Where's the Booming Apps Market Going? The History of the Auto Industry Holds Clues
The still-developing market for apps will reach $25 billion this year. So what's next?
To find out more about what Khalaf was getting at, I spoke with Christian Poppelreiter, an Account Specialist at Flurry. He said:
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.
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.
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:
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.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?
Henry Ford and the Adaptation of the App Market
As Bryan Leeds, Co-Founder of mobile file sharing company Xsync, tells me, "Apps are currently at the stage where Henry Ford came along. Do-it-yourself app platforms are prevalent, and other platforms allow mobile websites to turn into native apps. Anyone cane make an app now, and developers are building products to make it even easier."
Because they do not require any knowledge of or skill with coding, platforms such as Kleverbeast allow anyone to build an app. This will lead to a productive explosion of lower production cost apps that will perhaps continue to oversaturate the market. However, there is a trend against this among bigger companies, which aim to downsize the number of apps offered and focus on the highest quality offerings. In this way, the major app market resembles the unification and standardization of production seen in the early car industry.
For example, Disney's (NYSE:DIS) ESPN has decommissioned 23 of its 30 apps available on the Apple App Store, choosing to focus more on upkeep and quality control for popular ones such as ScoreCenter. As Michael Bayle, Senior Vice President and General Manger of Mobile at ESPN, told the Wall Street Journal, "It's easy to make an app, but the real expense is maintaining it."
Moreover, as Nathan Ooley, President of Appmosphere Inc., told Minyanville, the life of an app is short, with average lifespan at around 14 months. Throughout that time, most apps see two to three major redesigns. Keeping up with the speed of the app markets costs all companies, big and small, a lot of money. As the big developers draw talent and investment, they continue to gain the edge in reducing costs and making more efficient, or even assembly line-like, the process of creating an app.
We will see more apps produced thanks to platforms like Kleverbeast, but perhaps the ones that will succeed -- the ones with rigorous and expensive maintenance that remain relevant amongst the constant newcomers to the app stores -- will be the most used and most popular. As of now, 2% of 250 publishers on the Apple's App Store are "newcomers," while 3% are newcomers on Google Play. Recent research has shown that even though we're downloading more apps every year -- the average smartphone user had 41 apps installed in 2012 versus 32 in 2011, according to Nielsen-- we rarely use most of the apps on our devices.
Ooley provided another historical analogy, comparing app designers now to World War I fighter pilots. When the US joined the Allies in World War I, the Army had airplanes at its disposal, but not combat pilots because, for the most part, there weren't any. The people that knew how to fly planes were largely farmers who used them for crop dusting, and so, crop dusters became fighter pilots. In a similar way, apps emerged in a burst of innovation along with Apple's iPhone and the emergence of the smartphone market, and computer coders, marketers, and advertisers began to enter the field. What is developing is a newly specialized profession of app designer, just as fighter pilots were made from crop dusters. Extrapolating further, only a few fighter pilots racked up enough kills to make them famous aces, just as only a few big developers dominate today's app market.
Of course, these historical comparison are dubious to make considering all the other variables at play, given how much our country and our world have changed since the advent of cars and fighter pilots.
Felicity Loughrey, creator of an app called Card Lust, suggests another comparison: "I don't know much about the beginnings of the auto industry, but I do think apps right now are in a state similar to [the era] before blogging became super easy with WordPress, Typepad, and Tumblr," she tells me. Before those platforms, bloggers had to know how to code html; platforms that require no coding have made sharing on the internet more accessible. Now platforms like Kleverbeast are democratizing apps, making it possible for someone with no coding expertise to author a new program.
Democracy or Monopoly?
The car industry analogy that's at the heart of this article suggests just how big the market for apps has become. Imagine how many people drove cars in 1900 and look around and see how many people drive today. The technology will flourish and spread -- this is without doubt. The question is: How will the market develop? Will it be a democracy with small, independent publishers creating niche apps? Or will major players like Google and Apple continue to consolidate power and begin producing apps along their own versions of an assembly line? Obviously we will see both of these trends continue to develop, but what will win out -- the power of the mighty tech behemoth or the scrappiness of the individual?
Disclosure: Minyanville has a business relationship with BlackBerry.
Follow me on Twitter: @JoshWolonick and @Minyanville
Daily Recap Newsletter