There's a lot of hyperbole about the expected growth of smartphones over the next three to five years, especially when you consider that in 2009 smartphones represent just 15% of total mobile phone sales. But, the X factor that's changing the game and creating one of the hottest new trends in technology is smartphones evolving into an application platform.
The smartphone has arrived where it is today by taking the mobile phone and adding a qwerty keyboard plus "push" email and calendar functionality. But, the success of Apple's iPhone App Store has demonstrated is that simple, functionality-focused applications can unlock a wealth of additional usefulness in the smartphone. Now, the race is on, as mobile vendors and application developers elbow each other in the ribs to gain an advantage in this potentially massive opportunity to capture audience, influence, and revenue.
Apple ran this ad after the App Store hit the 1 billion download mark on April 23, 2009.
Credit Suisse recently projected that total smartphone sales for 2009 will end up at around 176 million units. In the years ahead, Credit Suisse expects the smartphone market to balloon to around 1.5 billion units. By comparison, worldwide unit sales of all mobile phones in 2009 will be about 1.2 billion and worldwide unit sales of all PCs in 2009 will be about 300 million. Credit Suisse commented: "We believe smartphones represent one of the most attractive secular trends in technology." (In this context, "secular" means not tied to just one vendor.)
Beyond smartphone applications, there are several additional forces at work that are going to drive the growth of the smartphone market:
There's no denying that Apple has a huge lead. In June, Apple CEO Steve Jobs said, "The App Store is like nothing the industry has ever seen before in both scale and quality. With 1.5 billion apps downloaded, it is going to be very hard for others to catch up."
A big issue here is that the smartphone market is ripe for consolidation in the next few years. There are simply too many platforms. The five big players will likely narrow down to 2-3 dominant players. And, the big ones know that applications will play a critical role in deciding which platforms survive. That's why smartphone app platforms represent the next big land rush in technology. This is akin to the PC operating systems race of the 1980s, and likewise it will have repercussions that will be felt for decades.
Of course, there's also a huge business here. AdMob estimates that Apple is selling $200 million/month ($2.4 billion/year) in applications. The next biggest competitor is the Android App Market, which is selling $5 million/month ($60 million/year).
However, the gold rush part of this scenario isn't just about the big companies. It's also about individual software developers and small teams of programmers. One low-priced iPhone app (a puzzle game) made $750,000 in just three weeks. A crossword puzzle developer reported that she was surprisingly making about $2000/day for her app. These kinds of reports have inspired a wave of developers who are hoping to make their fortune and be their own boss by selling smartphone apps, and many of them have bigger ambitions than just games and puzzles.
There are even small teams of startups springing up to try to strike gold in the iPhone App Store. One developer, Daniel Monroe, posted on a message board that smartphone app development is quickly getting more sophisticated. Monroe said, "Based on my experience, it's hard to be a one-man shop. You can't just place an app in the AppStore and wait for the money to roll in. An ideal team might have (1) an iPhone programmer, (2) a server-side programmer, (3) an artist/GUI designer, and (4) someone to focus on marketing/PR."
There are also new companies popping up (e.g. Sapient, Magnolia Labs, and Sourcebits) who are selling their services to build and market iPhone apps for bigger companies that want to get on the iPhone to promote their brands.
The challenge is that the iPhone App Store is already getting very crowded with over 70,000 apps. That makes it harder for new developers and new apps to get noticed. As a result, many app developers are already talking about spending more time developing for the Android or BlackBerry app stores, where things are just starting to get warmed up. There might be a better chance to strike gold over on that mountain.