Mobile apps not a lottery win, says Gartner

2014-01-14 09:30
Apps have emerged as a driver of smartphone adoption. (Duncan Alfreds, News24)

Apps have emerged as a driver of smartphone adoption. (Duncan Alfreds, News24) (Duncan Alfreds)

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Cape Town - Most mobile apps make no money for their developers, instead they generally create brand awareness or are designed for fun, research has found.

Major platforms like Google's Play Store, Apple's App Store, BlackBerry's App World and Microsoft's Windows Store boast thousands of apps available for download, but industry tracker Gartner said this didn't imply that it was making money for developers.

"However, 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," said Ken Dulaney, vice president and distinguished analyst at Gartner.

"Application designers who do not recognise this may find profits elusive," he added.

Mobile app leader Google Play has about 1.1 million mobile applications available for download though Google removes so-called "low quality" apps periodically.

Revenue

With that much available the competition for eyeballs means that people find it harder to download the apps without help from friends and family.

"Consumers are increasingly turning to recommendation engines, friends, social networking or advertising to discover mobile applications rather than sorting through the thousands of mobile apps available," Gartner said, indicating that by 2018, less than 0.01% of apps will be considered a financial success by developers.

But that does not mean that paid apps are dead - indeed, Apple reported last week that it took in over $10bn in app sales and in-app purchases in 2013.

The iPhone manufacturer generally takes a 30% cut of sales so it implies that developers for some apps are generating a profit, but Gartner said that this number will become smaller, going forward.

"There are so many applications that are free and that will never directly generate revenue. Gartner is forecasting that, by 2017, 94.5% of downloads will be for free apps," said Dulaney.

"Furthermore, of paid applications, about 90% are downloaded less than 500 times per day and make less than $1 250 a day. This is only going to get worse in the future when there will be even greater competition, especially in successful markets," he added.

In-app purchases have been seen as a new way to capitalise on popular apps. User play for free, but pay for extra tools or advantages to progress in the game, for example.

Developers also create successful apps for multiple platforms to capitalise on the number of users that may potentially purchase online content.


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