You can’t save the app store, and neither can Google or Apple.
Some would point out that more apps are being downloaded than ever before, which is true. And more still would argue that Apple and Google are paying their developers more than ever before, which is also true.
But the people who focus on these metrics miss one key point: The app store is increasingly a place for the 1% of developers, and those who aren’t already at the top have a really hard time getting there.
“Apple recently announced that it had cumulatively paid out ~$50 billion to app developers since 2008,” Mark May, analyst at Citi said in a note to clients.
“While there are some questions as to how sustainable this growth is given the slowdown in device sales, especially in developed markets, this better-than-expected growth likely bodes well for both app developers and for key players like Apple, Google and Facebook.”
In June, Myles Udland, markets correspondent at Business Insider, told you to stop developing your own apps because of the low money-making possibilities, noting that “People already have the apps they want, or they at least are tapped out at using a certain total number of apps, and so with the pie for mobile apps not getting any bigger, the giants of the space are accruing the gains.”
No one is downloading new, interesting apps. You get a new phone, download Facebook, Uber, a couple of games, and call it a day. Four of the top five spots in the mobile app store are dominated by Facebook.
Those giants of the app store, like Facebook, rake in 94% of total app store revenue, leaving little room for the smaller developers.
May predicts a 24% increase in revenue in 2016 for Apple’s app store, about $25.7 billion total. App development is no doubt a huge industry, and it is growing.
As more phones are being sold globally, especially in emerging markets, there will probably be even more revenue created in the app stores.
“Last year’s 24% growth was driven by 33% growth in installed [Google] Android devices and a 7% decline in avg. bookings per device as the mix shifted to emerging markets and as forked devices became a larger part of Android’s installed base,” May said.
Since the increase in app revenues seems to be coming from more phones, not more downloads per person, it would make sense that we will hit a peak in app revenues when phone sales start declining.
Apple’s app store is faring slightly better, having increased the amount of revenue generated by each device, but the number of new iPhones is already starting to slow.
For however long the app store growth continues, the problem of revenue concentration at the top will continue to persist. It’s not necessarily Google or Apple’s fault, but consumers just aren’t downloading a ton of apps. The average number of apps per phone has been stagnant at around 27 since 2012.
Apps certainly won’t disappear, as they are a huge industry. One thing is clear though: The average developer won’t be making much money from the app store, no matter how much money apps generate.
To me, that means the age of an exciting app store, filled with innovative developers, is basically done.
Long live the app store elite.