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

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

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

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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

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4 comments
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  • mobile apps are the new razors

    More and more app developers are realizing that they can make MUCH more money from in app ads and in app purchasing (more on the latter) then the price of the app alone. Let's look at Candy Crush. It's a free game...or is it? They engineered the game to be easy enough to get you hooked but as the game progresses you are virtually forced to buy in game add-ons to progress. Look through the press to see how many people have racked up $100's to $1000's and MORE of in-game purchases for this "free" game. As I stated...it's just like the razor business...sell the razor itself at a loss or "free" but make a fortune on the blades.
    smfrazz
  • categories..

    Games... get used for many hours, while user is in casual entertainmood mood. Ads and in-game item sales are a great way to monetize. An upfront charge would actually reduce your ability to monetize the product.

    Excellent work productivity utilities, get used for short periods, but are useful enough to be worth $20 or whatever. specialty mapping, connectivity, document databases, etc. Ads would get no view time, and in-app extras create a sense of uncertainty about the product being there when most needed. Initial purchase is a win.

    Moderate complexity utilities - land of the free really; So little code is required to build and distribute one of these, that once a free one of DoesX is available; there is no space to compete at DoesX, leaving hobbyist and retired programmers free to duke it out for zero money. If I ever retire, I'm definitely in for a bout or two.

    Fart App --- well, ya.
    rwwff
  • I haven't noticed any less paid apps.

    "Paid apps are becoming a rare item . . ."

    I haven't noticed any less paid apps. They're still there aplenty whenever I search for apps.

    Maybe you're just using bad search terms?

    Although I have noticed that "free with a catch" is extremely popular as well. Either in-app purchases (increasingly for vital functionality) or connecting to a for-pay service. And of course, advertising. "Free" is becoming a rather misleading term, as they're out to get your money regardless of whether the app store says "free."
    CobraA1
  • Wait, isn't the "Strings Attached" model

    The one Microsoft is pushing? You can "use office on Android, and iOS, if you Pay Microsoft a subscription fee? The Apps are free, you just pay monthly to use them. No thanks, you can keep your subscription crap. I never rented music, I will never rent Apps!
    I hate trolls also