App Game Gets Tougher For Developers

If making money from apps is tough now, it’s only going to get worse. That’s the upshot of a new Gartner report that estimates that by 2018, less than 0.01% of consumer mobile apps will be considered a financial success by their developers.
While the ever-growing number of mobile apps suggests an expanding opportunity for developers to strike it rich, the study indicates otherwise:
“Our analysis shows that most mobile applications are not generating profits and that many mobile apps are not designed to generate revenue, but rather are used to build brand recognition and product awareness or are just for fun. Application designers who do not recognize this may find profits elusive,” stated Ken Dulaney, vice president and analyst at Gartner.
The research firm projects that by 2017, nearly all (94.5%) of downloads will be for free apps, up from 91% last year. Among paid apps, 90% today are downloaded less than 500 times per day, making less than $1,250 a day on average. Those figures will only get worse for developers because of increasing competition, especially in successful markets.
Underscoring the growing shift away from paid apps, “Angry Birds” maker Rovio last month ditched paid titles in favor of a freemium model in which games are free to download, but include paid features to enhance game play. The games themselves have become a way to promote a wide variety of Angry-Birds-themed products, including theme parks, a recent Wall Street Journal story noted.
For its part, Apple last week announced the App Store topped $10 billion in sales in 2013, generating $15 billion to date for developers, who typically receive 70% of sales. But among the 10 top-grossing apps in the App Store last year—all games—only Minecraft ($6.99) was a paid app. The App Store alone now offers 1 million apps for the iPhone,and another 500,000 tailored to the iPad.
Gartner described the mobile app market as “hyperactive,” with more than 200 companies creating app development platforms used by millions of developers building hundreds of thousands of new titles annually. The abundance of good, free titles has also set a high bar of what a paid app should be among consumers.
At the same time, the study noted the mobile browser is evolving from what it called a “thin rendering engine” to a sophisticated delivery platform running complex JavaScript applications. As a result, HTML5 will be the best option for creating apps that can deliver high-quality apps across operating systems.
"At least three platforms (Android, iOS and Windows) will gain significant market share in the smartphone, tablet and PC space, requiring many organizations to support multiple platforms for both consumer- and employee-facing applications," stated Dulaney. While many platform-neutral tools exist, these usually involve technical or commercial compromises, he added.
Gartner overall recommended that developers set realistic expectations for making money for their apps. They should also build apps for appropriate reasons, like driving people to their businesses, or for aftermarket opportunities.
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