In the ever-evolving world of U.S. app stores, while the overall revenue in app stores continues to surge, a significant number of apps are experiencing a decline in downloads.
In the ever-evolving world of U.S. app stores, a concerning trend is taking shape, impacting companies both large and small. While the overall revenue in app stores continues to surge, a significant number of apps are experiencing a decline in downloads. This phenomenon reflects the growing competition in the market, leading to an overall drop in app installations.
While this trend hasn't yet reached a scale capable of dethroning large applications like Facebook, it's substantial enough to make waves in the industry. The decline in downloads is a cause for concern among app developers and investors.
To better understand this shift, our analysis is primarily focused on the U.S. App Store. We've tracked the performance of the top 25 apps in each category and compared the data to January 1, 2018, serving as a baseline to gauge the growth trajectory of these applications.
Last year, the Mobile Downloads Index, a measure of app installations, stood at 91.87. This figure indicated a slight decrease compared to 2018 figures. However, by August 31, 2023, the index had plummeted to 83.59, marking an 9% decline or an 8.28-point drop from the starting point. This significant deterioration reflects a concerning trend in the app ecosystem.
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While the download index saw a brief resurgence in December 2022, driven by the holiday season's influx of new devices and user downtime for app exploration, this momentum quickly faded. In April, the index hit a low point at 64.50, illustrating a challenging environment for app installations.
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It's worth noting that not all app categories have been equally affected by this decline. Categories like sports streaming, medical, business, education, shopping, travel, and productivity apps have managed to stay resilient and, in some cases, even expand their user bases. However, the news, games, and entertainment categories have all seen double-digit declines, mainly due to market saturation.
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When examining the root causes of this download decline, one factor that emerges is the gradual waning of large apps' appeal as new competitors enter the scene. While app tracking transparency has posed some challenges to acquisition, it is not the primary driving force behind the decline.
Recent months have witnessed a transformation at the pinnacle of the App Store hierarchy, with Meta's grip on the top loosening. This shift has created opportunities for newcomers like ByteDance's TikTok and CapCut, as well as Chinese shopping apps like Temu and Shein. As of now, only Meta's Threads holds a spot in the top 10 free non-gaming apps in the U.S. App Store, holding the #2 position.
Despite the challenges in app installations, there is a silver lining in the app economy. App revenue in the U.S. continues to soar, as developers increasingly focus on monetization strategies. Last year, the mobile revenue index stood at 363.13, well above 2018 figures. As of August 31, 2023, the index remained robust at 458.3, marking a substantial increase of 36.4% from its initial value.
Productivity apps were the frontrunners in revenue growth, experiencing a remarkable 69.3% increase. Within the gaming sector, board games witnessed the most significant surge, boasting an impressive 584.9% uptick. Only four categories experienced revenue declines in the U.S. App Store last year—sports, racing, music, and action—while nearly every other category enjoyed revenue growth. 
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The U.S. app store landscape is undergoing a significant transformation, characterized by declining app downloads in the face of increasing competition. While large apps are not yet on the brink of obsolescence, the industry is certainly feeling the impact of this trend. However, the app economy continues to thrive, driven by innovative monetization strategies and revenue growth in various categories. As the app store evolution continues, developers and businesses must adapt to this shifting paradigm to remain competitive in the digital marketplace.
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