App Economy

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Report: WHERE THE JOBS ARE: The App Economy. Michael Mandel. TechNet, 2012

URL = http://www.technet.org/wp-content/uploads/2012/02/TechNet-App-Economy-Jobs-Study.pdf


Findings

"by Todd Bishop:

"A new study out today documents the impact of apps on the U.S. economy, concluding that 466,000 jobs have been created by the “App Economy” since 2007 — including programmers, marketers, interface designers, managers and support staff working on apps and infrastructure for platforms including Android, Apple iOS, BlackBerry, Facebook and Windows Phone.

The New York Metro area has the largest proportion of jobs in the sector, at 9.2 percent. The Seattle region is fourth, at 5.7 percent, behind San Francisco and San Jose.

The research was conducted by economist Michael Mandel for industry group TechNet based on trends in help-wanted ads, in addition to other economic data. A summary of the findings is available here.

The report says, “Every major consumer-facing company, and many business-facing companies, has discovered that they need an app to be the public face of the business. In some sense, that makes the App Economy the construction sector of the 21st century, building a new front door to everyone’s house and in some cases constructing a whole new house.” ((http://www.geekwire.com/2012/study-app-economy-created-466000-jobs-2007))


Excerpts

1.

"‘App’, in the sense that we mean it today, did not exist before the iPhone was introduced in 2007. Apps are relatively lightweight programs, specifically designed to run on mobile platforms such as the iPhone and Android phones. In the past couple of years, the term ‘app’ has been extended to Facebook applications as well.


In the prospectus for its initial public offering, Zynga described the App Economy in this way:

- In order to provide users with a wider range of engaging experiences, social networks and mobile operating systems have opened their platforms to developers, transforming the creation, distribution and consumption of digital content. We refer to this as the “App Economy.” In the App Economy, developers can create applications accessing unique features of the platforms, distribute applications digitally to a broad audience and regularly update existing applications”

The term ‘App Economy’ started coming into use in early 2009, and was popularized by a prescient November 2009 BusinessWeek cover story.

The combination of ease of development and ease of delivery makes possible a stunning variety of apps. To just give some examples: You can take verbal notes; make your voice sound like a robot; schedule plane flights; play a baseball simulation; have customized news delivered to your device; create a digitized voodoo doll; and edit Microsoft Word documents.

But the App Economy is much more than a better delivery channel for software. From the economic perspective, we can think of the App Economy as a collection of interlocking innovative ecosystems.

Each ecosystem consists of a core company, which creates and maintains a platform and an app marketplace, plus small and large companies that produce apps and/or mobile devices for that platform. Businesses can belong to multiple ecosystems and usually do.

The key platforms in the App Economy today are

• Android, anchored by Google; • Apple iOS, anchored by Apple; • Blackberry, anchored by RIM; • Facebook, anchored by Facebook; • Windows Phone and Windows Mobile, anchored by Microsoft

Every major consumer-facing company, and many business-facing companies, has discovered that they need an app to be the public face of the business. In some sense, that makes the App Economy the construction sector of the 21st century, building a new front door to everyone’s house and in some cases constructing a whole new house."


Turnover

Michael Mandel:

“The App Economy lends itself to several types of metrics. For example, it’s relatively easy to count the number of apps in a particular app store, how many different developers, and even how many times apps have been downloaded. For example, the Apple App store had 529,550 active apps as of December 12, 2011, according to 148apps.biz, uploaded by 124,475 active publishers.

Another important metric is revenue. By one estimate, the App Economy generated almost $20 billion in revenue in 2011.6 This includes app downloads, in-app revenues, sales of virtual goods, and sales of physical goods and services.” (http://www.technet.org/wp-content/uploads/2012/02/TechNet-App-Economy-Jobs-Study.pdf)


Discussion

Drew Bartkiewicz:

"With the explosion of tablets and smartphones, the web browser is being complemented (if not soon dominated) by the mobile browser, where consumers and B2B users increasingly consume data via thumbs, index fingers and touch screens. Most users will not be aware that what powers this data agility is not microprocessors, enterprise software, nor a legion of mice, but global APIs (application programmable interface). What was once an esoteric IT term will become the dominant business mandate for any business to win in mobile for the long run. App success is iterative, experiential, and data-dependent. Therefore, any business approaching apps without APIs is going to experience mobile app logjams in their IT departments and mobile app lethargy with their design firms.


Managed APIs Are Not an "Implementation." They Are a Launch of a Business

A company without an API strategy in 2012 is a company without a mobile strategy. Unlike most other technology initiatives, successful API programs are managed as a launch, not an implementation. The ongoing blend of marketing, usability, design, promotion, and pricing all factor into whether a business can compete well in the mobile space with their data, goods and services. Business leaders that purely leave it solely to the IT department to manage these elements of a an API launch will soon hear the crickets chirp as their APIs sit in a disjointed bubble, poorly competing with the API programs of competitors that see the business of APIs, not just the technology of APIs. A true cloud based, multi-tenant model offers business and IT leaders the flexibility, scale, and adaptability to compete in the markets of big data, mobile, and social.


Discovery

The successful businesses with APIs, such as Klout, Expedia, ESPN, USA Today, and Best Buy, regularly assess their API potential by evaluating the uniqueness and breadth of their data assets. The more refined the data, the more easy for developers to access it, the greater the chance that the branded APIs will find their way into a multitude of apps. Take, for example, Yellow Pages, which programmatically and strategically exposed their data location assets in order to become an open data source for over 1,400 developers and be embedded within over 350 apps (in just the first year of launching their public APIs). The success of the API program led to highly visible mash-ups and mobile apps with companies like Facebook and Foursquare, two major players in the API trading market and complementary to Yellow Pages business goals of being the business location platform, a complete transformation (if not salvation) of their core business.

Without a diligent and regular discovery process for assessing data assets and exposing new web services, business leaders will not get market-based feedback on the appeal and uniqueness of their APIs, thus paving the way for a competitor to insert themselves into a new data relationship with a business' channel partners - and worse yet, mobile customers. Any business that loses a mobile customer in 2012 has a 50% chance they have lost the customer altogether.


Think Cloud Based API Management, and Win

Over the last five years the cloud model has spoken and the cloud model has won.

The ever-increasing mobility of consumers and the emergence of data-as-a-service models means that any business building or installing their own API management technology is wasting their time. The multi-tenant, SAAS, model has proven to win in CRM (with salesforce.com), HR (with SuccessFactors), and now ERP (with Netsuite), so why any business would install custom code or "appliances" for managed API's goes against the grain of software trends over the last five years. API management built on a cloud platform offers the best recipe for success within a very dynamic space. Lesson from enterprise software 1995 - 2005: You build or install your own API management system and you own the cost, complexity, risk, and unknown ROI for a mobile market that demands scale and speed.

Launch, compete, win. The fundamental strategy of businesses like Expedia, American Express, Klout, Nordstrom's, and Cap One is to compete in the API market by leveraging the agility and rapid scale of cloud based API management platforms. To win in the API market demands a continual approach to data innovation that sows the seeds of new platforms for years to come." (http://cloudcomputing.ulitzer.com/node/2161642)


The App Economy as an X Factor Economy: Apple's Serfdom

Aditya Chakrabortty:

"Whether in Californian press release, panting media profile or prime ministerial exhortation, the message is clear: there's gold in that code. The public discussion of the "app economy" is where the politicians' rote language of enterprise takes on the sheen of high technology, to potent effect. Success stories come round with obliging regularity. Last month was the turn of Nick D'Aloisio, a 17-year-old who slaved away in his bedroom over an app before flogging it to Yahoo for $30m (£19m). In every profile that played up his normality, and played down his investment-banker dad and funding from Stephen Fry, there was an almost audible sigh: if only more slugabed Britons would do this …

To which the honest riposte is: loads of them do, and it doesn't get them very far. It suits both politicians and journalists to portray the hi-tech economy as a succession of heroic geeks – in which Bill begets Steve who begets Larry and Sergei – but in doing so what often gets missed out is the prosaic, vital stuff of how these companies make their money. Apple's "app revolution" sounds groovily freeform but it is both tightly controlled and a veritable licence for the company to print money.

Designers have to submit their software to Apple, which both sets the parameters for acceptable design and exerts censorship over the finished products. If approved, programs are then hosted at the App Store – and Apple rakes off 30% of any cash from sales or ads. Obviously, there is a lot to be said for having a seal of approval and being stocked in what is one of the most popular shops on the planet. It's also true that app makers can take their creations to rival platforms. But Apple is hardly outsourcing app development for charity. As it admitted in its annual report last year: "If third-party software applications and services cease to be developed and maintained … customers may choose not to buy the company's products." This way, it has stacks of games and assorted fun to offer iPhone or iPad owners, without having to shell out on personnel, all the while running one of the biggest rent-extraction rackets of the 21st century.

The appmakers certainly know who's boss. In extensive interviews conducted by Birgitta Bergvall-Kåreborn of Sweden's Luleå University of Technology and Debra Howcroft of Manchester Business School, even successful developers made clear that when Apple told them to jump, the only acceptable response was how high. "If they decide that they do not like us any more, and they do not want to promote us, that makes a big difference in how much money we make," one said. "They are very much custodians of their marketplace so you've got to be well-behaved."

The designers are among the most educated in the UK, if not the world – Howcroft mentions Cambridge PhDs – doing exactly the knowledge-economy work so beloved of Blair and Cameron. Yet their working lives are precarious, cramped (eight men in a tiny office in one example) and often marked by long hours, where you do a full-time job then spend evenings coding in a box bedroom. You can probably do this for a chunk of your 20s, but it doesn't help with buying a house, raising a family or saving for a pension. And the grim likelihood is those conditions won't change. Last year, one consultancy estimated that seven apps took 10% of all revenue; the vast majority sunk without a trace. Averaging all of that out, Bergvall-Kåreborn and Howcroft estimate that developers earn 17.5 cents per download. Given the hours that go into producing just one piece of software, for most programmers that is well below the minimum wage.

Creative industries have always been dominated by tournaments, in which just a handful scoop the pool. But what you see in our new IT economy is an example of the intensification of these competitive forces, what you might call the X Factor economy. For a couple of generations now, young Britons have been force-fed the language of enterprise and no-jobs-for-life: now there are loads of them practising precisely these portfolio careers – and still not getting anywhere. Meanwhile, Apple takes about a 50% gross margin on every one of its smartphones made in China and 30% from every app sold, all the while taking full advantage of tax loopholes – and receives not lectures, but adoration." (http://www.guardian.co.uk/commentisfree/2013/apr/22/young-appmakers-cant-job-life)

More Information

Full report: http://www.technet.org/wp-content/uploads/2012/02/TechNet-App-Economy-Jobs-Study.pdf

  1. “Inside the App Economy,” BusinessWeek, November 2, 2009.
  2. http://148apps.biz/app-store-metrics/
  3. “How Big is the US App-Economy? Estimates and Forecasts 2011-2015” by Appnation and Rubinson Partners, Inc., November 2011
  4. “The Facebook App Economy,” Il-Horn Hann, Siva Viswanathan and Byungwan Koh , University of Maryland, September 2011