Getting users to pay for things remains the biggest challenge for the app developer

More than half of mobile developers are living in “app poverty”: making less than $500 a month from their apps.

We’ve produced an infographic which looks at insights such as this from The Evolving State of Mobile Commerce, a report published by VisionMobile in collaboration with Braintree.

Here are some more of the insights that are featured in the infographic:

  • Half of M-commerce developers are using the App store
  • Operators are still bankers in the Middle East and Africa
  • Bitcoin is bigger in the Americas

The M-commerce Ecosystem

This is just a small sample of the insights contained in the report, if you’d like to know more, then take a look at The Evolving State of Mobile Commerce report.

Whatever happened to Operator Billing?

In 2003 Europe’s mobile operators launched Simpay, promising to let us buy flowers and concert tickets across Europe, with the price added to our mobile phone bill. By 2005 that had morphed into PayForIt, for UK operators only but with similar aspirations, and a similar lack of success. A decade later, mobile network operators are still being cut out of the payment loop, but not for lack of trying.

Operator billing should be the perfect m-commerce platform: Mobile operators store prepaid credit for 77% of their customers, according to the GSMA, and have credit agreements with the other 23%. They have experience dealing with critical systems, and real-time credit checking systems built to take huge loading, so they should be the obvious winners in the m-commerce business. As then-CEO of Vodafone Arun Sarin told the FT in 2007:

“The simple fact that we have the customer and billing relationship is a hugely powerful thing that nobody can take away from us … Whoever comes into the marketplace is going to have to work through us.”

Only they didn’t, and they don’t, and these days operator billing is a minority pastime everywhere – except Africa and the Middle East.

mobile commerce operators in Africa

The data comes from the VisionMobile Developer Economics survey, which reached more than 11,000 mobile developers at the start of 2016. Almost 2,000 of those developers are involved in m-commerce, but only 16% of those have integrated operator billing into their applications.

In Europe, where operators have perhaps tried the hardest to become the wallet of the future, that number drops to 12%, and in North America only 8% of m-commerce developers have bothered to work with the operator to handle billing. In 2010 Verizon launched its own payment service, based on the BilltoMobile platform, but BilltoMobile has been losing money ever since, and in May this year was purchased by UK payment processor Bango.

The argument against operator billing has always been that of interoperability – developers integrating with one mobile operator’s billing system would have to port their code to support another. That was the problem that Simpay, and PayforIt, were designed to solve, and they are far from alone in solving that.

The GSMA’a OneAPI started out as platform for interfacing with SMS Centres and network call management, but quickly focused into a cross-operator billing system to attract operators who proved reluctant to spend money implementing the whole standard. Even GSMA’s decision to host a OneAPI proxy (making it much easier for operators to integrate) wasn’t enough for the operators, and the standard now languishes as a vertical API within a handful of network operators.

In May 2016 yet another attempt was made, with nine of the largest mobile operators joining up to endorse the “Open API” from the TM Forum (an industry body with a decent history of setting architectural standards in infrastructure). This latest set of APIs covers a very wide remit, but includes much that the OneAPI set out to achieve including the resolution of billing events.

Other cross-operator alternatives, such as Telefónica’s BlueVia, have achieved some level of success, but it is probably too late for mobile operators to become the default billing platform they imagined that they would be. Only in the Middle East and Africa is mobile operator billing being used by a significant proportion of m-commerce developers; everywhere else that role is being filled by other players.

Just as Apple and Google provided operator-independent app stores, those companies provide the perfect alternative for developers looking to collect money. Billing through the app store itself, or via the electronic wallets run by Apple and Google, is increasingly popular – and both companies have extended the functionality in recent months.

Credit cards also remain popular. Most credit card processing is done via third-party companies, such as Braintree and Stripe, who compete to provide the best APIs and value-added services. Meanwhile various banking consortia are jumping into the frame, and Visa and MasterCard are funding various competitions intended to raise the profile of their own developer programs, and demonstrate their utility beyond basic transaction processing.

With such strong competition in place the opportunity for operators to step in and take the market is long gone, and developers won’t be easily wooed away from third-party providers. With a coordinated approach the operators certainly could have grabbed the market, but arrogance, lethargy – and the fear of creating an illegal cartel – prevented that future from happening.

The world of mobile commerce is evolving fast, and is only going to become more important as it grows and changes so rapidly, but mobile network operators will struggle to be more than a big player in it.

If you’d like to know more about which m-commerce platforms are gaining ground, or what developers are looking for in an m-commerce platform, then take a look at The evolving state of mobile commerce, a report published by VisionMobile in collaboration with Braintree.

Android First is the New Normal

The mobile platform landscape was fairly stable for more than two years. Having both won the platform wars, Android and iOS seemed quite settled into their market positions. Android selling the most units in every market, but with iOS taking a dominant share of the lucrative high-end. Similarly, Android’s greater developer mindshare was always counterbalanced by iOS developers making the most revenue, and iOS being the primary platform for more full-time professionals. In the last six months we’ve seen a very significant shift on that last point. Apple will now have to work extremely hard in the next few years to avoid giving up further ground.

android_first_illustration

Why developers are prioritising Android

Towards the end of 2013, Steve Cheney wrote a very widely-read post on Why Android First is a Myth. We wrote a response at the time highlighting the strong silicon valley bias that made the conclusions doubtful, but also confirming with our data that, at least, professional developers were quite heavily prioritising iOS. In 2014 we heard that Android first was a fallacy – the user base might be there but fragmentation, plus inferior documentation and tooling, would make it a poor trade-off for many. In 2015 debate on the topic continued while our data showed Android gradually winning the priority of professional developers from other platforms, but not iOS. We entered 2016 with Android marginally ahead: 40% of professional developers globally prioritised the platform versus 39% for iOS. That seems to have been a tipping point, with our latest survey showing a large shift from iOS to Android. A massive 47% of mobile developers now tell us they consider Android most important, while preference for iOS has slipped to 31%.

The reasons for this shift are many but related. The fastest growing regions in terms of mobile developers are those dominated by Android already. New mobile developers are increasingly choosing Android first in all regions. Existing developers are shifting their priority to Android because the types of app they build are changing. We’ve been highlighting for some time that the app economy is shifting away from direct monetisation of apps, to using apps as a channel for some other business. Mobile commerce is by far the largest and fastest growing (at least in terms of total revenues) part of the app economy. Demographics still matter – users of iOS spend more on real-world goods and services through each device than Android users. However, unlike with downloads and in-app purchases, the difference is nowhere near enough to make up for Android’s larger user base.

Leveling of the playing field

For startups trying to find product-market fit, and enterprises needing to deploy across multiple platforms, a key reason to build on iOS first has been the ability to get to market faster. Android had more relaxed deployment policies and much faster publishing cycles, but it was was easier to develop higher quality apps for iOS. The most critical area in this regard has been the UI. Historically iOS had a few fixed resolutions and higher quality APIs for UI development. Android had a vast array of screen resolutions and aspect ratios, and fairly basic abstractions for dealing with that complexity. However, with the launch of the iPhone 6 and 6 plus in 2014, along with split screen mode for iPads in 2015, Apple has forced iOS developers down a scalable UI path as well. Once the UI of an app has to adapt to multiple resolutions dynamically, the complexity isn’t significantly increased by having to work with many more resolutions (maybe in testing but not in development). So iOS development has become harder, whilst Android has had time to mature their UI APIs, providing support libraries to reduce fragmentation across operating system versions.

The other area where a major Apple advantage has been eroded is in the design of app interfaces. Both Apple and Google moved towards a flatter and more minimalist style, which shifts the emphasis towards animation as the way to both give an interface personality and help users to understand it. Apple’s approach has been to show rather than tell, and leave artists to create, while Google has provided extensive guidance to developers on how to implement their Material Design. The latter has been favoured by many developers that don’t want completely custom UIs deciding to design for Android and adapt that for iOS, where the reverse was previously the case.
Apple isn’t doomed just yet
It’s important to note that mindshare for iOS is still within the range it has occupied for the last few years at 52%. Developers are not abandoning the platform. Shifting developer priorities towards Android are quite a long-leading indicator for device sales, and Apple are already making big moves to counter this trend. Swift is a boost to iOS developer productivity. Cutting app review times increases iteration speed. Apple Pay on the web gives iOS a greater advantage in the booming mobile commerce market.

The danger for Apple is if Android first becomes firmly established as the new normal. If some of the best apps and services come out on Android first then some of the early adopters will start to migrate. Where the early adopter user base goes, other users and the cool startups will follow. Without an app ecosystem advantage, Apple would become almost entirely dependent on hardware differentiation to maintain a price premium. This battle is far from over but Apple will be working a lot harder to keep developers focused on iOS than they have in the past.

The tip of the iceberg

We’ve just taken a deep dive into one interesting trend in the mobile developer ecosystem, there’s more going on with the mobile browser and Windows 10 too. We also have the latest trends from desktop, cloud and IoT, as well as new insights into augmented and virtual reality, plus data science and machine learning. Our State of the Developer Nation Q3 2016 report is filled with interesting trends as seen by 16,500+ developers across 145 countries.

Get it here

Why are mobile developers so obsessed with advertising?

Advertising is used as a revenue stream by 38% of mobile app developers, far higher than any other source, but the majority of developers chasing the advertising dollar aren’t making much money, so what kind of developer persists in embedding adverts when the real money is elsewhere?

At VisionMobile we ask developers about every aspect of their work, the tools they use, the languages they work with, and (most importantly) what they hope to achieve by developing mobile applications. That last question is used to divide the developer community into eight segments, reflecting the motivation behind their efforts.

mobile developer segmentation

We know that across the mobile community 38% of developers are using advertising, compared to 21% who are still making money from downloads and 19% who are looking for subscription revenue. That 38% has remained pretty static over the last few years – at the start of 2015 it was 36% (see State of the Developer Nation Q1 2015) despite the lack of revenue generated (see State of the Developer Nation Q1 2016 for more details). The simplicity and scalability of advertising is irresistible to cash-strapped developers. But when we break down the numbers by developer segment some more interesting patterns emerge.

More than half of Hunters, for example, are using advertising as a revenue stream, the largest of any segment. Hunters are making money from their applications, but are always on the lookout for new opportunities or sources of revenue. As a result, they are the largest users of pay-per-download and in-app purchasing, as well as advertising. Almost a third of Hunters are using each of those business models, and more than 20% are using subscriptions too.

revenue of mobile developers segments

Hunters are clearly prepared to make money any way they can, and have harnessed multiple business models to make their product viable, but the segment also reflects an industry trend towards harnessing more than one revenue stream.

The first wave of mobile applications were largely pay to download – users were asked for a few dollars which was collected by the application store. That resulted in race to the bottom, as cheaper applications supplanted higher-quality rivals, and the cost of developing a mobile app quickly become untenable. The solution was advertising, embedded in the app as it ran or sponsoring content within the app, to cover the cost of development. That worked for a while, but as the industry grew in size the advertising revenue was spread more thinly.

In-app purchasing is another alternative, and now a foundation of most games and many other mobile applications too. Freemium models, where a basic version of an app is free, but users pay to remove adverts or add features (or both) have become increasing popular. Developers aren’t pinning their hopes on one revenue model any more, they are taking money however they can.

Digital Content Publishers are almost as polyamorous as Hunters in their exploitation of different revenue streams; subscriptions are obviously very important to them, 27% citing subscriptions as a revenue stream, but Advertising is even more significant with 34% mentioning it.

There are really two groups of developers who use advertising as a revenue source – those looking for simplicity and scalability as they dream of being the next big thing, and those who have added advertising as an additional revenue stream to top up their income.

The developer of Flappy Bird didn’t expect to make much more than pocket money when he released his childishly-simple (but challenging) game into the app stores, but (almost a year later) an unexpected surge in popularity was generating $50,000 a day for the developer. The scalability and simplicity makes advertising attractive, but very few developers manage to emulate that level of success.

For the second group, advertising is more viable – the only risk is a possible alienation of users, but that can be alleviated by offering a “premium” version for those who choose to pay. For many developers the income from advertising can form part of a revenue mix which combines to form a sustainable business.

Advertising isn’t the fairy dust it once was – giving up 10% of a mobile screen isn’t the route to riches – but neither can it be ignored as part of the mobile revenue mix, as it has become for many developers.

To gain more insights into how mobile developers can be understood through segmentation take a look at Mobile Developer Segmentation 2016, available from VisionMobile.