The mobile app gold rush may be over

Ten years ago, Apple announced the iPhone, which soon gave birth to the App Store and the resulting broader app ecosystem. That industry has now matured, having reached critical mass, according to a new report from Flurry out this morning. While there’s still some growth to be seen — app usage is up 11 percent over last year, for example — that growth is slowing. And many app categories are now growing at the expense of others, when before, all were growing in tandem.

This indicates that apps have maxed out on the finite resource that is users’ time. That is, drawing attention to a new app will mean having to shift users away from others. This could be a problem for new app businesses — especially those that mean to take on the incumbents like 2016’s most used apps: Facebook, Messenger, Google, Gmail, Instagram, Amazon, Apple Music and others.

To generate its analysis, Flurry looks at the apps on its analytics platform. Flurry’s footprint now includes the ability to track more than 940,000 apps across 2.1 billion devices in 3.2 billion sessions, offering deep insight to the state of the app ecosystem today.

The firm found that overall app usage is only up a moderate amount — 11 percent year-over-year, compared with 58 percent in the 2015 annual report. However, time spent in apps is soaring, up 69 percent over last year.

Some apps are doing better than others, the report indicates.

Social networking and messaging applications, not surprisingly, had a great year, with session growth climbing 44 percent over 2015, and time spent in apps up a staggering 394 percent year-over-year.

The increases in these categories are due to a number of factors: the ubiquity of smart devices, faster mobile broadband, newer features that allow for voice and video calling, the combination of communication and entertainment that the apps allow for, the addition of live content, the aging of the “I Generation” (who were kids when smartphones arrived and are now teens with their own devices) and more.

One factor Flurry didn’t mention, but seems notable, is users’ newer desire for more private socializing and sharing. This feels like a cultural response to an overall decline in user privacy, or at least an awareness of how un-private the web really is. Over the past few years, people have grown to understand how much what takes place on public social networks is watched, analyzed and used to generate big piles of personal data that’s traded and sold to marketers and advertisers. (Not to mention that whole government spying on their citizens thing.)

Messaging apps aren’t necessarily any more private and secure than a more public social network — that depends on their use of encryption techniques and security practices — but they feel that way, which has also factored into their growing adoption.

But their growth has come at others’ expense.

For example, the personalization category lost the most traction, with a 46 percent decline in usage. Flurry attributed this drop to the diminishing value for users of these apps.

Games also declined in terms of time spent by 4 percent — a smallish drop, but one that speaks to the ephemeral nature of these applications. Gaming revenue is doing okay, though. Thanks to massive hits like Pokémon GO, the App Store has been breaking records on that front. (Also, note that Super Mario Run arrived too late in the year to impact Flurry’s numbers in the Games category.)

Other app categories on the rise in 2016 included Business and Finance, up 43 percent in terms of time spent; Shopping, up 32 percent; and Sports, up 25 percent.

Shopping, in particular, benefited from the maturation of the e-commerce industry, which has made strides in terms of enabling easier mobile checkout flows, and has benefited from native mobile payment mechanisms, like Apple Pay, we’d argue.

And Flurry notes, too, that Amazon’s prowess can’t be overlooked, as it took 38 percent of holiday sales transactions.

Beyond apps, the report also delved into form factor preferences, finding that phablets now account for 41 percent market share by Q4 2016. This correlates with the growth in media consumption and social engagement app categories, Flurry says.

Overall, the slowing of growth in app usage points to the end of the app gold rush era and market maturity. It will be harder for new apps to find install bases, which means you’ll see more startups pulling stunts like spamming your contact list to hack their growth, perhaps, more M&A activity in this space and more VC-backed apps closing up shop when the funds run out.

The big tech companies behind the app platforms — Apple, Google, Microsoft and the like — will be looking to find the next developer platform, as the mobile app ecosystem matures. In the running are apps for wearables, connected TVs and media players and bots. But the most promising next frontier appears to be voice computing — which means 2017 may be Amazon’s turn to play in the “app” ecosystem, thanks to its Alexa assistant and its many add-ons.

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