The mobile app economy is growing fast, but is it growing fast enough? In the first half of 2010, sales of smartphone apps worldwide generated $2.2 billion in revenue compared with $1.7 billion in the whole of 2009, according to a new study by analysts at research2guidance.
If we assume there are 100,000 active app developers worldwide, that amounts to just $22,000 revenue per developer in the first half of 2010. If you take out the 30% levied by the typical app store, developers will have made an average of just $15,400 apiece. Take out their development costs and that doesn’t leave much in profit.
Of course, developers may have other sources of revenue beyond straightforward apps sales. Some will have been commissioned to create free apps as adverts or promotional services for big companies, while others will be pursuing the “freemium” model, creating free mobile apps to promote their own paid-for software or content on other media. And there will also be some in-app advertising revenue to add into the mix.
Indeed, Juniper Research forecast recently that total mobile apps-related revenues (encompassing pay-per-download sales, value-added services and advertising) will reach $32 billion by 2015. If the global active developer community is still 100,000 strong by 2015, that would mean the average developer would be generating $320,000 in annual revenues before paying commission to app stores, ad-brokers and other elements of the ecosystem. That would appear to put the mobile app community on a more commercially-sustainable footing.
Deflationary forces at work
But it isn’t yet clear whether the rapid growth in the app economy envisaged by Juniper and other analysts will be disrupted once the widespread usage of HTML5 makes it viable to run sophisticated web apps in mobile browsers, removing the need for actual downloads and app stores. Whereas app stores have had some success in reinstating the notion that content and software isn’t always free, people tend to shirk away from web sites that charge for their content or services. Rupert Murdoch’s News Corp., one of the world’s leading newspaper groups, is trying to change that by putting a pay wall in front of some of its online articles, but many commentators are pessimistic about its chances, while news from other sources is free.
Moreover, another potentially deflationary force is the continued corporate conquest of the apps market. Popular practical apps, such as fitness trainers or share price trackers, are increasingly likely to be sponsored or developed by big brands, such as Nike or Google, putting downward pressure on the prices independent, self-sustaining apps can charge. Only 12% of corporate mobile apps are designed to generate revenue, according to a study published by research2guidance in January.
Despite the bullish growth forecasts, I suspect the economics of the mobile apps market will remain pretty precarious for those developers without corporate sponsors through 2015 and beyond.