The App Boom Is Over! Can You Still Make Money From Apps?

There is a lot of negative news in the market regarding the future of app store and mobile apps. Peter Kafka at Recode has claimed ‘The app boom is over.’ Marketing Land cites a report by Adobe, ‘The PC is over, the ‘app boom’ is, too’. Quartz came out with an article stating majority smartphone users do not download any new apps.

However, it is just a skewed representation of facts incentivized by the media mantra, ‘Bad news sells better.

These are the same experts who have been claiming since the past 5 years that the e-commerce market is saturated and no longer a viable business. Anyone who believes the same should go and look at the stock price of Amazon, which is touching dizzying heights.

Amazon Stock Price

The App Boom Is Not Over

The top 15 apps in the app market have acquired a huge user base which is a considerable portion of the total smartphone market. Claiming that the top apps are not growing at the rate they used to earlier, is not a good argument to proclaim doomsday scenario for apps store.

Let’s look at the revenue growth forecast numbers by App Annie. There are present in annual filings by Google and Apple, and there is little scope for manipulation.

App Store Revenue Forecast

Mobile App Store revenue is expected to increase from $61 billion in 2016 to $139 billion in 2021.

In other words, app store revenue is expected to more than double in the next 5 years at a CAGR (Compounded Annual Growth Rate) of 18%.

To put this in perspective, US tech industry is expected to grow at a CAGR of 4-5% over the next 5 years.

App Store Downloads Forecast

The other claim that users are not downloading any apps, can also be laid to rest by this statistic.

App downloads are expected to increase from 149 billion in 2016 to 353 billion in 2021 at a CAGR of 19%.

Naysayers would claim, ‘But the entire growth would come from emerging markets in Asia. There is no scope for developed markets.’

Think again. The chart on the left shows that the number of downloads is expected to double in Americas and EMEA in the next 5 years.

But there are just forecasts. Show me hard core data!

Well you asked for it.

App Store Actual Revenue and Downloads

App Store Revenue GrowthApp Store Downloads

App download growth in 2016 followed roughly the same trajectory as last year. This resulted in annual downloads reaching over 90 billion, an increase of more than 13 billion across the iOS App Store and Google Play.

13 billion more app downloads (+15% growth) across the app store in 2016.

In 2016, publishers were paid over $35 billion in revenue across the iOS App Store and Google Play. This represented a 40% rate of yearly growth, surpassing 2015’s rate.

$35 billion revenue generated (+40% growth) across the app store in 2016.

While app store revenue continues to soar, it represents less than half of all revenue in the app economy. When we include third-party Android stores and advertising revenue, the 2016 total amount paid to publishers increases to nearly $89 billion.

User Engagement

Ok, so the downloads and revenue might have gone up due to new users. But what about user engagement? People are getting bored of apps. Not at all!

Total time spent in apps worldwide increased by over 150 billion hours year over year, reaching nearly 900 billion hours in 2016*.

App store time spent 2016

What about App Developers? Is there money to be made on app store if you are not Candy Crush or War of Clans?

It’s not 2008 anymore! You can’t expect to just make an Emoji app and expect to get a million downloads. The app market is maturing since starting in 2008 and you have to build an app like a proper business with validation, marketing, customer feedback, analytics, etc.

In fact, 60% of the app developers make less than $500 per month referred to as the App Poverty Line.

Man! That doesn’t look so good!

App Poverty Line

So, I shouldn’t venture into apps now?

No, this is a great time to venture into apps. Similar to the approach by Peter Kafka, I would like to answer it with a few stats.

When the app store started in 2008, there were only 173 million smartphones. This number has grown to 1.5 billion in 2016. All of these users have access to the app store and are downloading apps.

There are so many tools and resources available now to develop apps. You can get easy access to a good developer on Upwork. In 2008, developers were a rare breed and would have charged a bomb for an app that can be made in a day now using an app builder.

But what about the moolah?

I was just coming to that. I have saved the best for the last.

As per the latest App Store Millionaire’s Index (10th June 2017) from Pollen Venture Capital and Priori Data:

  1. 4648 app developers made >$1M across the iOS App Store and Google Play in 2016
  2. 56% of ‘millionaire’ app revenues were outside the top 100 publishers
  3. Almost 30,000 developers made >$100,000 on the app stores in 2016

App Developer's Income Split

So, go ahead and create your own app business. Take the first step and come up with an app idea. Or if you are looking for a little inspiration you can start here ‘How to come up with your first app idea’.

2 thoughts on “The App Boom Is Over! Can You Still Make Money From Apps?

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