Last night I went to the NESTA’s “What’s App?” discussion. You can watch the event at NESTA’s website.
Here at @nesta_uk for What's App a look at the emerging app economy.
— Terence Eden (@edent) March 22, 2010
It was an excellent panel – despite being a bit stale, pale and male.
But I can’t help feeling that the central premise of the event was flawed.
We were meant to be discussing the “emerging economy” of mobile applications.
Emerging? Mobile apps are beyond that. They have emerged. They are mainstream and they have been for a while. Vodafone* has been selling apps for nearly 6 year. Other mobile operators have been selling games, application, tools, utilities, ebooks, and other apps for just as long.
And it has been profitable.
Ah, that word, “profitable”. I’m not an economist, but I would have thought that an economy requires the exchange of money somewhere along the lines.
The vast majority of downloads from app stores are free. Now, undoubtedly a few of those free apps lead on to purchases – but not many. (See Tomi T Ahonen’s amazing dissection of the hype).
Then there’s the pricing of the applications themselves.
A game like Angry Birds (which seems to be a favourite) costs around 59p. A few years ago it would have sold for £4.99 via an operator store. 15 years ago the same quality game on the MegaDrive would probably have cost around £35.
Cheaper prices are good for customers – but are they good for the economy when the price continually trends downwards?
So we have a range of apps with an average price of £0.00. Of those that cost, the monetary sums are very low. Making money from apps is a fool errand.
So, who is making money?
The developers aren’t – not in any significant way.
The payment gateways aren’t – 30% of 0 is still 0.
Advertisers are – lots of adverts on apps which are given away.
The device manufacturers are – they can sell more hardware on the basis of freely developed 3rd party content.
The operators are – they’re selling more phones and more data bundles.
So what (if anything) has changed?
What the app space hasn’t been is open. True, anyone could develop a J2ME or S60 app – and many did. But getting them distributed was always hard unless you could do a deal with a major publisher.
Now, the middle-man is (nearly) gone. The developer can submit their work to a central app store and have it in front of potential customers. Almost instantly.
Because there are many more highly-spec’d phones and SDKs have improved immeasurably, there’s been an outpouring of new developers.
But are they any good?
In the bad old days – when people actually made money from apps – there was a quality threshold. If an app was buggy or crap, customers would ring up a call-centre and demand a refund. That’s costly to a company, so naturally the bar for apps was set fairly high.
It also encouraged conservatism – releasing a beta app with experimental functionality was a risk. Few people would buy it and the cost of refunds could be horrendous.
Now, we have everyone and her sister developing iFart apps. Reading the reviews of paid-for apps can be quite depressing – constant tales of broken or missing functionality.
So, we have a decrease in price and a decrease in quality – but a rapid increase in supply. Rapid to the point where developers struggle to even give away their product. Is this a healthy economy?
Despite my grousing, I enjoy living in a world where anyone – even me – can develop an app. The financial rewards are more like a lottery than a business, it’s true. The rewards to society where a company can take a punt on a product like AudioBoo are immense.
But can it last? I’ve no doubt that this current boom will mirror the home-computer boom of the early 1980s.
We’ll probably see another Codemasters emerge from Britain’s bedrooms – and the rest either get bought out or fail.
But I bet they have fun doing it.
*I work for them but this blog is a personal comment. Please set your bias filters accordingly.