A demographic and business model analysis of today's app developer

A demographic and business model
analysis of today’s app developer

By Amy Cravens

This research was underwritten by the Application Developers Alliance.

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Table of contents
EXECUTIVE SUMMARY 4

INTRODUCTION 5
Methodology 6

DEMOGRAPHIC PROFILE OF APP DEVELOPERS 7
Personal characteristics of app developers 7
Employment profile of app developers 9

WORK ENVIRONMENT FOR APP DEVELOPERS 12

DEVICE PREFERENCES 16

PLATFORM PREFERENCES: CURRENT AND PLANNED 19
Android is gaining ground 19
Further concentration of the top four phone platforms 20

Growth in Windows 21
Growth in HTML5 22

LEADING APP CATEGORIES 23

AD USAGE 24
Performance metrics: ad impressions and revenue 25

PAID APPS 27

APP MONETIZATION AND CORRELATION TO OTHER STRATEGY FACTORS
31
Correlation between paid apps and other strategy factors 32
Strategy variances 33
Correlation between paid apps and other strategy factors 33
Profile variances 34
Strategy variances 34

A demographic and business model September 2012 -2 -
analysis of today’s app developer © GigaOM Pro, All Rights Reserved

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EMERGING TV-APP MARKET 36
Ads in TV apps 39
Paid TV apps 40

DEMOGRAPHIC IMPACT ON APP-DEVELOPMENT STRATEGY 41
Size of firm 41
The small app-development firm 42
Case study: independent consultant (HT Applications) 43
The large app-development firm 44
Regional app-market variations 46
Asia-Pacific app-market variations 46
North America app-market variations 48
Western Europe app-market variations 49
Work status of app developers 51
Hobbyist developers 51
Case study: connecting developers with projects (Work for Pie) 53
Professional developers 54
Career developers 57

FORECAST 59

CONCLUSION 63

APPENDIX A: DEVELOPER SUPPORT 64
Case study: infrastructure (Twilio) 64

Case study: programming tools (Temboo) 65
Case study: search and discovery (Hook Mobile) 66

ABOUT AMY CRAVENS 68

ABOUT GIGAOM PRO 68

ABOUT THE APPLICATION DEVELOPERS ALLIANCE 68


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App developers are the cornerstone of the multibillion-dollar app market. They supply
the creativity and the talent behind the creation of the millions of apps on the market
today.

However, because individual and small companies are the prominent players in the
app-development field rather than large, multinational organizations, very little is
known about this segment of the app market.

App developers are concentrated in North America, Western Europe, and Asia-Pacific.
Except for high school hobbyists, they are usually highly educated men in their mid-
thirties with several years of app-development experience. Their primary focus is on
developing tools and utility apps, with a secondary focus on gaming and social utilities.

While paid apps are more prevalent than ad-based revenue models, many developers
view apps as projects rather than products, so they are not highly motivated to
monetize their applications. Composed mainly of individuals or very small companies,
the developer community remains largely unknown and often underrepresented in the
app market. Given these challenges, those organizations and companies that can bring
tools, resources, and a collective voice to this group will be an important factor in the
evolution of mobile-app development.


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In the five years since Apple launched the iPhone, the mobile-app market has
experienced phenomenal growth: The App Store, launched in 2008, reached 25 billion
downloads as of March 2012.

Apple’s success inspired numerous other market entrants, creating a broad and
diverse array of devices and platforms as well as distribution and payment methods.
Although Android came to market two years after iOS, its devices and applications,
based on Google’s operating system, have captured a large share of the market,
surpassing 15 billion downloads as of the second quarter of 2012. Operating systems
from other companies such as BlackBerry, Symbian, and Windows have added further
complexity to the market.

In 2010 Apple instigated significant growth in the app market with the launch of its
iPad, which provided a new medium for app usage distinct from smartphones. Over
the past two years the tablet market, like the smartphone market, has diversified, and
device shipments have grown enormously. And despite being a nascent market, TV
apps have the potential to usher in a third era of app usage.

With the influx of players and the growth in the installed base of smartphones and
tablets, the app market reached roughly $5 billion worldwide in 2011. The many
parties participating in this revenue opportunity include operating system developers,
device manufacturers, and mobile operators, but at the core of the market is the
community of developers creating the apps. Although this community has expanded
with the market and these developers are the foundation of the industry, little research
has explored this group. This report explores the demographics of the app-developer
community and how differences in demographics affect perspectives and app-
development strategies.


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Methodology
This report examines the results of a web-based survey fielded to app developers in the
summer of 2012. GigaOM and the Application Developers Alliance sponsored the
survey, and upon completion it had 352 respondents. Over half of the respondents
were based in North America, a factor of both the sample that was drawn from the
GigaOM and the Application Developers Alliance client base as well as the strength of
the app market in North America compared to other regions. While this sample group
may not be entirely representative of the overall worldwide app-developer market, it is
a good indication of the demographic breakdown of the market.


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Who are the people developing the apps so integral to contemporary lives? The
common stereotype of an app developer is that of a young male who works
independently — typically not as a career but while in school or working another job —
creating apps for the love of it, hoping to “make it big.” Is that accurate? To find out,
GigaOM and the Application Developers Alliance conducted an extensive primary-
research project exploring the app-developer market.

Personal characteristics of app developers
According to the survey, some of the stereotypical characteristics of app developers are
true; others are not. For example, the survey determined that 94 percent of app
developers are male. However, they are not as young as stereotypes suggest. Just over
20 percent of respondents are in their teens or early 20s, while nearly 60 percent are
30 or older, with 33 being the median age.

Another misperception, somewhat tied to age, is the level of education app developers
have completed. Most are not high school or college students developing apps on the
side. More than 70 percent of app-developer respondents had a college degree, and
nearly half of those (33 percent of total respondents) had completed some graduate
work or earned a graduate degree.


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Figure 1. Demographics of an app developer


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Source: GigaOM Pro

Employment profile of app developers
The majority of app developers are full-time employees, with app development
accounting for all or a portion of their jobs. Full-time employees accounted for nearly
60 percent of survey respondents, with 65 percent of those individuals solely focused
on app development and the other 35 percent engaging in app development as a
portion of their jobs. Survey results indicate that the 40 percent of respondents
participating in app development on a part-time basis are more likely to be individuals
working other jobs (with app development being supplementary revenue) than high
school or college students.


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Figure 2. Respondents’ work status

Source: GigaOM Pro

While many app developers only work on developing apps part-time, the community
has a high level of experience. Given that the mobile-app market as we think of it today
is only five years old, the level of tenure is quite long. According to GigaOM’s survey
results, nearly 30 percent of respondents have been developing apps for over four
years, which makes them pioneers in the field. However, because app development is
such a rapidly growing and evolving space, it attracts ample new talent to drive the
market forward. Just over one-quarter of respondents have been in app development
for less than a year.

A demographic and business model September 2012 - 10 -

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Figure 3. Respondents’ tenure

Source: GigaOM Pro

While app developers are largely an experienced group, with many working full-time
in the industry, a large segment of the community earns relatively little income.
Among those respondents providing income information, more than half reported that
their annual income from app development was less than $15,000. That figure is
somewhat expected, given that over 40 percent of respondents participate in app
development on a part-time basis. However, despite the large number of developers
earning less than $15,000, the average annual income among survey respondents was
roughly $45,000, a figure that jumps to $75,000 if the segment earning less than
$15,000 is removed from the average.


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Figure 4. Respondents’ income distribution

Source: GigaOM Pro

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Developers tend to work either independently or in midsize firms (Figure 5). Very few
work in small businesses of 4 to 9 employees. Two-thirds of survey respondents
indicated they work either independently or in a group of 3 or fewer, while 19 percent
work for development firms with 10 or more employees.

The domination of small businesses in the app market has given this community a
unique personality. A market that includes hundreds of thousands of small companies
creates an innovative and competitive environment in which most firms have fairly
equal footing and no single voice dictates the direction of market development.
However, the lack of large, powerful companies makes representing the app
developers’ interests in the larger app ecosystem (which includes giant companies like
Apple and Google) difficult. Subsequent sections of this report will address other
aspects of development strategy related to the size of a firm.


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Figure 5. Respondents’ business size

Source: GigaOM Pro

According to the survey results, the majority of respondents focus on 1 or 2 projects at
a time, though one group of developers that represents less than one-quarter of the
community tends to work on 4 or more projects, bringing the average number of
current projects to 2.7.


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Figure 6. Respondents’ workload

Source: GigaOM Pro

With low barriers to entry and few starting costs, app development is an opportunity
available to many individuals across many regions. However, app developers
concentrate where app usage is highest. According to the survey results, North
America accounted for 54 percent of respondents’ headquarters. That may have been
influenced slightly by the fact that the survey was in part sourced from the Application
Developers Alliance and GigaOM, which have a large percentage of members and
readers in North America. North America, nevertheless, is the center of the app
marketplace currently. Over time app development may shift overseas, as has
happened with the software-development market. Western Europe also had strong
representation, as did Asia-Pacific. Central America, Eastern Europe, and Africa had
relatively light representation.


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Figure 7. Respondents’ geographic distribution

Source: GigaOM Pro

As would be expected, the regional focus for app localization tended to map to regional
headquarters, so the regions with the higher concentrations of regional headquarters


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were those where apps were localized. In many respects, the app market is without
boundaries. The apps themselves indicate that many app developers are now
capitalizing on a global audience. Nearly 56 percent of respondents indicated they only
develop one version of their applications, with which they intend to address a global
audience. Even those developers who localize apps for specific markets usually localize
for more than one region — at least two regions, according to the survey results. An
app developer’s location and regional focus have an impact on strategic choices, just as
the size of the firm does. Later sections of this report explore this in more depth.

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While app development initially focused solely on mobile phones, developers can now
create apps for tablets or the emerging TV-app market. Ninety-five percent of survey
respondents are currently developing an app for the mobile phone — the largest and
most established market — or have developed one in the past year. While fewer
developers create apps for tablets than for mobile phones, the gap has narrowed
significantly.

Table 1. Smartphone and tablet shipments (millions)

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Source: GigaOM Pro

The tablet market has seen a large influx of developers over the past year or so: 80
percent, according to survey respondents. Just over 60 percent of mobile-app
developers are new to the market, so the percentage of those creating tablet apps is
now much closer to the percentage creating mobile apps.


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Figure 8. Respondents’ tenure in app development by device type

Source: GigaOM Pro

Survey results indicate that 70 percent of respondents are developing apps for tablet
devices compared to 95 percent for mobile phones. Currently, just 11 percent are
developing for the TV market, but this is a factor of the market’s youth and not its
potential; an influx of developers to this space in coming years is likely.


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Figure 9. Respondents’ choice of device for app development

Source: GigaOM Pro

While smartphone and tablet apps have similar market structures and players as well
as significant crossover in catalogs, in many aspects they are two unique markets.
When developers choose to develop for a device, that choice has an impact on their
platform preferences, the type of apps they develop, and the monetization and
profitability of those apps. (Subsequent sections of this report will highlight the impact
of device choice.)


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Figure 10. Respondents’ current and planned platforms for app development

Source: GigaOM Pro

One respondent noted, “IOS is still the king.” This statement is supported by the
survey data: More developers are creating apps for iOS than for any other operating
system, and by a significant margin. Currently 20 percent more developers are
designing mobile-phone apps for iOS than for Android, the next leading platform. The
discrepancy is even greater for tablet apps, where over 60 percent more developers
design for iOS than for Android. Apple has created a venerable app ecosystem that is
attractive to developers and encourages development for iOS. In the words of another
respondent, “Developing for anything other than iOS is awful.”

Android is gaining ground
Even so, Android has been chipping away at the dominance of iOS over the past
several years, and that trend will probably continue. Looking toward the next 12
months, respondents indicated a slight increase in their expected development for iOS


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but a large gain in their anticipated Android development. For mobile-phone apps, an
additional 5 percent of respondents anticipated developing for iOS in 12 months
versus an additional 9 percent developing apps for Android. In tablets, an additional 3
percent said they will develop for iOS, but an additional 12 percent said they would for
Android. As illustrated in Table 2, the gap between developer representation for iOS
and representation for Android will continue to decline for mobile phones and even
more for tablets.

Table 2. Variance between respondents developing for iOS and Android, current and future

Variance between iOS and Android
Mobile phone Tablet
Current 12% 27%
Future 8% 18%
Source: GigaOM Pro

Despite the rise in interest, Android continues to face challenges, particularly
fragmentation. Android’s open-source operating system has encouraged many device
manufacturers to design phones based on the OS, but with so many devices running
different versions, often with different capabilities that can alter the end-user
experience, the inconsistency can be daunting for developers. Another challenge for
Android is creating a developer-friendly experience. To paraphrase one respondent,
“Android has growing pains. Google and OEM are hesitant to make it easier for
developers.”

Further concentration of the top four phone platforms
The app-development market is consolidating around the top operating systems as
developers move away from operating systems with less market share. According to
survey respondents, while the top four operating systems will see more developers
creating apps in the next year, the others (except Brew) will see a decline (Figure 11).


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As a result, app development for the top operating systems will increase — and so will
competition.

Figure 11. Anticipated increase (or decrease) in respondents developing apps by mobile-
phone operating system

Source: GigaOM Pro

Growth in Windows
Exceeding the anticipated migration to Android is an expected migration to Windows
for both mobile phones and tablets. Fewer than 30 percent of developers expect to
create Windows apps in the next year, but that is a significant jump over the current
number. Two comments drawn from the GigaOM survey illustrate the varying
perspectives on Windows among developers:

“I believe that Windows 8 and Windows Phone 8 will have a great potential.”

“Windows Phone is not going anywhere and Windows tablet is uncertain (and
unlikely).”


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The top three challenges for Windows, from a developer’s perspective, are devices,
apps, and users. As the Windows-based operating system was late to the smartphone
game, relatively few manufacturers are basing devices on its operating system. While
Windows phones will likely become more prevalent, relatively few phones are on the
market now, and with few devices available, the catalog of available apps is limited.
With fewer apps currently on the market, developers creating apps for Windows will
face less competition. There is also better discoverability in a less-crowded app
marketplace. While this means less competition for developers, it also means weak
consumer interest, as most phone buyers are looking for devices that will give them
access to many applications. Added together, a limited selection of devices, a relatively
bare library of apps, and weak consumer interest in Windows phones equal a low
addressable market and low success for an app.

Growth in HTML5
While native-app development will increasingly focus on iOS, Android, and (to a lesser
extent) the Windows operating system, developers are also looking for alternatives.
They are frustrated with the lack of cross-platform development tools and capabilities
as well as with the restrictions that app stores place on them. HTML5 presents an
opportunity for circumventing these problems. As one survey respondent wrote,
“There is a desperate need for standards. [App development] can't continue the way it
is . . . it's getting really really difficult to develop for many platforms. HTML5 is the
way.”

However, HTML5 has its potential shortcomings. By nature it is not as integrated with
the device and operating system as native apps are, so performance is often
substandard to native apps. Also, mobile users have become very familiar with
locating, downloading, and using native apps, so a shift to HTML5 will require
consumer education and retraining — often a difficult task.


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Various sources categorize apps differently, but certain categories, such as gaming and
social networking, are most often uniform. GigaOM divides apps into 16 categories
(Figure 12).

Figure 12. Respondents’ development by app category

Source: GigaOM Pro

According to survey results, the leading app-development category for both mobile
phones and tablets is tools and utilities, by a margin of 10 percent. While the gaming
market is well-publicized, results indicate a strong market for utilitarian apps that
increase a device’s performance. Games ranked second, and business and finance
ranked a close third. For most app categories, more respondents are developing for
mobile phones than for tablets, but a few categories had higher concentrations in
tablets, particularly entertainment areas such as e-readers, games, and video.


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As the application market shifts from a pay-to-download model to other revenue
models, ads have become an important revenue source for some app developers.
Surprisingly, only 25 percent of phone-app developers and 18 percent of tablet-app
developers are incorporating ads in their applications. The reason may be the
numerous barriers to implementing an effective ad strategy for mobile apps. Because it
is a relatively new marketing medium, most companies’ mobile-ad budgets are small,
and with the vast number of developers clamoring for those dollars, competition is
fierce. Data charting the effectiveness of mobile-ad strategies and their capacity to
target the appropriate audience and generate sales is scant. Mobile commerce has not
been very robust to date, so brands are hesitant to allocate a significant portion of their
advertising budgets to this medium.

Figure 13. Respondents’ usage of ads in phone and tablet apps

Source: GigaOM Pro


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Performance metrics: ad impressions and revenue
Two measurements of a developer’s success integrating advertising into an app are ad
impressions (a single member of the target audience viewing an ad) and ad revenue.
For both phone and tablet apps, the majority of respondents who have integrated ads
into their mobile apps experience fewer than 6,000 impressions per day. The average
number of ad impression hovers around 12,000 per day and is slightly higher for
mobile phones than for tablets.

Figure 14. Average daily ad impressions

Source: GigaOM Pro

Survey results indicate that while the vast majority of developers are earning little ad
revenue, a very few are earning significant amounts. More than one-third of
developers earn less than $100 per month on ad impressions (on both phones and
tablets); over 60 percent make less than $500 per month. However, the few earning
large amounts pull average revenue up to $1,923 for phone apps and $1,253 for tablet


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apps. (On average, ad revenue for mobile-phone apps is 35 percent higher than for
tablet apps.) These results were somewhat skewed upward by respondents making
over $20,000 per month; discarding these outliers brings the average monthly income
to $1,588 for phone apps.

Figure 15. Average monthly ad revenue

Source: GigaOM Pro

According to survey results, Google’s AdMob is the unequivocal leader among ad
networks. Founded in 2006 and one of the earliest mobile-advertising companies,
AdMob attracted the attention of mobile giants Apple and Google in 2009 when they
entered into a bidding war for the company. Google won and purchased AdMob for
$750 million. AdMob offers advertising solutions for mobile platforms other than
Android, too, including iOS and Windows Phone 7, as well as standard mobile web
browsers.

Apple’s advertising network, iAd, also had strong support among respondents.
Founded in 2010, iAd is an in-app advertising system for developers, but it is specific


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to iOS. Millennial Media, another early market entrant (founded in 2006) is a
platform-agnostic network. Although Millennial Media’s market share is reportedly
just shy of Apple’s iAd, our survey shows significantly higher usage for iAd than for
Millennial Media.

Figure 16. Ad network utilized by respondents

Source: GigaOM Pro

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The majority of respondents are developing paid apps, which GigaOM defined for the
survey as those requiring a fee to download or free apps offering opportunities for in-
app purchases. Paid apps are more prevalent among mobile-phone-app developers
than among tablet-app developers. Several studies have showed that the download
rate of paid apps on tablets is higher than it is on smartphones, but GigaOM survey
results indicate that developers are still more apt to create a paid app for a phone than
for a tablet.


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Figure 17. Percent of respondents developing paid apps

Source: GigaOM Pro

While the majority of app developers have paid apps on the market, they do not have
many. On average, respondents had 2.46 paid phone apps and 2.09 tablet apps on the
market. Most often, companies (both large and small) contract developers to create
branded apps. The developer then receives a job-based payment rather than ad fees or
user-based payments.


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Figure 18. Number of paid apps that respondents have on the market

Source: GigaOM Pro

Based on survey results, the average fee for mobile-phone apps monetized through
user-based payments is $2.71, with the majority priced at $1.99 or less. Tablets come
in a little higher, at $3.25, with a higher percentage of apps priced at $2.99 or more.
Only 11 percent of phone-app developers and 7 percent of tablet-app developers are
monetizing through in-app purchases.

The app revenue model has gone through a significant transition over the past several
years. The original model, based on pay-per-download, or paid, apps, began to weaken
as a slew of free apps appeared on the market. Developers began providing the basic
app for free and then charging very small amounts for virtual goods and special
capabilities within the app. This scheme allowed users to control their own level of
participation in an app, so dedicated users would spend higher amounts while casual
users paid less (or nothing). Developers often found that a recurring revenue stream of
micropayments was more profitable than a single download fee. However, survey
results indicate that respondents do not use the in-app payment model very much.


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In-app purchases, a relatively new method for revenue generation, are very popular in
the gaming and social networking categories but less so in other sectors. Many
developers view in-app purchases as a less solid revenue opportunity, while others are
waiting to figure out what the best practices will be. Still others are concerned that
these offers will degrade the user experience and discourage users from returning.
With developers’ overall goal being user acquisition, they will not sacrifice an app’s
reputation solely for in-app-purchase revenues.

Figure 19. Average price point for paid apps among respondents

Source: GigaOM Pro

A developer’s motivation for incorporating user-based payment opportunities into an
app is largely based on income potential. According to survey results, this income
potential is not that strong for most developers. Only about 20 percent of respondents
generated thousands of dollars per month from paid apps; the majority generated only
a few hundred dollars.


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Figure 20. Respondents’ monthly income from paid apps

Source: GigaOM Pro

Comparatively, user-based payments are fairly equal to ad-based revenues, with the
majority of developers earning several hundred dollars per month from each revenue
source. Overall, however, with the relatively low earning potential for ad-based and
paid apps, developers largely rely on contract fees as their primary revenue source.

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Monetization strategies are closely tied to other key strategic elements in app
development and marketing. Developers who have embraced paid and ad-based apps
are distinct from those who have not, both in demographics and in strategy decisions.


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Correlation between paid apps and other strategy
factors
While the majority of survey respondents indicated they incorporate user-based
payment opportunities into their applications, nearly 40 percent do not develop paid
apps. Survey results demonstrate that developers creating paid apps differ from those
who do not, both in strategy choices and in developer profile.

Profile variances
! Paid-app developers usually have a longer tenure in the market. Nearly one-
quarter of those developers without paid apps have been in the market for less
than six months, compared to only 10 percent of respondents offering paid apps.
With longer tenure, the paid-app developers have more experience integrating
monetization opportunities.

! Somewhat correlated to the longer tenure, those who develop paid apps are
usually older than those who do not. Nearly 70 percent of paid-app developers
are over 30 years old, but only 50 percent of those who do not develop paid apps
are that age.

! Paid-app developers are more likely to work independently and are less likely to
be a part of a large firm. Table 3 compares the size of shop: that is, the
independents versus large firms (those with 10 or more employees).

Table 3. Paid-app vs. other app developer comparison: size of shop

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Source: GigaOM Pro


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Strategy variances
! Paid-app developers are significantly more likely to use the iOS platform and
significantly less likely to use the Android platform than those who do not
develop paid apps, because iPhone users spend significantly more on
applications than Android users do. As expected, this imbalance draws paid-app
developers to the iOS platform. However, those who do not develop paid apps
are also adopting the iOS platform: Fifty-nine percent currently use iOS, and 69
percent plan to use it in the next 12 months.

! Paid-app developers are significantly more likely to develop gaming apps than
those who do not charge for their apps. While one-third of paid-app developers
create gaming apps, only 13 percent of the other developers do. Paid-app
developers focus on gaming, where in-app payments have flourished.
Conversely, a significantly lower percentage of paid-app developers create
location-based apps.

Table 4. Paid-app versus other app developer comparison: platform preferences

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Source: GigaOM Pro

Correlation between paid apps and other strategy
factors
Just one-quarter of the developers responding to the survey incorporate ads in their
apps. While developers of ad-based-apps are a minority segment, they have several
characteristics that distinguish them from other app developers.


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Profile variances
! Developers using ads usually have a longer tenure in the market than those who
do not: Fifty-four percent of ad-based developers have been in the market for
over two years versus less than one-third of those who do not use ads. As with
paid-app developers, these percentages suggest a correlation between the level of
experience and the use of monetization tools.

! App developers implementing ads have a higher concentration in midsize firms
(four to nine developers) than other developers do: 28 percent versus 11 percent.

Strategy variances
! While paid-app developers tend to favor iOS, ad-based-app developers
concentrate more on Android, BlackBerry, and Samsung bada. Since iPhone
users spend more on apps than users on other platforms, developers for non-iOS
platforms are more likely to use ads or other nonuser-based revenues, because
the success of paid apps on these platforms is not as strong.


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Table 5. Ad-based-app vs. other app developer comparison: platform preferences

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Source: GigaOM Pro

! Developers of paid apps often have a broader range of categories represented in
their app portfolios than other developers, with the greatest variance in social
networking and news, two app categories strongly associated with advertising.
Table 6 lists other categories that have a relatively higher percentage of ad-based
apps.

Table 6. Ad-based-app vs. other app developer comparison: app categories

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Source: GigaOM Pro

! Ad-based-app developers often localize apps, because ads are usually specific to
a market (either regional or national). While 53 percent of ad-based developers
localize apps, only 42 percent of other developers do. Regions with the greatest
concentration of localized apps are North America, Western Europe, and Central
and South America.


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Figure 21. Respondents developing apps for TV platforms and tenure in the market

Source: GigaOM Pro

According to GigaOM survey results, just 11 percent of respondents are developing
apps for TV platforms. This is not surprising, given the low penetration of supporting


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devices in the nascent TV-app market, the small potential market, and the relatively
few apps currently developed. Further highlighting the youth of TV apps, nearly three-
quarters (73 percent) of respondents have been in the market for 12 months or less.

Even with low participation, Google TV and Samsung TV are emerging as the market
leaders and have the greatest percentage of developers creating apps for their
platforms. Apple TV, which is among those with the fewest apps, has not yet signaled a
strong — and public — commitment to the TV market. Apple recently referred to Apple
TV as a hobby, a move that could generate hesitancy among the developer community
and a reluctance to create apps for the platform.

TV-app market share is still anyone’s to win and is very susceptible to development
and marketing efforts. Current versus planned platform preferences revealed in the
survey suggest that several platforms are poised for growth in the coming year. Google
TV and Samsung should continue to do well, but significantly fewer developers plan to
create apps for Yahoo Widgets than do at present. Survey results also indicate slight
declines for Xbox Live Marketplace and Roku. The increased number of developers
creating apps for LG TV and Apple TV over the next year will elevate both platforms to
a more prominent position than they currently hold. Note, however, that the
community of TV-app developers is still small, so survey sample sizes are small as well.
This developing market and its preferences could change significantly, but the survey
results still offer important insight into early market entrants.


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Figure 22. Respondents’ choice of TV-app platform: current and planned

Source: GigaOm Pro

At this early stage, social networking, lifestyle, and gaming apps are poised to be the
leading TV apps. Video-entertainment apps such as YouTube, Vimeo (video sharing),
and vTuner (internet-streamed media) are popular among early TV-app adopters and
thus have a strong developer following. The TV-app market has the potential to merge
many of these app categories so that users can engage with friends while they watch
TV or interact with the programs themselves.


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Figure 23. Leading TV-app categories

Source: GigaOM Pro

Ads in TV apps
Survey respondents use ads in TV apps much more than in phone and tablet apps
(both of which have relatively few in-app ads). While 18 to 25 percent of developers
integrate ads in phone and tablet apps, 40 percent of TV-app developers — nearly
double that amount — are incorporating ads. The TV ads also appear to be more
successful, at least in this early stage. While phone- and tablet-app ads averaged
approximately 12,000 ad impressions per day, TV-app-developer respondents are
achieving, on average, more than twice that number, reaching 25,000 impressions per
day. TV-app advertising may be more lucrative as well. The pioneer developers
responding to the GigaOM survey indicated that average monthly income from ads is
$5,400. That is almost three times the amount phone-app developers earn.


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Table 7. Comparison of ad success across devices: mobile phone, tablet, TV

Mobile phone Tablet TV
Percent of respondents integrating ads in
apps 4;> 15> 40%
Average daily ad impressions 12,288 11,786 25,315
Average monthly income from ads $1,923 $1,253 $5,411
Source: GigaOM Pro

Paid TV apps
As with ads in TV apps, GigaOM’s early research indicates that user-based payments
will also fare well in the TV-app market. Table 8 illustrates that the average price paid
and the average monthly income are higher for paid apps in the TV market than for
paid apps in either of the other markets. While app developers for TV, tablets, and
mobile phones have roughly the same number of paid apps available on the market,
survey results show that the TV-app market is three times more lucrative.

Table 8. Comparison of paid-app success across devices: mobile phone, tablet, TV

Mobile phone Tablet TV
Percent of respondents developing paid
apps 31> ;?> 50%
Number of paid apps currently available 2.46 2.09 2.58
Average price for paid app $2.71 $3.25 $4.40
Average monthly income from paid apps $2,286 $2,263 R3SD9D
Source: GigaOM Pro

Again, these results are based on a small community of developers, but they represent
potential for interesting and lucrative trends going forward. If these early results prove
true, the potential profit in this market will certainly attract many more developers.


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Discussion thus far has highlighted trends among the entire group of app developers, a
broad and diverse community, but demographics such as the size of the firm, the
region, and market tenure have a significant impact on who they are as developers, the
types of apps they create, and their monetization strategies.

Size of firm
Initially, the key players in the app-developer market were small firms made up of just
a few individuals, but as the market has matured, larger firms have emerged in the
space. Small and large app-development firms are very different, with varying levels of
resources, funding, and partner relationships impacting their app-development
strategy. While small firms dominate the market, big firms dominate the app-store
rankings, suggesting that success feeds success. Table 9 summarizes the key
differences in small and large firms, which are further detailed in the following
sections.

Table 9. Comparison of solo and large app-development firms

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Source: GigaOM Pro


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The small app-development firm
Small app-development firms, consisting of one to three individuals, make up the vast
majority of the app market and accounted for two-thirds of the respondents to the
GigaOM survey. These app developers are young, have recently entered the app
market, and are often developers on a part-time basis. Among those working alone, 41
percent have been in the market for less than one year, while just over one-quarter of
large firms have such short tenures. Approximately one-quarter (27 percent) work in
app development full-time; more than half work in development part-time and hold
another job. Many in this segment are currently hobbyists, but many also want to
pursue app development as a career.

Strategy differs between small and large firms in several key ways.

! Small firms usually focus highly on consumers and have less emphasis on
business and other verticals. While consumers are the leading target market for
developer firms of all sizes, a particularly high concentration of solo developers
(88 percent) focuses on this segment. Only 69 percent of large firms target
consumers. Often apps in the business and vertical markets are developed in
association with third-party partnerships, which are more difficult for small
firms to develop.

! Small firms are more likely than large to develop gaming apps, an element of
their strategy that ties closely to their strong consumer focus: Thirty percent of
small firms are developing gaming apps versus just 16 percent of large firms.
Note, however, that since gaming is the most competitive app-development
category, chances of a highly successful app are minimal.

! Small firms are most likely to utilize user-based payment opportunities, either


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pay-to-download models or in-app purchases. These opportunities are a
relatively simple means for small developers to monetize their apps, but in the
increasingly competitive app marketplace, paid-app profitability is deteriorating.

! Small firms are more likely to focus on phone apps and less likely to develop
apps for tablets and TV platforms. Resources are scarce in a firm of one or two
individuals, so they focus on devices with the largest user base and greatest
potential for success. Similarly, these developers are less likely to develop on
numerous platforms, so they often concentrate on developing for only one or two
platforms.

Case study: independent consultant (HT Applications)
Individuals working independently rather than for an employer make up a large and
diverse contingency in the app market of solo developers. They have varying levels of
experience and range from hobbyists to career app developers. Most solo app
developers (62 percent) are only involved in the space on a part-time basis, but a
smaller group (27 percent) of independent consultants pursue app development as a
full-time career. This case study highlights the activity of the independent app-
development consultant HT Applications, a company based in the Netherlands and
originated by Hessel van Tuinen.

In 2010 van Tuinen began developing mobile apps, initially through freelancing
projects. The success of several apps he launched as a freelancer provided credentials
for contract work with local as well as international companies. His time is currently
split between projects for European and American clients. He has launched several
development businesses in addition to HT Applications, including GreenGrass (which
is working together with HT Applications) and Friks Mobile. He is active, partnering
with other companies including Siteworkers, NetSupport, and DotComello.


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Van Tuinen initially focused entirely on iOS and developed numerous iOS applications
that are currently available from the Apple App Store, including RescuePhone, A6.nl,
IkbenZwanger, Keurslager, HTA Slider, and Tomke. He also expanded his
development activities to include the releases of Android and Windows Phone 7 and is
beginning to program for HTML5.

Van Tuinen often focuses on developing applications for businesses rather than for the
consumer market, as they are a faster, more reliable way to earn money. His clients are
based in many countries and include both large and small businesses. Current projects
include:

! ICommander: an iOS app for the fire department in Hayward, Calif.
! RescuePhone: a project for helping people in case of emergency that will work
across iOS, Android, and Windows Phone 7

! ConnectUs: an iOS app developed during the Apps Foundry Contest in
Luxembourg

! Keurslager: an iOS app that 500 butchers in the Netherlands will use for
collective use and sale of butcher products

! De Echte Bakker: an iOS and Android app that 200 to 300 bakeries will use
for collective use and sale of bakery products

! A6.nl: a car-sales app for iOS and Android

The large app-development firm
In contrast to the solo app developer, who embodies the quintessential image of an
app developer, the large firms that have emerged in the market have a very different
demographic. Their employees have usually spent more time in the app market, and
68 percent are full-time app developers, who earn higher app-based annual salaries
than most solo developers. Correlating with their size, these firms often have more app


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projects currently under way, with more than one-quarter of large firms working on six
or more projects simultaneously. From a strategy perspective, large firms have several
key characteristics:

! Large firms are more likely to localize apps, because they have more resources
and can release multiple versions of an app. Additionally, these firms are more
likely to have advertising partners that may wish to localize apps so that they can
best reach target markets.

! A greater percentage of large businesses are focused on business users than solo
developers are. Similarly, large firms have a higher concentration of developers
creating business apps.

! A greater percentage of large firms are creating Android phone apps (69 percent)
than iOS apps (67 percent), while solo developers are much more likely to use
iOS (66 percent) than Android (42 percent). Large companies are also more
likely to develop for HTML5 (47 percent) than solo developers are (36 percent).

! While solo developers are more likely to integrate paid opportunities into their
apps, large firms are able to extract more profitability from paid apps. Among
those that follow the paid app model, solo developers earn, on average, $564 per
month from paid apps while large firms earn nearly ten times that amount,
$5,314 per month. Note, however, that large firms also have ten times more
developers creating the apps, so per developer, solo developers and large firms
generate similar revenue from paid apps.


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Regional app-market variations
Just as other parts of the economy change from region to region, the app market varies
considerably in different markets across the globe. The strongest markets for apps are
aligned with those that have the highest smartphone penetration, and they include
Asia-Pacific, North America, and Western Europe. However, even these three regions
have significant differences in app markets and the developers that create for them.

Asia-Pacific app-market variations
Among the three largest app markets, Asia-Pacific is the most distinct in terms of app
developers, who they are, and the strategies they choose. App developers in Asia-
Pacific are usually younger than developers in other regions (by five years on average).
Based on survey results, the average ages of developers are 29 in Asia-Pacific, 35 in
North America, and 34 in Western Europe.

Perhaps because they are younger, developers in Asia-Pacific usually have less
experience than their counterparts in the other regions. Over half of developers in the
region (55 percent) have been developing for less than a year, while the work history of
roughly one-third of the total respondents is that short. Finally, while developers tend
to be male worldwide, this is particularly true in Asia-Pacific: One hundred percent of
the respondents in this region were male. From a strategy perspective, Asia-Pacific
also has several distinguishing characteristics:

! Asia-Pacific developers are more evenly distributed across platforms, with less
concentration on the top platforms, whereas developers in other regions
concentrate on creating apps for the iOS and Android platforms. Based on survey
results, 68 percent and 56 percent of respondents developed for iOS and


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Android, respectively, but only 48 percent and 42 percent of the Asia-Pacific
respondents develop for these platforms, respectively. The high price point of
iOS-based devices is less appealing in the Asian market, where average salaries
in many countries are significantly lower than those in North America and
Western Europe. Thus, developers are less compelled to create for the iOS
platform. Likewise, alternative platforms like BlackBerry, whose devices are
highly popular in many Asian markets, have a higher concentration of
developers than in other regions.

! Developers in Asia-Pacific usually concentrate on different app-development
categories from the total respondent base (Table 10). Tools and utilities is the
No. 1 app category for both, but more Asian developers are creating social
networking apps.

Table 10. Leading phone-app categories (percent of developers) across regions
Asia-Pacific North America Western Europe Total
Tools and utilities 42% Tools and utilities 38% Tools and utilities 34% Tools and utilities 38%
Social network Games Business and finance Business and finance
27% 27% 32% 27%
Business and finance Location-based Games Games
24% 27% 30% 25%
Source: GigaOM Pro

! While the majority of developers in Asia-Pacific are creating consumer-focused
apps, that majority is smaller than among total respondents (66 percent versus
77 percent). However, a greater percent of these developers are creating apps for
business (one of the top three app categories in the region) and education.

! Developers in Asia-Pacific have the highest concentration of respondents
developing apps for TV platforms (15 percent). The majority of leading TV
manufacturers are based in Asia, making it a strong region in which to trial and
introduce emerging TV apps.


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! While more than 40 percent of North American and Western European
developers often localize for their own markets, developers in Asia-Pacific are as
likely to localize for the North American (21 percent) market as they are for their
own markets (27 percent).

! Based on survey results, the average price point for a paid app in Asia-Pacific is
much higher than it is in other regions: $4.25 in Asia-Pacific is nearly twice the
$2.26 charged in North America or $2.21 in Western Europe. Even so, average
income from paid apps for developers in the region lies between the North
American average at the high end and Western Europe’s at the low end (Table
11). Note that the percentages in Table 11 take into account other regions
(Central and South America, Eastern Europe, and Africa) that are omitted from
the table.

Table 11. Paid-app comparison across regions

Use in-app Average price per Average monthly
Develop paid apps purchase app paid-app income
Phone Tablet Phone Tablet Phone Tablet Phone Tablet
Asia-Pacific 58% 50% 21% 8% $4.25 $4.78 $0 $0
North America 59% 47% 12% 5% $2.26 $2.82 $2,500 $5,000
Western Europe 66% 64% 6% 10% $2.21 $2.83 $5,000 $2,500
Total 61% 52% 12% 7% $2.31 $3.05 $7,500 $7,500
Source: GigaOM Pro

North America app-market variations
North America, which is home to the largest percentage of developers in the GigaOM
survey, is a very strong market for phone and tablet apps and contains a very large
app-developer community with the highest average salary of the top three markets.
The U.S. market offers good opportunities and its salaries are high, but the level of
education among North American developers is not as high as it is among developers


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in Asia-Pacific and Western Europe; the percentage of those who have completed
graduate work is roughly 30 percent less than in the other two regions.

Table 12. Education and salary comparison across regions

Asia- North Western
' Pacific America Europe Total
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68,%'A7"=J"&%'K87H'87'A7"=J"&%'=%A7%% 42% 29% 41% ?:>
Average salary R:1SD;2 R;3S:1? R?;S:42 R?3S:99
Source: GigaOM Pro

! North American developers create more apps for the iOS and Android platforms
than total respondents do.

! Gaming is a particularly popular app-development category among North
American developers, as are lifestyle apps.

! Monetization patterns in North America are somewhat distinct, with fewer
developers pursuing ad-based and user-based revenue opportunities than total
respondents do. But while fewer developers are creating paid apps, those who do
are generating more income monthly from their paid apps than developers in
other regions.

! North American developers usually carry the heaviest workload, with the highest
percentage of respondents managing six or more app projects concurrently.

Western Europe app-market variations
Western Europe appears to be a very competitive, though not necessarily well-
compensated, market for app developers. Its developers have often completed


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graduate-level studies (41 percent), but they also have the lowest average salary. On
average, developers in Western Europe earn 37 percent less than their counterparts in
North America, the highest compensated market. Developers in Western Europe are
also less likely than those in other regions to be involved in app development as a full-
time career and are more likely to be doing app development in a part-time capacity as
part of a full-time job.

! Western European developers are less likely than their North American
counterparts to create apps for iOS and especially less likely to develop for
Android. This preference is unlikely to change in coming years, as future
development plans concentrate less on the top two platforms there than in North
America. In fact, while most developers in the survey are trending toward iOS,
developers in Western Europe are actually trending away from it (Table 13).

! Developers in Western Europe are the most likely among the top three regions to
develop paid apps (66 percent versus 61 percent of total respondents), but they
have the lowest average salary from them. While the pay-to-download model is
prevalent among Western European users, in-app purchases are relatively
infrequent in this market.

Table 13. IOS and Android development trends across regions

Phone Tablet
Current Planned Current Planned
Android 42% 59% 50% 63%
Asia-Pacific
iOS 48% 75% 58% 71%
Android 60% 68% 43% 59%
North America
iOS 72% 80% 76% 82%
Android 51% 61% 31% 44%
Western Europe
iOS 71% 67% 69% 67%
Source: GigaOM Pro


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Work status of app developers
More so than in most other fields, the work status of app developers varies
significantly across the community, ranging from those who develop apps just for fun
to those who are pursuing a lifelong career. As expected, demographics influence the
level of engagement and have a significant impact on strategy choices. For the purpose
of this analysis, GigaOM segments app developers into three categories:

Hobbyists. These individuals are pursuing app development on a part-time basis and
may be students or employed in a different career and pursuing app development as a
secondary activity. App development may be a non-income-generating leisure activity
for these individuals, or income may be generated via consulting fees, ad-based apps,
or paid-app opportunities. These individuals may have aspirations of full-time app
development, but for various reasons they are not currently able to achieve that goal.

Professionals. Professional app developers are engaged in app development as an
element of their full-time jobs. App development may be their primary career interest
or it may be a skill necessitated by their positions, but it is not necessarily a career
focus.

Career developers. Career app developers are engaged in app development as a
full-time job. These individuals usually expect long-term involvement in app
development and are pursuing it as a career.

Hobbyist developers
Hobbyists are segmented from the survey results based on their having chosen one of
the following work categories:


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! I work part-time in app development and also hold another job.
! I work part-time in app development and do not hold another job.

Hobbyists often work independently (62 percent work alone) and have only been in
the market a brief time; their average tenure is less than two years, compared with
roughly three years for professional and career developers. Regionally, North America
has the highest concentration of hobbyists.

Strategic characteristics:

! Hobbyists often operate as a one-man shop and on a part-time basis, so they
often work on only one or two projects at a time. The lighter workload coupled
with their shorter tenure in the market results in fewer projects in their
portfolios.

! Hobbyists do not have the bandwidth for multiple projects, so they usually try to
achieve the broadest reach for their time. Consequently, nearly two-thirds of
hobbyists create global apps rather than local apps that only reach a portion of
the potential addressable market. Hobbyists also often focus on the consumer
market, because it has a broader scale than business or vertical markets.
Correspondingly, a significantly lower percentage of hobbyists create business
apps or location-based apps than career and professional developers do.

! Hobbyists do not often have time to create multiple versions of an app for
multiple platforms, so fewer of them than professional and career developers
appear across the various app platforms. Survey results show a particularly low
development rate for Android (46 percent) among hobbyists. Except for gaming,
news, and reference apps, hobbyists also have much lower representation across
app categories.


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! Hobbyists are the most likely of the three segments to develop paid apps (66
percent for phone and 60 percent for tablet), but their apps usually sell at less
than half the average price point of a professional developer’s apps ($2.11 versus
$4.49). While hobbyists strongly favor the pay-per-download model, very few (5
percent of those developing paid apps) incorporate in-app-purchase
opportunities.

! Lower paid-app price points translate into lower income for hobbyist apps. Many
developers in this segment rely on paid-app and ad-based revenue (also low
compared to other segments) for their app-generated income. For those paid a
consultancy fee, average income is also lower, simply because it is only a part-
time activity that generates a part-time salary. Average income for hobbyist
developers was $26,000, less than half that of the average professional or career
developer.

Case study: connecting developers with projects (Work for Pie)
One of the biggest challenges facing developers, particularly the new ones just entering
the market, is connecting with available work projects. They have no central repository
where they can shop for app-development projects. Since new developers do not have
a broad portfolio of work to serve as a résumé, finding secure work and proving
themselves capable is difficult. The team at Work for Pie is attempting to bridge the
gap between available projects and developer talent.

Co-founders Cliff McKinney and Brad Montgomery launched Work for Pie, a
community for software developers and a platform for company discovery, in
mid-2011. Work for Pie matches developers with companies based on mutual
preferences, such as programming language, work environment, and so on. Unlike


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traditional job-posting sites, Work for Pie aims to establish long-term relationships
among companies and developers by encouraging close alignments based on these
mutual preferences.

Employers looking to hire app developers are still challenged by the idea of hiring
people without college degrees or with a degree in an area other than programming.
Without the traditional measurements of college degrees, which are not always
applicable to this field, they are concerned about the presence of a skill set. Work for
Pie provides employers reassurance by allowing them to see a portfolio that the
developers create to showcase their work in lieu of a general résumé.

Developers on Work for Pie receive an SAT-like score based on their public
contributions to open-source projects and the larger development community. Work
for Pie obtains this information from GitHub, Bitbucket, Stack Overflow, and Hacker
News. The score is highly code-based and takes into account the developer’s history of
useful projects or contributions to others’ useful projects, not educational background.
Employers can use the score as an evaluation tool.

Work for Pie relies on a subscription-based model, with companies paying a monthly
fee to host their company profile. The company profile is a place where members can
talk about their company culture, show off their team, and post project needs. The
site’s goal is to develop long-term relationships with client companies, thus ensuring
strong renewal rates. Work for Pie raised seed money in mid-2012 and is working to
further develop the site through company discovery tools set to launch in September
2012.

Professional developers
Professional developers share no similarities in demographics or strategy choices with
hobbyists. As described in the GigaOM survey, professional developers “work in app


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development in a part-time capacity as part of a full-time job.” These individuals may
or may not have intended to pursue app development as a career, but development is
now incorporated as an element of a full-time position. On average, they have a long
tenure in the app market; nearly 30 percent of these respondents have been in the field
for over five years, compared with only 10 percent of hobbyists. They also are highly
educated, with 42 percent having completed graduate-level work.

Professional developers are more evenly distributed between North America and
Western Europe than other segments are, and they often work for larger companies,
with nearly 30 percent working for firms with 10 or more employees. Professional
developers usually carry a heavier workload and are involved in a larger number of
projects.


! Because they work for larger companies, professional app developers have access
to more resources and must be able to develop for a broader range of platforms
than the other two segments. Concentration is particularly high for HTML5, both
in current phone- and tablet-app development as well as in plans for future
development.


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Table 14. Comparison of similarities across career, professional, and hobbyist developers
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! More professional developers create apps for the consumer audience than for
business, but the gap is narrow. However, 53 percent of professional app
developers target the business audience with business and location-based apps,
which is more than the other two segments by a large margin (career, 37 percent;
hobbyist, 30 percent). Comparatively, only a very small faction of this segment
(8 percent) develops gaming apps, a top category for most developers.

! Professional developers are the least likely to develop ad-based and paid apps,
but they generate the highest income from ad-based apps — an average of
$4,000 per month.


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Career developers
According to the survey criteria, career developers “work full-time in app
development.” They often pursue app development as their lifelong career and usually
have a long tenure in the market. Career developers are more heavily concentrated in
North America (59 percent) compared with professional developers (44 percent).

Career-developer survey respondents have the longest tenure among respondent
groups, with an average of almost three years of experience. Like professional
developers, individuals in this segment are educated; only 8 percent lack education
beyond a high school diploma. As with professional developers, career developers
work for firms with multiple persons rather than solo or with one to two other
individuals, and as with professional developers, they have heavier workloads and are
involved in multiple projects.


! Career developers create a significantly lower level of apps for HTML5; only 29
percent of phone-app developers and 23 percent of tablet-app developers create
HTML5 apps. However, more career developers anticipate using HTML5 in a
year’s time, jumping to nearly 40 percent. While growth in HTML5 usage will be
significant, career developers anticipate an even heavier migration to iOS.
Within 12 months 85 percent of career developers will create phone apps based
on iOS, up from the current two-thirds, according to respondents’ development
plans.

! Career developers tend to create apps for a broad base of categories and have a
higher concentration in all app categories except gaming compared to the total
respondent base. The leading app categories for this group are tools and utilities


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and social networking apps.

! Career developers are the least likely to incorporate advertising in applications,
and those who do incorporate advertising generate the least income from this
source compared to other developer segments. These developers are more apt to
pursue paid apps, with over 60 percent incorporating these revenue
opportunities into their apps.

! Career app developers usually have the highest average income, roughly
$66,000 (slightly higher than the professional developer’s average income of
$60,000).


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Figure 24. Worldwide annual mobile-phone-app downloads (billions), by region

Source: GigaOM Pro

App-download rates will continue climbing over the next several years. GigaOM
anticipates that annual mobile-app downloads will approach 31 billion in 2012,
growing to nearly 56 billion in 2015. Tablets will offer a smaller opportunity, with
annual downloads increasing from 5 billion in 2012 to 17 billion in 2015. Although
tablet downloads will not approach the scale of mobile-app downloads, because of the
relative nascence in the tablet market and rapid growth in device penetration, growth
rates of tablet-app downloads will be significantly higher than growth rates of mobile-
app downloads.


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Figure 25. Worldwide annual tablet-app downloads (billions), by region

Source: GigaOM Pro

Factors impacting and potentially disrupting app growth over the forecast period
include:

! Smartphone shipment growth. GigaOM anticipates smartphone shipments
will continue to grow over the next several years, with annual unit shipments
increasing from 528 million units in 2012 to 844 million units in 2015.

! Tablet shipment growth. Annual tablet shipments are expected to increase
from 86 million units in 2012 to 145 million units in 2015. The vast majority of
these shipments will represent new users, resulting in the rapid growth of the
potential addressable market, which will be a significant factor in driving tablet-
app growth.

! Cloud computing. The migration to cloud computing will have an impact on


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the app market in several ways. More-agile delivery of apps through cloud-based
delivery systems will work to drive app growth. Cloud-based app-development
tools will allow the faster creation of more-sophisticated apps and will further
open the market of app development to novice developers.

! Business apps. Significantly fewer developers are currently focused on the
business segment than on the consumer market, but the business opportunity
continues to grow. This is especially true for tablet apps as a greater percentage
of the workforce shifts from laptops to tablets over the next several years.

! Open sourcing. Open-source software development will continue to be a trend
over the coming years. Organizations and enterprises will continue to favor
open-source apps, thus driving developers to embrace open source in app
development.

! Demographics. While a portion of new smartphone shipments will be
replacement units for existing smartphone users, another portion will be original
devices that will effectively increase smartphone penetration. This larger base of
smartphone users will be significant in driving app downloads. While the new
generation of smartphone owners will differ from early adopters, indications are
that these individuals will also have a strong interest in apps and continue to
support strong download rates.

! Nonnative apps. While native-app download rates will continue to escalate,
nonnative apps will continue to emerge as an alternative to native. Nonnative
apps have largely offered an inferior experience to native apps to date, but tools
are emerging that allow developers experienced in HTML5 and Java to compete
with native in feature sets. Nonnative app development, and the tools emerging
to support it, will open the mobile-app market to a larger group of developers.


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Furthermore, developers are combining native with nonnative language,
merging the two spaces.

! Democratization of app development. The number of app developers
continues to grow. Enrollment in programs like Codecademy is on the rise, and
tools like virtualized codes are opening the field of app development to new
groups. The trend can be described as a democratization of programming; as the
space is democratized and broadened, the number and diversity of apps in the
market will continue growing and driving further consumer and business usage.

! Increased competition. The democratization of app development will result
in greater competition in an already difficult market. Differentiation will become
even more important for developer success, and tools to aid in that
differentiation will become an emergent element of the market in the coming
years. These tools will be critical in helping drive user-acquisition costs
downward in an effort to restore profitability for all of those in the app-market
ecosystem.

! New market entrants. In the current app market, operating system players
(especially Apple and Android) have a lot of power over app developers. Should
they change the rules of play, they could have a huge impact on the app market.
The entrance of new market players, particularly those with a great deal of
influence, like Amazon, could significantly shift the market structure as it now
exists.


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This GigaOM study provides in-depth insight into the demographics of the app-
developer community and explores how aspects of those demographics are having an
impact on app-development strategies.

While often operating as individuals, app developers are highly reliant on the
community for support, a trend that will only grow stronger over the coming years.
They are a highly educated group, operating as individuals or small companies, but
they often lack expertise in all the aspects of app development needed to be successful.
Furthermore, the influx of new talent entering the market is seeking resources to learn
best practices. App developers are turning to community resources such as hackathons
and organizations like the Application Developers Alliance to provide a wide variety of
resources from programming tools to monetization strategies to job leads. These
communities will provide a voice for developers, who often are underrepresented in
the app economy. Community resources will be a key component of the app-developer
market going forward, and they represent a significant market opportunity for
companies to support the large and growing market of app developers.


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The app-developer world is a community in the truest sense of that word,
encompassing individuals with similar professions and interests who offer support and
share knowledge through various forums as well as national and local app-developer
groups such as the Application Developers Association. App developers are usually a
collaborative group. As the popularity of hackathons has shown, they are anxious to
share their knowledge and learn from others.

In the rapidly changing and complex app-development space, developers (particularly
startups) looking to keep pace with the latest tools and capabilities are turning to
knowledge sharing and support resources. Besides the associations and events formed
for this purpose, an increasing number of companies have emerged that support
developers and offer them services. The following sections highlight a few of the
specific needs that many developers share and the solutions emerging from companies
that meet those needs.

Case study: infrastructure (Twilio)
The difficulty accessing the specific infrastructure necessary to support an
application’s capabilities and the cost to obtain it can limit a developer’s vision for the
application. Twilio is working to solve this problem by providing app developers with
infrastructure capabilities.

Founded in 2007 and based in San Francisco, this company provides developers with a
telephony infrastructure web service in the cloud that allows them to integrate phone
calls, text messages, and IP voice communications into their web, mobile, and
traditional phone applications. The company provides infrastructure for developers to
plug into the phone network so they can integrate the capability to make and receive
phone calls or send and receive text messages using Twilio’s web service application
programming interface (API).


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In addition, Twilio is actively engaging with developers, primarily through a team of
developer evangelists whose customer-support service is much more proactive and
involved than the standard customer call center. Communicating and interacting with
the developers through events, hackathons, articles, and blogs, these evangelists
encourage the transfer of knowledge while educating developers about Twilio’s APIs
and giving support as they use them.

Twilio has experienced significant traction with its cloud-based telephony service,
announcing in June 2012 that it had passed the 100,000 mark in registered software
developers. The company has grown from 25 employees in early 2011 to a current base
of 125 employees. Twilio’s initial focus was on startups, but it has branched out into
the enterprise market over the past several months. It is also expanding
internationally. Largely funded by a December 2011 Series C funding round of $17
million, Twilio has extended coverage outside the United States to include fifteen
European countries.

Case study: programming tools (Temboo)
Startups and hobbyists new to the field of app development — a large segment of the
app-developer community — often need support to develop tools to create more-
sophisticated and more-complex applications. While programming knowledge is
shared through community organizations and hackathons, developers need a go-to
source for programming tools that is continuously available. Temboo is working to
become that source.

Founded in 2006 and based in New York, Temboo has sought out the common sources
of friction in software development and addressed them through a cloud-based library
of ready-to-use processes it calls Choreos. Developers can integrate these ready-to-use


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processes right into their codes. The service is a visual-based tool that allows easy and
intuitive usage, so in minutes developers can integrate functionality into their apps
that might otherwise take hours or even days. Currently the Temboo library includes
more than 1,200 Choreos that enable over 100 APIs. Developers can search the library
with keywords such as Facebook, Foursquare, or Twitter.

Temboo’s service is designed to serve the broad range of developers, from first-timers
to veteran programmers, and it can be scaled to meet a range of needs, with pricing
based primarily on the number of Choreos used. The company offers a free, basic tier
followed by multiple paid tiers for everyone from the first-timer to the big-time
developer, but the service’s back-end infrastructure was developed to meet the needs
of its enterprise users.

Case study: search and discovery (Hook Mobile)
In a sea of over two million apps, one of the biggest challenges that all developers face
is app discovery. Users have difficulty locating the apps they want, and developers
have difficulty getting their app in front of their target audiences. Achieving desired
success rates has become exceptionally difficult. Furthermore, with approximately 1
percent of app developers cornering the market, startup developers face a significant
challenge getting traction for their apps.

Hook Mobile has created the App Growth Engine (AGE), a patent-pending social
invitation engine with greater conversion powers than traditional acquisition services.
AGE allows developers and mobile marketers to generate new users, cut acquisition
costs, and gain social insight in the new app economy. Once integrated, users gain the
ability to invite their mobile contacts effortlessly from within the app: AGE’s mobile
intelligence qualifies users’ app-compatible friends by scanning the numbers stored in
their phone books. AGE then prepopulates invitation messages with the app’s title and


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link for immediate invite and download. Harnessing user phone books, the app will
grow virally across social circles and reach untapped demographics.

The theory behind AGE is that users are closely associated with their phone and
number, because with number portability consumers rarely have to switch numbers.
The intelligence in AGE enables app recommendations to be sent to qualified contacts,
eliminating wasted leads for developers, thus having a higher efficiency rate than word
of mouth or other conversion vehicles such as Facebook, Twitter, and email.

AGE combines new user-acquisition capability with analyzing tools to monitor user
data, conversion rates, and app trends. The solution also enables developers and
publishers to accurately track users via their mobile number and boost user identity
and associations by cross-referencing their carrier, device, and operating system
information. Ultimately the solution is a mechanism that cuts user acquisition costs
from the range of several dollars up to $7 in acquisition costs per new user to possibly
just several cents per user. The AGE tools give developers and publishers a better
understanding of their users and their users’ friends so they can leverage that
information through a crowdsourced marketing effort launched through users’ address
books.

Launched in March 2012 and now in beta, AGE is Hook Mobile’s most recent product,
but the company has been building its core competencies for years, offering cloud-
based mobile APIs and software development kits (SDK) that power mobile messaging
and device detection, mobile user and content intelligence, and text-based audience
responses. The company’s clients include top movie and media studios, mobile
messaging and content providers, and large Internet companies. Created in Vienna,
Va., in 2006, Hook Mobile receives funding and support from four leading venture
capital firms — IDG-Accel Partners, Amplifier Ventures, Acta Capital, and 500
Startups — as part of an elite portfolio of technology firms that also includes Facebook,
Rovio, and Millennial Media.


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Amy Cravens is a longtime technology market analyst with domain expertise across a
number of areas, including telecommunications, networking, media, software, and
hardware. From 2001 to 2003 she was a lead analyst for In-Stat, helping to pioneer the
company’s hotspot and Wi-Fi analysis. Since 2006 she has been involved in a number
of projects for companies as well as market research vendors as an independent
analyst.

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The Application Developers Alliance is an industry association dedicated to meeting
the unique needs of application developers as creators, innovators, and entrepreneurs.
Alliance members include more than 10,000 individual application developers and
dozens of companies, investors, and stakeholders in the apps ecosystem.


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