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The Mobile App Environment Is More Challenging than Ever

The number of US app users continues to rise and so too does the amount of time consumers spend using mobile apps each day

September 26, 2016 | Mobile

The record-breaking adoption of Pokémon Go has stifled arguments that mobile apps have seen their heyday. But one runaway hit doesn’t diminish two significant challenges faced by app developers: acquiring and retaining high-value users. Every app now competes with more than 2 million others in each of the leading app stores. Getting discovered and downloaded is more challenging than ever, and retaining users is getting more difficult, too, as explored in a new eMarketer report, “App Install Advertising: Key Challenges, Trends and Effectiveness Ratings” (eMarketer PRO customers only).

Mobile App Store Downloads Worldwide, Android vs. iOS, Q1 2015 & Q1 2016 (billions)

Nearly every US smartphone and tablet user regularly uses apps, due in large part to apps coming preinstalled on those devices. But most app users will also download apps from the leading app stores. By eMarketer’s estimate, roughly 98% of US smartphone and tablet app users ages 14 and older will install at least one app this year. Most of these users will download free apps.

Looking ahead, eMarketer expects the number of smartphone and tablet app installers to increase as adoption of both devices continues to tick upwards. By 2020, eMarketer projects, the number of smartphone and tablet app installers will reach 219.9 million and 144.2 million respectively, up from nearly 185 million and 126 million this year.

The painful truth is most apps are failing to keep mobile users interested and engaged for long. An April 2016 analysis conducted by Localytics showed 23% of mobile app users worldwide gave up on an app after using it just once. The trend was similar in the US, where 20% of US smartphone users polled in October 2015 by Research Now on behalf of Localytics said they would stop using an app after trying it only twice, while 6% said they would only try it once. The largest share of the group (56%) was somewhat more forgiving; they would use an app three to five times before giving up on it.

Performance Metrics on Day 1 vs. Day 30 for iOs App Installs Worldwide, by App Category, Q1 2016

The 24 hours after an app is first used is when most users disappear. Only 24% to 29% of iOS users who installed an app used it again within 24 hours of their first app session, according to a Q1 2016 analysis conducted by measurement firm adjust. Android users performed slightly better: Between 27% and 40% of those studied returned to the app within one day.

Thirty days after the first session, user retention rates fell to single-digit percentages among both operating system (OS) groups, Research Now found, with roughly 3% to 7% of new users returning to the app 30 days after their first session.

Research also indicates retention rates are getting worse each year. Localytics conducted a year-over-year comparison of 30-day retention rates and found the percentage had dropped from an average of 42% in June 2015 to 37% by June 2016. Additionally, the 2016 analysis showed 80% of new users had stopped using an app three months after the install, up from 75% in 2015.

Despite such challenges, the number of apps keeps growing. Apple announced in June 2016 that its app store had 2 million apps, an increase of roughly 500,000 over the previous year and equal to a 33% year-over-year growth rate. Google Play has even more apps, nearly 2.4 million as of early September 2016, according to app-tracker AppBrain, which also reports that tens of thousands of apps are being added to Google Play each month.

The trouble is that the potential user base for apps is growing at a slower pace than the number of available apps, and so too is the rate of downloads. By eMarketer’s estimate, the number of smartphone and tablet users worldwide grew by 16% in the 12 months ending 2015. As for downloads, data from Sensor Tower showed that the total number of mobile app store downloads in Q1 2016 was 8% higher than in Q1 2015.

Get more on this topic with the full eMarketer report, “App Install Advertising: Key Challenges, Trends and Effectiveness Ratings.”

eMarketer releases over 200 analyst reports per year, which are only available to eMarketer PRO customers.

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