The tech world shook a few weeks ago, when Facebook purchased photo-enhancing app Instagram for $1 billion US. How did a single app, which hasn’t generated any revenue, get valued so highly? How do developers such as Rovio, with Angry Birds, and Zynga, with its slate of social games, generate so many downloads?
While there are plenty of factors that go into their success with mobile apps, their general placements have a lot to do with it. Remember, the mobile app market didn’t take off until mid-2008, when Apple launched the App Store in line with its second generation iPhone. There had been third party apps and app markets before that, but none created an impact even close to the App Store.
As with any young industry, there is something of a gold rush at the start. After that things tend to taper off. Yet with smartphones we’re seeing a unique environment. It could mean continued opportunities for companies looking to generate additional revenue in the mobile space.
Smartphone sector still growing
Many countries have reached a cellular penetration rate of over 100 percent. That is, the number of active cell phone accounts exceeds the adult population. It might seem, then, that there is limited room for growth. Yet that doesn’t take into account smartphones specifically. In that sector there is tons of room for growth, and we’re likely to see that growth in the coming months and years.
Every time we see companies issue reports about the percentage of their subscribers using smartphones, the number rises. We’re still under the 50 percent mark, meaning we’ll see more and more people adopt smartphones in the next few years. It’s much like the evolution of the cell phone itself. They started out as luxury items, and eventually became integral parts of our communication networks. The same trend figures to follow for smartphones.
The more people who buy and own smartphones, the more opportunity there is to sell apps. First-time users tend to be more curious, so there is great opportunity with future adopters. Even long-time smartphone users buy apps aplenty. With growth from both new and existing users, the possibilities seem endless.
People switch platforms
Typically, subscribers either sign two-year contracts in exchange for discounted smartphones, or they pay a high rate for a new phone. In both cases, there’s a good chance they wait a few years before buying a new phone. It’s at these junctures that new opportunities exist. There are Android users who will switch to iPhone when they buy a new smartphone, and vice versa. With new platforms such as Windows Phone and BlackBerry 10 coming to market, consumers will have even more choices.
When people switch smartphone platforms, they start from scratch. That is, if you buy Angry Birds on your iPhone and switch to Android, you have to buy it again. The differences between platforms create further opportunities for developers. It gives them the chance to sell the same product multiple times to the same people. That means the app industry could grow even when smartphone adoption levels off.
The emergence of new platforms only amplifies this opportunity. If RIM can find success with BlackBerry 10 and Microsoft does well with Windows Phone, consumers will have more options when buying a new phone. The greater the number of choices, the greater the chance that they switch platforms. App developers will reap the rewards if the industry can support three or four platforms. Even with two there are great opportunities for growth.
Constantly improving technology
Smartphones are getting more powerful by the day, it seems. Manufacturers are lining up this year with phones containing quad-core processors and vibrant screens. They’re linking up to high-speed 4G LTE networks. This improving technology trend is a boon for app developers. It means they can continue to pump out improved apps.
Just take a look at the selection of T-Mobile Samsung Android phones. It’s a high-powered lot, capable of running advanced apps. Now think back to the original T-Mobile Android, the G1. That wasn’t capable of doing nearly the same things as the new high-powered Samsung lines. App developers, then, can profit with these new technologies, since they can create apps that previous phones could not support.
Plus, since technology is constantly improving, these opportunities will continue to appear. When we get even faster phones and better screens, developers will be able to create apps that even the current high-end models cannot support. And on goes the cycle.
We hear stories all the time of “apprepreneurs” — entrepreneurs who deal in mobile apps. They’ve jumped into a relatively young industry, and one that is rife with growth. There are major opportunities when it comes to mobile apps, and any small business should explore it, whether it’s as a primary or secondary means of income. It’s hard to ignore an industry that has so much future growth potential built-in.
About the Guest Post Author: Joe Pawlikowski writes and edits several tech blogs across the web, including the prepaid wireless blog Prepaid Reviews.