In March, consumers downloaded two million fewer iPhone apps, or a 30 percent drop, highlighting a shifting taste from cheaper novelty programs to higher-quality service software.
Smartphones, which accounted for around one in five phones sold last year, pushed apps to the mainstream. Sometimes free, and often wacky, the first crop of these handheld-programs turned hundreds of thousands of smartphones into barcode scanners, arcade machines and photo booths.
But the novelty is wearing off, and consumers increasingly demand sophisticated apps to run on a growing spate of faster smartphones. As a result, consumers are downloading fewer of these free or cheaper programs, which often cost 99 cents, and instead, are willing to pay for apps that can help the blind to read, check-out customers or monitor the health of patients.
In short, apps are no longer required to run locally, on the device, but instead in the “cloud,” opening a channel for developers to create better apps and monetize on in-app purchases and recurring service charges.
“With the novelty factor of the iPhone 4S launch and the holidays well behind us, March’s download dip was expected,” said Micah Adler, CEO of research firm Fiksu.
Carriers, competing to expand their 4G service, are partly responsible for the shift. As faster broadband-like speeds reach customers, more powerful smartphones are able to run more robust apps, allowing them to stream music and television shows.
In the past, developers were largely crippled by slower infrastructure, limiting the features they could build into mobile versions of their programs. But 4G is opening up higher-quality services, and as a result, pushing out cheaper and simple first-generation apps.
In fact, carriers, which used to make money largely on calling and texting services, have largely capped plans to cash in on data. But now, the trend is trickling down to developers, giving them a larger canvas to create better apps, and increasing the competition to stand out.
Despite the drop in downloads, Fiksu said the cost of marketing held steady. The cost of acquiring a loyal customer, or a user that opens an app more than three times a month, fell to a cent to $1.30 last month.
As flood of apps overwhelm consumers, independent developers, such as the 12-year-old whiz kid that topped the charts, will likely be pushed out. And established brands, like Angry Birds, spend millions in marketing dollars to push their titles to the top of the rankings, and continue to garner the most downloads.