More than a decade since the launch of the App Store, the app economy is mature and thriving in many ways. The smartphone + app combination has become an indispensable part of daily life for most of us.
However, much of the ecosystem fails to strike a proper balance between the app publisher’s business objectives and the end user experience. In fact, many of the strategies employed by app publishers are antithetical to delivering a great experience.
This series, understanding the impact of the app economy on end users, will explore current industry dynamics and suggest ways to foster a win-win relationship.
In Part 1, we’ll look at the current status quo and explore the focus of growth.
According to AppAnnie, fewer than 3,000 apps are making more than $1 million dollars a year via paid downloads, in-app purchases, or subscriptions.
There are plenty of apps that are just not viable for a host of reasons regardless of monetization strategy - from poor design and build quality, to inadequate marketing and promotion, to functionality simply lacking an audience. Many of these apps end up published then abandoned after just a few releases.
There’s another cohort of apps that shows potential. Even without top rankings on the App Store, these apps often have experienced millions of downloads from interested users around the world. Yet, the AppAnnie data suggests, that despite impressive downloads, making real money remains elusive.
App downloads are a common traction signal used by early stage investors to evaluate companies for investment. It makes sense. If an app has shown it has an audience on the inventory rich App Store, there must be something to it, right?
These apps have become attractive targets for investors. One major language learning app raised $108 million dollars over five rounds of venture capital. The second most popular meditation app raised $75 million dollars. The most popular meditation app? $143 million dollars. These are just a few examples. Spend a few minutes on Crunchbase and you will find many more.
With cash to spend, these well-funded app publishers have one job: grow.
How is growth measured? While total downloads continues to be a measure, one of the most important key performance metrics is Monthly Active Users (MAUs). Rapidly growing MAUs can be game, set, match for many of these companies as they raise subsequent rounds of funding.
But it’s not just private companies using MAUs to measure growth. Public companies like Facebook, Twitter, and Snap have seen sharp stock market reactions to their quarterly reports due to surges or cliffs in active user counts.
So how do app publishers grow? They have plenty of tools at their disposal including a whole ecosystem of mobile marketing products. At Nami, we’re intimately familiar with these from our experience building our prior company, Push IO, which became the mobile marketing engine for the Oracle Marketing Cloud.
Mobile marketing tools tend to be very expensive. We regularly hear that the most popular tools charge publishers a minimum of $50,000 per year. For that kind of money, what do these tools do? If you scour the web sites of mobile marketing vendors you’ll see one word over and over: engagement.
Engagement is such a positive sounding term. If you’re an app publisher, of course you want your users to be engaged. However, engagement is coded language that really means “keep your users from abandoning your app at all costs.”
It’s not unusual to hear people in Silicon Valley talking about growth hacking - finding was to grow as fast as possible without spending all the money in the world. An implicit part of that mission is to prevent churn at all costs.
In Part 2, we’ll explore how app publishers increase downloads and which sets the stage for how the user experience is being harmed by growth.
It’s earnings season on Wall Street and for companies in the App Economy. It's a tale of two monetization strategies plus pressure for further change.
Google slashes Play Store commission on app subscriptions after pressure builds from both app publishers and regulators. Will the Apple App Store follow?