"Apps" have become much more than lightweight applications running on iPhones or Android phones. An "app economy" has emerged that is generating hundreds of thousands of jobs and billions of dollars in revenues. In recent years, apps have become an industry onto itself, surpassing most segments of the information technology market.
That's the conclusion drawn in a new report from TechNet, a consortium of business leaders formed to promote the growth of technology-led innovation.
"Nothing illustrates the job-creating power of innovation better than the App Economy," writes Dr. Michael Mandel of South Mountain Economics, author of the report. "The incredibly rapid rise of smartphones, tablets, and social media, and the applications—'apps'—that run on them, is perhaps the biggest economic and technological phenomenon today. Almost a million apps have been created for the iPhone, iPad and Android alone, greatly augmenting the usefulness of mobile devices."
Each app represents jobs and economic opportunities — for programmers, user interface designers, marketers, managers, and support staff to name a few.
The App Economy now is responsible for roughly 466,000 jobs in the United States alone, up from zero in 2007 when the iPhone was introduced, the report estimates. This total includes jobs at ‘pure’ app firms such as Zynga, a San Francisco-based maker of Facebook game apps, app-related jobs at large companies such as Electronic Arts, Amazon, and AT&T, as well as app ‘infrastructure’ jobs at core firms such as Google, Apple, and Facebook. In addition, the App Economy total includes employment spillovers to the rest of the economy.
About 155,000 of App Economy jobs were tech jobs, including developer and tech support jobs at both dedicated app developers and at large companies who create apps for them or for others. The other 311,000 "spillover" jobs that would include tech and non-tech occupations benefiting from good fortune of app developers and marketers.
To arrive at these numbers, researchers analyzed detailed information from The Conference Board Help-Wanted OnLine (HWOL) database, a compilation of want ads.
The TechNet study only focuses on jobs, and does not account for the entrepreneurial opportunities or ventures that also are being built on top of apps. The proliferation of apps and app stores is giving rise to micro-enterprises that develop, post and sell apps. There usually is a 70-30 split in profits between the publisher and the app store.
Small software shops could theoretically build and post individual services and making a few cents or dollars on each download of the service from some type of app marketplace. Soon, it all adds up. For example, Mark Maunder, founder and CEO of Feedjit, made an effort to add up all the possibilities, calculating the potential income a developer shop could make from posting an app at the Apple App Store. He calculates that on average, each app posted brings in $4,000 to $8,000 to its publisher. He bases this calculation on the $3.64 average price for each paid apps, along with 244,720 paid apps, published by 85,569 unique developers.
Get up to 100 apps in the store, and you have a decent-size startup. In fact, we have the potential for creating software startups that no longer require bank loans and venture capital funding -- just a lot of micro-streams of revenue.
The App Economy is part of a new realm in which companies and individuals alike are accessing on-demand services from a range of providers, including one-person development shops, small ISVs, large ISVs, systems integrators and consultants, and even the IT departments of non-IT companies.
TechNet also reports that App Economy jobs are spread around the country, and not exclusively focused on technology corridors such as Silicon Valley. While San Jose and San Francisco do make the top of the list, other hotbeds of app development include New York, Los angeles, Washington, Chicago, Boston and Atlanta. More than two-thirds of App Economy employment is outside of California and New York, the report adds.
The TechNet study's results also suggest that the App Economy is still growing at a rapid clip.
The authors admit that the App Economy is difficult to size in terms of dollars, but cite an estimate from Appnation and Rubinson Partners that puts it at $20 billion in revenue in 2011. This includes app downloads, in-app revenues, sales of virtual goods, and sales of physical goods and services.