The app industry represents a significant battlefield for businesses fighting for consumer attention and loyalty. With millions of apps available across various platforms, the competition is fierce. However, not all apps are created equal, and the value derived from an app can vary dramatically based on its market performance. Here we explore why aiming for mediocrity in the app development space rarely pays off and how investing in native app development for platforms like iOS and Android can be crucial for crafting a top-performing app.
In today's digital economy, the app industry represents a significant battlefield for businesses fighting for consumer attention and loyalty. With millions of apps available across various platforms, the competition is fierce. However, not all apps are created equal, and the value derived from an app can vary dramatically based on its market performance.
Top Apps Dominate the Market: Understanding the Dynamics of App Store Polarisation
The app market is highly polarized, with most of the benefits going to the top apps. Various studies and market analyses suggest that the top three to five apps in any given category capture the majority of the market's revenue and user engagement.
In fact, the top ten apps within each category account for 87% of all traffic in the app stores. With 33 available categories for the Google Play Store, and 24 for Apple App Store, this means that somewhere between 240-330 apps are taking the mother share of all traffic, leaving little to no traction for all other apps.
This polarization is driven by several factors, including user preferences, app visibility, and the quality of the user experience and, of course, some outliers, such as the social media platforms that generate an intensive amount of downloads. For a deeper understanding into the dynamics of the different market sectors keep reading.
You will find a thorough walkthrough of how different industries and markets have been impacted by the emergence of apps and how this can either give you an opportunity to win the market through aggressive tactics or how it will impose a forced investment for you, just to remain competitive.
The Economics of Top Performers vs. Mediocre Apps
Developing a mobile app can be costly, often involving significant investment in time, resources, and money. However, the return on this investment can vary greatly based on the app's market performance.
Revenue Concentration: Why Leading Apps Outperform the Competition
The top apps in any category often enjoy exponential returns compared to their lower-ranked counterparts. For instance, top apps like Spotify or Instagram dominate their respective categories, capturing the majority of user engagement and revenue. Of course the extent to which this phenomenon is true, varies depending on the nature of the market, with some markets leaving a larger space for several competitors to thrive. This is most often true in the cases where the app is somewhat tied to a physical product or service.
For example, think of ferry apps – in this case the app is tied to the ferry connection which in many cases is only operated by one shipping company, thus the app can act as a tool for upselling, loyalty, and ease of use. However, there is not a “winner takes all” scenario in play when it comes to ferry apps, as a lot of the revenue is tied to the physical offering which it is helping facilitate – the user is taking the ferry no matter what, it’s just a matter of convenience that drives them towards the app. The opposite is true for apps like Spotify and Instagram that have no connection to a physical service or product, so they rely on driving the engagement in the app in order to drive their business growth.
This means, as an app provider, unless you have a physical product, digital domination is essential for driving the intended value from the app.
User Acquisition Costs: How App Store Algorithms Favor Top Performers
The cost of acquiring new users is typically lower for top-performing apps due to their higher visibility and organic reach. In contrast, mediocre apps may struggle to gain visibility, requiring more spending on marketing and promotion to attract users.
It is no secret that the app store algorithms significantly boosts apps that show high user engagement and satisfaction. A high-ranking app attracts more visibility, leading to increased downloads. These new downloads often translate into more reviews and ratings, which in turn further elevate the app's rank.
This cycle perpetuates itself, creating a positive spiral where visibility breeds more downloads, enhancing the app’s standing on the platform. The higher the app climbs in the rankings, the more it benefits from organic exposure, feeding back into the cycle and perpetuating its success. This all leads to a reduction in the User Acquisition Cost, as a lot of it is driven by the organic reach and popularity.
Engagement and Retention: Why Top Apps Excel in Keeping Users Hooked
Top apps also tend to have higher user engagement and retention rates, which are crucial for sustained success. Users are more likely to return to an app that offers a superior experience and value, further widening the gap between top-performing apps and their mediocre counterparts.
For a deeper understanding of how to work with retention and which questions to ask, read the article The App Retention Recipe. This article provides an extensive framework for understanding and working with retention within the app space.
In order to try and quantify the actual effects of this, Apptentive made a study in which they surveyed 100.000 users over the course of two months to understand the effect of app ratings on the monthly interactions with the app (transactions). While there are limitations and blind spots to this survey, it still paints an overall picture that helps support the above standing points.
* Estimated impact is based on applying report number to a fictive case of 100,000 users with avg. two transactions per month per user, Apptentive 2022 Mobile Consumer Engagement report
The Risk of Mediocrity
Investing in app development without aiming for the top can be risky. Apps that do not reach the top tiers of their market segment often fail to generate sufficient revenue to justify their development costs. Moreover, they face a constant uphill battle regarding user acquisition and retention, which can lead to a cycle of low profitability and minimal growth.
Benefits of Native App Development
Choosing the right technological foundation is critical for developing a top-performing app. Native app development, using Swift for iOS and Kotlin for Android, offers several advantages that can help an app stand out in a crowded marketplace, such as.
Optimized Performance: Native apps are specifically designed for their platforms, offering optimized performance in terms of speed and responsiveness. This can significantly enhance the user experience, making the app more appealing.
Better Integration with Device Features: Native apps can better leverage device capabilities such as the camera, microphone, and accelerometer. This integration allows for a more seamless and powerful user experience, which can be a crucial differentiator.
Higher Security: Native development offers enhanced security features for protecting user data and building trust.
Consistent UI/UX: Apps developed using native languages can more easily adhere to the specific design guidelines of each platform, ensuring a consistent and intuitive user experience.
Securing Market Share Through Top-Tier App Development
The app industry is not just competitive; it is disproportionately rewarding to those at the top. The difference in value between a mediocre app and a top-performing app can be vast, both in terms of financial returns and market presence. While the investment in high-quality, native app development is significant, the potential returns from becoming a market leader can justify the expenditure. Businesses must therefore carefully consider their strategy and commit to excellence in app development if they aim to capture and sustain significant market share.
As the digital landscape continues to evolve, the stakes will only get higher, making it imperative for businesses to leverage every advantage they can. In this regard, native app development remains a key factor in the quest to build a top-performing app that stands out in a saturated market. To learn more about how this could benefit your business, reach out to us at curious@bontouch.com.