The App Bubble Burst: The Coming Mobile App Economy Correction
The mobile app economy is one of the most important developments in the paid content marketplace but its success may be built on shaky foundations. In May 2014 we warned about the potential risks of the superstar app economy, with too few apps taking most of the revenue. Revenue is dominated by games, making mobile apps a de facto games economy, with the pursuit of the standout success of a handful of app developers creating bubble economics. Yet many of those pacesetters have struggled to come up with follow up hits that meet, let alone surpass, their previous successes. It is now clear that the sustainability of the current mobile app games market, and by implication the broader app economy, cannot be taken for granted.
The warning signs lie in the divergence between the ‘Free’ and ‘Top Grossing’ charts. The majority of mobile app revenues comes from in app purchasing in free games so the free charts are a forward looking indicator of where future grossing revenue will come from and thus reveal what is coming next. We conducted a 6 month update to the MIDIA Global App Tracker and found the following:
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The bubble environment of the app economy is clearly visible. Although the top line numbers don’t show the burst quite yet, the change is coming:The app bubble will burst: The mobile app economy’s over dependence on single-hit factories, and the way in which these companies have starved other mobile game companies of oxygen, has helped create shaky foundations for the wider mobile app market. If they fail, they fail big. With the new audience flow slowing so dramatically for the big titles, time is running out.Realignment rather than collapse: The bubble bursting does not mean an end of the sector, but instead a realignment similar to that caused by the dot com bubble burst. The shake out will leave a more sustainable market. But it is also an important opportunity to correct some of the underlying problems such as discovery. Solving app discovery will be key for unlocking long term sustainable revenue growth. Without it, the market app economy will simply not be able to reap the benefits of the inevitable correction it’s heading towards.