Who’s winning the App Game?

By on April 8, 2013

Ever since smartphones took off, hordes of bedroom hopefuls have been trying to make a fortune developing games and gimmicks. John Morrish reports that now the big corporates are moving in…

How many apps do you have on your smartphone? The average is 23. How many did you pay for? Possibly a couple; probably none.

Apps are the gold rush that happened for only a few. Like so many new web developments, the initial frenzy of excitement and promise of making untold riches have dribbled away. Unless you’re a games developer, the apps biz isn’t a lucrative one.

Useful if you want to know the weather or what time your train is arriving, or want to place an order with Amazon. But apps have grown up and the future now lies in the hands of marketers who want to push business services and products and with corporates that want to help employees do their jobs better.

Dave Addey, managing director of developers Agant, was there at the start. He placed a little game on the App Store the day it opened, in July 2008. Eight months later, he published his first real app, UK Train Times. It sold more than 300 000 copies at £4.99 each. Even allowing for Apple’s 30% rake-off and VAT, and paying National Rail Enquiries for the use of its data, that was not a bad payday.

Things were easier in those days. There were only 25 000 apps in Apple’s store and paying a good price for something you’d never been able to do before: finding out, on your phone, whether your train was going to be late or cancelled, made for a happy deal.

Today, that same train app is one of 800 000 apps on the App Store, with the same number on the Android store, Google Play. And you can get apps that do a similar job for nothing.

Since the App Store opened, Apple has paid out $8b to developers; it paid out $1b in January alone. Google does not divulge how much it pays to Android developers; it is thought to be about a quarter of the Apple figure.

There is still big money to be made, but it helps if you are publishing games. NaturalMotion of Oxford announced last year that one of its games, CSR Racing, was grossing $12m a month.

Most games, though, make nothing, and that goes for apps generally. Analysts Canalys reported last year that two-thirds of apps receive fewer than 1 000 downloads in their first year and many get none at all. There are said to be 400 000 ‘zombie apps’ on Apple’s site, existing but effectively dead.

Some people are making a lot of money out of apps, however: Apple and, to a lesser extent, Google.

Both firms take a 30% cut out of the purchase price of an app. They also take 30% out of what are called ‘in-app’ purchases, which are key to the economics of the games business: developers give away the games, and then charge players to enter extra levels.

So painless has this one-click process been that Apple has just had to refund $100m to US parents whose children blundered into it. Still, Apple can afford it. It has earned $3b from the App Store over the past five years. And then there are the hardware sales that the App Store encourages.

Few app developers have balked at this monopolistic regime, but many magazine and newspaper publishers, which have high hopes of Apple’s tablets, were enraged when it started a new subscription service in 2011.

It gave users of magazine and newspaper apps the option of buying subscriptions through a one-click button inside the app. In return, Apple would take its 30% and, as it won’t, retain readers’ credit card data. Apps would not, however, be allowed to link to subscription sites outside the app and thus avoid Apple’s rake-off.

Most bit the bullet: the Guardian, for instance, was happy to earn £1.4m from subscriptions bought through its iPad app last year. The FT, however, pulled its successful iOS app from the App Store and replaced it with what is called a ‘webapp’, a kind of mobile-optimised website that runs in the iPad’s Safari browser. From that site, the FT is free to sell subscriptions or anything else, and Apple doesn’t get a penny. The FT still has an Android app, but you leave the app to pay for your subscription.

With so many obstacles to making money from apps, it’s no wonder some people seem to be edging away from them. Book publishers, for example, have invested heavily in book-based apps, but a survey of US industry executives last year found that the number considering apps ‘a significant revenue opportunity’ had dropped from 34% to 15% in a year.

Nevertheless, many continue to find selling apps on the app stores a worthwhile model.

APP MYTHS

1) Any app is better than no app

No. They have to do something useful. It’s a waste of money to produce an app that consumers download and then uninstall: on average, they keep only 23 on their phones. Worse, if your app doesn’t work properly, it will damage your reputation: app users are vociferous critics on the app stores and elsewhere.

2) One app will fit all devices

Apps have to be coded separately for each operating system, though ‘hybrid’ apps can share some elements. Apps should also be optimised for iPad or iPhone. Apps for Android may not perform properly on all Android devices, because there are so many different types of hardware, often running different versions of the operating system.

3) Once you have placed the app on the stores, your job is done

No. You need to promote it, monitor its reception, study the ‘metrics’ to see how it is used, and ensure it is updated: many developers produce a ‘minimum viable product’, improving it when they get feedback. You normally keep the IP of the app, and your IT people may be able to take on these jobs, but it’s more likely you will need a continuing relationship with your developer.

4)  All the best app ideas have been done

No one needs more apps for email, browsing, music, maps, etc. Every retailer has a mobile shopping trolley, and they all do the same thing. But there is still potential in using hardware – GPS, camera, accelerometer, sound, microphone – to assist in life and business tasks. British Gas’s meter-reading app uses the phone’s flash as a little torch, so you can read the numbers in the dark. Simple, but clever.

5)  Apps require the services of an expensive developer

If your needs are basic, there are online tools that will let you build some sort of app without coding. App Press uses a Photoshop-style interface to let graphic designers move on to apps. MobileRoadie lets you assemble stylish and functional modules to ‘build an app in minutes’. Andromo generates simple native apps for Android. Other sites, for instance AppBreeder and MyAppBuilder, offer template-based apps for small businesses. The App Studio offers its own DIY system as an alternative to its bespoke development services. Beware, though, these sites tend to use a subscription model: if your payments stop, your app does too.

 

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