When I recently received my new iPhone 4, I took great delight in organizing my apps into folders, finding new apps in the app store, and seeing how beautiful various apps looked on the new screen. Then I used it for a couple of days and realized, not counting pre-loaded Apple software, I use exactly five apps: the New York Times, Dropbox, Pandora, MenuPages and Skype. Why am I wasting time collecting and organizing all these apps? We're in an app bubble.
My app library -- littered with exactly 87 apps I used once and never touched again -- now reminds me of a graveyard of defunct company logos from the dot-com boom. Like the go-go days of 1999 when everyone had to have a Web site, today everyone wants an app. iPhone, iPad, Android apps for all, plus Blackberry for the very ambitious.
Here are eight signs we're in an app bubble:
- Apps don't generate profit for developers. Apple CEO Steve Jobs has said the App Store has generated more than one billion in revenue for developers. That sounds like a big number. But in this context it's not. One billion dollars in revenue for the approximately 225,000 apps is $4,444 per app -- significantly less than an app costs to develop. In a well-thought-out analysis of the economics of iPhone apps, authors Tomi T. Ahonen and Alan Moore paint a bleak picture. A typical iPhone app costs $35,000 to develop. The median paid app earns $682 per year after Apple takes its cut. With these calculations for the typical paid app, it takes 51 years to break even. It's not any better for free apps. A free app also costs about $35,000 to develop. But there are so many free iPhone apps that at a rate of twoseconds per app, it would take approximately 34 hours for someone to check out each one. That's not great odds for a revenue-model based on advertising.
- Apps aren't very profitable for Apple either. According to Apple Insider, "Apple has long maintained that the App Store isn't meant to be a profit generator, as much as a means of attracting customers to the iPhone and iPod touch." The App Store's gross profits amount to just one percent of Apple's total gross profits.
- iPhone users don't find their apps very valuable. In 2009, analytics start-up Pinch Media reported that people barely use the majority of apps they download. Only 20 percent of consumers utilize a free app the day after they download it. By 30 days out, less than 5 percent of consumers are still using it. Paid apps (page 13 of the company's fascinating 33-page slideshow) have a slightly better performance record, but they still get hit with a steep drop in usage within a period of 11 days. The value of most apps may be in satisfying the curiosity of what the app can do, not in its usefulness or relevance in a user's daily life.
- Apple brags more about the value of their app mass than the value of the apps themselves. This is the case both on the App Store page, iPad advertising and in a recent keynote speech where Steve Jobs said people have downloaded five billion apps in the last two years. Meanwhile, only a handful of apps have been featured for their usefulness.
- Ditto for Android advertising. I feel like I'm back in the days when Alta Vista bragged about spidering more Web pages than Lycos.
- Marketers are spending money on iDevice apps at the expense of improving their mobile Web sites that everyone with a smart phone can access. According to Ahonen and Moore, iDevice app development actually costs 10 times more and reach is 50 times worse. Sex appeal will only trump pragmatic reach for so long.
- Venture capital is flooding into the app economy in spite of the questionable ROI proposition. Prior to the iPad launch, venture-capital firm Kleiner Perkins Caufield & Byers doubled the size of its "iFund investment pool" to 200 million, Reuters reported. Recently CNET, an E! Online co-founder, and a couple of other partners teamed up to form AppFund, a company that provides funding and direction for app developers. And there are plenty more Internet funds spending much of their bankroll on app startups.
- There are so many apps, finding the one you want takes time and effort -- time and effort that could be spent getting the information in a faster way. The iPhone 4 can display 2,149 apps. That's 2,144 more than I need; 1,969 more than could be displayed via iOS3; and 2,001 more apps than could be displayed by earlier versions of the operating system. Graph out this increase in app display capacity, and it looks like an obelisk. But still 2,149 is only 0.96 percent of the 225,000 available iDevice apps. Steve Jobs has said 15,000 apps are submitted to the App Store each week. With this many apps to sort through, finding new, useful ones to download can be a painstaking task. Then on my phone, if I want to find an app I don't regularly use or a new one, I need to use the search function to find it. Can you think of a faster way to get information? The browser. Once mobile Internet gets faster, apps as the key to on-the-go information and tools will be on the outs.
Does this mean companies should stop making apps? Unfortunately, no. Until the bubble bursts, apps are the only mobile game in town. And without a doubt the future of digital is the ubiquitous, pocket-sized screen. What's needed are apps tied to real business models that have real ROI. And,companies should build apps with their eyes open about what they should realistically expect to accomplish with what they develop. Having an app for an app's sake is not enough.
This story was originally published on FastCompany.com.
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I developed an iPhone internet radio app called TuneIn Radio while working in my spare time over several months. By focusing on providing great features with quality and usability, it has risen to become the number one paid radio app in several countries generating significant profits.
So, there is hope for developers that can outshine the competition and produce apps that people actually want to use.
In fact there is a growing industry of small development houses that keep the "staff" on contract and pull them in as needed. I've worked on project where I did nohing more than create the framework to display the visuals (animated) and handle the taps. 3 days work a handshake, a 1099 tax form with a check and I was out the door.
The problem still is no one makes any money except Apple who sold the hardware!
You can't sell the app in most cases, you have to use it as a gateway to a paid service like Hulu+, Netflix or even dropbox.com for cloud storage.
Games can sell but the need for constant updates gets expensive and you can only charge the user for a few upgrades before you start getting negative reviews in the app store.
So if you have an existing web based service and want to add another way to get there then you have two choices, make a simple app and it's free or make it feature rich and charge a premimum app fee.
Oh, and I have 193 app sitting it my aps folder on iTunes that will never go back on any of my devices!
And then there's the redundancy of the apps. Seriously, how many calculator, Twitter or note-taking apps do there need to be? Are they really that much different from their competitors?
I will submit this article as well, which also talks about how many developers simply don't recover their investment and other costs:
http://wmpoweruser.com/?p=17365
There are a lot of books out there, too. WAY more books than most of us will ever read. But there are still people making money writing and selling them.
Furthermore: "yes, you might be able to knock out an app in a weekend." But, if that's so, anyone else can do the same, and they probably did. That is called, "no barrier to entry."
An application, to be truly successful, has to have a compelling reason for the user to use it, again and again. Most of the apps that I have seen are "enablers" for other services, and are not considered to be revenue-producers themselves. The preponderance of apps cost less than the electricity required to recharge the phone itself.
As a developer, I have elected not to pursue developing mobile apps because I can't justify the development effort if that effort would be -locked- to a particular platform, i.e. the iPhone. If the app can't be deployed simultaneously to multiple platforms, and if it doesn't have a reasonable profit-making lifespan of three to five years, and if you probably can't even FIND the damm thing anyway, then ... there's ample time to wait for the market to mature.
I doubt you'll build a high quality app in a weekend but take your best shot. If you want to put out the shovel ware that's littering the app store now then make it free and connect iAd to it.
I think one of the problems is the tech sites that want to be seen as cool, hip and with it for the iPhone and iPad. They take the developers copy and put it out as if they wrote it and people download it thinking that it's really good.
This exact same thing happened with the PC, Microsoft started pushing Visual Basic and how easy it would be for anyone to write software. We ended up with a lot of cr@p out there that had to be fixed or replaced and many of us made a fair amount of money fixing this class of software.
I know I'll burn in he'll for saying this but I hope the android really takes off! Why? Because it has a lower barrier of entry than the iPhone so maybe the developers flooding the app store with crap will move there.
I really don't like thinking about someone searching for one of my apps and finding it between iFart and iPee. When people search the store I want them to find quality apps that work!