A Mobile App Reality Check

If you possess programming chops and have dreams of chucking your day job to build a cash cow mobile app in your basement, here's an irksome reality check.

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Thu, January 16, 2014

Computerworld — If you possess programming chops and have dreams of chucking your day job to build a cash cow mobile app in your basement, here's an irksome reality check.

Research firm Gartner says that fewer than 0.01% of consumer mobile apps, or one in 10,000, will make enough money through 2018 to be considered a financial success by their authors.

"The stories of mobile app developers making $1 million in their first month are just the extreme case," said Gartner analyst Bob Hafner in an interview. "Some apps are going to make a ton of money, but they are in the 1% that are regularly downloaded."

With more than 1 million apps in each of the major app stores -- Google Play and Apple's App Store -- there are indeed millions of downloads in a year, but only about 5% of the apps in each of those stores are even trying to make money, Hafner said. "With millions of downloads, the chances are really thin of making a killing."

In 2011, 88% of the 26 million mobile apps downloaded globally were free, according to Gartner. By 2013, 91% of the 102 million apps downloaded were free. By 2017, 268.6 million apps are expected to be downloaded, and 94.5% of them will be free.

Gartner's analysis may come as a big buzz kill for the thousands of computer science students and programmers who dream of writing the next Angry Birds. Wasn't there supposed to be a big apps economy to employ tens of thousands of programmers?

In fact, yes. The apps economy is still there, but is functioning differently and laying a golden egg only for a few hot shot developers. The big money from mobile apps is coming from in-app advertising and app-enabled purchasing of goods and services.

Research firm App Nation reported in July that the combined value of goods and services purchased through apps, plus paid apps and in-app advertising had reached $72 billion, a figure expected to more than double to $151 billion in 2017.

Less than $1 billion of that $72 billion came from paid app downloads, and revenue from such downloads is projected to just slightly surpass the $1 billion mark in 2017, AppNation said.

Of all paid applications, about 90% are downloaded less than 500 times a day and make less than $1,250 a day, Gartner said in a recent report. "This is only going to get worse," the report added. "There will be greater competition, especially in successful markets."

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