One of the most dynamic and profitable industries at the moment is arguably the Mobile App Development market. With over 258 billion app downloads by the end of 2022 and an estimated consumer app spend of USD $156, the industry is undoubtedly quite desirable for aspiring investors.
Q2 2021 hedge fund letters, conferences and more
Having said that, recent regulatory threats have been widespread in the EU, the UK, and the U.S. These are important to take into account for two reasons. Firstly, they allow potential investors to accurately ascertain the likely projective growth of the app development sector, and secondly, they can serve as potential opportunities for innovative developers who find ways to rectify some of the market inadequacies discussed below.
Q1 2021 App Availability, Industry Growth, and More
The largest names in the Mobile App market at the moment are:
- Alphabet Inc (NASDAQ:GOOG)
- Apple Inc (NASDAQ:AAPL)
- Facebook Inc (NASDAQ:FB)
- Amazon Inc (NASDAQ:AMZN)
Apple’s and Google’s Prolific Influence
Google and Apple have arguably created a mechanism through which their initiatives have to be utilized.
The tech colossals’ application stores have (as of 2021) become exceptionally dominant to such a high extent that the vast majority of large economies around the world- including the U.S, the EU, and the UK, are beginning to introduce certain legislative measures which are targeted at increasing the level of scrutiny that the companies currently face.
Multiple U.S states, for example, have already placed bills which directly and overtly target Apple’s and Google’s anticompetitive and antitrust policies; in fact, a plethora of leading app developing firms have even challenged Apple’s infamous policies judicially. The justice department itself may have set the trend in 2020.
This is because- unlike back in 2007 when the iPhone was first launched, most users do not merely use their phones to make calls and send messages anymore. Nowadays, almost every aspect of individuals’ mobile activities is (to some extent) linked to either Google or Apple’s stores.
This obviously has given both companies an exorbitantly high level of control (and leverage) in relation to the Terms and Conditions through which app developers can operate in the global Web and App Development industry.
Lack of Competition Costs Money
As briefly touched on above, practically all apps run on either Google’s Android software or on Apple’s IOS. This means that most consumers use either Android or Apple, and not both at the same time.
Consequently, the two companies cumulatively retain absolute discretion in relation to how the vast majority of mobile phone transactions are handled. This has been the root of increasing concern lately (following the aftermath of the COVID-19 pandemic and the consequent boom of the e-commerce industry), as certain consumer shifts in spending habits have inadvertently proliferated the world’s digital economy- increasing Google and Apple’s influence significantly.
When considering the extent of Google and Apple’s significant presence, it’s worth noting the exceptionally lucrative and fruitful nature of the mobile marketplace industry at the moment. For contextual purposes, CNBC indicates that Google’s gross app store revenue was approximately USD $40 billion in 2020, with Apple’s exceeding USD $68 billion.
Even so, the two companies have retained a very high degree of flexibility up until now- being subject to a relatively mild degree of government scrutiny. For example, Apple and Google still prohibit every single payment solution in their app stores (aside from their own); this means that they can effectively charge a 15-30% service fee on all sales made through their stores, with practically no competition.
For consumers, this (unsurprisingly) commonly translates to higher prices (as most app developers generally choose to pass these costs down to their customers) whilst retaining no real choice in the matter.
Moreover, even where consumers can in fact purchase the same apps outside of Google or Apple’s app stores for a significantly lower price, they tend to not realize because Google and Apple’s Terms and Conditions specifically preclude companies from informing their consumers in any way.
Even more astonishingly, Google and Apple tend to grant a plethora of direct advantages to all of the apps that they own. These include: a) preferential treatment in the search algorithm’s rankings, and b) not having to pay any % commission (meaning that they can very easily attain a competitive price advantage over any competitors involved).
Third-party Apps Need To Be Competitive
Government initiatives to increasingly scrutinize Google and Apple largely stem from the reasons discussed above.
Undoubtedly, increased and ‘’fair’’ competition amongst app providers will ultimately benefit one economic class the most- the consumers. This is because they will have access to a higher amount of information, lower prices, and more choices.
Ideally, third-party apps will begin to have an increased (or perhaps commensurate) level of market access and transparency to that of Google and Apple’s in the next few years. This would greatly incentivize innovation and growth in the market.
‘’Ultimately, such solutions would be a great first step towards striking the right balance between Google and Apple’s influence and that of third-party app developers.’’ says Eva Akhter- the current owner and CEO of 48 Cubes Inc. Akhter, who is known for raising customer lifetime value and UX optimization benchmarks, also believes more platform competition will be healthy for the global market.
In the next few years, government lawmakers around the world will likely prioritize the introduction of certain legislative measures which will aim to ‘’even out the playing field’’- increasing the industry’s: transparency and competition, and decreasing its barriers to entry holistically.
The App Development Industry
Between 2013 and 2021, Google’s app store has paid its app developers almost USD $900 million, with Apple’s App store distributing approximately USD $5 billion.
After accounting for the total number of developers during this time period, this equates to approximately USD $6,000 per developer, although (of course) the most successful app developers in the market have unsurprisingly reaped the vast majority of the financial benefits.
If you are currently interested in launching your own app, you will want to ensure that you allocate a significant amount of time in: a) deciding the nature and structure of your app’s specificities, b) deciding the marketing initiatives that you will use to propel your app’s popularity, and c) deciding how exactly you will develop your app (will you hire third-party app developers?).
Updated on
