Reality Check – The Current State of Competition in the App Ecosystem

Image credit: legrandmag

Image credit: legrandmag

How many unicorns started in a garage before becoming a global success? The garage is a symbol of innovation and potential. It is the common link between dozens of unknown founders who became billionaires. Today, in garages, basements, and living rooms hundreds of thousands of people are coding apps, building companies, reaching users and creating jobs.  In Europe, according to the Progressive Policy Institute, the app economy has created more than 1,64 million app economy jobs. 

Thanks to its culture and creativity - and to numerous talents living there, a new wave of innovation generates growth and success stories. In the gaming industry, Gameloft created more than 6,000 jobs, most of them working on apps for smartphones. Spotify, Rovio and King are amongst other golden nuggets. The openness of the mobile ecosystem permits companies to enter quickly on the market and to compete, sometimes with established ones.

 

A thriving and competitive market

Revolut is one such success story. “We were four guys in a shared office with very limited resources”, said Edward Cooper, Head of Mobile. They had a clear objective: “be able to take on incumbent players and compete with them in the Fintech space, one of the toughest markets”. And it worked! In one year, the London-based Fintech startup has received more than 400,000 active users and 2000 new subscriptions daily. What allowed Revolut to be so successful? “it’s thanks to how the app ecosystem works,” Cooper tells us in this recent interview (watch here).

Today’s mobile ecosystem is a network of interconnected partners and stakeholders including app developers, app stores, operating systems, mobile operators, device manufacturers and, of course, consumers. It supports a vibrant ecosystem with more than 2 millions apps created in fewer than 10 years. The number of app publishers, the speed of innovation, and the low barrier to entry for startups makes the app market incredibly competitive. In a recent Developers Alliance survey, 40% of developers said the greatest threat to their success was their direct competitors.  

To compete and survive in such a competitive market, entrepreneurs have to diversify their products and their business models. Our survey found that publishers are responding to this need and finding niche audiences and users - eleven different categories of apps have at least 10% representation.

Marketing - the key to success for apps

Boris Kolev created his first start-up at only 18 years old. He is now the co-founder of DigiMark: “The most important thing for a successful app is having the best marketing strategy. Competition is outside the device and outside the app-stores”. (Watch Boris's interview) The leading reason developers cite for an app’s lack of success is discoverability, rather than challenges with distribution - 77% of developers are distributing their apps through, at least, 2 different app stores and 14% permit downloads from their websites.  

There is no easy solution for publishers. Even apps preinstalled by hardware manufacturers don't have a market advantage according to 68% of app developers. As Ian Rumac, Lead Android Developer at SuperPopcorn explained: “We can even make deals to have our apps be preinstalled on devices, but we can also choose to let users decide the ones they want”. (Watch Ian's interview)

A fragmented ecosystem can kill your company

For entrepreneurs, the internet based digital economy is an enormous opportunity to start a business from scratch and reach a global audience with a low barrier to entry.

The mobile vertical of the digital economy also offers tremendous opportunity, but there are inherent obstacles to success. Specifically, the diversity of devices and the nature of application development can - and often does - create compatibility challenges. In the early years of the mobile app industry this fragmentation - differing hardware specifications, screen sizes, etc., - required publishers to create and maintain dozens of versions of their products. The time and money demands of market fragmentation forced many, far too many, companies out of business. As Edward Cooper said, “If you release an app to a fragmented platform, and it doesn’t work on several users devices, it can kill a really good start-up”.

Today, due largely to a concerted effort by platforms and hardware manufacturers to reduce fragmentation, increase compatibility, and lower the barrier to entry and success for publishers, the negative effects of fragmentation have been significantly reduced. More than half of publishers surveyed by the Developers Alliance in August believe the problem has gotten better in the past several years. 

Working in a more integrated ecosystem, EU developers were able to develop 40 of the top 100 grossing apps in 2015. This is good news for publishers, consumers, and the industry. When asked about how and if changes should be made to the current regulatory environment or the app industry at-large, mobile app publishers like Edward say “even if well-intended, regulation might have unexpected repercussions on a fast moving environment such as the mobile app space and slow it down”. 

Ian, Edward and Boris spoke at the Apps Alliance roundtable on September 26. Watch their presentations and learn more about competition and innovation in the app ecosystem on our youtube channel.