Mobile app shops: Diversify or die

Few technologies — possibly the car and the computer — have matched the app’s wildfire spread. Since the smartphone boom, the app has entered our lexicons, overtaken our home screens, and laid claim to whole days of our months.

Like every gold rush, it has brought prospectors with it. Countless app shops have pushed the market above $50 billion, and there truly is “an app for that” — whatever “that” may be.

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But like every gold rush, the boom will bust. While the app market looks strong from afar — it’s expected to top $100 billion by 2020 — a closer look reveals worrying cracks. App fatigue is very real, and, like it or not, those cracks will expand, sending the whole house tumbling down.

The App’s Rise and Fall

Times have certainly been good for app creators. Mobile media outstrips every other source of digital media in the nation, creating giants from once-humble mobile startups. Instagram, for one, became insta-rich in 2012 after striking a $1 billion acquisition deal with Facebook, and Snapchat’s CEO actually rejected Facebook’s $3 billion offer just two years ago, believing the company would continue to accrue value.

For every successful app startup in Silicon Valley, though, hundreds more are failing. This year, just one in three mobile users will pay for an app. The numbers aren’t any better for free apps: Most users download less than one app per month. Heavy-hitters at the top are buoying the rest of the field, but with so few downloads to go around, the app market is crumbling.

Ghost Towns Are Coming

If they’re not already, agencies that focus solely on mobile apps will soon struggle to survive.

The problem is one of supply and demand. In the good old days, there were few app developers in a fast-growing market and, therefore, many investors eager to support mobile studios. But the market has become oversaturated. The number of development firms has skyrocketed, and demand has taken a nosedive.

Part of the demand issue stems from valueless apps. The apps people are using are those with untold millions of dollars and thousands of developer hours behind them. Even an industry as massive and established as the healthcare industry can’t get consumers to use its apps because people don’t judge them to be worth the hassle.

That’s allowed incumbents to dominate app stores. And with less venture capital available, fewer cash-strapped startups can afford to dethrone them. Complex apps can easily cost six figures to develop, but 90 percent of paid applications earn less than $1,250 per day. With application maintenance costs and company overhead factored in, app creation is risky business.

Compounding the problem is how fast technology moves. Consumers always want the latest and greatest, and smaller mobile studios simply don’t have the resources to update their apps every third week like the bigger players.

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The Specialized Shop’s Plight

Ultimately, mobile agencies cannot last because no technology ever has. Apps have been around for a decade — a lifetime in tech years — and the hype will soon blow over. Studios that build apps alone will be carried away by the windstorm.

Apps, of course, won’t disappear overnight. In the coming years, some studios will still manage to turn significant profits. But platform providers like Google see that single-serve apps are in their twilight, and firms that refuse to face what’s next — like software with conversational automation or external integrations — will find the market has moved on.

While apps have undoubtedly reinvented the tech sector, it’s time for app developers to apply their skills to robust, connected digital products instead.

Tony Scherba is the president and a founding partner of Yeti LLC, a product-focused development and design studio in San Francisco. He has been building software since his teen years and has led product development efforts for global brands such as Google, Westfield Labs, JBL, MIT, and Sony PlayStation.

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