The Great App Bubble(fastcompany.com)
fastcompany.com
The Great App Bubble
http://www.fastcompany.com/1684020/the-great-app-bubble
15 comments
Yes, don't expect any sort of financial sophistication from the peanut gallery. Just after Bernie Madoff, journos called everything they could think of a "Ponzi scheme".
Bubble is just today's word for "doubleplus ungood".
Bubble is just today's word for "doubleplus ungood".
I define a bubble like this to myself: too much is invested into something compared to the revenue it will generate in the future. Now if we assume that 'developer time' is an investment from the developer, then we can discuss whether apps are a bubble or not. I don't know the answer, because I don't know the numbers. We should sum up all the revenues generated by apps and divide it by the sum of all develoment time invested into apps. If this number is very low then we may speak about some kind of bubble. If we assume that users will buy even less apps in the future, then we can speak about a bubble even more.
For me, I know it's a bubble when everyone from my neighbors, mom, coworkers, etc. start talking about investing in it or when there are "reality" shows and late night infomercials about it. That's when it's time to get out.
Yeah, I'm waiting for my family to start talking about buying gold so I can short it :-)
You mean they are not? I thought gold is the perennial "hedge against economic downturn" and non-financial specialists treat it as such.
I hear friends and family talk about gold whenever the economy is sour.
I hear friends and family talk about gold whenever the economy is sour.
I worked with a guy that got into buying and selling Beanie Babies right as that "bubble" burst. At least he didn't take out a second mortgage just to buy them.
I don't think you can have a bubble in a commodity that cannot be traded. You can sell an app, but you can't trade it for more than you bought it for, because there is an infinite supply of copies of the app available for sale by the original vendor.
The touchstone of a bubble is that even rational people, who know that (e.g.) there is no rational reason why a tulip bulb should be 1000x more expensive this year than last, nevertheless feel inclined to buy an expensive tulip bulb because tomorrow it will be even more irrationally expensive and they can sell it for a profit.
The app situation is a mere boom. Which, as you say, is a garden-variety occurrence. Fields boom and bust all the time.
The touchstone of a bubble is that even rational people, who know that (e.g.) there is no rational reason why a tulip bulb should be 1000x more expensive this year than last, nevertheless feel inclined to buy an expensive tulip bulb because tomorrow it will be even more irrationally expensive and they can sell it for a profit.
The app situation is a mere boom. Which, as you say, is a garden-variety occurrence. Fields boom and bust all the time.
Wasn't there a dutch tulip bubble once? Also baseball cards were kind of a bubble in the 80s/90s, right?
Speculative bubbles have been happening fairly frequently for centuries:
http://en.wikipedia.org/wiki/Tulip_mania
http://en.wikipedia.org/wiki/South_Sea_Company
http://en.wikipedia.org/wiki/Railway_Mania
http://en.wikipedia.org/wiki/Tulip_mania
http://en.wikipedia.org/wiki/South_Sea_Company
http://en.wikipedia.org/wiki/Railway_Mania
The consumer good industries suffer side effects of bubbles and their eventual busts but I can't think of a bubble that was created in the consumer good industry. It's just not capital intensive enough for that.
What about the dot com bubble?
What about the dot com bubble?
Uh,
It is true that bubbles generally involve capital investment rather than "investment" in consumer goods (with some exceptions like Bennie Babies and such).
However, the article argues that "the app bubble" is akin to the earlier "dot-com bubble" - ie, that the bubble involves venture capital investment in startups selling apps ("Venture capital is flooding into the app economy in spite of the questionable ROI proposition"). I don't know if that's true but the "dot-com bust" seems to refute your argument that such a bubble is not possible.
It is true that bubbles generally involve capital investment rather than "investment" in consumer goods (with some exceptions like Bennie Babies and such).
However, the article argues that "the app bubble" is akin to the earlier "dot-com bubble" - ie, that the bubble involves venture capital investment in startups selling apps ("Venture capital is flooding into the app economy in spite of the questionable ROI proposition"). I don't know if that's true but the "dot-com bust" seems to refute your argument that such a bubble is not possible.
I find it interesting that he compares the value of phone apps to the value of the mobile web. There are thousands more apps than the user can process, and the majority of apps that the user downloads will be abandoned/forgotten within a few hours/days.
It sounds a lot like the internet in general, to the extent that App stores could be considered a transient analogue to a gated internet. Thousands of apps/sites all struggling to attract the attention of users.
It sounds a lot like the internet in general, to the extent that App stores could be considered a transient analogue to a gated internet. Thousands of apps/sites all struggling to attract the attention of users.
I generally agree with his arguments. But, perhaps naive, I believe games can be immune to a lot of this. Gamers always have room for one more game if it's good. There is a sizable chunk of iOS users who pretty much use it as a game platform (toucharcade.com's forums are a good testament to that).
But at the same time, I've come across many excellent, well developed, beautiful games in the app store that 3 people have downloaded. So games for sure are not a magic bullet.
But at the same time, I've come across many excellent, well developed, beautiful games in the app store that 3 people have downloaded. So games for sure are not a magic bullet.
Care to share the names of some of these games? Always looking for well-produced indie games. Also, how do you find them? Serendipity or scrolling endlessly?
I really only find games by word of mouth, the top listings, or keyword searching.
I really only find games by word of mouth, the top listings, or keyword searching.
I recently bought an iPad so browsing the app store and downloading pretty much everything that is free has become a hobby of mine :)
My favorite is LinKing (iPhone and iPad). It's by a German game company (they have 180 employees and pump out a lot of games) so they're not quite "indie"; but the game's sole review is from me (I reviewed both the lite and pay versions), and no one has rated it. It's a well done puzzle game with a really nice interface. It's my current favorite iPad game.
Just Deliver It (iPad) is a really polished game from a Japanese developer. Great music, graphics and interface. IMO the game itself is not so great, but it may be other people's cup of tea. It's also a puzzle game. It has 13 ratings and no reviews, so I'm sure the developer is not seeing a return on investment.
Brainstory (iPhone) is surprisingly polished for such an obscure little entry tucked away in the app store. It's got great graphics. But the whole thing is just really weird, and I think that turns people off. It's a pretty standard puzzle game ala columns or dr. mario.
Ninja Block (iPhone) is a strange beast. Also from a small Japanese team. It has beautiful graphics (their artist is awesome), strange canned music, engrish galore :), and the game itself is mindlessly stupid. You have to stack blocks on top of each other as high as you can. The engrish, bad music and slightly raw feel the game has is a turn off. Some things just aren't very polished, it could have used another week of dev time. But I actually think if they could have polished it up just a tad more (and hired someone who speaks english well), they would have had a good entry in the very popular "super simple games that only shoot for a high score" that totally dominate iOS.
ESP Galuda II (iPhone) is from Cave, a very successful long time player in the shmup genre (huge in Japan). ESP Galuda II is by no means ignored (63 ratings and 27 reviews), but since it's from Cave (they are just a fantastic company), it's disappointing. iOS users, you were given caviar and you ignore it! :)
My favorite is LinKing (iPhone and iPad). It's by a German game company (they have 180 employees and pump out a lot of games) so they're not quite "indie"; but the game's sole review is from me (I reviewed both the lite and pay versions), and no one has rated it. It's a well done puzzle game with a really nice interface. It's my current favorite iPad game.
Just Deliver It (iPad) is a really polished game from a Japanese developer. Great music, graphics and interface. IMO the game itself is not so great, but it may be other people's cup of tea. It's also a puzzle game. It has 13 ratings and no reviews, so I'm sure the developer is not seeing a return on investment.
Brainstory (iPhone) is surprisingly polished for such an obscure little entry tucked away in the app store. It's got great graphics. But the whole thing is just really weird, and I think that turns people off. It's a pretty standard puzzle game ala columns or dr. mario.
Ninja Block (iPhone) is a strange beast. Also from a small Japanese team. It has beautiful graphics (their artist is awesome), strange canned music, engrish galore :), and the game itself is mindlessly stupid. You have to stack blocks on top of each other as high as you can. The engrish, bad music and slightly raw feel the game has is a turn off. Some things just aren't very polished, it could have used another week of dev time. But I actually think if they could have polished it up just a tad more (and hired someone who speaks english well), they would have had a good entry in the very popular "super simple games that only shoot for a high score" that totally dominate iOS.
ESP Galuda II (iPhone) is from Cave, a very successful long time player in the shmup genre (huge in Japan). ESP Galuda II is by no means ignored (63 ratings and 27 reviews), but since it's from Cave (they are just a fantastic company), it's disappointing. iOS users, you were given caviar and you ignore it! :)
Love Ninja Block. Thanks for the recommendations!
So this man thinks that because he only uses 5 apps other people will only use 5 apps.
This reminds me to the web "bubble". The same way not every web page about cars or cats made millions to their creators, not every fart app is going to make you millionaire.
You can use the same arguments for web too: 1)web don't generate profit for their developers(using his per capita metrics). 2)web is not profitable for MS, Apple, IBM... ... But the web is very good thing with or without profit. It gives you just the profit opportunity. Is not going to give you money just by standing up waiting for the money to come.
This is only the start of a new paradigm: Using touch with your computer, and like the first "visual" apps, they look like toys compared to the serious precedent(were is Lotus 1-2-3?). Easy to look down on, some people could loose the train if they don't jump.
This reminds me to the web "bubble". The same way not every web page about cars or cats made millions to their creators, not every fart app is going to make you millionaire.
You can use the same arguments for web too: 1)web don't generate profit for their developers(using his per capita metrics). 2)web is not profitable for MS, Apple, IBM... ... But the web is very good thing with or without profit. It gives you just the profit opportunity. Is not going to give you money just by standing up waiting for the money to come.
This is only the start of a new paradigm: Using touch with your computer, and like the first "visual" apps, they look like toys compared to the serious precedent(were is Lotus 1-2-3?). Easy to look down on, some people could loose the train if they don't jump.
Pick any of his arguments and you can flatten it in seconds.
I've seen the nonsense 'avg cost to develop app' metric before, put it in context, there are a huge number of apps that use the same code with different data.
Also claiming that apple doesn't value the actual apps is ludicrous given their app specific advertising campaigns of 'There's an app for that'.
I've seen the nonsense 'avg cost to develop app' metric before, put it in context, there are a huge number of apps that use the same code with different data.
Also claiming that apple doesn't value the actual apps is ludicrous given their app specific advertising campaigns of 'There's an app for that'.
Overall, I agree with you, but there are a couple of observations that renders the article out of the completely bogus realm:
Marketers are spending money on iDevice apps at the expense of improving their mobile Web sites that everyone with a smart phone can access.
True. I guess it's mostly a matter of visibility rather than using the appropriate technology.
App business is a bubble? Nah, I don't think so.
Marketers are spending money on iDevice apps at the expense of improving their mobile Web sites that everyone with a smart phone can access.
True. I guess it's mostly a matter of visibility rather than using the appropriate technology.
App business is a bubble? Nah, I don't think so.
there are also a huge number of free apps that simply should not be counted, and that would push the average return-on-app much higher.
Indeed 36K seems a little high for all the cheap free apps on the market.
As for using the mobile browser instead of the app. I'm curious why people aren't just making apps that load up their site. They will have a universal platform for app development and get to say, "We now have an app on X that allows you to use our product."
As for using the mobile browser instead of the app. I'm curious why people aren't just making apps that load up their site. They will have a universal platform for app development and get to say, "We now have an app on X that allows you to use our product."
The bubble has already burst, as evidenced by the lack of value-generating apps (run once and never touched again) and the bottom falling out on prices. Apps are either free or 99 cents, with the exception a few proprietary platforms (or protocols) that won't easily allow competition (Slingbox, etc).
The only apps I have purchased for a real amounts of money are from Rock or Cydia. Most of them were $10+ and to be honest I use them everyday. Apps such MyWi 4.0, My3g, IntelliScreen, Wifi Sync, and many others get daily use from me and and I am more than happy with what I paid. Granted, AT&T and Apple aren't likely huge fans of these types of Apps, but I think that is a huge mistake on their part. Android too is hamstrung by Verizon with what they are allowed to give developers access to on their phones. If these restrictions weren't in place I really believe that there would be so many more unique and USEFUL Apps than there are now. The really useful (jailbroken) Apps go beyond porting websites to cocoa.
The subject has already much discussed on HN. I don't see how making the association with the bubble sheds new light to the App phenomena. I doubt the comparison even applies, or if it applies you could put the label "bubble" to anything trendy (and many that is what is going on... the bubble of using the word "bubble"). Apps can only be traded one way, you can't sell them back to someone else.
At least the target market for the iPhone apps is growing and a stepping stone to the iPad or any other device to come that will adopt IOS.
The author doesn't use many apps on your phone. I can bet he is not using many apps on his PC either. There are tons of things people buy or offer that remain never used.
At least the target market for the iPhone apps is growing and a stepping stone to the iPad or any other device to come that will adopt IOS.
The author doesn't use many apps on your phone. I can bet he is not using many apps on his PC either. There are tons of things people buy or offer that remain never used.
There is one app which is worth of hundred euros to me: a local public transportation app (ReittiGPS in Finland). 3 euros for an app which I use almost daily and which has saved me hours is pretty low.
On other hand I have dozens of little apps which I use very seldomly. But I guess I will be wasting money for those apps, since one or two of them has been pretty useful to me (and games of course).
And I still use much more money for beer than apps :)
On other hand I have dozens of little apps which I use very seldomly. But I guess I will be wasting money for those apps, since one or two of them has been pretty useful to me (and games of course).
And I still use much more money for beer than apps :)
Another example of lying with statistics. The author takes the number of apps / revenue to paint an unrealistic average. What's really going on is a few apps are making millions, and the rest almost nothing.
Per
Per
Where did they come up with $35k to develop an app?? That's craziness. Where do I find people willing to pay me that much?
In new york city - contract through a digital agency.
Every rich company wants an iphone app and they have no idea why, but $35K is a drop in the bucket for them.
Every rich company wants an iphone app and they have no idea why, but $35K is a drop in the bucket for them.
"What's needed are apps tied to real business models that have real ROI. And,companies should build apps with their eyes open about what they should realistically expect to accomplish with what they develop. Having an app for an app's sake is not enough."
That pretty much summarizes the entire story
That pretty much summarizes the entire story
In the terms of the classic trinity - Innovators, Imitators, Idiots, the term bubble could be defined as a rush of third ones. Blogs, SEO, and community-created-content sites already in that stage.
Honestly I think that the first comment made more sense than the article itself.
I don't see why people trying to start companies based on developing higher quality apps could ever be a bubble. If those companies don't end up serving consumers they'll go out of business which is not abnormal at all. It's part of life.