All About Apps Revisited (Part 1: By the Numbers)

Apps have become a big business and increasingly an indispensable marketing tool.

User population: one billion strong and expanding. There were one billion app users in the world in 2012. Thirty percent of them lived in the Asia-Pacific region, 29 percent in Europe and 17 percent in North America. The population of app users is projected to swell to 1.6 billion in 2014 and 2.1 billion in 2016.

Apps_WorldwideUserPopulation

App usage varies among countries. An analysis of the world’s top-30 nations in app usage (Gordon 02/21/2013) identifies the United States plus seven others (Australia, Canada, Denmark, the Netherlands, Singapore, Sweden and the UK) as “mobile pioneers” – leaders in adopting mobile technology. Right behind them are the “connected Asia” – the hyper-connected Asian economies of South Korea, Taiwan and Hong Kong). China and Japan are quite unique in their pattern of app usage. Among the rest of the top-30 countries are several “slumbering giants” – those nations that are still low in app usage but very large in population (Russia, Brazil and India) or are small in population but can be quite influential (Israel and Switzerland).

Users have a healthy “app-etite”. Web browsing and TV viewing have peaked in the United States, at around 168 and 70 minutes a day in recent years. Meanwhile, app usage is on the rise, from 66 minutes a day in December 2010 to 127 minutes in December 2012 (Khalaf 12/05/2012). Worldwide, users made 45.6 billion downloads in 2012, of which 5 billion were paid downloads, generating $12 billion in revenues for the app stores. This revenue figure includes both the revenues from downloading apps and from purchases made by consumers using downloaded apps (in-app purchases, IAP). It does not include other revenue sources such as advertising using apps (in-app advertising, IAA), which do not flow through app stores. Advertising still holds a small share of total app revenues (23 percent in 2012), but that share appears to be on the rise (from 18 percent in 2011) (Farago, 2012). Apple took the lion’s share of app revenues – 50 percent in 2012; Android took 25 percent and other platforms the remaining 25 percent. Some of the download and revenue figures will nearly double in 2013: 81.4 billion downloads over all, including 8.1 billion paid downloads for a total revenue of $20.4 billion. By country, the United States is the largest app market in revenue term, followed by Japan, the UK and Australia (Spriensma 2012).

Apps_WorldwideDownloads_UsageByCountry

There is an app for that. With so many apps being available currently, there is an app for just about anything. By the number of apps, games make up the largest category (17 percent). Behind them are apps for education, entertainment, lifestyle, business, books, utilities and more in that descending order. Consumers spend 80 percent of their time on mobile devices using apps and the remaining 20 percent using web browsers. By the time spent on mobile devices, games still make up the largest category but become more dominant (43 percent). Social networking apps ranks second on the time spent (26 percent) although they barely amounts to 2 percent in number. Next are entertainment (10 percent), utilities, news, productivity and other app categories (Khalaf 04/03/2013).

Apps_ByCategory_iOS_Android_2013

Usage and retention matter as much as, if not more than, downloading. Downloading apps does not equate with using them. About one in four apps, once downloaded, is not used again after the first time, and the trend seems to get worse (Localytics 2011). Among tablet owners having downloaded just a few apps, 95 percent use them on a regular basis, those having downloaded 10 or more apps 37 percent, and those having downloaded 20 or more apps only 16 percent. App usage among iPhone owners shows a similar pattern – only 17 percent of users having downloaded 10 or more apps use them regularly (eMarketer, 09/22/2011). An analysis by Gordon (03/13/2013) offers some additional insights on this. It categorizes apps along two dimensions: the number of monthly users and the level of retention (percentage of users still using an app at least once after downloading it for one month) into the top, middle and bottom thirds. In term of users, the top-third apps in term of users have 32,000 users or more whereas the bottom third-apps have fewer than 8,000 users. In term of retention, the top-third apps reach a rate of 37 percent or higher whereas the bottom-third apps has a rate of 21 percent or less. Combining the two dimensions produces nine possible categories, four of which represent interesting situations.

  • Superstars. They are in the top third along both dimensions – the number of users and the retention rate. About 15 percent of the apps attain this status.
  • Black Holes. Quite the opposite to the superstars, black holes apps are in the bottom-third along both dimensions. Falling into this categories are 17 percent of the apps.
  • Shooting Stars. The make up 6 percent of the apps. They attract lots of users (being in the top third) but fade away very quickly (poor retention).
  • Red Dwarfs. They are the opposite of the shooting stars. They have small user base (being in the bottom third) but retain their users very well (in the top third). About 6 percent of the apps are in this category.

Users spend more time with superstar and red-dwarf apps (98 and 62 minutes per app-month, respectively) and less time with shooting-star and black-hole apps (50 and 29 minutes per app-month, respectively). Looking at that from a marketing viewpoint, better retention offers greater opportunities for advertising by having users to spend more time on an app.

Apps_UserRetention

It is a two-horse race. Two operating systems – Apple iOS and Google Android – have come to dominate the mobile device business and hence the mobile app business. iOS devices, particularly the iPhone, had been in the lead since its introduction in June 2007 and particularly since its 3G version and the opening of the App Store in July 2008. From 800 at the start, the number of apps on Apple App Store had risen quickly to about 900K in July 2013. Shipments of Android smartphones trailed iOS devices initially, but since 2012, have surpassed the latter and hence given Android apps a big boost lately. The number of apps on Google Play, the leading app store for Android devices, had reached 850K in April 2013. Meanwhile, Windows Phone and Blackberry lag far behind. In term of cumulative app downloads, the App Store passed the 50 billion mark in May 2013 while Google Play reached 48 billion.

Apps_AvailableNumbersOnAppStores

All About Apps: Part 4. “Where’s the Money?”

This is Part 4 in the series “All About Apps”.

With all the publicity about apps and the rush to build them, it is time to ask “Where’s the money?”. To put it differently, how and how well do developers monetize their apps?

Pay-per-Download

This is the leading revenue model for mobile apps. Users pay for each of the apps they download. On Apple App Store, for example, it is the route taken by 59 percent of developers, compared to 43 and 42 percent for in-app advertising and in-app purchase strategies, respectively (O’Dell, 2011). For their services (e.g., providing a store front and processing payments), app stores typically get a cut of 30 percent on the selling price of an app; the remaining 70 percent go to developers. These stores are getting very crowded as the number of apps continue to rise rapidly. So, competition among the apps becomes more intense and their prices are on a decline as a result, particularly among the top-100 apps. Between January and December 2010, the average selling price declined by 12 percent overall and 19 percent for the top-100 apps on Apple App Store, 24 and 24 percent on Blackberry App World and 29 and 61 percent on Nokia Ovi; on Google Android Market, there was a 1-percent rise overall, but still a 9-percent decline for the top-100 apps (Distimo, 2010 December). The majority of apps are now priced below $2.00, be them iOS, Android or Blackberry apps. The percentage of apps priced at $10 and up is in the single digit across all app stores (Distimo, 2010 November).

Most developers would dream of having a mega hit like Angry Birds but more often than not they find it tough to make a living from paid downloads. One third of paid apps generate less than $1,000 each for their developers even though they often take months to develop (Vision Mobile, 2011). The app business seems to be more like the music business than the software business, some would say. On average, it may take as much time to build an app as to compose a song; both bring in about the same revenue per download, below $2.00 (before the 30 percent cut for the app stores) in most cases; some become mega hit but most linger in the “long tail”. Apart from “evergreens” (e.g., games, utilities and programs to use Facebook and Twitter), even more successful apps often quickly fade into obscurity (Economist, 06/17/2010). Increasingly, developers are turning to other strategies for monetizing apps or even switching to earning their money through salary or commission from developing branded apps for organizations that use such apps for marketing purposes, e.g., advertising or engaging customers (Vision Mobile, 2011).

In-App Purchases

This revenue model let users conveniently acquire upgrades, additional game-playing levels, new content or virtual goods right within an app, without having to go back to the app store. It enables developers to monetize user engagement ratherthan downloads. Apps with in-app purchase functionality can be either free apps or paid apps (at a price lower than it would be otherwise). Purchases from within an app have to be paid for with real money in return for the desired items or app features, or for virtual currency to be used inside the app. Here are some examples.

  • Tap Fish by Gameview Studios is a free game app available on both iOS and Android platforms. It offers multiple playing levels with different numbers of aquariums. Users can decide what fish to grow, sell and breed; they can buy, feed and sell their fishes; they can add backgrounds (e.g., Atlantis), coral reefs, caves, sunken ships and mermaids, among others. In-app purchases give users virtual currency, called “Fish Bucks and Coins”, which is used for game activities.
  • Guitar Hero by Activision Publishing is a paid game app ($2.99 on iOS platform) that let players create rocker avatar and play rock guitar. It comes with only 6 songs but players can get more through in-app purchases of $1.99 per 3-song pack.
  • Amplitube by IK Multimedia enables its users to turn their iPhone, iPod Touch or iPad into multi-effect processor for an electric guitar and a mobile recording studio. Its free version comes with only basic features, which can be expanded with in-app purchases (e.g., metal and clean amp effects for $4.99 each and chorus, wah and delay pedal effects for $2.99 each). Its paid version, at $19.99, comes with a bundle of selected features beyond the basics. Even here, users still can add more features through in-app purchases (e.g., graphic equalizer for $2.99 and 4-track recorder for $9.99).
  • FarmVille by Zynga is a free game app that was initially designed for Facebook platform but is now available also on mobile devices. Players can buy farm land then plow, plant, harvest and sell their crops, thus spending and earning game money doing that and other related activities. They buy game money, called Farm Cash and Coins, through in-app purchases.

Apps with in-app purchase feature: Tapfish, Guitar Hero, Amplitube and FarmVille

In-app purchases fall into three categories: consumable, durable and personalization items. Consumable items, once used, cannot be used again,e.g., virtual currency or special items that can help a player get through a game faster and ascend to the next level. Durable items can be used again and again after their purchase, e.g., additional playing levels or add-on features. Personalization items create a more personalized user experience, e.g., decorative items such as sunken ships and mermaids in Tap Fish game or clothing outfits for rocker avatar in Guitar Hero. About two thirds of in-app purchase dollars for game apps are consumables, with virtual currency purchases being most common; at the other end, personalization items account for only a tiny fraction (2percent); durable items account for the remaining or nearly one third of in-app purchases (Warren, 2011).

In-app purchases generate a new and very substantial stream of revenues. On Apple App Store, for example, they are found in only 4 percent of iPhone apps but they generate 72 percent of the revenues in 2011; by comparison, paid-only apps bring in just 28 percent. It was the other way around in 2010 when in-app purchases generated just 30 percent of the revenues and paid-only apps 70 percent (Distimo, 2011 July). Data for Android Marketplace is currently not available. Android has been supporting in-app purchases only since April 2011, whereas iOS has done so since June 2009. Overall, in-app purchase revenue model has become more popular with app developers and will rival pay-per-download revenue model before long (both being the choice of 50 percent of developers for 2012); the latter model has lost some of its luster (Ogg, 2011).

In-App Revenue Models Gain Popularity

App stores maintain their typical 30-percent share of in-app purchase revenues, leaving the remaining 70 percent to developers. They justify their revenue share for providing the services needed by such purchases (e.g., electronic delivery, secured billing and payment processing). On the other hand, they can impose very strict requirements to protect their share. Apple will reject (from its App Store) any apps that do not use Apple’s in-app purchase application programming interface (API). Such apps would let their in-app purchases bypass Apple’s service infrastructures (i.e., not using iTunes and Apple customer ID) and hence skip paying Apple its revenue share. For some apps (e.g., e‑readers), their developers simply cannot afford the 30-pecent cut for app stores after having to pay also for the content (e.g., books and magazines) to publishers. Sony eReader was reportedly rejected by Apple App Store for not complying with its restrictions whereas iFlow Reader was taken off the App Store by its developer for being too costly. Meanwhile, Amazon Kindle app simply lets its readers go to Amazon web site to purchase books. With its highly efficient website and convenient ordering process, Amazon still can make the whole content purchasing process as seamless as possible for Kindle app users without providing in-app purchase functionality. Most other e-reader developers cannot do that; neither can they afford the 30-percent revenue share for app stores.

In-App Revenue Trends

In-App Advertising

This revenue model relies on payments from advertisers for having their advertisements inserted into individual apps when the latter are in use. Advertising is a major source of income for many media channels (e.g., newspapers and magazines, radio and TV programs, and websites), and mobile communication is no exception. In-app advertising, or “appvertising”, has received a lot of attention lately after Rovio begins offering the full-size versions of its Angry Birds games for free and funds them through in-game advertising; it is generating about $1 million a month from appvertising on the Android platform alone. Meanwhile, platform operators have also promoted their mobile ad networks (e.g., Apple iAd and Google AdMob), which help advertisers effectively target their audience and serve their ads, give consumers greater user experience and efficiently manage billing for app developers.

As a huge number of apps are being downloaded onto mobile devices and as consumers are spending a great deal of their time using these apps, appvertising has become a rapidly expanding business opportunity despite being eclipsed by the even faster growing volume of in-app purchases. On per-user basis, the average advertising revenue is only better than half of what it was in 2009. However, with a fast growing population of smartphones and mobile devices, appvertising revenues are project to rise from $87 million in 2010 to $894 million in 2015, or ten folds in 5 years, admittedly from a small base (Flurry, 2011). There are also other reasons, besides the growing population of mobile devices and apps, for advertisers to be interested in appvertising. One is its apparent effectiveness. The recall rate for ads seen inside apps is higher than that for ads seen while surfing the mobile web at large, 52 vs. 40 percent. Another is the relatively stable audience share for in-app ads on iOS and Android platforms during much of the day, from early morning to almost midnight; by comparison, the audience shares for ads on TV and the Internet tend to rise for only a few hours in the evening but remain much lower during most of the day (Flurry 2011). Anticipating the growing demand for appvertising, developers also show an increased interest in appvertising revenue model, from 27 to 43 percent between 2010 and 2011, on par with their interest in in-app purchase revenue model.

In-App Advertising Infographic -- BuySellAds.com

Not all apps are a suitable candidate for appvertising. Most suitable are apps that are still in use long after being downloaded and used frequently (e.g., weather and news apps plus some popular games and “cannot do without” utilities). Those “sticky” apps can help generate a large number of (app) lifetime ad impressions. Least suitable are “gimmick” apps that are low on both dimensions (length of usage and intensity of usage).

Types of Apps Suitable for Appvertising

Paid, Free and Freemium

The revenue models above can be described as direct models where developers make money directly from their apps either through paid downloads, in-app purchases or in-app advertising. The pay-per-download model applies to paid apps whereas the in-app models apply mostly to free apps. These free apps are not exactly free but rather “freemium” (“free” + “premium”). A key characteristic of freemium products is that most users can have them for free while only some users pay (e.g., for advanced features and additional content). It is often necessary for “experience goods”, which apps are, to be offered as freemium products. Experience goods are those consumers need to use for some period of time before being able to determine their value and would therefore be reluctant or unwilling to pay for them up front. “Free” is an emotional hot button that immediately reduces the mental barriers for consumers by giving them a feeling of having nothing to lose. The freemium model works best when the products are “phenomenal” – having something to amaze users and hence to prompt them later to pay for the upgrades (Shmilovici, 2011).

There are also free, not freemium, apps where their developers do not intent on monetizing them directly. Instead, these free apps are designed for the purpose of engaging customers, building business relationships and accomplishing other marketing objectives. They are known as “branded apps” because they are individually tied to a specific brand. Some of them may cost money to download (e.g., Kraft charges $0.99 for its iFood Assistant app that features recipes and cooking tips), not unlike paid apps, but generating revenues directly from paid downloads is not their primary purpose, marketing is (e.g., 90 percent of iFood Assistant users, many among them are men, also go to register at Kraftfoods.com, helping Kraft not only to promote its products but also to reach a broader consumer base beyond its traditional audience of women) (Northcott, 2010). As more companies are getting interested in offering their branded apps, the number of these apps is going to grow rapidly. The next post in this series will look more closely at them.

All About Apps: Part 3. App Business by the Numbers

This is Part 3 in the series “All About Apps”.

Here are a few numbers to put the business of apps in perspective.

There are more than half a million apps available on the leading platforms. About 60 percent of them are iOS apps (for the iPhone and iPad) and nearly 25 percent are Android apps (Distimo, 2011 April). These are figures for the United States. The figures on the availability of apps worldwide should be quite similar because the apps being made available in different national markets are almost identical, e.g., 93 percent of apps on Android markets in the US are identical to those in Germany and Australia, and 91 percent to those in Singapore (Distimo, 2011 January). Developers show a strong interest in building apps for iOS platforms (92 and 87 percent for iPhone and iPad, respectively) and Android (87 percent for phone and 74 percent for tablet). Beyond these two platforms, their interest drops significantly (to 38 and 28 percent for Blackberry phone and tablet, respectively, 36 percent for Windows 7 phone and 16 percent for WebOS tablet) (Appcelerator-IDC, 2010).

Game apps account for the lion’s share (45 percent) of revenues. No other category of apps comes close (Vision Mobile, 2011). Android has more free apps than any other platform. Proportionally, it has twice as many (60 percent) free apps as iOS (29 percent for the iPhone and 26 percent for the iPad) and Backberry (26 percent) (Distimo, 2010 August). Going by usage, games still make up the most popular app category (e.g., 64 percent users have played a game app in the last 30 days), ahead of weather (60 percent), social networking (56), maps/navigation/search (51), music (44) and news (39) (Nielsen, 2011). For tablets, they are very popular with book apps thanks to their larger screen, e.g., books are the second most popular app category (54 percent) behind games (62 percent) (Yudu Media, 2011).

In 2009, the apps had been downloaded 7 billion times and generated US$4.1 billion in revenue globally. Two years before that, the app market barely existed. Asia had the highest percentage of downloads (37 percent), slightly ahead of Europe and North America, yet North America generated over half of the revenues, ahead of Europe and several times more than Asia. This means Asian mobile users are much more likely to download free or low-price apps than European and North American users. Looking forward, app downloads are projected to approach 50 billion and revenues to reach US$17.5 billion in 2012 (Sharma, 2010).

App Business by the Numbers

App Business by the Numbers

Downloading apps does not equate with using them. About one in four apps, once downloaded, is not used again after the first time; and the trend seems to get worse (22 percent in 2010 Q1, 26 and 28 percent in Q3 and Q4, respectively), according to Localytics (2011). Among tablet owners having downloaded just a few apps, 95 percent use them on a regular basis, those having downloaded 10+ apps 37 percent, and those having downloaded 20+ apps only 16 percent. App usage among iPhone owners shows a similar pattern – only 17 percent of users having downloaded 10+ apps use them regularly (eMarketer, 09/22/2011).

All About Apps: Part 2. Web Stores as a Business Model

This is Part 2 in the series “All About Apps”.

App stores must not be viewed as simply distribution outlets for apps but as a new business model. That model centers on building an attractive business platform and leveraging its network effects to reshape the competitive landscape to the advantage of leading app store operators.

Mobile apps are downloaded mainly from app stores, e.g., three out of four iPhone apps from Apple App Store and more than half of Android apps from Android Market (VisionMobile, 2011). These stores generated approximately 7 billion downloads for $4.1 billion in revenue in 2009 and are projected to reach 50 billion downloads for $17.5 billion in revenue by 2012 (Chetan Sharma Consulting, 2010). There are 103 app stores, according to the Wireless Industry Partnetship (WIP, 2010). Only a few stores (among them, Apple App Store, Google Android Market, Androlib and GetJar) have reached the level of one billion plus downloads. For developers, app stores offer the widest market reach, far ahead of other distribution channels (e.g., own websites). However, each store has its own developer sign-up, app submission process, app certification and approval criteria, revenue model options, and payment settlement terms. Developers may find the costs of distributing apps via multiple stores, even for the same development platform, add up quickly and are thus hesistant to go beyond a few stores.

App stores are run by either:

  • mobile device producers (aka original equipmentmanufacturers [OEMs], e.g., Dell Mobile Application Store, BlackBerry App World, Nokia Ovi and Samsung Apps),
  • mobile operating system developers (e.g., Apple App Store, Android Market and Windows Marketplace for Mobile),
  • mobile network operators (MNOs, aka phone carriers, e.g., Orange App Shop and Verizon Apps) or
  • independent intermediaries (e.g., Amazon Appstore, Getjar and Appitalism).

By design, some stores carry only native apps for a particular operating system (e.g., Android Market, Apple App Store, BlackBerry App World and Nokia Ovi Store) while others offer apps for multiple platforms (e.g., Getjar, Mobango and Hallmark).

App stores embody a new business model that capitalizes on the trends toward technology and media convergence, leverages a different economic driver and reshapes industry landscape to the advantage of leading app store operators.

Technology and media convergence. Traditionally, industry boundary was clear cut and key market players easily identified. In the hardware sector, the phone industry was led by global OEMs (e.g., Nokia, Samsung, LG, RIM, Sony Ericsson and Motorola). Their focus was on the hardware; they typically treated software (operating system and applications) as a supporting elements necessary for the hardware to function rather than a key market differentiator. In introducing the iPhone and its associated App Store, Apple sees the business quite differently: traditional industry boundary no longer matters when several technologies are converging on a single piece of hardware. The iPhone is not just a mobile phone; it is also a media player, a game device, a web browser and a networked computer (though with only limited computing capabilities).

From scale economies to network effect. Apple views its operation system iOS not as a piece of software on which its iPhone hardware runs but as a platform serving a multi-sided market. In the old mobile phone business, the market was viewed as single-sided – the OEMs served only one side of the market (phone users); third-party developers and their applications were very few in number and limited to providing some basic functionalities for the hardware as specified by the OEMs. One OEM saw other OEMs as its competitors. Their business model typically relied on supply-side economies of scale – pricing aggressively to boost sales; higher sale volume would lead to larger production scale, lower unit costs and in turn even lower prices to boost sales further. By contrast, the iOS platform, with the App Store being its business element, mediates interactions and transactions between several groups of market partipants who were, except the phone users, traditionally not key players in the mobile phone business. Each group is attracted to the platform by the vast opportunities to monetize on the products and services they can offer to participants on the other side or sides of the market, e.g., independent developers by the large base of iPhone users who may download their apps, and iPhone users by the large and growing number of apps and media sources that enrich their user experience. The value of a platform to any group of market participants depends on the number of participants on the other side or sides of the market. This is known as the (cross-side) network effect. It tends to propel a market leader already ahead of its competitors further ahead. There is little benefits for market participants to join a trailing platform when many participants on the other side(s) already join the leading platform. Few developers are interested in building apps for HP Touchpad, which runs on HP WebOS, when most users prefer Apple iPad; in absence of any other compelling incentive, few users would be interested in buying the Touchpad when most apps are being built for the iOS (and Android) instead.

Altered competitive landscape. Apple’s rival, Google, has been quick to recognize the new business model centering on leveraging the network effects. It leads the Open Handset Alliance, a consortium of many hardware, software and telecommunication companies, in developing Android as an operating system for mobile devices. It seeks to capitalize on Android not simply as an operating system for mobile devices but as a platform to capture the lion’s share of a multi-sided market emerging from the convergence of several technologies and media. Unlike Apple, it does not offer mobile devices but its partners in the Open Handset Alliance (e.g., Samsung, LG, Sony Ericsson and Toshiba) do. The graphic below depicts Android as a platform serving a five-sided market.

  1. On the one side are app developers and media publishers who seek to monetize their apps and media content through downloads, subscription and/or advertising revenues. They are attracted to Android by the potentially large number of devices running on this operating system.
  2. On another side are the OEMs who see the bennefit of having a common (thus popular) operating system that (a) lets them quickly enter the smartphone business without having to develop an operatingn system of their own and (b) can quickly attract many app developers.
  3. On the third side are mobile device users who are drawn by the large number of available apps giving the hardware a fuller set of functionalities and offering them rich sources of media content.
  4. On the fourth side are network operators (or phone carriers, e.g., Verizon and ATT) who see a huge pool of subscribers for their service and data plans. They also see the growing libraries of media content being made available for mobile devices as a new source of demand growth for higher-price, unlimited data plans. They are eager to sign up subscribers by offering subsidized prices for mobile devices so as to lower the initial cost of hardware acquisition.
  5. On the fifth side are marketers. They view this huge pool of mobile device users, who are individually identifiable and geographically located, as an attractive target for their ads and services.

For Apple’s iOS, the picture is quite similar. The main difference lies in the second side of this five-sided platform – mobile device producers. All devices running iOS are Apple’s products. Still the network effects work the same way. All the other sides are atttracted to iOS by the large and fast expanding population of iOS devices (iPhone and iPad) in use.

In this emerging multi-sided market, the rising stars are the few players that can attract the most apps for their platforms and in turn enrich user experience and generate greater value to other market participants. Success in this regard enables these platform operators to gain market shares without resorting to price competition. Apple (with its iOS) and Google (with its Android) are two such rising stars. Apple has been charging premium prices on its iPhone and iPads. Meanwhile, Google focuses on making money from advertising and location-based services, leaving  it up to the OEMs to flood the market with affordable Android smartphones and mobile devices; the more ubiquitous these devices become, the more money Google is going to make from its advertising business. On the decline are some former leading OEMs (e.g., Motorola and Sony Erickson) who have stayed too long with the old-style strategy of exploiting supply-side economies of scale to drive down unit costs and prices. Unfortunately for them, the consumers buying smartphones and tablets in recent years are much more willing to pay for design novelty, rich media consumption experience and business productivity tools than for stripped-down devices at a low price. Other OEMs may have rested on the large size of their customer base and thus not been active in attracting app developers. Their platforms (e.g., Blackberry by RIM and Symbianby Nokia) trail far behind Android and iOS in app count.

All About Apps: Part 1. Native, Web or Hybrid App?

This is Part 1 in the series “All About Apps”.

The rapidly growing population of mobile devices such as smartphones and tablets has opened up a new world of opportunities centering on “apps”. There is an app for practically everything, from games and entertainment to education, news, weather, shopping, social networking and productivity. Several hundred thousand apps are now available; they have been downloaded more than 10 billion times in the last few years. What are these apps? Are they any different from the software applications traditionally found on personal computers (PCs)?

What are so different about apps?

Applications are software programs designed for end users (e.g., database, word processors, presentation, spreadsheets, Web browsers and e-mail client) and are different from systems software, which consists of files and programs making up a computer’s operating system (MS Windows or Mac OS) and managing its resources (e.g., drivers for hardware). Applications sit on top of systems software; they cannot run without the latter. Those deployed by organizations are predominantly enterprise applications, which perform system-wide functions such as accounting, payroll processing, e-mail systems, production scheduling, procurement and customer relationship management. They are hosted on some servers and provide simultaneous services to a large number of users, typically over a computer network. Some are proprietary applications being developed and deployed in-house by corporate IT staff; others are outsourced from application service providers (ASPs). The latter can be installed on-premise or hosted by the providers (thus known as software as a service – SaaS). A more recent trend is to move enterprise applications to the “cloud” – a type of Internet-based computing services delivered to an organization’s computers on-demand.

Other than enterprise applications, there are single-user applications. They are installed and executed on a user’s PC and serves only one user at a time. Thanks to the proliferation of personal computers, single-user applications have become widely common, inside as well as outside organizations.

There is another kind of applications, which have caught on like wild fire thanks the rapidly multiplying population of handheld mobile devices such as smartphones and tablets in recent years. Known as “apps” (an abbreviation for “applications”) or often also as “mobile apps”, they make it easier for users to access common Internet-based services and utilities (e.g., email, bookmarking and text messaging) on handheld devices, which generally have smaller screens and more limited computing power than desktop or laptop PCs. They also provide additional functionalities and utilities (e.g., games, photo editing and office productivity) to mobile devices, making these vastly more useful (e.g., a smartphones is not just a voice and data transmitting device but also a web browser, a gaming device and a media player; a tablet is not just a gaming device and media player but also increasingly a replacement for a netbook or laptop PC). They have become the new channel for delivering enhanced services and experiences to mobile device users.

It should be noted that apps are not strictly for mobile devices even though their rise has been closely associated with the proliferation of mobile devices and in particular with the market success of Apple App Store. In May 2007, for example, Facebook launched the Facebook F8 Platform to provide a framework for software developers to create applications that interact with core Facebook features. Within a few months, it had attracted thousands of applications that enabled users to perform numerous tasks, from shopping (by tapping into circle of friends to find the best deals) to nightlife (by notifying friends on the nightlife hangouts of one another), which had not previously been available on online social networks, Facebook or elsewhere. These apps quickly expanded the functionalities of Facebook and helped to propel Facebook quickly ahead of its rival (then market leader) MySpace. They were originally designed for PCs, not mobile devices. Apple did not open its App Store until July 2008. Within 9 months of its launch, however, Apple App Store reached one billion downloads and by January 2011 (or two and half years later) ten billions. In light of Apple’s spectacular success, other competitors have also launched their own stores for mobile apps (e.g., Android Market by Google, BlackBerry App World by RIM and Ovi Store by Nokia). Even Apple has extended the App Store business concept with its Mac App Store for its Mac computers (instead of the iPhones and iPads) and its rivals have quickly followed (e.g., AppUp Store for Windows netbook PCs by Intel). So, apps are now going beyond mobile devices and onto the desktop and laptop PCs, the web (Chrome Webstore by Google) and even the billions of other connected devices out there, from TVs to cars.

If “apps” are not strictly for mobile handheld devices, then how do they differ from more traditional “applications” for desktop and laptop PCs? Both are software applications for end users, but they differ in some subtle ways.

  1. Functionalities and features. Traditional applications for PCs are typically designed to provide a fuller range of functionalities and features, where only a subset of which is actually needed by any individual users. They normally give users a menu of options for personalizing these features to individual needs. They require substantial hardware resources (e.g., computing power, graphics capabilities and storage space). By comparison, apps are more like mini,or bite-size, applications that perform very specific functions, typically on handheld devices with more limited computing resources.
  2. Prices. Given their full range of functionalities and features, applications for PCs naturally cost a lot, often in hundreds of dollar. Apps are on the other hand much simpler in design and hence in development and testing. They cost much less, $2.28 on the average on Apple App Store (148Apps.biz, 2011), although some may cost close to $1,000 (Shontell, 2011; Ide, 2011) .
  3. Distribution. Applications on PCs usually require relatively complex processes of software installation, personalization and updating that often cannot be easily completed without the help of an user manual. The same processes for apps are relatively simple and completely automated. Users usually find, purchase, download and update apps through a few major app stores, usually with a simple press of a button. Some apps can also be found on websites other than app stores; still, users can download, install and/or launch them with one button click.

Native, web or hybrid?

From the development standpoints, there are three choices: native, Web and hybrid apps.

  1. Native apps are those designed to run on a specific operating system (e.g., Apple iOS, Google Android or HP webOS) or even a specific type of device (e.g., iPad or iPhone, though both are running on iOS). Being system/device-specific, native apps can access the hardware features (e.g., camera, gyroscope, compass, accelerometer, microphone and GPS) and resources (e.g., local files, contacts and calendar events) of the device to give richer user experiences (e.g., responsive user interfaces and complex animated content). They use robust programming languages (e.g. Java, Objective C and C++) which are highly suitable for complex application development and have proven track records. Games and entertainment apps therefore tend to go the native route. On the downside, native apps designed for one operating system need to be recoded (with considerable time and cost) to run on another operating system. They are typically distributed through an app store and must therefore get approval from that store; the standards and process for approval vary from store to store. They have to be downloaded and installed on a device before they can run; once installed, they can run even when that device is offline.
  2. Web apps are web sites specifically optimized for mobile devices. These sites can be anything, from a currency exchange rate calculator or business brochure to an online newsletter. Web apps run on mobile Web browsers. They are typically written in a browser-rendered language such as HTML (for defining the static text and images) combined with CSS (for defining styling and presentational elements) and JavaScript (for describing interactions and animations), e.g., content is simply reformatted with CSS to suit a particular screen size and resolution. They work across almost any mobile devices and operating systems. Some uncertainties remain because, for any version of HTML, not all its features are supported by all browsers; likewise, JavaScript may not be interpreted in the same manner by all browsers and on some browsers may not be interpreted at all. There is no guarantee that a particular feature that works on one mobile web browser (e.g., Safari) will also work on another browser (e.g., Chrome, Firefox Android, Dolphin or Opera Mobile). Web apps do not need to be installed on mobile devices; nor do they have to be distributed through an app store. Each time a Web app is used, all or some of its parts are automatically downloaded from the Web. That means it cannot run unless the device on which it is used is connected to the Internet. Web apps are particular popular for communication, shopping, weather and financial services, which depend on data and content constantly updated via Internet connection.
  3. Hybrid apps combine selected features of native and web apps to take advantage of the strengths of these two app types. They do so by “wrapping” a web app, which uses cross-platform web technologies, with a native app to gain access to hardware features and resources (e.g., camera and local files). To users, hybrid apps look and feel just like native apps – they are downloaded from the app store or marketplace, installed on a mobile device launched just like any native apps. For developers, it is not necessary to recode hybrid apps from scratch in order to port them from one mobile operating system to another. Their web portion is already written in HTML, CSS and JavaScript, which can be reused across operating systems and devices.

Mobile Apps Explained from Splash Digital Media, LLC on Vimeo.

The image below illustrates how native, web and hybrid apps differ from one another. A native app has binary executable files that are installed on a mobile device. It interfaces directly with the mobile operating system, without any intermediary or container, and access hardware features and resources via the application programming interfaces (APIs) made available by the operating system vendor for the device. By contrat, a web app consists of web files written in HTML, CSS and JavaScript, and run on a mobile web browser, and thus does not interface directly with the operating system. A hybrid app wraps such web code inside a native container; that container then interfaces with the operating system through the device APIs.

Apps illustrated

Apps illustrated: native vs. web vs. hybrid (by Worklight, 2011a)

Until very recently, the look and feel of, and hence the user experience with, native apps and those of web apps were far apart. But that is beginning to change fast. Behind this change are the technology improvements being made by HTML. Its latest version HTML5, still a work in progress, promises to push the capabilities of web apps to the point of making them as engaging as Flash applications and as integrated with the device as native apps. It supports vector graphics, besides bitmap, and animation. Slowly it is enabling Web apps to gain access to some hardware features. Web apps can now get the user’s current location from the mobile device’s GPS. Before long they can gain access to its camera and sensors, and be cached on the device for offline use when Internet connection is not available.

HTML5 hardware access

Timeline for HTML5 access to hardware features of mobile devices (Global Intelligence Alliance,2011)

Which type of apps should an organization opt for?

  • When there is a need to offer complex user interfaces, killer speed and rich user experience (e.g., games), native apps are the way to go. Being distributed through an app store can be a benefit because app stores are where users go to look for apps. However, be prepared for the high costs of development and porting the apps to multiple platforms, and the time and uncertainties of getting these apps and their subsequent updates approved for distribution through an app store.
  • When there is no need for access to hardware features or only limited need for such access (e.g., simple GPS) but a much greater need for data to be updated frequently, and when speed is not important but low-cost, cross-platform availability is, web apps offer a better option. They cannot be distributed through app stores, however, and must therefore rely on search engines and website marketing to be found by users. This may not be a serious disadvantage as it was not too long ago. With the influx of (native) apps onto app stores, it is getting harder and harder to gain visibility there.
  • When there is a need to reuse a code base across multiple platforms for development cost savings and also to access some (but not the whole set of) hardware features for more complex user interface or richer user experiences, not to mention a desire to have app store distribution, hybrid apps offer an attractive compromise. There are some mobile development frameworks out there (e.g., PhoneGap) that let developers build the native wrapper for hybrid apps by using JavaScript, HTML and CSS, instead of difficult languages such as Objective C and Java, to query the device’s compass, take pictures, find contacts, create appointments and tap other hardware features not otherwise accessible to web apps.

Native, Web and Hybrid Apps Compared (by Worklight, 2011b)

Resources

  1. 148Apps.biz “App store metrics”, accessed Sept 19, 2011.
  2. Global Intelligence Alliance, Native or Web Applications? How Best to Deliver Content and Services to Your Audiences over the Mobile Phone, (April 2010).
  3. Micheal Ide “List Of Most Expensive iPad Apps Hits $999”, IT ProPortal, (May 11, 2011).
  4. Alyson Shontell “The 15 Most Expensive Android Apps In The World!Business Insider, (August 11, 2011).
  5. Worklight (2011a), HTML5, Hybrid or Native App Development.
  6. Worklight (2011b), Native, Web or Hybrid App Development? Worklight Webinar Series.