Is the 'app economy' dead? Or just morphing?

Summary:Paid apps are becoming a rare item as the market moves to other funding models.

Are paid apps going the way of DOS applications?  In recent years, analysts have pegged the burgeoning "app economy" -- in which publishers can sell their solutions for what amounts to micropayments -- at about $25 billion. However, it appears less of it is about selling the actual apps to a broad audience, as app stores are now brimming with free apps that have a few strings attached, designed to enhance marketing or serve as on-ramps to online (in-app) purchases.

iPad photo by Joe McKendrick 5-2013
Photo credit: Joe McKendrick

In a recent TechCrunch post, Sarah Perez cites an analysis by app provider Flurry, which concludes that 90 percent of apps are now free -- up from 84 percent just last year. 

Why? Because many publishers offer apps as part of their branding, marketing, customer service, or to facilitate in-app sales. "The app stores fill up with 'good enough' alternatives to paid apps, while major publishers game the charts with free offerings... which can then be used for their ongoing user acquisition efforts."

There has been a move away attempting to collect revenues directly from end-users, then. Perez identifies the apps that are still selling -- which include productivity tools that enable document scanning, scheduling, recording tools, and email organizers. The apps that are leading sales list are "very utilitarian," she observes. "These apps about are about getting something done.... things users do often enough to make it worth paying for the upgraded experience or additional features beyond what you could get in a free version."

Perhaps apps have simply become the new form of front-end Web application. In the PC Web economy, fewer people are actually paying for basic applications, and using more from the Web under a different business model.  No one pays to use Facebook, Twitter, email or Google Docs, for example. 

Plus, the process of selling apps, even through an app store, isn't just "build it and they will come." Selling enough apps to make it worthwhile and profitable takes the same marketing oomph as it does for any piece of software. The arrival of mobile hasn't altered the laws of economics when it comes to software publishing. As developers have learned over the decades, you can have the most sophisticated and elegant application ever created, but if it isn't publicized and marketed, it will remain on the shelf.

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Topics: Apps, Software Development, Web development

About

Joe McKendrick is an author and independent analyst who tracks the impact of information technology on management and markets. Joe is co-author, along with 16 leading industry leaders and thinkers, of the SOA Manifesto, which outlines the values and guiding principles of service orientation. He speaks frequently on cloud, SOA, data, and... Full Bio

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