How big is the mobile app market really?
It is quite certain that the mobile app market is huge, so huge that it is worth tens of billions. It is even estimated that by 2016, the app market will be worth about $70-100 billion. The highest revenue is from in-app purchases and ads. It is a very profitable industry, but it doesn’t mean that there isn’t much competition. As of the first quarter of 2015, there are about 1.3 million apps in the Play Store, 1.2 million in the App Store, 300,000 in the Windows Phone Store and 240,000 in the Amazon Appstore. Three hundred thousand of these apps are from the gaming category alone.
More than 500,000 developers fight for this market but only one percent of the total number of apps can even be considered profitable. And with more than a hundred thousand apps per year, and the increase of acquisition costs, this competition is expected to become steeper.
App Rank volatility: App Store vs. Play Store
Rankings within the Apple App Store are more volatile compared to Google Play Store rankings. This means that apps are more likely to retain their ranking in the Play Store compared to the App Store. iOS apps can move up or down 50 ranks a day while Android apps only move 12 ranks. The ranking volatility of apps in the Play Store is also consistent even along lower ranks compared in the App Store where the rank volatility increases the higher an app is in the ranking.
Volatile rankings can either be a good or bad thing. It can increase a new app’s chances of ranking higher than its competition and even reaching the top in just a matter of weeks. On the other hand, low volatility especially in the upper ranks can lower customer acquisition costs since high ranking apps can trust that people can find them organically. This is tricky for apps in the bottom of the ranking since it can take a while before they can be discovered.
App rank and app revenue, the connection
Getting on top of the ranking is almost the sole focus of developers once their apps go live and for a good reason. Visibility is everything. According to a survey conducted by Apptentive, about half a million mobile app users revealed that they mostly download apps from the top of the charts and search results.
Factors that affect app ranking include: rating, reviews, downloads, retention and churns (uninstall), average app usage (frequency and length of use), consistency of download rates and keyword density. But being on top doesn’t always equal success revenue-wise. Here’s the reason why.
Why high ranking apps can still be unprofitable :
Ken Dulaney, an analyst at Gartner said this of the analysis on mobile apps conducted by the company: “…most mobile applications are not generating profits and that many mobile apps are not designed to generate revenue, but rather are used to build brand recognition and product awareness or are just for fun. Application designers who do not recognize this may find profits elusive.” Gartner also forecasted that by 2017, 94.5 percent of total downloads in app stores will be free apps. Majority of paid app downloads would be lowered to 500 times a day with only an income of $1,250. This trend is going to head south in the following years as the competition becomes greater.
User retention is also an issue, especially with free apps that only profit from in-app purchases and apps. Only 40 percent of those who downloaded an app still use the app after a month and only 4 percent after a year. These users don’t necessarily uninstall the app, they just lost interest in the app and may not use it again.
Why you should still enter the mobile app market
As competitive as the mobile app market is, it cannot be sustained by a select few apps in the top rank. New apps are needed to even keep that competition alive. Without any real competition, the market will become stagnant. For every good app, there are probably 1,000 low quality apps. Quality, proper marketing and monetization strategies can keep your app competing for market share because the number of apps in the app store doesn’t matter; what matters is how many of these apps are your competition.
To further prove the viability of the mobile app market, let’s look into the statistics. For every million apps available in the Play Store, there are about 900 million Android users that make up to 50 billion downloads. Developers receive an average of $6000 in revenue, about $1,115 per app (in the Play Store). These numbers are bound to get higher as it was predicted that by 2020, almost half of the world’s population would own smart devices.
On the issue of feasibility, especially with indie developers, doing business in the mobile app market is just like doing online business – you can’t just go and leave everything and trust that the venture would be successful. But starting at this stage would actually be quite advantageous, especially for reskinners. With acquisition costs rising, it is important to invest in an already bankable niche and genre where marketing costs lesser and there is a large audience that can assure steady revenue. Apps that take a short time to develop also take a huge chunk of the revenue since it can meet seasonal demands and trends.