The App Gold Rush Is Over

If the App Store presented developers with a potential river of revenue when it launched six years ago, it's little more than a trickle today. The Financial Times says profits are "squeezed" as the App Store becomes more "industrialized."

At one time, app developers could earn tens of thousands of dollars for releasing tools built in hours. No more, reports the Financial Times:

Apple says the app economy has created about 1m jobs in Europe and that it has paid more than $20bn to developers since the app store launched in 2008. A report commissioned by Google forecasts revenues from producing smartphone applications to exceed $51bn by 2025.

Yet amid the apparent wealth, the mood is gloomy among the independent coders and small businesses that make most of the apps now available for Apple and Google devices.

Luc Vandal, founder of Montreal app shop Edovia, sums up the feeling of many: "Let's face it, the app gold rush is over."

Developers are already facing an uphill battle to earn revenue. According to a report released last month, 1.6 percent of developers earn more than the other 98.4 percent combined. And the bottom 47 percent of engineers earn less than $100 per month.

But the situation is made worse by copy artists. The duo behind Threes claims that their puzzle game was ripped off within 21 days of its release, despite having spent over a year creating it. The threat of copycats pushes prices down, forcing developers that would ordinary charge for an app to offer it for free, relying on advertising or in-game purchases to support development.

Of course, worrying about copycats is a relatively good problem to have. The so-called "tyranny of the top charts" means apps now have less of chance of being discovered in the first place:

Part of the problem stems from the success of the app store itself. Back in 2008 or 2010, developers say, the best apps rose to the top of the charts – even those that charged a dollar or two. Now, with millions of apps to choose from, the stores are dominated by those companies that can afford to invest heavily in online advertising.

The Financial Times says the majority of customers "simply look at what everyone else is downloading," so landing your app at the App Store's Top Charts is critical for gaining traction. And app developers whatever it takes to astroturf their way to popularity:

That dynamic has fuelled a black market in app downloads. Shady marketing firms offer desperate developers a "guarantee" that their app will appear in the charts, using automated server farms. Some employ rooms full of people doing nothing but downloading apps.

Gaming the App Store won't save the app economy though. As the Financial Times notes, those lists are controlled by editors and algorithms, making it nearly impossible for any marketing specialist to promise placement on the charts.

Instead, analysts believe niche apps are the future, offering services that no other app yet provides. Push for Pizza, anyone?

Photo: Getty