So, does this mean the smartphone’s honeymoon period is finally over? Or, to use the language more commonly associated with the boom and bust of previous technologies – has the smartphone bubble finally burst?
Absolutely Not
Make no mistake, the smartphone is still (and will continue to be for the foreseeable future) the world’s leading technology in terms of connectivity, communication and commerce. The smartphone will continue to disrupt all manner of industries and displace other less mobile, less intuitive and less affordable technologies, becoming ever more indispensable to the growing number of people who rely on the devices every day.
Your smartphone is the single device that connects and controls all of the other “smart” technology that increasingly finds its way into our smart homes, smart cars and smart cities. Let’s face facts, despite this bump in the road regarding device sales – the smartphone isn’t going anywhere soon.
Note: Compared to similar technologies, smartphone sales are still incredibly robust. For example, tablet sales have seen a significant decline over the last 13 consecutive quarters, with larger smartphones (often referred to as phablets) taking much of their market share. Similarly, laptop sales have fallen off a cliff and seen decline for much of the last six years.
So Why the Decline in Sales?
There are a number of factors which have contributed to the decline in new smartphone sales, many of which we have previously covered on this blog. However, the three most prevalent reasons include the rising cost of smartphones, the growing “open market” where devices are not tied into contracts and the burgeoning second-hand market where sales are less likely to be tracked.
Further Reading: The Rising Cost of Smartphones Creates a Burgeoning Second-Hand Market
Increased Replacement Cycles
As premium and mid-range devices creep up in price, consumers are more reluctant to change their devices as frequently as they would have in the past. It has also been suggested in some quarters, that consumers have found the innovation in newly released devices hasn’t been sufficient enough to persuade smartphone owners to want to upgrade their current handsets.
Note: At the recent Mobile World Congress event in Barcelona we scoured the eight massive halls of the Gran Via exhibition center, looking for the latest innovations in smartphone technology. At first glance, any innovation beyond faster, more powerful and more expensive smartphones (which looked a lot like the smartphone you already have in your pocket) was hard to find. However, we dug a little deeper and found real innovation in the areas of accessibility (particularly for the disabled and elderly), security and multi-device connectivity. Keep your eye on this blog where we’ll be publishing our innovation report soon.
These increased replacement cycles have been highlighted by companies that manage smartphone trade-ins.
In a recent post on CNBC, a spokesperson for HYLA, a company that runs the smartphone trade-in programs for mobile networks including AT&T and Verizon, told reporters that in 2017 U.S. consumers owned a device for 2.59 years, or 945 days before trading it in. This period was 78 days longer than data shown in 2016 (2.38 years or 867 days) and therefore it was inevitable that new device sales would suffer.
Depreciation in Value
It’s also been suggested that some owners of premium smartphones (often retailing above $1,000) have noticed a sharp depreciation in price following their un-boxing. While your next smartphone might be reaching the realms of other considered purchases (like a new car), it will not retain its value and therefore make it a less attractive prospect to trade in for a newer and equally expensive model (again, much like a new car).
What Does This Mean for App Developers?
Well the good news is, the platform you have invested countless time, effort and money into in research, development and marketing, isn’t going away any time soon.
We should also highlight the fact, that while new smartphone sales have declined, the number of devices shipped globally last year was still around the 1.54 billion mark (84 percent of these were Android devices). To add some perspective, this figure equates to more than 20 percent of the global population acquiring a new smartphone in 2017. That’s a pretty big “niche” to be working with.
With this in mind, proven routes to app discoverability and activation, including pre-loading apps on new devices, will remain one of the most powerful and lucrative ways of positioning the right app in front of the right person at the right time – more often than not, the moment they unbox and activate a new device.
However, as people keep hold of their devices for longer periods of time and acquire smartphones outside of the traditional contract route, it also makes sense to explore alternative routes including smart folders, app delivery via SIM card and targeted mobile advertising campaigns with one-click installation.
Remember: With more than 50 percent of smartphone owners never downloading an app, relying on traditional marketing channels like the Google Play Store is far from an optimized strategy.
More Good News for Developers
While sales of new devices might have seen a slight decline, other smartphone-related stats show no sign of slowing down.
Smartphone usage is on the rise. It is estimated that the typical US consumer now dedicates more than four hours per day to their smartphones with 90 percent of this time spent in-app. And with increased use, comes increased revenues. Global app revenues (measuring paid apps, subscriptions and in-app purchases) increased by a staggering 35 percent in 2017 to a cool $60 billion, compared to 43.5 billion in the previous year.
Does this Sound Like a Market in Decline to You?
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