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 US$2.2 billion in revenue compared with US$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 US$22,000 revenue per developer in the first half of 2010. If you take out the 30 percent levied by the typical app store, developers will have made an average of just US$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 US$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 US$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 websites 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 percent 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.

 

David Pringle

 

This article was first published on the GSMA’s Mobile World Live portal. David moderates discussion forums on the site and is a freelance media and investor relations consultant.

The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members