So many apps – so little to download
In 2012, Deloitte expects the number of apps available from all application stores to exceed two million236. The size of the apps market more than doubled in 2011, reaching one million in December237. As the global supply of apps grows, the proportion that are paid for (or even downloaded) by anyone other than the developers and their immediate families is likely to become ever smaller238. Even considering branded apps alone, only 20 percent are downloaded more than 1,000 times239.
This dearth of downloads does not necessarily mean the ‘apps model’ is fundamentally flawed. Instead, it reflects the ‘winner-takes-all’ nature of most online content markets, ranging from music tracks to television shows to online videos240.
In fact, what the market really needs is more and newer apps, not fewer. And the supply is likely to reflect this. Even when the two million milestone is reached, the number of apps should continue to rise. The principal driver for this growing catalog is the rising installed base of smartphones and tablets. This base is becoming increasingly heterogeneous, reflecting the continued strength of the five main operating systems for mobile devices, the evolution of new apps markets in emerging countries, and the widening capability gap between high-end and entry-level smartphones and tablets.
In the future, the global apps market will likely be characterized by the co-existence of multiple platforms, countries, languages, genres, manufacturers, file sizes and even model-specific application stores. To reach more than 90 percent of all apps users, a developer may need to create versions for five different operating systems (plus HTML5), five major languages, three different processor speeds, and four different screen sizes. In other words, 360 variants of a single app may need to be created in order to fully cover the global market. Each variant would count as a distinct app.
The feature and capability gap between high-end and entry-level smartphones is likely to grow, which will likely necessitate multiple versions of the same app, optimized for different processor speeds. In 2012, the fastest smartphones will likely offer quad-core 1.5-2.5GHz processors241 while the growing number of $100 smartphones is likely to have processors with speeds between 200MHz and 600MHz.
Today’s largely homogeneous tablet market may also become far more diverse in 2012 in terms of operating systems, processors and screen sizes242.
In developing countries with emerging application stores, apps are likely to be simpler and more reminiscent of the first ones for mobile phones, which appeared in 2009. In these markets, apps built in garages or bedrooms may still be able to achieve critical mass; with their success possibly driven by how well they provide locally made content in local languages.
In countries with more mature apps markets, production and marketing costs are likely to be far higher as competition intensifies. In 2012, the most expensive apps could cost millions of dollars to produce243.
The file size of apps is also likely to become more diverse, with the largest apps being several gigabytes in size244. Large apps are fine in countries with fast, extensive networks; but in other countries apps might need to be built with lower speeds in mind. This means including less video, lower resolution images, and perhaps breaking app downloads into multiple parts.
As the catalog of apps continues to swell, the gulf between the blockbuster hits and everything else is likely to continue widening in 2012 and beyond.
A few years ago, it was feasible for developers to write apps in their spare time that might rank as a Top 10 download. In mature apps markets, those days are largely over. The market has become more professional, and is increasingly dominated by major content developers, although there are still many tens of thousands of smaller companies and individuals developing new software.
Apps should exploit what the technology is able to deliver. But showcasing technology should not be an app’s primary objective, but rather a by-product of it. App developers should be careful not to ’kitchen-sink’ their creations – that is, throw every piece of functionality and every piece of multimedia content into it. Leaner apps may be just as appealing. They will also be cheaper for developers to create, and quicker for users to download.
As smartphone penetration rises around the world, the need for apps in local languages is likely to grow. ‘Early adopter’ users of apps were, given the price of devices, more likely to be professionals and people who have travelled and can speak English. The need for local language content was probably lower. As of December 2011, many top selling apps in non-English-speaking countries around the world are in English245.
In emerging markets, application stores need to ensure they have billing relationships with local network operators to accommodate users who do not have a bank account.
The more apps that are available, the higher the marketing costs are likely to be for those apps that are marketed at all. Most apps will never benefit from significant marketing campaigns, a predicament common to other media formats. Only a tiny proportion of unpromoted apps will likely become successful, as too few potential customers will be aware of their existence.
To stand out, application store providers should consider improving and assuring the quality of their programs. A store that can offer apps with superior power management, security and ease-of-use is more likely to catch the eye of potential customers.
Application stores that are looking to differentiate themselves may want to consider subscription models that offer hand-picked apps from various genres – apps bundles, in effect246. Emerging app developers may welcome such an approach as a way of introducing their content to a wider audience.
Deloitte Canada, as referenced in videos, podcasts, or online materials related to TMT Predictions 2012, refers to Deloitte & Touche LLP, the Canadian member firm of Deloitte Touche Tohmatsu Limited.
236This refers to the number of apps concurrently available; the catalog of application stores is constantly being refreshed. The one million apps milestone was reached in 16 September 2011. See: http://blog.appsfire.com/1-million-apps-ios-android/
237It’s a 1 million mobile app world, GigaOM, 2 December 2011: http://gigaom.com/2011/12/02/its-a-1-million-mobile-app-world/
238iOS users buy more apps and pay more for them, GigaOM, 11 July 2011: http://gigaom.com/apple/ios-users-buy-more-apps-and-pay-more-for-them/Android Still Trails iOS as a Money Maker for Devs, GigaOM, 27 May 2011: http://gigaom.com/2011/05/27/android-still-trails-ios-as-a-money-maker-for-devs/
239Most branded apps are a flop says Deloitte. But why?, The Guardian, 11 July 2011: http://www.guardian.co.uk/technology/appsblog/2011/jul/11/brandedapps-flopping
240A very small proportion of content generates the vast majority of usage. In the music industry, about 80 percent of the online catalog in the United Kingdom (equivalent to 10 million titles) does not sell a single copy. And 0.5 percent of the market generates 80 percent of all sales. In the US book industry, in 2006, almost 1.5 million titles were on sale, of which 483 sold more than 100,000 copies. See: Behind the music: Is the long tail a myth?, The Guardian, 8 January 2009: http://www.guardian.co.uk/music/musicblog/2009/jan/08/long-tail-myth-download; also see: Under the Radar, BIGS: http://www.bisg.org/publications/product.php?p=8
241Quad Core Phones: What to Expect in 2012, PC World, 11 December, 2011, http://www.pcworld.com/246011/quadcore_phones_what_to_expect_in_2012.html
242For further discussion, see: “It takes two to tablet: the rise of the multi-tablet-owner prediction”.
243Sting’s Message in an iPad, The Wall Street Journal, 11 November 2011: http://online.wsj.com/SB10001424052970204554204577026312266905128.html?mod=googlenews_wsj
244The largest file size for an app on iOS is 2GB. Source: iTunes Connect Developer Guide 7.2, Page 180, Apple, 17 October 2011: https://itunesconnect.apple.com/docs/iTunesConnect_DeveloperGuide.pdf. The maximum file size for Android is 50 MB. Source: The maximum file size for Android is 50 MB: Android Market for Developer, Google: http://www.google.com/support/androidmarket/developer/bin/answer.py?hl=en&answer=113469
245Research based on application stores in various countries as of December 2011.
246Intel Pushes Subscription Model for Tablet App Store, PC World, 25 June 2011: http://www.pcworld.com/businesscenter/231150/intel_pushes_subscription_model_for_tablet_app_store.html