Editorial note: This is a guest post by Aman Ghei, an early/growth stage Investor at Accel Partners. You can follow him on twitter with @amanghei.
There’s a lot of noise lately about whether or not mobile apps are sustainable, or have any future. But so far, and despite some real challenges and issues, mobile apps have been nothing short of success.
The challenges for developers working on mobile apps range from visibility and pick up rates to loyalty and monetization. The majority of revenue generated by app stores today still comes from the top 100 apps and the “long tail” is often ignored. As the demand for smartphone real estate increases, the cost of acquiring new mobile customers is rising rapidly as well. Seamless payment and customer acquisition methods are other big challenges that apps are struggling to solve. Not to mention how inhomogeneous the two leading platforms – iOS and Android- are.
That said, it’s a market that was virtually non-existent 3 years ago. Like any new technology platform, it needs time to develop, adapt and learn from its short comings – and I couldn’t think of anyone better than Apple and Google to hold its hand. The market has been growing exponentially in the past 18 months, and it’s showing tremendous potential for further growth.
An average smartphone user has 65 apps per device today, according to Flurry, while mobile apps are predicted to generate anywhere from $6 to $10B this year. That is incredible for an industry founded in 2008, and which came about because mobile users were hacking into the 1st gen iPhone to install 3rd party apps. Today, Apple has 200 million iOS devices in the market and pays out $2.5B to developers while Android activations are over 550,000 a day! Based on current run rate, Android is expected to catch up with Apple in terms of app availability by the end of this year.
Developers love new challenges brought on by nascent platforms – it presents an opportunity for them to race again for top prizes –even though the iOS has some established winners (Rovio, Spotify, EA amongst others). There might be different winners on the Android though, but so much depends on the hardware. I am a big admirer of the Samsung S II (disclosure: I own an iPhone). It’s a fantastic phone and the US is currently deprived of it. It will eventually get there, in some form or another – and if Android is to reach the predicted 1B installed base mark by 2015, Samsung and HTC (and maybe even Motorola now) will have to hit many home runs to hold up the challenge.
Looking forward, it’s fair to assess that Android and iOS will co-exist. While it looks like Apple will attract heavy spenders, Android enable distribution to the masses. As for developers, their motivation is driven by both monetization and installed base. That said, the Windows-Nokia alliance could very much be a wildcard. If Microsoft can leverage Nokia’s distribution channel effectively, I see the WP7 becoming a serious contender in the market.
In terms of categories, there is so much more to mobile apps than gaming! Messaging, Pictures, Utilities, Education, Music are just some examples of the areas that are likely to take off. Mobile and mobile applications are key areas of focus for Accel globally and we have invested in leading companies such as Spotify and Rovio, which I am sure you all know well enough, as well as in other emerging areas with companies like Tiny Speck, a next generation social gaming company, Qriously, a platform to measure real time sentiment on the mobile, and Lookout, a leader in smartphone security. And we know there are more great ideas to come.
What app would I love to have on my iPhone? A next generation recommendations app that helps me pick restaurants, wine and movies. See Mark Suster’s Article on Recommendations slicing.
Image by camero.cc
