Outlook: The Rise of the Mega SDKs in Mobile

Outlook The Rise of the Mega SDKs in MobileThe following is a guest contributed post from Panos Papadopoulos, CEO and Co-Founder of BugSense.

Many would argue that the mobile platform consolidation in the form of today’s Apple / Google duopoly is a good thing for developers; less choice, but two mature platforms and a billion-smartphones addressable market. Despite the platform consolidation, developers face real challenges not just in developing, but in prototyping, designing, marketing, selling and supporting apps.

The quality bar for apps is increasing; apps need to incorporate more functionality in a slicker UI, in a sexier package (graphical assets and messaging), through the right marketing channels and at the right price, which is usually free-to-try. App consumers are demanding, expecting utility, convenience and easy of use – all at a low or free price point with monetization shifting from paid downloads to advertising and in-app purchases.  Enterprise apps have to talk to legacy systems, be an effective part of a company’s business strategy, enhance brand image, while being secure, reliable and cost efficient to develop and maintain.

To support the 500,000+ mobile developers globally, a new “SDK economy” has emerged to cater to the needs of mobile developers. A storm of over 500 SDK startups and Enterprise IT incumbents, have emerged since 2009 to help developers in everything from app prototyping and debugging, to user analytics, planning tools, and customer support. These days developers can choose from a gazillion tools to monetize their apps, test, monitor app performance, manage security, study user behavior, cross-promote apps to attract & engage users, and manage API use and simplify use of cloud services.

Today most of the supporting infrastructure for app developers resides, within 3rd party developer tools, rather than within the platform itself. This SDK economy has become the critical infrastructure underneath the app economy.

Growth and consolidation in the SDK economy

The SDK economy has seen an impressive amount of growth and consolidation in the last 4 years. It’s also an economy that’s intensely suffering in terms of monetization.

The very first SDKs or tools for mobile developers were App store analytics (tracking sales & downloads) from the likes of Distimo and App Annie. Then came ad networks (mobile-centric like AdMob, acquired by Google), later followed by web ad networks expanding to in-app advertising, with ad networks and servers now in abundant supply. Cross platform tools followed soon after, helping develop apps for more platforms, from a single code base. Led by PhoneGap and Appcelerator, the supply of CPTs has exceeded 50 vendors, practically making this area of the tools economy a red ocean.

Looking for investment opportunities, VCs began investing in the companies that support Enterprise and Consumer mobile app development. The VC capital created value but it also changed developer perceptions of value, by forcing tool vendors to offer base products for free. It also led to a string of acquisitions (see below), as covered in VisionMobile’s Developer Economics 2013 report.

Table: Mergers and Acquisitions in Mobile Developer Tools

BugSense Table Mergers and Acquisitions in Mobile Developer Tools

There are three reasons behind the consolidation of the SDK economy.

  1. Capital changing the perception of value. VC capital allowed tool vendors to offer developer products for free to accelerate user acquisition.
  2. The need to subsidize developer onboarding. Developers are always the side of a mobile platform that Apple, Google, Microsoft or BlackBerry will need to subsidies. As a result platform-provided tools will be usually free and 3rd party tools will be prime acquisition targets for platforms themselves.
  3. Catering to adjacent developer needs. There are substantial benefits to developers by integrating functionality across tools (e.g. ad networks with user analytics or crash reporting with performance management), which inevitably leads to acquisitions on tools that are adjacent in the developer journey. Catering to adjacent developer needs also helps tool vendors attract and, most importantly, retain their user base.

Who stands to survive and win in this ongoing consolidation of the SDK economy?. As is already evident from the earlier M&A list, consolidation will become clustered around where the developer money is flowing into: App Marketing Services & Enterprise Mobile Services.

App Marketing Services

Mobile Advertising is expected to be a 20B market by 2015.   Traditional ad networks have already ported their existing products – banner advertising – over to mobile in the form of in-app advertising.  This model doesn’t work well yet in mobile and is a factor in why traditional ad networks are not yet profitable.

About The Author

Panos Papadopoulos is CEO and Co-Founder of BugSense. BugSense helps thousands of developers worldwide, including Fortune 500 companies, create better mobile app experiences by harnessing the power of mobile data. BugSense is the leading operational intelligence service for mobile app developers providing real-time insights for Android, iOS, HTML5, WP and Windows 8 using big data analysis. To learn more, please visit bugsense.com.