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The Race to the Bottom: The Golden Age of Apps, 2008-2013


The past five years will one day be described as the golden age of apps. Over one million applications were developed in this period. In the first part of this series, I explained why further growth in the smartphone market was based on converting feature phone users to smartphone users. Large growth in the market is based on the willingness to sell cheap smartphones. In the second part of this series, I wrote about why expansion of smartphones into the feature phone market will be fueled by Android and Windows Phone.

This will have an impact on app development, and not in the way most think. There is this theory that if Google’s Android hits a critical mass, Apple iOS app development will cease. Hogwash. If Apple was to maintain a 10% market share for the next few years, that would be a big enough market for iOS development to be lucrative to developers. That would be something in the region of 300-400 million iOS devices active at any given time, and that is assuming iOS loses market share.

What will actually impact developers more is that as the smartphone market grows, the growth will be from a user base that spends less. They spend less on the hardware and are also likely to spend less on apps. The new devices will be more and more composed of smartphones on postpaid plans, which are less likely to be connected to the Internet 24/7. So whether you make your money from apps sales, in-apps sales or ad based income, the market as it exists today is your nest egg. As smartphone sales register more and more numbers, the returns to app developers will diminish.

This impacts app developers in different ways. For example, if you are a game developer with a successful title, you should be able to release new versions of your title using the same engines for several years. Satisfied buyers, will buy your new releases. But for developers of productivity, social apps and utilities, it is a bit different. Let me digress a bit.

The last “productivity” app I bought on Google Play was Tasks by Team Tasks (now BitSpin). I purchased this on April 17, 2012. That was a new release then, and before that, I did not find an Android app I really liked for syncing with Google Tasks. Before that, the last productivity app I bought was PicSay Pro by Shinycore on December 27, 2011. While newer apps with similar functionality have been released after these two, I have not found them wanting and have had no reason to buy something else. When moving to a new platform, I buy the productivity apps I need in the first few days or weeks. Now, do not go thinking I am a miser. I have bought a dozen apps since April 2012, from SQUARE ENIX and KEMCO. I will be buying more from them. What can I say, I am a fan. These two app developers are game developers.

So this is what the picture looks like. Every two years or so, we will get a new smartphone. We we will not be buying new productivity apps. We will carry over what we had with our previous phone, and maybe pick up one or two new jewels along the way. Two years from now, the situation will be same. Every month or two, for the foreseeable future, we will pick up a new game.

There is another factor which limits how lucrative productivity apps become. Each year, more and more functionality which used to be the province of apps, has been integrated into the operating system. If you used to build virtual assistants for iOS, Siri has eaten your cake. Android keyboard developers have probably looked at the ever improving stock Android keyboard worriedly. If you are developing navigation apps, between Google Maps, Apple Maps and Nokia HERE, your days are numbered.

That is what the situation looks like for the app developers. For game developers, you have a billion user market, with a good number of users pleading with you, or harassing you, for the year’s next release. For productivity app developers, their market is shrinking by the year. The multiple device perpetual license that our current mobile apps come with, was a fine model in a market growing by leaps and bounds each year.  Each passing year is likely to make the smartphone market become less lucrative for productivity apps developers. For the party to start over again, Android or iOS, has to be displaced by something else.

To make maximize their existing investments, productivity apps developers are likely to become more interested in developing tablet-specific versions (if they have not already) and look more and more at the feasibility of porting apps over the BlackBerry 10 and Windows Phone 8.


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