Smartphone apps gold rush could be a mirage

“All that glitters isn’t gold.”

The old saw could well be applied to the smartphone apps market.

For developing trendy mobile apps isn’t exactly the highroad to fame and fortune, two Canadian mobile software experts say.

In fact, many of the applications currently flooding mobile app boutiques such as Apple’s App Store and Research in Motion’s (RIM) App World, are likely to end up discarded before they even turn a profit, according to Gary Schwartz, president and CEO of Impact Mobile, a Toronto-based firm.

SMS (short messaging service) and mobile Web are the two sweet spots – where the money will be in the near future, according to Schwartz. His company focuses on helping clients monetize the mobile channel.

Schwartz is also the vice-chair of Mobile Entertainment Forum, a global trade association for mobile entertainment companies large and small.

In the near future, people and comapnies will be more inclined to shell out money for smartphone-ready tools that actually solve business problems and connect with a company’s pre-existing business applications, says Alykhan Jetha, president and CEO of Marketcircle Inc., a Markham, Ont-based developer of applications for Mac OSX and the iPhone.

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“Users don’t want mere applications,” Jetha said. “They want business productivity boosting solutions.”

Jetha’s Daylite Productivity Suite, for instance, enables iPhone users to carry out project collaboration, calendar sharing, task delegation and sales tracking on the popular Apple smartphone. An accompanying product, Daylight Touch, allows users to access business information on their Ipod Touch.

“These tools solve business problems but allow user to do that using mobile devices that are generally associated with entertainment,” said Jetha.

Runaway sales

While Schwartz and Jetha are skeptical about the long-term value of many of the mobile apps flooding the market – revenue wise this market seems on a roll.

U.S. revenues alone for smartphone apps will increase 10 times, reaching $4.2 billion by 2013, according to a study by the Boston-based research firm Yankee Group.

The study which predicts smartphone sales will quadruple from 40 million in 209 to 160 million in 2013, also o estimates the average selling price of paid mobile applications will jump from the $1.95 to $2.37.

In all of 2009, Yankee estimates there will be $343 million in U.S. revenues for applications for smartphones from application stores, a number expected to exceed $1 billion in 2011 and to reach more than $4.2 billion in 2013.

About $2.9 billion of that $4.2 billion will go into the hands of developers, while $1.3 billion will go to the companies running the app stores, such as Apple Inc., Research in Motion Ltd. for its BlackBerry App World, Android’s App Market and Nokia’s Ovi Store.

What to concentrate on

But if you’re expecting to make a profit building mobile gaming apps, you’ll be disappointed, said Schwartz of Impact Mobile.

While there are more than 65,000 apps being offered on the App Store, many of those, he said, will be ignored or junked by users.

The leading mobile apps are mostly weather reporting and news delivery oriented, he said.

A better bet for mobile app developers would be to concentrate of SMS-based and mobile Web offerings, according to Schwartz who is doing exactly just that.

Among other things, Impact Mobile builds transactional SMS tools to help companies make money out of subscription-based text message services.

The company also enables businesses to extend their online reach to a growing mobile Internet audience.

Impact Media develops tools and services that enable business to push media through mobile Web channels and make profits by CPM (cost per thousand impressions), said Schwartz.

Nearly 58 per cent of cell phone users and 83 per cent of smartphone owners use SMS. Mobile Web functions are available to 15 per cent of cell phone users and 71 per cent of smartphone users.

By contrast only 7 per cent of cell phone owners and 48 per cent of smartphone owners use mobile applications, said Schwartz. “Of those people using mobile applications more than half, limit themselves to five applications because anything more is just too much to handle.”

A Yankee Group analyst agrees with Schwartz and Jetha.

Focus less on games for the iPhone App Store and more on software for professionals, which are available in smaller numbers, says Yankee Group analyst, Carl Howe.

But for BlackBerry app developers, Howe said, they should try to write games instead since the platform already has a lot of business- oriented software.

(With files from Matt Hamblen)

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