In 1976, Apple built its first computer, kicking off a personal computer revolution that helped push the United States out of a deep economic rut a few years later. After the downturn of the early 1990s, the rise of the Web proved to be a bright spot in the economy. Now, as the US struggles to recover from an even steeper recession, can today's hot technology – mobile applications or mobile apps – provide a similar economic boost?
It's a tall order. Information technology since its start has helped expand the US economy by some $2 trillion, says the Information Technology and Innovation Foundation (ITIF) in Washington. Mobile apps, pieces of software for mobile devices, can be downloaded for a few dollars, or even free of charge sometimes. So it takes big sales to generate big revenue.
Nevertheless, the prospects are encouraging. Globally, users made more than 7 billion software downloads from app stores last year; by 2012, they will be making nearly 50 billion, according to estimates by an independent study commissioned by GetJar, a cross-platform app store with locations in the US, Britain, and Lithuania. Entrepreneurs are busy creating apps for everything from games and news to real estate listings and recipes. Revenues from Apple's and others' primary app stores are slated to rise from $3 billion last year to $18 billion by 2014, according to Todd Day, an industry analyst at Frost & Sullivan.
"I was around in the '90s when the first browser came out, and this feels like that," says Daniel Odio, a cofounder of PointAbout, an app developer in Washington. "It feels like there's a lot of innovation happening now. I think we're only in the first half of the first inning."
So far, the growth in apps compares favorably with the PC revolution of the 1980s. Although software programs were more expensive than today's apps, they generated only about one-ninth the revenue ($340 million in today's dollars versus $3 billion), according to the Consumer Electronics Association. Of course, the PC software industry kept growing. By 1995, sales were 20 times bigger ($3.6 billion in today's dollars). If apps can match that pace, they will lift the economy.
"My reason for optimism as to [apps'] impact on the economy is related to the economy of scale," says Thomas Way, a computer scientist at Villanova University in Pennsylvania. "If 3.5 million iPad apps can be sold in about a week, I think that is a very positive indication of the depth and ability of the mobile app market to play a strong part in an economic recovery."
Another advantage: The barrier to entry is significantly lower for app creators than it is for traditional software developers. They can quickly develop an app for multiple smart phones and monetize the work through an app store.
Of course, that's a blip in a $14.6 trillion economy. But the economic impact of apps is not limited to their development and sale. There's far more potential in the changes they create throughout the workplace, in stores, and at home.
"At the end of the day, what is created is an on-demand society where you can access and engage in information at a moment's notice across every aspect of your lifestyle and work life," says Matt Goddard of R2integrated, an Internet marketing and technology firm based in Baltimore. "The mobile, on-demand society will reach almost every sector of the economy and every individual in the economy in more ways than you can imagine."
For example, the Red Laser app that allows users to scan bar codes could change the way businesses take inventory or consumers price shop. Mobile phones enabled with "near field communication" chips can be swiped at metro stations and convenience stores, turning a cellphone into a mobile wallet. ITIF estimates the global use of these contactless mobile payments at $10 billion in 2009 and they're expected to surpass $52 billion by 2012.
"The $4 app means you're going to buy more stuff, try more things, and do more things because it's only four bucks," says Oren Michels, CEO of San Francisco-based Mashery, which manages application programming interfaces that help companies develop and manage mobile and Web applications. Even free apps can generate new business. [Editor's note: This paragraph was changed to accurately reflect Mashery's business.]
"Mobile applications will be a huge driver of employment," says ITIF analyst Stephen Ezell. "You have tens of thousands of people writing mobile applications, and I'm sure an increasing amount of e-commerce will be driven on the device. A mobile phone now is a communication and computing platform and that's going to drive real transformation."
Of course, this level of utility could also penalize the economy. Mobile apps might replace many bank tellers. They could cut into PC sales. As mobile e-commerce catches on, the global value of mobile commercial or financial transactions will exceed $587 billion, ITIF says.
"The killer app is anything that enables e-commerce," says Mr. Way of Villanova. "Putting the ability to make immediate purchases or sales in many potential customers' and sellers' hands is power."