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How Smartphone Apps Deliver an Economic Boost

February 28, 2012 - 0 Comments

By Howard Baldwin, Contributing Columnist

The place: San Francisco. The time: a Saturday afternoon.

The scenario: after lunch, two out-of-town couples find themselves in a neighborhood where taxi cabs are scarce. One of the women remembers a new iPhone app called Uber that allows you to wirelessly order a Lincoln Towncar and bill the trip to a credit card.

Elapsed time between signing up with Uber and the car arriving: 10 minutes. Estimated incremental cost above a traditional cab: $7.

This is not an apocryphal story, because I was a member of the group (in fact, I was the one who’d insisted going by cab would be easy). Not only is it true, but it is indicative of a side of broadband networking that’s not often called out: the economic boost that iPhone and Android smartphone apps are delivering.

It’s a compelling upside growth opportunity that’s only possible thanks to the wireless broadband network infrastructure that supports mobile high-speed communications and rich-media applications.

Introducing the App Economy

A report released early in February 2012, entitled “Where The Jobs Are: The App Economy,” highlighted this economic boost. TechNet, a bipartisan organization promoting the growth of technology-led innovation founded in 1997 by venture capitalist John Doerr, entrepreneur Jim Barksdale and Cisco Systems CEO John Chambers, sponsored the report, which was conducted by Dr. Michael Mandel of South Mountain Economics.

As Mandel notes, “the App Economy now is responsible for roughly 466,000 jobs in the United States, up from zero in 2007 when the iPhone was introduced.”

How big is that in dollars? Appnation and Rubinson Partners estimated in late 2011 that the App Economy generated almost $20 billion in revenue that year. They included app downloads, in-app revenues, sales of virtual goods, and sales of physical goods and services in that estimate.

Creating Jobs in the App Economy

One of the most interesting aspects of the report: it discovered that the so-called App Economy casts a wide geographical net in terms of supporting employment.

Not surprisingly, development activity is centered in Silicon Valley and New York City. But Mandel’s research reveals that not only is there a high concentration of development activity in Georgia, Florida, and Illinois, but more than two-thirds of App Economy employment takes place outside of California and New York.

The figure of 466,000 jobs does include a calculated multiplier; it’s not just developers but the people who work to test, deploy, and market the applications. But still, to have a half-million jobs pop out of nowhere in five years is pretty astonishing, especially when you consider it doesn’t include the design, manufacturing, and marketing of the devices themselves. Nor does it look at more-general web development, networking and carrier infrastructure, and other economic segments of the market.

Those of us whose memories stretch back to the days before cell phones and smartphones can only marvel at this new boost for both the U.S. and global economies.

It’s one more example of what we used to call “Internet time” — the increasing speed with which change takes place, provided you have a structural foundation like wireless networking on which to create greatness.

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