06 January 2010

The myth of mobile apps

Frustrated by repeated news stories about the growth of mobile apps Tomi T. Ahonen has a wonderful rant about their actual significance as a source of revenue in the mobile comms industry. A small extract here:

Yankee Group measured in 2009 that the total value of all apps sold in all Apps Stores, not just the Apple iPhone App Store was worth 343 million dollars. I do not mean to belittle some number that is hundreds of millions of dollars worldwide, and yes, its a very attractive opportunity for any application developer. But applications are a small part of the software and services income of the computer industry. And software is only a part of the global computer industry. And the global computer industry is far smaller than the total telecoms industry. Now you get the picture? That 343 million total value of all apps store sales globally in 2009, compares to 5 BILLION dollars of annual income for one category of downloaded content of paid mobile service worldwide - get this - the ringing tone (says Juniper Research). I do not mean full track downloads to phones, not 'real tones' type of better quality ringing tones and am not talking about 'ringback tones' - each of which is also worth over a billlion dollars for mobile content by the way. No, basic ringing tones are worth 5 Billion dollars all by themselves. Just one 'moronic' type of ultra-simplistic cellphone content type, the basic 'ploink-ploink' style ringing tone, that is downloaded roughly speaking by about ten percent of global cellphone owners, earns 14 times more than ALL app stores worldwide, not just Apple's. (and yes, you read it right, basic dumb ringing tones sell more than 2.5X more than all iTunes music sales worldwide annually). All of ringing tones are 'downloaded' content to phones. You don't need a smartphone for ringing tones (oh, silly iPhone, early iPhones didin't even accept ringing tones). And yeah, while most Apple App Store downloads are free, all ringing tones are paid content. Which is the better more economically viable story? The magnitude in just one category is so enormous as setting up a zoo and then celebrating the goat and ignoring the elephant at the zoo. Do you now understand, why I am so insistent, that this is a freak side-show of totally disproportionate attention, this silly obsession with App Stores and counting how many thousand apps exist and how many billion free app downloads happened to some smartphone? Let me show you the real economics.

He then sets apps (in his view, a geek preoccupation, irrelevant to most phone users) into perspective against the mobile comms industry as a whole. In his words: apps are as irrelevant to mobile comms as the Segway is to cars.

He is very persuasive. And yet, regardless of the revenue they earn, there is something about the rhetoric of apps that, I suspect, does influence buying decisions. They're like the features of a washing machine a user never needs but, at the point of purchase, is persuaded they shouldn't be without. And they have a social element too; far more visible and demonstrable than a super-turbo-drying feature in your laundry room. They're a promise that a sales person can easily use to draw in an impressionable customer (I've seen it done). So you can understand why Apple exploits the opportunity, and others try to follow suit.

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