App Monetization To Get Tougher Still, With Gartner Predicting 94.5% Of Downloads Will Be Free By 2017

The business of making money from apps is going to get tougher still, with analyst Gartner predicting that through to 2018 less than 0.01% of consumer mobile apps will be considered a financial success by their developers.

A key factor making it harder for apps to attract a paying audience is the sheer number of apps consumers can wade through before making their choice. Both Apple’s iOS and Google’s Android stores now each have more than one million apps on tap. It’s the very definition of a crowded playing field — and this is pushing mobile users to take shortcuts to help them determine which apps to download.

Gartner notes in its forecast that app users are increasingly turning to recommendation engines, friends, social networking or advertising for app discovery, rather than sorting through the thousands of mobile apps available. So even if your app is the cream of the crop vs the competition there’s little chance users are going to take the time themselves to figure that out themselves.

Add to that, app competition means there’s almost always a free app option consumers can choose instead of shelling out for a paid app. So the bar for what a paid app should be is pushed ever higher. By 2017, Gartner predicts that 94.5% of downloads will be for free apps.

That’s up several percentage points on 2013’s figure. Last year, Gartner projected that nearly 83 billion downloaded apps would be free — or 91% of all downloads. So freemium app business models which rely on monetizing a free download after the fact via in-app purchases (IAP) will continue to grow in importance for developers. (As will app advertising.) Gartner previously forecast that IAP will account for 48% of all app revenues, up from 17% in 2013 and just 11% in 2011.

When it comes to pay-to-download applications, the pie continues to be sliced unevenly, with around 90% of paid apps being downloaded less than 500 times per day — and making less than $1,250 per day.

“This is only going to get worse in the future when there will be even greater competition, especially in successful markets,” says Gartner’s Ken Dulaney, vice president and distinguished analyst, in a statement.

“Most mobile applications are not generating profits and… 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,” he adds. “Application designers who do not recognize this may find profits elusive.”

Dulaney characterised the mobile app market as “hyperactive” — referring to the more than 200 mobile app development platforms that the “millions” of active developers are targeting.

As well as the big platforms, such as Google’s Android and Apple’s iOS, there are of course multiple spin-off development arenas that developers can target which extend mobile in new ways — such as wearable devices like the Pebble, which has its own selection of apps, or other Bluetooth connected auxiliary hardware brings a new clutch of sensors developers can leverage and play around with. Choosing which of these platforms to target (and which to skip) is therefore another growing headache for developers.

Meanwhile, the “platform-neutral” option of developing browser-based apps, using technologies such as HTML5, is still hampered by performance challenges, fragmentation and immaturity, according to Gartner. The analyst also warns developers to be on the look out for vendors trying to lock them in to platform-specific browser features.

By 2017, the analyst says it does see the mobile browser being used as “a sophisticated application delivery platform” and HTML5 becoming “somewhat-standardized”. In three years’ time, Gartner predicts half of new web apps will involve complex client-side JavaScript — pushing the mobile browser to evolve from a thin rendering engine to a sophisticated app delivery platform in its own right, i.e. one which can support high quality apps with a good-quality user experience.

“Although more than 100 ‘platform independent’ development tools exist, most involve technical or commercial compromises, such as lock-in to relatively niche technologies and small vendors. This will drive increasing interest in HTML5 as a somewhat-standardized, widely available, platform-neutral delivery technology,” adds Dulaney. 

As for overarching development platforms, Gartner sees “at least” three gaining significant marketshare in the smartphone, tablet and PC space over its forecast window: no surprises in those names, with the big three predicted to be Android, iOS and Windows.