The App Economy Slowed Down In 2022 – Here’s What Lies Ahead

Ever since mobile apps were first introduced, the market for them has grown and blossomed year after year.

That all changed in 2022, when people spent less on mobile software than they had over the previous 12 months.

The contraction of the app economy set alarm bells ringing, but is it all doom and gloom, or are there opportunities in the market that remain untapped?

Taking stock & getting perspective

New figures point to a 2 percent downturn in app store spending last year, which is all the more interesting given that there was actually an 11 percent increase in the number of app downloads reported over the same period.

This is an important contrast, because it shows that the downturn in the app economy isn’t actually down to mobile users falling out of love with bite-sized software, but rather of how apps are monetized.

Further evidence of this comes from the fact that the amount spent on mobile ads actually rose by 14 percent, hitting $336 billion in 2022.

With people spending more time on apps, it’s clear that the model is shifting towards an ad-funded one, rather than the previous scenario in which a lot of revenue was generated by things like in-app purchases and recurring subscriptions.

The role of falling data costs

Another facet in the current furore surrounding the apparent shrinking of the app economy is that mobile phone plans are a lot more generous with data allowances than they were in the past.

While people might not have had the ability to justify using ad-supported apps where it’s necessary to watch a full motion video promotion on a regular basis to continue using it free of charge, today such a data-intensive approach to monetization is no longer an issue.

This goes hand in hand with the rollout of faster 5G networking, which means that there’s no detriment to the user experience if developers want to rake in cash using this tactic.

Of course not everyone has 5G coverage, a compatible phone or an especially data-packed phone plan from their current provider. But as the shift continues to gather pace in 2023 and beyond, it seems likely that this trend will only continue to reduce how much people actively splash out on mobile applications.

The call of the cloud

What the figures fail to pick up on is that we’re entering a new era for mobile apps, and mobile games in particular, which is more focused on delivering experiences through cloud-based infrastructures, instead of relying on locally installed software.

This is good for users because it means even modestly powerful devices can access cutting edge apps. It’s also representative of a meaningful change in how app revenues are generated, and we’re definitely on the way to adopting a model that’s more similar to the one used by video streaming platforms like Netflix and Disney Plus.

Microsoft’s Xbox Games Pass is the perfect example of this. It’s available as a mobile app, but isn’t tied to portable devices in particular. Rather it’s a gateway to a service which many users will have signed up for and subscribed to elsewhere, meaning that any revenues it generates won’t appear in studies that focus only on mobile app spending.

This app, like many others, lets users stream software that’s running on a data center, interacting with it on their mobile phone without having to deal with any of the number-crunching or storage overheads.

There are lots of other examples like this, including web apps becoming more popular, and it’s more of an indicator that the app economy is evolving, rather than entering a state of stagnation or even regression.

Concluding thoughts

It’s never easy to give an accurate overview of how any market will change in the mid to long term, and that’s certainly true of apps. However, if you’ve been worried by the news of the reduction in spending last year, the good news is that when seen in a wider context, this isn’t the issue that it seems at first.

That’s not to say the ride will be easy for every developer or publisher; there’s still a lot of work needed to make any app a success. Effective monetization strategies will change along with technology and user demands, so being agile and adaptable will matter most.

Feature Image Source: Pexels

Last Updated on March 3, 2023 by Ian Naylor