Health and medical app landscape becoming crowded, harder to monetize, report finds

By Heather Mack
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In the land of digital health apps, space is becoming limited. According to a new study by Research 2 Guidance, the number of health and medical apps is still surging – 259,000 such apps were listed on major app stores in 2016 – but downloads are starting to slow down, indicating an increasingly crowded and competitive market.

“There is no end in sight for the current hype surrounding mHealth apps, but only a fraction of mHealth publishers have found a way to monetize on it,” the report states. “The 6th mHealth Developer Economics Report reveals that despite the never ending list of market news […] the core business of mHealth app publishing is developing at only a moderate speed. The breakthrough is yet to come.”

As things slow down a bit across the industry, the study identified a few different trends over the past year.  Almost 100,000 health and medical apps were added to the total library last year, bringing the total number of such apps to over a quarter million, and many of those are coming from developers new to the market. Of the 58,000 total digital health publishers, the report identified 13,000 newcomers since the beginning of 2015.

Newcomers to the app-making field should include health insurance companies, the report stated. Payers are expected to become a key player in the market, but they still haven’t stepped up to the plate. Of the 2,600 digital health companies surveyed for the report, 85 percent assume patients would be willing to share their health data with their plan in return for cheaper rates, better health recommendations or research purposes. However, only 17 percent of this group rate the app portfolio of payers as anything but average.

As far as apps themselves, the report found a few ways they are changing. For one, they are more likely to be connected, with more publishers using APIs to connect their apps to third party apps, sensors or data aggregators. Apple HealthKit is “by far the most commonly used API,” the report found, and 58 percent of publishers are now using APIs, compared with 42 percent of last year.  Most are also putting their apps on multiple channels – 75 percent of digital health apps are developed for both iOS and Android. Other platforms still aren’t playing a major role, the report found.

As the market grows up, so too are health and medical app publishers. The report saw most app publishers gaining the experience that has made development increasingly sophisticated, with 72 percent of publishers using tools like analytics, testing and cross platform tools to develop, market and evaluate their apps.

More are also losing their starry-eyed ideals about why they develop the apps, too, the report said. While the number of small startups increased from 8 percent to 13 percent last year, the authors still believe the primary motivation is profits.

“mHealth companies are getting smaller again and are losing their altruistic motive,” the report stated. “Last year saw a wave of new market players, which are the 'garage' type of start ups with one to two founders. Perhaps with this wave of new entrants, the altruistic ambition of ‘we do this to help others’ is still prominently unique to the mHealth market, but it gave way to ‘we do this to make money’ as number one motivation.”
 
That being said, app publishers aren’t exactly rolling in dough, and paid app downloads are only the main moneymaking source for 4 to 10 percent of today’s publishers. The report found 78 percent of app publishers as making less than $100,000 from their entire digital health app portfolio business, and 60 percent are actually making less than $1,000 per month. Most of them are making their money from licensing technology (15 percent) or third party development (14 percent) services.

Demand, unsurprisingly, is slowing down as the market becomes saturated. Downloads are still increasing, but at a much more tempered pace, with total downloads for 2016 estimated at 3.2 billion. This amounts to only a 7 percent increase from 2015, which enjoyed a 35 percent growth in download demand from the previous year. While users are still downloading a lot of apps, they aren’t so into the idea of paying a lot for them. The report set the most common threshold at $10.

Even with the relative plateau of the market, the report concludes, they still expect the market to grow, with health and medical apps reaching $31 billion by 2020 and apps seeping deeper into the healthcare system.

“There is a strong belief that eventually mHealth apps will become an integrated part of the healthcare system,” the report states. “Still, when this will happen remains an open question, at least for the foreseeable future.”