articles.

[Louis]

1. I don't really understand the point of this analysis. It's sort of like saying that the average bakery makes more profit than the average app, so you should practice your sourdough recipe. This may well be true, but there's no technical content to the argument, and it's an artifact of survivorship bias. The average web page is never read by anybody either.

The point of apps is that they enable scenarios that have been proven to soak up user attention more than directly competing technologies. Anybody who wants to go against this has to first realize they are giving up on most of the market before they start.

2. In the recent comments, there seems to be some technical confusion about what is important in a platform. In reality, what's important is that an acceptable experience is technically possible and that enough users are on it. When the minimum acceptable quality is going up rapidly (as is the case right now for smartphones), programmer effort isn't the constraining factor.

So, sure, HTML5 lets you create apps from four years ago more easily. This won't be relevant until nothing interesting has happened for a few years. In the meantime, people who say that "all you need" is HTML5 and "a little CSS" just sound a little bizarre.

[New Start]

The problem with Tomi's analysis is that the value of the contract work is not included. That is all some good money for the developers and it's also some serious money. It can well be worth more than the revenues Google and Apple generate through the app stores.

[E.Casais]

@New Start

This is very true: there is real money to be made as subcontractors to develop apps for large corporations or State entities (where I am it looks as if this is how developers involved in apps make ends meet -- not by selling apps).

But this can, in no way, be included in the app "ecosystem": this is good old software services and consultancy business, and money flows accrue to that part of the IT economy.

[AppleTurfer]

Corporate apps are indeed part of the ecosystem. Companies will pay hundreds of thousands (perhaps millions) for service enabled by mobile app I'm involved in. Not one penny counts as app sales, ad sales or in-app purchase. Pays for a good living for the app developers and everyone else involved. And the availability of this product and the many thousands like it are part of the powerful ecosystem of Apple and Android.

[AppleTurfer]

Mobile apps are the new web. If the engagement of mobile apps crushing the mobile web doesn't convince you...how about considering the top companies that make money on the web. Google, Facebook, Amazon, Ebay, Skype.

Everyone of them made billions from PC web sites. All of them have apps on mobile as the PRIMARY mobile phone experience. Facebook famously tried to not depend on mobile apps, but had to reverse course when they couldn't get the customer experience with web apps that they could with native mobile apps.

All of these companies were STEEPED in the web. Made their many billions on the web. None of them think that the mobile web is the primary smart phone interface. All have native apps.

That's how you ALREADY have mobile APPS being used more than the PC internet. Because the smartphone is the computer, and apps are the new web.

[Per "wertigon" Ekström]

AppleTurfer: You are missing the point.

You are looking at the star players and say "These have apps, so apps is the new future". What you fail to realise is that none of these companies have their income tied to their app. Very few developers actually turn a profit on their app. In fact, about 2.5% of ALL apps turn a profit - the rest are unprofitable. Therefore, the app market will implode, it's but a matter of time.

Many apps also do exactly the same thing as a webpage would have. Where I live I have an app installed that keeps track of local collective traffic (buses, trains etc). The interface could be just as easily developed in HTML5 as an App, but they chose the App because that was the "new cool thing".

There are some apps, particularly games, banking apps, and utility apps, where having an app is critical. But most other applications? Might as well use a webpage.

[E.Casais]

@AppleTurfer

"Corporate apps are indeed part of the ecosystem."

Corporate apps serve as front-end to internal systems of the firm, e.g. an ERP, a database, or a transaction monitor. Do we also count the costs of developing such apps as part of the SAP, Oracle or IBM ecosystem? Is there any method to decompose income statistics into their constituent parts so to accrue them to each individual sub-ecosystem?

No.

Developing bespoke software that has no economic existence of its own and integrating it into back-end systems is part of the general IT service business. It is relevant for the Apple, Google or Blackberry _platform_ ecosystems, just not the app economy as such. It is the same distinction made between packaged software and bespoke programs; you simply do not aggregate the two to compute some kind of general sales amount or profitability of software.

And to be complete: when people talk about the "Web economy", I just do not think that this all-encompassing term makes much sense either.

[AppleTurfer]

@Per - the lengths people will go to to avoid admitting the obvious....apps are the new web. It doesn't matter WHY. It doesn't matter if YOU think web technologies are good enough or better.

The fact that these companies have a business that isn't about "the app" is OUR point. Yes there is Uber and Snapchat and countless others making big money because they have an app. This is that survival of the fittest, only a few make it really big that Tomi is trying to distract you with. Apps are the front end, the user experience on mobile for ALL manner of businesses that have nothing to do with selling the app itself.

On the PC, these same companies use web technologies. On mobile, they use APPS....far and away more than the mobile web. They aren't bothered by Apple/Google's cut of app sales because the app isn't how they monetize their business.

I've made a career out of corporate web development (well, I started before the web). I never once made a single dollar making a business out of a website ala Google, EBay or FB. The web was simply a tool to facilitate my employer's/customer's real business. The "millions of mobile developers" - far and away most of them are doing "work for salary/hire" just like I did on web and do on mobile. But on mobile, the tool of choice -- far and away -- is native iOS and Android apps.

The smartphone is the new computer and apps are the web.

[RottenApple]

@AppleTurfer:

Sorry, my head just hurts.
Who is paying you for writing this crap? Who is 'WE'?

So, from your post I get the following: People like YOU who are heavily invested in the whole thing advise others to use apps instead of the web - not because apps are better but because apps are 'the thing'. Obviously no reflection about the solution's viability is going into the decision making, just that moronic 'we need an app because apps are the new web' mantra. The only problem is: There is no logic behind it, just some short-lived coolness factor you can project. Pity the fools that fall for it.

Well, the app craze will die eventually (due to the cost factor I already mentioned earlier this is inevitable), the web won't - and people like you will look like fools.

[Tumbleweed]

>>>

Yeh they said that about Rock n Roll as well. Its still here.

ANyway, is your entire argument simply that apps cost too much? Thats it ? Because thats pretty weak.

Look what it used to cost to get a record out. Or have a book published? In the 1960;s you could have argued that books have no future. Now its close to free to publish a book. What happens when apps are just as easy to code as a web page? Or only (pick your metric - 3x or 2x or 1.5x or the same?)

Also technology will lower the cost of building apps, and there is the whole 3rd world thing (enabled by the web), I pay some smart coders in Brazil or India or wherever to code it for 10% or less what it costs in the west. If its a hit then I can pay more to expand it, if not no harm done. And software technology makes it easier, look at Swift for Apple, its only a matter of time before Google copy that, there will be other frameworks that make it easier, faster cheaper.

[AppleTurfer]

The "we" are those of use who've poked hole in the ludicrous notion Tomi has put forward that 1 in a million app developers make money while 1/10 of everybody in other businesses do. That is one serious heaping stinking pile of dung he foisted off as analysis.

And no, I could care less what anybody here choose to develop for - web or apps. But as this blog is about unit share -- the app ecosystem issue is relevant. It's not just about "is it a good business to invest your time hoping to create a hit money making app".

Take the recent IBM/Apple partnership. IBM has committed to creating 100 vertical industry apps and put the weight of it's 100,000 consultants behind taking them to market. You think the clients that purchase these apps and consulting services are going to switch platform from the iPhone to Tizen/Sailfish/Blackberry at the drop of a hat to shave a hundred or so off the price of the handset/tablet?

Both the Android and iOS ecosystems have reached a level of both being self sustaining and a barrier to entry for anybody else trying to break in. Just ask Msft.

It's true that on the desktop, web technologies had gone a long way to making the OS irrelevant. It didn't hurt that 90+% of PC's were on windows so that when you did need to make apps, it was for one primary platform. But, linux and Mac greatly benefitted from the move to web apps as the main platform.

Who knows...maybe in a future far enough away that we can only speculate...web apps will again take over. But that's not now, and it's not in the near future. We started with web apps (you know, the original iPhone) and then MOVED to native apps. For many and various reasons.

And now it is an app world.

[RottenApple]

@Tumbleweed:

Re.: cost of apps.

Sorry, but you are wrong on all accounts. There's several factors that will never make app development equal costs of web sites. None of them have anything to do with actuall programming costs but with the basics of how apps get deployed vs. how web sites get deployed:

1. You need far, far more thorough testing to ensure that an app works properly. Don't and you risk submission failure.
2. The submission process itself is time consuming, you can't just do a quick update or a quick bugfix, no - it all needs to go through the submission bottleneck. Preparing apps for submission also costs time.

None of these apply to the web. You can just quickly update your script, do some quick checks that it all works and roll it out.
And should some error occur, just do a quick rollback.

@AppleTurfer:

In all these vague reports, there's always one important thing missing: What's the purpose of an app?
If the purpose is to replicate the functionality of a native PC program, no problem, that's all fine and legit. This is just normal and uses a computer for actual computing, just like on PCs.

However, if the purpose of an app is to replicate the functionality of a web site, I have to say that things are going very, very wrong here. This amounts to creating an app because someone does not understand the concepts of the entire system.

So, ultimately it all boils down to the simple question: What's the respective percentage of these two types of apps in the market? We already know some points from the chart you yourself linked to:

The vast majority of app use consists of gaming, social networking, watching videos on Youtube and running utilities. This makes up of roughly 80% of all app use. But - and this is the but I am emphazising - none of this constitutes app-as-web use! (I'll intentionally ignoring Youtube and social networking here because these are special cases that do not translate well to other use cases. Both of these would be nice to have as apps on Windows desktop, too, btw.)

So for app-as-web use we are left with 21%, 14 of which are actual web browser use, leaving us with just 7% that's relevant for everything else.

So, I'll agree that currently it's an app world, no doubt about it. People are factually using their phones to run apps.
What I do NOT agree with is the conclusion you make from this that apps are the new web. There's nothing in these numbers to even remotely suggest it.

Just for comparison: I use my PC roughly 70-80% for non-web use (like developing apps and other software, playing music, chatting via Skype etc.) It's roughly the same distribution of time across the same type of applications. So even on a regular PC you won't suddenly get 80% web brower usage - and if you count stuff like Skype into accessing the web, you'll get similar usage patterns - again with the exception of Facebook and Youtube whic do not have a PC app - because if there was, the numbers would probably be pretty even.

So, all this shows that smartphones are increasingly used JUST LIKE A COMPUTER - where you also run native programs in parallel to the web brower. So, hardly any surprise, that's what all the experts have been predicting for quite some time.

Don't let yourself be fooled by a handful of huge services skewing the numbers because they only have native apps for mobile platforms - because that'a all what is different.

[Tumbleweed]

@RottenAPple "So, all this shows that smartphones are increasingly used JUST LIKE A COMPUTER - where you also run native programs in parallel to the web brower. So, hardly any surprise, that's what all the experts have been predicting for quite some time."

So are we talking cross purposes here? Because I'd agree with that. And I'd agree with Tomi's analysis that teh "app business" overall doesn't make money.

But I say a big fat "so what" to that. As said neither do many other fields. Games, music, books, PC apps, web sites. But due to the way money is invested, multiple (generally small) different "investors" across millions of attempts, perhaps its more akin to a lottery or the slots at Las Vegas for that matter.

And I dont see anyone saying "well the lottery business loses money, only 1 in a hundred thousand make any money so that's going to implode". Or that "people will soon stop going to Las vegas because no one makes any money at the roulette wheel".

We have musicians, authors, game and general app writers, and little old ladies pulling the handles in LV, all thinking they will get lucky. And when one drops out, another fills their seat.

Replace Tomi's analysis on Apps with "Roulette" and the same argument holds and is equally fallacious.

[Per "wertigon" Ekström]

@AppleTurfer: Still missing the point.

Look at it this way then. I can design an app for $10 000 per platform or a simple mobile-first webpage for around $2 500. If I'm a company, why would I wish to pay $30 000 (iPhone, Windows, Android) or even $10 000 (Android only) when I could pay $2 500 to reach 90% of what I want, with less bugs to boot?

Because apps are the new web? Sorry, not buying.

@Tumbleweed:

"In fact, about 2.5% of all musicians makes a living from music therefore the music market will implode, it's but a matter of time."

It already has. Look at music record numbers between 1990 and 2014...

"In fact, about 2.5% of all authors makes a living from books therefore the book market will implode, it's but a matter of time."

The vast majority of authors make their living in other ways than writing books. They do not depend on their books as their income. Also, these days books are mainly created for either spreading knowledge, or for making publishers money.

"In fact, about 2.5% of all PC games makes a profit therefore games on PCs will implode, it's but a matter of time."

App:Games is a very different market from App:All_Apps.

"In fact, about 2.5% of all web sites makes a profit therefore the internet will implode, it's but a matter of ti"

Oh, please. Most websites are not created with profit in mind - rather, it's a marketing budget.

Most apps, however, are developed with the expectation that they will return a profit. They will not. The only apps that will survive are the few that return a profit, or the few that do not need to make a profit. That is what I mean with the market imploding. The rest? Dead within a few upgrade cycles. Once Android hits 5.0 or whatever version that will be incompatible with 4.x, well... That's the day shit will hit the fan.

Now, we can argue about this to the end of days, or we can agree to disagree and let time run it's course. Doesn't really matter either way.

[AppleTurfer]

@Per - I don't disagree that there's a good case to be made for mobile web over apps for MANY use cases. However, it's clear that apps are ruling on mobile. We can debate that they SHOULDN'T or that perhaps in the future they won't. But we've had 7 years since the original iPhone redefined what a smartphone was (even though the app store came out the next year)....and in all that time, the mobile web has not achieved what your reasoning says it should.

Everyone feels the pain of having to support more than one platform. There is simply too compelling an advantage in user experience with native apps over mobile web apps. If this were not so, then your reasoning would have ruled the day already.

[baron99]

FYI, More and more recent obituaries for WP:

http://www.fool.com/investing/general/2014/09/02/microsofts-windows-phone-is-bound-to-be-a-flop.aspx

http://www.computerworld.com/article/2600445/smartphones/should-microsoft-kill-windows-phone.html

[Tomi T Ahonen]

Hi everybody

I removed some comments that were not appropriate (ie didn't read the article, so cannot contribute to the discussion).

About the comments that you cna't do Facebook or Twitter or Uber etc on SMS. I totally understand that is the conventional wisdom. And that is EXACTLY why I maintain this blog and try to help the industry. What is the biggest social network of Pakistan? It is not Facebook and its not Twitter. It is SMSall. SMSall has over 10 million active users including Pakistan's Prime Minister already years ago. SMSall has been winning awards in many mobile industry events. It is somewhat a Facebook and Twitter clone, ie has very similar user features as Facebook and Twitter form likes to hashtags. It is based on SMS ! It pays (discounted) SMS rates to the carriers who love it. Its on all networks in Pakistan. Its not primarily funded by advertising although it also does have ads. And it was launched by a couple of smart university students. Yes, a genuine garage operation. Launched four years ago so well into the global hegemony of Facebook. Its now spreading to other countries. Some in the discussion thread think its not possible for a start-up to do SMS based services and SMS is not suitable for advanced 'modern' services that say Facebook or Twitter would do. Utterly untrue, based only on ignorance and prejudice. Go check out SMSall and you will see.

Meanwhile Uber? Lovely service and app. And can you do uber-like services on SMS? You betcha! Check out just in India such taxi services as Autoraja, Autowale and mGaadi. Again, you don't need to be a mobile operator or giant TV studio etc to do SMS based services. You need to be clever about it.

That is the purpose of this blog and my books. To help my readers find examples of where success has been discovered in the mobile opportunity. Not to follow the latest shiny object like sheep, but rather discover the real money-making opportunities in the fastest-growing giant industry of the planet. And again, as Peggy Ann Saltz teaches in her latest book, if you're an app developer, you should look very closely into mobile messaging (SMS and MMS) to add to your revenues, you customer engagement and expand your offering. Like who? Well, take Square in the USA, the mobile payments solution. They too have added SMS to their offering, so that users can send money to even those US mobile phone owners (more than a third of the phones in use) who don't yet have a smartphon

You don't have to take my word for it, but back in 2008 I told you on this blog when the apps hysteria was starting, that a far better opportunity was in premium SMS. And once again, I was proven right. I do know this industry...

Tomi Ahonen :-)