Are we in an APP Bubble?

app bubbleAlthough IBM can lay claim to the world’s first smartphone, it wasn’t until the 2007 arrival of the iPhone that the mobile revolution really began. From that point on, the smartphone wasn’t just for the business-oriented, but for anyone who wanted to wield a powerful handheld computer.

With the advent of such a consumer-focused device came opportunity for startups, and apps of all stripes began flooding into the space, contributing to what some have called “The Great App Bubble.” Symptoms of an alleged mobile app bubble, for those unfamiliar, include apps that aren’t making money, are downloaded but never used, or worst – sit and collect dust in an already overcrowded app distribution platform.

To put things into perspective, we’ll use Apple as an example. The App Store first opened its digital doors in July 2008 with just 500 apps, and has surpassed the 1.2 million mark in six years. While these numbers show off the value of Apple’s app mass, they also represent a thoroughly saturated market where simply developing an app no longer equates downloads.

Besides having to sift through an already crowded marketplace, users are also now faced with a myriad of apps – each more efficient, high-quality and user friendly than the next. “People are now spending money to build apps with proper UX development and design and proper focus groups, there’s now an evolution into a higher standard of app,” said Angelina Draper – a tech journalist and the host of ‘28 Tech,’ an RTHK show on how technology impacts our everyday lives.

it's not so much a bubbleAs an avid app user, Draper relies heavily on reviews, ratings and keeps an eye on the release dates, citing “time optimization” and “problem-solving” as two main reasons to hit download. With 15,000 new apps submitted to the App Store each week, selections now plentiful and with ample choice comes great expectation. “You now have more people coming of age who are digital natives and won’t think twice to use a ‘To-Do’ list app versus jotting things down, and they expect a level of performance from an app. It’s an evolution of the space and of people,” she said.

The competition currently vying for user attention in the mobile space is fierce. But does an oversaturated space always equate a bubble?

Simon Squibb, CEO of Nest Investments which invests heavily in the mobile app space, doesn’t think so. “It’s not so much a bubble, but an evolution of the opportunity of mobile. There was a time where you could launch an app on the App Store, but what has changed now is the saturation point. That means you have to be more innovative, more creative and use more tools in your toolbox such as marketing,” he said listing relationship marketing and building a social media fan base as two key ways to help your product stand out.

According to Squibb, a great product is essential but will not carry a startup to the top, as a restaurant with great food may not be successful without a clever marketing strategy. “The tech should go hand in hand with the marketing, and those who are doing that should be able to avoid any kind of bubble reference,” he said. “Ultimately, as the market matures and as mobile becomes a way of life for people, the differential is going to be the brand and ensuring people get the difference between the new app on the market and yours.”

While large app publishers may have substantial budgets allocated towards marketing campaigns, smaller outfits will have to get creative. According to Ben Cheng, the founder of development studio Oursky, being featured by the App store or developing for a niche category are two strategies a startup can use to stand out. However, he laments that the “app land grab” days are on its way out. In the past, any developer or freelancer could create an app in a new category and swiftly pick up downloads, but that now proves to be difficult as iOS and Android are no longer the unconquered platforms of the past.

Cheng, who believes that the end of the “app land grab” is an indicator that the mobile app bubble has already burst, urges startups to develop a good monetization strategy. “Given all the low-hanging fruit is already taken, my advice would be to build an app with a real business model behind it. Don’t just build an app hoping people will use it, then figure out the business side. If you are doing a new startup in the mobile space today, know that mobile is just a platform and that it’s important to build a business behind it,” he said.

As more startups flock into the mobile space, so are investors. According to a report released by Digi-Capital in mid 2014, investments into the mobile app space have doubled since the third quarter of 2013 to US $10 billion – the hot spots being m-commerce, games, utilities, travel and transport.

While these numbers are encouraging, Cheng is still dubious about the sustainability of some of these businesses. “There’s a lot of angel investment and venture money going into the app space right now, but in the future, you’ll see a lot of app companies that are not sustainable, as in the business model can’t support the app. Then you’ll start seeing some apps becoming obsolete or the company behind them shutting down,” he said.

Whether you think the bubble is still growing, has already burst or is merely a facade for a rapidly evolving mobile space – there’s a lesson to be learned here for startups. A great tech product no longer speaks for itself without an effective marketing strategy, and a venture cannot be sustainable without a working business plan. The motto “If You Build It, They Will Come” no longer paves the path to success and startups should be more vigilant if they want to stay afloat.


Iris Leung is a tech journalist covering entrepreneurship and ecosystem news in Greater China and is a contributor to Forbes Asia. She has Masters of journalism degree from the University of Hong Kong.