The Future of the App Economy
August 28, 2015
In the same year that Deloitte reported smartphone users downloading fewer apps – 1.8 per person vs. 2.3 per person – 2014 was also a record year for funding in the mobile technology sector.
Companies like Uber, Snapchat, Instacart and Square attracted $7.8 Billion in funding. With so much money to be had in mobile entrepreneurialism, it’s no wonder how many startups we have coming to us right now who want to build apps. Some of these start-ups have incredible business ideas that really will work, assuming said start-up is willing to invest the funds needed to create disruptive, market-leading technology. And then there are others that bring us app ideas for yet another social media community that is no different from the myriad of established social community giants.
Over-saturation of apps in the app stores is starting to frustrate users. Novelty apps with heightened amounts of buzz around them see fewer downloads, suggesting that just because an app is new and hot doesn’t mean as many users will download it as they did previous “new, next” apps. Older users especially find the apps they need when they purchase a new phone and then don’t return to the App Store or Google Play after that. Vulnerability is also leading to fewer downloads – no one wants to be part of a class of victims in the next global hack or invite malware onto their handset.
So naturally, high-profile individuals in the industry start talking about an “app bubble” and the possibility of it bursting. Mark Cuban is one of the loudest voices on this side of the conversation. He believes this bubble will be far worse than the original bubble burst of 2000, in fact. And while Cuban has a great knack for investing in successful technology companies, I don’t think we are going to see scores of angel investors lose their shirts because of bad app investments. Some of them learned many hard lessons from the dot com burst, after all. I agree that certain types of apps can’t sustain the momentum they’ve enjoyed previously, but at the same time, apps aren’t going anywhere. At least not anytime soon.
I sat in a session on the “State of the Industry” at the 2015 Georgia Technology Summit yesterday. You may be surprised that there is huge economic growth in the state of Georgia as it pertains to technology in general, and in mobility, specifically. Since 2010, Georgia has seen more than 25,000 new jobs created in tech disciplines. But when it comes to funding, Georgia companies only attracted one percent of the nation’s VC funding in 2014. You could surmise this is due to a lack of visibility on the part of Georgia as a hub of technological advancement. But maybe VCs have become smarter about what they invest in. So instead of declining app technology, what we really are seeing is a maturing app economy.
The days of the one-hit app wonder are mostly behind us. Users want quality over quantity. Developers hoping to make it big as the next Yik Yak or Game of War or even bigger as the next Facebook, have a tough road ahead of them. Legacy apps like Instagram aren’t going anywhere. They’ve got years of skin in a game where developer and designer talent comes at a premium and marketing budgets exceed many new app entrepreneurs’ revenue projections for the next five years. Even if the number of downloads have decreased, adoption is so widespread that few entrants can hope to compete.
Sure, many consumer apps still “made it,” but that’s because they’ve had big marketing machines behind them that drove downloads. According to a Forbes article, a developer can’t expect to be paid much more than one cent per app download. Without millions of downloads supplemented by advertising dollars, that doesn’t add up quickly. A developer must create multiple apps if they want to make any living at all based off App Store or Google Play or Windows Store downloads.
The Future of the App Economy Lies in the Enterprise
Assuming the “app bubble bursts,” mobile apps aren’t going away. Many developers previously focused on building the next app entrepreneurial empire will have to figure out how to create sustainable revenue. They may want to take a look at what development consultancies like ours have already figured out – there is huge room for growth within the enterprise. Big (and small) brands need talented B2B software engineers to help them navigate the complexities of building beautifully-designed, solidly-architected mobile technology.
Vision Mobile’s Developer Economics survey finds developers publishing enterprise apps make four to five times that which consumer app developers return. That’s a pretty staggering gap. And it isn’t necessarily big development teams that have a hold on this enterprise market. The same study reveals smaller teams working on enterprise apps pull in significant revenue. A quick Google search for “top mobile app companies” returns a list compiled by Quora of 50 developers located all over the globe who are focused on building apps for clients – big name clients at that. And most of those apps aren’t your use-it-once-and-throw-it-away apps; they bring users back again and again because of their usefulness.
As developers, our end goal has to be delivering real business value to our clients. That’s where we are moving as an industry – creating useful software tools on mobile devices for a vast array of industries and uses, such as internal-facing enterprise apps focused on improved productivity and or simplifying processes, or apps in the healthcare space that monitor vitals, provide easy access to EMR, facilitate referral requests, etc.
As the Internet of Things grows bigger and more pervasive, developers will be in higher demand to help make these device-things connections. Right now our mobile phones can talk to our water heaters and thermostats. One day, the thermostat itself is going to want to talk directly to the weather!
And as more companies embrace BYOD, they are realizing that internal apps are a great way to embrace their workforce’s consumption of technology – all while improving efficiencies.
A Word About Offshoring’s Impact on the App Economy
This is such a hot button issue, and one that has to be addressed when talking about the future of software development. Non-technical executives are trying to do more with less and stretch their budgets as far as possible. Like any other industry, offshoring work to countries where cheap labor is ubiquitous seems to make sense. And once an exec has been around the world a few times on multiple projects using offshore’d labor, they’ll soon realize the cost of cheap labor typically comes with a much higher price.
That doesn’t mean that offshoring labor will stop, but it does mean that more low-end work will go offshore, while the work needing deep insights into client business will remain in the hands of local, senior development teams who have dug deep into their clients’ verticals and understand best practices for those industries.
Because Atlanta is hyper-focused on building its reputation as a center for technological excellence, I think the general IQ for executives in technology companies and leaders focused on economic development is pretty high when it comes to keeping innovation on-shore, and more importantly, right here in our community. When introducing myself and our company to a member of the Atlanta technology community, at least seventy percent of the time I’m asked if we are all local, or if we use offshore talent as part of our business model. I love seeing their eyes light up when I’m able to say our entire team works out of our Old Fourth Ward offices. There is a lot of respect for talented developers in our community.
Steve Ballmer said: “The number one benefit of information technology is that it empowers people to do what they want to do. It lets people be creative. It lets people be productive. It lets people learn things they didn’t think they could learn before, and so in a sense it is all about potential.”
So even though there is no crystal ball to see the future through, I think we can safely say that while the app landscape is changing, developers who focus on creating useful, meaningful software, especially in the enterprise, will find years of success to look forward to. There are endless opportunities to learn new ways of doing things in order to solve new problems. There will be new challenges that non-tech industries will come to us to find ways of revolutionizing their very non-tech businesses. Developers are changing and will continue to change the face of every industry that impacts the human experience, from healthcare to agriculture, from beauty to education. And that’s awesome.