App store market opportunity overhyped

Despite all the hype around mobile apps, only a minority of consumers download them on a monthly basis. Research released this week based on a survey of more than 25,000 European adults shows that only 4 per cent of all mobile users and 15 per cent of smartphone users download apps at least once per month.

According to Forrester, the researcher which carried out the survey, the fact that 21 per cent of all European mobile users consider apps to be an important feature when choosing a new mobile handset highlights a large gap between the limited actual usage of apps and consumer awareness.

This limited usage is primarily due to the combination of two factors: identified as the small number of exhaustive offerings available, and the fact that only recently shipped smartphones come with native application stores embedded.

The exception to this rule, unsurprisingly, is Apple, with 64 per cent of European iPhone users downloading apps on a monthly basis. But while the numbers look impressive — more than five billion downloads and $1bn paid to developers in the two years since the launch of the Apple App Store – Forrester analyst Thomas Husson expects that the limited number of paid apps means it is likely that a significant number of independent developers have not recouped their investments.

Husson notes that the recent launch of Apple’s iAd platform is a way for Apple to maintain attractiveness, allowing third parties that provide free apps to develop sustainable business models. But he also notes that in the longer run – with around 80 would-be application stores available worldwide as of June 2010 – few players will be able to address the key factors that will make them a success.

In this respect, Husson argued that the market opportunity for app stores is somewhat overhyped, and said players should be looking at sources of inspiration other than Apple to provide a unique user experience. “Expect successful players to look at and Facebook, which provide open platforms with unique social, personalization, and recommendation features, rather than to copy and paste Apple’s model,” Husson said. Indeed, we can expect the concept of app stores to expand to other connected devices and platforms.

“Cross platform players will continue to emerge, but stakeholders with the ability to [succeed] are more likely to be those that control the operating system and the user experience and are able to offer reach to a wide variety of connected devices. That’s why fragmentation is likely to increase in the early days and will likely be followed by a consolidation phase,” he said.

Successful market players will be those capable of creating a viable business model for third parties and developers; providing third parties with marketing and merchandizing tools; and those offering a wide choice of payment and pricing options along the lines of in-application billing, operator billing, and subscription models.

Mobile app stores represent a revenue opportunity via

  • advertising (21%, 35 Votes)
  • premium apps (20%, 34 Votes)
  • in-app purchases (16%, 27 Votes)
  • They don't. They're overhyped. (15%, 25 Votes)
  • carrier billing (14%, 24 Votes)
  • direct billing (14%, 23 Votes)

Total Voters: 122

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  • TechXLR8


  1. Avatar pc 27/07/2010 @ 3:30 pm

    As Apple have demonstrated while traditional manufacturers slept, the model for an app store is not to make the store a stand-alone financial success, but to support uptake of the handsets.

    Rather than looking elsewhere than Apple for inspiration, people with dreams of making app stores profitable should look out the window and check they’re still on planet earth, because only in a galaxy far, far away is an app store anything more than a must-have feature for your smartphone.

  2. Avatar Naresh 31/07/2010 @ 10:35 am

    For a developer he has to come with a innovative i mean search for an app that doesn’t exist already in app store is very difficult and having a good revenue model makes it tricky

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