The Coming Apps-ocalypse

In the early days of the smartphone, apps came upon consumers like tiny technological miracles sent from heaven to make their lives easier. “There’s an app for that” was more than a marketing pitch. For a short time, it became something of a lifestyle movement for consumers enamored of their one-tap access to everything.

The love affair, however dizzying, was relatively short-lived as consumers began to realize two things simultaneously.

The first is that phones, however smart and powerful, do not have infinite memory capacity and are easier to fill up with apps than one might think. The rush to download all the apps ever slowed markedly around the time people started having to choose between the random fact generator they downloaded on a whim, and being able to look at pictures of their dogs and kids.

The second realization is that no matter how much one grew the phone to combat the memory problem, human beings have a limited amount of bandwidth and can only spend so much time focusing on so many apps.

And so the consumer’s relationship with apps has began to shift. And with change come the normal proclamations of doom — the end of “euphoric times” for custom app developers was one headline that was especially eye-catching, particularly since it followed a different piece in the same publication that affirmed “reports of the death of apps have been greatly exaggerated.”

So is it the apps-ocalypse now — we’re truly sorry, but we’ve been holding on to that one for a while — or a case of an ecosystem finding new things to fear in an environment that is already a little bit fraught?

Well …

The Good News Is Apps Are Definitely Not Getting Less Popular (Just Less Diverse)

It would not make sense to claim that the consumer love affair with apps is over, unless perhaps one found themselves in an alternate smartphone-free universe. In our smartphone universe, however, the numbers don’t lie.

Apple’s App Store, alone, brought in over $20 billion last year — a 40 percent uptick from 2014. Add Android into the mix and the total app market was worth more than $40 billion — and according to App Annie, that figure is going to swell to $100 billion in the next four years.

But spending more on apps (and more time in apps) while encouraging data for the app developers of the world comes with a big fat pair of asterisks. The first is that, according to Nielsen, increasing time and spend has not upped the diversity in the selection of apps the average consumer uses per month. On average, users tap into about 27 different apps per month (tops) — a figure that has held basically constant for a year or two.

And, it turns out, the same few apps are attracting the vast, vast majority of the eyeballs on smartphones. And here’s an interesting factoid: The Top 6 mobile apps are owned by Facebook or Google — the two-company duo that would own the entire Top 10 were it not for Pandora (#7) and Apple Music (#10).

And, in fact, a quick perusal of the those Top 25 apps by traffic and year-over-year growth will quickly point out that there are ZERO startups to be found on that list. The youngest and least established firm is Snapchat, which is four years old.

And then there’s the new data that, for the first time in about eight years, shows that the number of small businesses that employ app developers fell, largely due to the increasing rise of white labels and SDKs that make it easier and more profitable to build mobile customization without necessarily designing a full custom app. The “ready to use” framework on offer is often the better choice.

So if small businesses don’t want them — and consumers are increasingly consolidating around their few favorite choices — is the time for app innovation over? Is it time to move on to the next big thing?

Some Other Things To Consider

While it is probably not a great idea to sell all of one’s possessions, drop out of school and head west to pursue a dream of making it big by building the next big world-beating app, the truth is that has never actually been a good idea, since the number of people it ever worked for is vanishingly small.

However, more directly on the subject of apps, it is at least worth noting that though app marketplace and spaces are changing, they are not necessarily going away. Umbrella apps — Facebook being the most glaring American example, whereas in China WeChat fills this roll — are an emerging frontier for app developers and business looking to leverage the app’s power. Consumers may be downloading few branded apps as standalones, but they are still willing to access the content through a sub-app that lives under one of those major umbrellas.

Moreover, time spent in apps is not the only way to measure value. Consumers may only spend 10 to 15 percent of their time in branded apps, but they spent a whole lot of their money while they’re hanging out. In banking alone, mobile customers are a huge boon to the bottom line, as a yearlong study by Fiserv demonstrated.

Mobile banking customers generate 72 percent more revenue than their branch-only counterparts. They also use an average of 2.3 banking products, as opposed to 1.3 for the branch-committed customer. On the whole, mobile customers also do more transactions.

“The financial institutions in this study are seeing tangible revenue from mobile banking,” said Matt Wilcox, senior vice president of marketing strategy and innovation at Fiserv. “Marketing mobile banking and highlighting how it can help consumers keep pace with the speed of life is absolutely essential if financial institutions want to grow adoption and use of the service, and reap the benefits of their mobile investment.”

Consumers spend more time on Facebook than in their bank’s mobile app, but, even in that relatively short amount of time, banks are getting a lot more done with those mobile customers — and getting to lower their overhead by keeping fewer physical locations.

Which means writing obituaries for the app economy is probably not quite the right way to celebrate spring in 2016, though it does seem how we view and judge them might be in need of a revision. In the past, the question was about mass: how many, how often and how quirky could it be. The new standard seems to be use: what is it producing, who is it connecting and how is it boosting the bottom line.

That, of course, raises a number of other questions, but there’s one in particular that both Facebook and Google and every app that’s popular should be asking of themselves. As fewer apps get even more usage and users, how at risk are they to the whims of the gatekeeper — Apple, in particular? With Apple iOS dominating about 65 percent of traffic on mobile devices, it’s not much of a stretch to imagine that one day, the way that Apple’s App Store revenue gets a lift is by slapping a toll on the apps that drive the most traffic. Facebook, and others that are using their apps to build their own walled gardens, could then be in a world of hurt.