The Appsphere in a bubble?

Apple might have single-handedly created the Appsphere, but just recently it’s showing some worrying signs. So worrying that a number of pundits are starting to quote “just like 1999, all over again“. The notion that companies raise money before finding customers last appeared during the first Internet bubble (2000) and, as I was around at the time, it sure feels very similar.

  • New App companies being sold for stupid money, even if they’re just off the ground
  • Second-time round App companies now struggling to repeat first-time success
  • VC funding in overdrive

Hopefully, this won’t last too long and the good might survive (some good companies went to the wall in the last bubble). So, aside from greed, why is the darling of the IOS Market feeling the pain? It’s probably a number of reasons:

Platform fragmentation. No longer the preserve of just Apple there is now Android and Microsoft and many more to come over the next year. There is even fragmentation inside the platforms; just take a look at how radically different Apple’s IOS7 is compared to IOS6 – so much has changed that Apple themselves use the phrase “time to re-imagine your applications” which is coded-speak for “re-build them now”. Oh, and there’s a catch … you can’t charge for application upgrades on IOS so I wonder how many App developers will even bother “re-imagining” for IOS7?

Platform consolidation. On the flip-side, to match the plethora of new mobile and tablet platforms there is some consolidation happening around HTML5 which negates the need to write a single line of code. Some new mobile phone Platforms, such as Mozilla’s Firefox, only run HTML5 so there is no app development. Whilst these are early stabs at “browser-only” phones it has lots of attraction, not the least the cost; a fully fledged SmartPhone for less than £100!!

Poor return. On the Apple iStore, over the last 5 years, the average Application has earned less than £3,000 per annum. That’s the average, so includes the huge hitters as well as the no hopers. That’s not a business model for companies, it’s a passable hobby but not much more than that. OK, some Apps are built for on behalf of companies to provide service to it’s base and they will be making invisible returns but the hard fact remains that commercial development of Apps is falling into the hands of hobbyists and freelancers who’ll work a thousand hours for scant return.

The rise of frameworks. It’s got a whole lot easier to build digital services in the last year. So easy, in fact, that traditional last decade web development is dying out and being replaced by marketing, sales and operational folks creating their own digital services around easy-to-use frameworks like WordPress. These new frameworks create digital services so fast that non-techies can create agile working prototypes in a matter of days when dedicated development teams using linear development  methodology take weeks and months.

Consumer applications. Folks used to make big decisions about which spreadsheet they’d use, or which sat nav or which email system. People now swap and change as easily as picking a different restaurant to eat in. Sometimes we’ll try stuff just because we fancy a change. As a result there is no loyalty and it’s much harder to generate recurring revenues. In that world you’re far better off serving your digital “app” from a conventional web-server, that is a model for recurring revenue.

Portability. We’re all getting acutely aware that some of these applications now store a fair amount of our life. We’re looking to both backup these services and also be able to move from one to another and this is driving us away from applications and towards web-based services.

The App market won’t die, there’ll always be a need for applications, but the days of “there’s an app for that” are probably over; to be replaced with the less snappy “there’s probably a digital service that will meet your needs across a wider range of open platforms”.

By Martin Dower