App Makers Chase an Elusive Dream

Jon Markman

There has always been an income-inequality problem in the world of software development. Now, a new study from Sensor Tower illuminates just how big that divide has become.

Like most gold rushes, the app-development frenzy started with a good slogan. Steve Jobs knew the first iPhone was revolutionary because it elegantly replaced the ubiquitous iPod and the most important elements of a BlackBerry.

By the time the “there’s an app for that” campaign reached office water coolers, the word was out: Apps just might be something really big.

They were shape-shifting, capable of turning iPhones into personalized radios, lens-blurring cameras and a place to catch up with friends. When Facebook (FB) paid $1 billion for Instagram, a photo-sharing app with just 13 employees, developers began sprinting westward to plant their own stake in the app economy. So we got a lot of new apps. In fact, the App Store still gets more than one thousand new apps every day in a dizzying array of categories.

Apps turned iPhones into personalized radios, lens-blurring cameras and a place to catch up with friends.

Facebook and Alphabet (GOOG), major makers of free applications, dominate app downloads in the categories of the most popular apps and the apps people spend the most time on. What’s interesting is the top 1% of developers making pay-to-play apps — firms behind software titles like Clash of Clans, Spotify, Netflix and HBO Go —  account for 94% of all App Store revenues.

To put these numbers into perspective, the App Store collected $1.43 billion in revenue in Q1. Of that number, 623 developers generated $1.34 billion in sales, meaning just $85.8 million was divided among the remaining 61,677 software developers. At an average of about $21,000, that’s not a lot left to pay software engineers and run a business. The truth is, most software developers are scraping by.

Discoverability and the forces of friction are against them. Apple (AAPL) has been criticized by software publishers because it’s simply too hard to find new applications in its voluminous App Store. It is making strides to change the way people find apps, but the issue of process is more difficult. In the App Store, visitors must find the app, download it, enter credentials or set up an account and then interact. All of that friction between them and the software developer creates a disincentive and explains why the average iPhone owner downloads zero new applications per month.

For developers, there is some hope, though. At its I/O developer conference May 18, Google announced Instant Apps. The idea is applications get a deep link in the Google Search algorithm in addition to a spot in the Google Play Store. Choosing that link in Google Search provides instant access to the pertinent information indexed by the software application. All credentials and payment information are stored in the user’s Google login or Android Pay accounts, so that part is seamless.

The result is all of the functionality of the full application without a lengthy download and better discoverability. In theory, this rich experience puts smaller software developers on a level footing with their larger competitors. Unfortunately, Instant Apps are available to Android devices only.

Smartphones were game-changing devices enriched by the ability to download shape-shifting software applications. The promise of great riches spawned many thousands of new developers and applications. Yet real winners have been few and that is unlikely to change. The richest developers are getting richer while the rest chase a dream that remains elusive.

Best wishes,

Jon Markman

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About the Editor

Jon D. Markman and team are winners of the Pulitzer Prize and the Gerald Loeb Award. He helped introduce Microsoft’s StockScouter, the world’s first online stock-screening system. And in the early 2010s, Jon correctly predicted the four major tech megatrends — mobile computing, big data, AI and AVs — that now dominate the world.

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