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Where's the Booming Apps Market Going? The History of the Auto Industry Holds Clues

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The still-developing market for apps will reach $25 billion this year. So what's next?

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Earlier this week, I was reading this story in the Wall Street Journal, which is about the growth of the apps industry, when I came across an analogy that both puzzled and intrigued me: Simon Khalaf, the CEO the mobile analytics company Flurry Inc., was comparing the apps industry now to the car industry at the turn of the last century. He said, "You see the growth of roads and know they're going to be big. But it is still early days."

To find out more about what Khalaf was getting at, I spoke with Christian Poppelreiter, an Account Specialist at Flurry. He said:

Simon was making a comparison between mobile applications and cars -- the main similarity, of course, is the rate of adoption of both apps and cars at their respective points in history and the consequent opportunity for entrepreneurs to capitalize on this adoption. The "roads" that he mentions are smartphones and tablets, on which the "cars" (apps) can run. Simon would also point out the adoption of mobile devices and the use of apps has taken place much more quickly than any other form of consumer technology including cars, electricity, PCs, and even the Internet.

Obviously the app market has shown an incredible adoption rate as apps have become a part of our society and as the market continues to grow. As of now, Google's (NASDAQ:GOOG) Play and Apple's (NASDAQ:AAPL) App Store both have more than 700,000 apps available for download. Adding in the offerings from smaller app competitors Microsoft (NASDAQ:MSFT), BlackBerry (NASDAQ:BBRY), and Amazon (NASDAQ:AMZN), the app industry is huge and chaotic, and it brings in a lot of cash: Global revenue from apps is expected to rise a full 62% to $25 billion this year, according to Gartner, Inc. Companies obviously consider the costs of development and initial release, but often fail to allow for how expensive maintenance can be; fixing bugs, tweaking the app to meet consumer preference, and keeping it competitive in design and function with the ever increasing number of competitors all comes with costs. (Read more here on how an app's maintenance is critical to its success.) Here is where we can to continue the comparison with the car industry at the turn of the 20th century.

Too Many App Makers?

By 1900, there were at least 100 different brands of early automobiles being manufactured and marketed in the US. Since this was before Henry Ford's production line, the majority of these were handmade and expensive to make and to buy.

As Scott Lorenz, the President of Westwind iPhone App Publicity, told me:
Back in the early car days, you had thousands of tinkerers, mechanics, and investors all working to build automobiles, just as you have app developers today trying to create the next big app to make a fortune. Most of those early auto pioneers failed and sadly, most of the app developers today will fail, too. Today upwards of 300 apps a day are created, many of which are extremely creative and well done. But the oversupply of new apps means they simply cannot all succeed. Furthermore, just as was the case in the early car days, the guy with the money gobbled up other car makers in a roll-up won the game. The question is, Who is the General Motors of the app development game today? Or did Apple just get millions of apps with no development cost in the ultimate modern day version of Tom Sawyer getting others to paint the fence?
The market for apps is supersaturated. For every behemoth like the billion-dollar Instagram, there are hundreds of thousands of creative, well-designed apps that will never make it. As Shauri Levy of Software Progressions told me, "The current app environment is not sustainable, especially with mobile devices. It requires too much money and time to create apps that run on Web, all mobile devices, and operating systems." Simply put, the app market will have to adapt to these issues just as the auto industry did in its salad years. The adaptation is already happening.
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