The Future of Apps and the Era of Mobile Gateways

By Hugo Gersanois | August 24th, 2015

The mobile app ecosystem has gone through a rather solid and steady growth since the launch of the Apple App Store 7 years ago, and so did the products and marketing associated with it. Shortly after the launch of the App Store, a “land grab” playground arose, where lots of companies - especially gaming companies, such as Rovio or King, found success in a very short amount of time. Today, over 3 millions of apps are available to the end customers across the stores, which makes discoverability extremely hard. Mobile app developers need a really high value proposition to attract users to their products.

In mature markets such as US, current trends show that people use a decreasing amount of applications, but spend more time in those fewer apps. In other words, users dedicate less time to a limited amount of apps. Many studies and surveys back this phenomenon: in June 2015, Nielsen revealed that "70% of the time spent is done within the top 200 applications".

future of apps average time per session

According to PwC, US users only installed an average of 20 apps last year, which accounts for less than two apps per month. This is most likely due to users becoming mobile-savvy and more educated, thinking twice before downloading an app which will not bring them major value for the time spent using it.

future of apps number of apps used

(Source: PwC)

On the other hand, mobile Internet usage is still growing at a fast pace, meaning that users are increasingly accessing the mobile web, but through a decreasing amount of specific applications.

These applications have become the gateways to mobile Internet.

Browsers (Chrome, Safari, Opera) are undisputedly gateways, but mostly so on the desktop - in the last few years especially, with lots of services being hosted in the cloud. Recently, and more importantly, other types of players have become mobile gateways. The most significant example is Facebook. The social network is now used to access lots of content, services, as well as products directly within the app. If someone posts an interesting article from Business Insider, people now read it directly within the Facebook app, and then return to browsing their feed. An increasing amount of content is accessed directly within Facebook rather than through the publisher’s app, or even a mobile browser. A similar strategy has been adopted by other players, such as Kakao, now offering users to buy on GS Shop, or Uber letting passengers play songs in the vehicle without having to open the Spotify app.

In a way, this makes sense from a user perspective: why use 10 different airline apps, when you could have flight search, booking management, and fidelity programs for all companies syndicated into one gateway app? Same goes of news content: why read stories on 10 different newspaper and magazine apps?

Does this mean that the app era is over?

Well, not quite. Some categories are likely to retain an app form for a long time; among others, mobile games and entertainment apps. This shift will also take some time to complete, as the app and mobile markets are at various levels of maturity across verticals and geographies. If this trend started appearing in the US as well as a few other very mature and saturated markets, in emerging countries the app fest is still ongoing. As you can see from the graph above (PwC), in the past year Chinese users downloaded twice many apps as their US counterparts.

A. What does this mean for app developers?

  1. Once again, it is getting increasingly harder for a (new) app to get discovered; at any mobile industry event, this discoverability issue remains the topic of choice. Advertising can be a solution whenever a ROI model has been implemented at an early stage of the product development cycle. However, not all companies will be able to scale on their user acquisition strategies, as it can get costly quite rapidly.
  2. Cross product integrations are likely to be a very relevant alternative to building an app of its own. Nevertheless, there is a huge platform risk: control is in the hands of the app that gets the traffic.
  3. If you can’t be a gateway, start thinking browser and mobile web. Acquisition costs can be cheaper. Infrastructures will develop, with one-button pay solutions as well as the roll-out of 4G networks in many countries around the world.

B. What does this means for marketers? How can they reach their consumers?

  1. Carefully and specifically target users with placements within these gateways. Programmatic/RTB will be the right way to target the right users, or re-engage your existing ones.
  2. Adapt ad-units to the actual gateway itself - more of native formats. Facebook has shown the way and other SSPs, such as PubNative, are taking this road.
  3. Don't build an app for branding purposes if there is no strong value proposition to the end user. Just don’t do it.

C. What does this mean for investors?

  1. Primarily target potential gateways.
  2. Be on the lookout for models that fit or can adapt to these gateways. Alternately, look for companies providing services used across all gateways (Twilio is a good example).

A few years from now, the world of mobile will likely resemble the desktop, as the large majority of mobile services and content will be accessed through a handful of gateway apps. Among them: Facebook, the new Internet Explorer Chrome…

We might be back to a desktop world... but on mobile.

Hugo Gersanois
Hugo Gersanois is Partner at AppLift, where's he's in charge of general corporate development. Before AppLift, Hugo co-founded app performance marketing company appiris together with Hitfox and Stefan Benndorf. Hugo cut his teeth in the mobile advertising space through a business development role at AppGratis. He previously worked as an Analyst in the Private Equity team of BNP Paribas New York focusing on Oil & Gas investments. He also gained exposure to Venture Capital through Analyst positions at Ventech and Gamma Capital Partners evaluating business models in the TMT space. He graduated from EM LYON Business School with a Master in Finance and Strategy.

Hugo gersanois