The App Economy

The Birth of The App Economy

The first time “The App Economy” term got into the press was in 2009 and it was popularized by the American economist, author, and journalist, Michael Mandel. Going back to an article he published in 2009, he linked the launch of iPhones to the rise of the App Economy, which significantly contributed to job creation and innovation.

App Economy & Job Creation

Michael Mandel categorized the jobs created by the App Economy into two categories, which are the Core App Economy & Indirect App Economy jobs. Core App Economy employees are the software engineers, app developers, security engineers, and help desk. On the other hand, the Indirect App Economy employees includes the support function jobs like HR, Accounts, Finance, Marketing, and sales. According to his research, the App Economy in the United States created more than 1.6 million jobs for both groups.

App Economy & Innovation

Beyond job creation, the App Economy was sought to - ever since its revolution - play a critical role in driving economic growth, foster entrepreneurship, and revolutionize consumer behaviors. It directly drove the education system to cope with the revolution through bringing to the table new practice-oriented degree programs. More than 35% of the adult population in The United States holds a bachelor degree that qualifies them to enter the Core App Economy market. Which in turn drives either employment or direct entrepreneurship, and both hold significant impact on both, global and local economies.

Now to the spicy stuff, numbers :)

App Economy & Fundraising

The smartphones penetration has increased significantly with the rise of the App Economy. VCs acknowledged the potential of the industry in its early days and it dominated the fundraising game compared to the other industries. However, it was a trend! In 2016, the fundraising to the App Economy formed ~14% of the total US startups investments, which went all the way down to 2.5% only in 2023. Worth mentioning that this decline is not purely due to decline in the App Economy, but also the flourish of other industries.

Now, the appetite towards this turf shrunk. In 2021, the App Economy had a total funding of $19b in 744 rounds. 2023 marked a total funding of $3b in only 345 rounds. The average round size went from $25m to $8m only. Lots of challenges that led this sudden shift, which is saturation and competition, user acquisition costs, customer retention challenges, and realistically speaking, the shift in investors direction (example: AI).

The news called it the death of the App Economy in The United States. Dramatic?