Apps Aren’t Dying, but Not Everyone Knows How to Make Money on Mobile

Mobile industry analyst Eric Seufert argues in this July 2016 commentary that the "death of the app" narrative is a misreading of the data. A June 2016 Nomura report, using SensorTower data, found US downloads fell 20% year-over-year from May 2015 to May 2016, and few large developers grew monthly installs. Seufert contends that install counts for large, established publishers are a poor proxy for the health of the app economy, and that the slowdown reflects declining smartphone sales growth in developed markets rather than a broader contraction.

Supporting evidence centers on revenue and valuation rather than installs. Supercell was valued at over $10BN, more than triple its 2013 valuation, while Snapchat targeted $1BN in revenues by 2017, up from an expected $250-500MM in 2016. Seufert notes that revenue concentration is longstanding: by his 2014 estimates, King Digital and Supercell alone generated 14% of in-app purchase revenue across the App Store and Google Play. App Annie projects global mobile gross revenues to grow 24% to $50.9BN in 2016 and roughly double to $100BN by 2020.

The piece draws on an Appsflyer study of in-app spending showing average monetization is about 20 times higher among paying users than across entire user bases. It also finds shopping apps monetizing users better than gaming apps, consistent with mobile accounting for 37% of online purchases over Black Friday through Cyber Monday 2015 (up from 30% in 2014). Advertising is a growing share of mobile revenue and is not captured in top-grossing charts, with eMarketer forecasting global mobile ad spending to nearly double to $200BN between 2016 and 2019.

Seufert concludes that install counts are vanity metrics, citing Facebook's strategy of deepening engagement across a portfolio of apps rather than chasing new installs for its flagship. Monetizing is harder because stakes are higher than in 2012, but developers with strong monetization and ad placement expertise continue to earn substantial revenue.