Half of all app store revenue goes to just 25 developers

http://www.theregister.co.uk/2012/12/04/top_25_app_devs_earn_half_of_revenue/

by bitcartel • 14 years ago

121 74 14 years ago

theregister.co.uk

jessaustin• 14 years ago

I'm not a mobile app dev, but I could have sworn that I'd heard until recently that no one made money from this stuff. Obviously this article implies that many people are like that, but it also seems to imply that there is a transition area -- a middle tail if you will -- in which independent devs can make money without becoming Zynga or Rovio.

clarky074• 14 years ago

yeah, there is definitely a middle tail. The recent app changes have unfortunately moved even more revenue to the top, but there is room for people to make a salary type living on the app store.

ja272• 14 years ago

There certainly is. I know from how well our iOS apps chart based on their sales numbers that there must be a huge long tail making nearly zero. 10 paid downloads a day is enough to break the top 1000 in many categories, so that leaves 20-70,000 apps in those categories that sell less than that.

There's a lot of doom and gloom about the big guys pushing out the indie developers, but I believe that there will always be a middle to the market where a small studio or single indie developer can grind out a living on niche apps that aren't big enough for the big guys but are big enough to be worth pursuing. The hard part is finding the right size niches.

Samuel_Michon3• 14 years ago

"Of the $120m in total revenue generated from paid app downloads and in-app purchases in the US during the first 20 days of November 2012, fully half was split between just 25 developers."

That's actually pretty diverse when you compare it to other markets: there are 6 big publishers [1], 6 big media conglomerates [2], and only 3 big record labels [3].

I also wonder how the pie was divided when software was only sold in boxes. I believe that Electronic Arts and Disney have been doing well far before the App Store came along.

[1] http://www.criticalpages.com/2012/the-big-six/#more-1252

[2] http://en.wikipedia.org/wiki/Media_conglomerate#Notable_exam...

[3] http://en.wikipedia.org/wiki/Record_label#Major_labels

jonknee2• 14 years ago

Those aren't fair comparisons though, the stores themselves are more akin to your examples than the developers selling through them.

But it's actually worse, if you're a musician you can sell your music through a label or you can sell it on your own. If you are a mobile developer you can sell through one of the app stores or you can pound sand.

Samuel_Michon3• 14 years ago

"the stores themselves are more akin to your examples than the developers selling through them."

How so? Game publishers sell their products through iTunes – book/magazine publishers, movie studios, and record labels do too. The game publisher invests and curates, Apple acts as distributor and retailer – that's the same as how other media work.

"If you are a mobile developer you can sell through one of the app stores or you can pound sand."

Or the third option: you can work for one of the successful software publishers. We now know there are at least 25.

Writers don't have to pretend to be publishers. Recording artists don't have to run a record label. Mobile developers don't have to be software publishers or distributors.

ja272• 14 years ago

Or you can give the app away for free and charge for a subscription through your site (Netflix, Instapaper, etc.)

johnrgrace• 14 years ago

Yea, the big six publishers are now going to be five as Penguin and Random House are merging. Also the #7 publisher, Thomas Nelson a Christian focus publisher became part of Harper Collins one of the big six. And Simon and Schuster has several players looking to buy them, likely because their digital marketing execs have never used facebook, twitter etc.

sumukh1• 14 years ago

There's a strong power law with app revenue on iOS . The new updates in the iOS App Store continues to favor the top producers.

Among iOS games the bottom 80% of apps make around 3% of the revenue. [1]

This blog post has more information from game developers: http://www.streamingcolour.com/blog/2011/09/28/results-ios-g...

Here's a graph of self-reported revenue among iOS Game Devs: http://www.streamingcolour.com/blog/wp-content/uploads/2011/...

[1] http://www.streamingcolour.com/blog/wp-content/uploads/2011/...

pedalpete2• 14 years ago

Dig into these details a bit deeper, and you'll see the average revenue of these 25 developers (by my math) is $4.38m/year. But of course, the developers don't get the full $4.38m, apple get's a 30% cut, leaving the developers with $3 million in revenue.

How many of these top 25 developers can operate on $3 million per year?

Of course, their is likely another significant difference between the #1 developer and #25, so I wouldn't be surprised to see #25 developer making < $1m while #1 makes $15m+.

All of this is of course assuming that the first 20 days of November are consistent with sales for the rest of the year.

Samuel_Michon3• 14 years ago

Hmm. That's not how my math works out.

$60 million divided by 20, times 365, divided by 25 equals $43.8 million.

Times 0.7, that results in $30.66 million in revenue per one of the 25 developers (average).

pedalpete2• 14 years ago

Oh you're right, sorry about that. Funny how a factor of 10 makes things so much better... Or worse.

clarky074• 14 years ago

I think your math is missing a 0. Correct me if I'm wrong...

60/25 = 2.4 mil / 20 days 365/20 = 18.25 18.25*2.4 = 43.8 mil/year

coryl• 14 years ago

This is really just a result of app store architecture. Being on a top grossing or top download list simply perpetuates an increase in your download numbers and consequently your placement on the ranking.

unreal37• 14 years ago

The same can be said of Google Search results... Being #1 drives more traffic than #11.

But I agree, the app stores are worse. They make it harder to discover interesting apps not on the top downloads list.

gurkendoktor• 14 years ago

I can't speak for Android, but I don't think the top 25 lists are too prominent on iOS. The Top Grossing List shows very few apps from Top Paid and Top Free, so the three top lists don't seem to promote each other a lot.

I usually shop on Apple's curated landing page precisely because it is full of indie(-ish) content. Not sure what Apple could do better there, short of killing the Top lists altogether.

wallflower2• 14 years ago

I've said this before. Almost all iOS developers (who are not full-time employees) I know make their money by building free apps for Fortune 500 Corporations, smaller companies, and other organizations. The consumer never knows, the developers handle everything from walking the company through the App Store initial registration to initial submission to updates.

It is all about ego. There is immense peer pressure on executives to have an app on iOS (and sometimes Android).

saryant3• 14 years ago

I ended up on a project like that. My first foray into "professional" software development, about 18 months ago:

I was an intern in college getting a CS degree, just finished my senior year. I had an summer internship lined up with a small company but they folded at the last minute so I had to scramble for something to fill my summer. I wound up as an intern at a financial firm. Fairly large but not one you've probably heard of.

I was told that I'd be on the mobile development team. They knew I didn't have experience but I said I was eager to learn.

Turns out, there was no team. I was the team. The CIO had decided that they needed an iPhone app, despite being an entirely B2B company with virtually no consumer brand awareness, and he'd already sold the corner office crowd on the idea.

Problem is, no one in IT wanted to build it. The CIO had no clue what he actually wanted, they were understaffed as it was and no one had the time.

Enter me.

In my first meeting with the CIO, he pulled out his iPhone, went to m.msn.com and said "I want this but for $COMPANY." I went back and laughed in my cube for a while. I think he just liked the news article carousel MSN had.

My boss had talked him down to a mobile website which I began throwing together in jQuery Mobile. A few loan calculators and some contact info. I had a few ideas for something more aggressive but I got shot down as they needed me on other projects anyways. They had me spending a few hours a week on mobile dev just to keep the CIO happy.

My internship ended right as the CIO was bringing in a big consulting firm to replace everyone. And that's the story of how I decided not to work at a megacorp.

readme3• 14 years ago

Lots of clients don't know what they want. Helping them figure that out is part of our job.

yskchu• 14 years ago

Don't let that experience sour you too much about working for a megacorp. It sounds you got quite a crap deal.

The worst project you can be on is one:

1. With no clear goals, he has no idea what he wants.

2. No support team; basically, like you said, you're the team, and even worse, you're "green".

It sounds like you got one of those "pie in the sky" projects; there's no clear benefit that the CIO can get from this, and if you succeed, he looks awesome; if you fail, he doesn't care, it's one of those "throwaway" projects.

In a megacorp, you have to get into a project which is directly involved in their day to day business, directly contributing to revenue, to get more recognition, resources, and $$$. Get into such a project, or make yours give some visible benefit to the company.

In your example, I'd have tried to pivot it to be a reporting tool; I find that senior management in banking generally have a poor visibility in their business monitoring, current transaction levels etc; this can give clear and visible benefit to the company.

Once you can show the benefits to your Boss and the CEO, the extra help and resources will follow.

herval• 14 years ago

If you found the lack of direction and/or the "you as a team" frustating, wait until you work on a startup. Megacorp will seem like a dream come true...

readme3• 14 years ago

What's the big deal if the consumer knows? The practice of companies outsourcing work to consultants is not a new thing.

clarky074• 14 years ago

This. If you want to make money fast on the app store, don't make apps for the app store. Make apps for other people. That being said, you have to be selective with your clients otherwise it's miserable.

If you are patient, and ok with making money slowly over time, then there is still a long tail on the store you can make money with. It's a much more pleasant way to make money, but unless you get lucky you'll make less of it this way (most likely).

aptimpropriety2• 14 years ago

As someone pretty close to the Fortune 500, I'd like to refute the ego point. Having a quality app - especially with iPads, and especially with higher-spending consumers - is a business necessity. You lose out on a lot of engagement and most of all brand credibility by not having an app.

I think it's hard to put actual numbers to it because it's not a $$$ per app kind of metric - it's a signaling mechanism that a company is still 'with it', and not losing touch. Sort of a 'cool/current' factor, but also a consumer trust that they will be able to operate at the cutting edge if they desire.

opminion• 14 years ago

Just to be clear: by being in the cutting edge with an iPad app (vs website) you mean something that can be used beyond wifi/3G range?

Or is it something about the native vs web page feel? (which I'm missing)

bergie• 14 years ago

So, essentially the iOS / Android ecosystem is the same as the website ecosystem in early 2000s, and FaceBook app ecosystem in late 2000s. Digital agencies building apps for big companies' marketing purposes.

I wonder how sustainable that is. How many of these apps actually generate any kind of customer interest?

penguin_gab• 14 years ago

I run an iOS development company that does exactly what you describe. Our clients range from large corporations to scrappy startups. But I can attest to one thing, the only people who are making STEADY PROFITS are developers like myself. It's too much of a crap shoot for any single app to be noticed and profitable in the App Store.

It's kind of like the story of the California Gold Rush isn't it? Here's an excerpt -

"Recent scholarship confirms that merchants made far more money than miners during the Gold Rush. The wealthiest man in California during the early years of the Gold Rush was Samuel Brannan, the tireless self-promoter, shopkeeper and newspaper publisher. Brannan opened the first supply stores in Sacramento, Coloma, and other spots in the gold fields. Just as the Gold Rush began, he purchased all the prospecting supplies available in San Francisco and re-sold them at a substantial profit. However, substantial money was made by some gold-seekers as well."

Tell me you can't see the similarities with the modern day digital mobile gold rush.

http://en.wikipedia.org/wiki/California_Gold_Rush#Profits

vijayboyapati• 14 years ago

Yet another zipfian distribution in computer science. Hoocuddanowed

brudgers4• 14 years ago

Over the long run, Apple may not want small developers playing a prominent role in the App store.

There's more risk to the brand compared to Electronic Arts, and Apple could probably charge for Fortune 500 companies to place their apps in the store.

Stripping out the small developers would remove a lot of scams and address discovery issues.

700,000 apps isn't consistent with the way Apple's other stores operate. Nor is it consistent with their brand strategy of high quality via curation.

readme3• 14 years ago

I hope apple does this. One more reason I will be glad I'm an Android developer.

muhfuhkuh• 14 years ago

"700,000 apps isn't consistent with the way Apple's other stores operate."

I thought Apple quite liked touting their 25+ million tracks in their iTunes music store catalog.

brudgers4• 14 years ago

I was considering this as I posted. The difference, I believe, is that apps have users and music tracks do not.

The best song I've ever downloaded has exactly the same functional requirements as the worst song. The interface is consistent. There are not versioning issues. The purchase, delivery, and use experience is consistent. Variation is purely due to content.

Furthermore, I can accurately make predictions about the quality of music based on previous experience. If I like Rock-a-billy, my expectations when downloading a new artist within the genre are likely to be met. This isn't true if I like first person shooters.

To put it another way, a music store contains a much lower percentage of poor value propositions. A song may suck, but it won't be useless, not as advertised, or a scam.

[edit] Pandora illustrates the phenomenological difference between songs and apps. The idea of an app which streams apps to users is incoherent.

bitcartel• 14 years ago

A decade ago, Apple fans said it didn't matter if the Mac had fewer apps than Windows, because the quality was higher. How times change.

ctdonath• 14 years ago

A small library of apps does no platform good.

brudgers4• 14 years ago

Is 100,000 a small library of apps?

Quality matters. It is better to be an unhappy Socrates than a happy pig.

brianchu• 14 years ago

Without small developers, there would never have been Angry Birds, Tiny Wings, Temple Run, and countless other (when released) indie games. Ditto for apps.

I think what you mean to suggest is that Apple should raise the bar for app approva. Given the accumulation of thousands of crufty, poorly-designed apps, I would totally agree with this.

brudgers4• 14 years ago

My point is now that they have Angry Birds, etc. they may not really need small developers. Back in the late 1980's and through the mid 1990's there were lots of independent computer shops building PC's in the U.S. The industry changed and those shops are largely gone.

What the report indicates is that the gold rush is ending. Yes there's still mining, but it's increasingly being done by Rio Tinto with giant trucks, not someone squatting in a stream with a pan.

agildehaus• 14 years ago

Apple needs to allow for off-Appstore installs (off by default is fine). Then they need to have a program like Steam's Greenlight where the community chooses what should be considered.

clarky074• 14 years ago

I think they like to tout the big numbers, but you're right. They want you to get something they know is good and already popular. That's why we have the recent changes to the app store. It's meant to limit search to things that are already popular, and also put a heavier importance to things like their curated favorites.

It's interesting, even in their favorites recently I seem to be seeing more of the big companies and more of the same apps that have already been featured popping up.

bicknergseng• 14 years ago

I know the point you're making because we struggle with something similar in a different industry. I think we've already seen the "phase out" of small developers in the App Store; rarely if ever does an indie company make it into the top 25 charts or, more importantly, the Spotlight app section. I don't really anticipate it becoming much worse than this because the submission process is mostly effective at weeding out the fart apps and broken software that often makes it into something like the Android store, and apps at the bottom are naturally hidden from the end user anyway.

I think the reason Apple can continue to allow mediocrity into the store is because those apps don't actually reach many end users and they pad those 700k apps and 25 mil songs vanity metrics. This is opposite someone like Groupon or a high end designer brand, where exclusivity is a major factor and driver. The only parts of the App store where exclusivity is a factor are the top lists and the spotlight section, which as I mentioned above have largely excluded small developers for a long time.

freehunter• 14 years ago

Remember that, at least according what they said at the time, Apple didn't want apps. They wanted websites that were designed for iOS and mobile devices using HTML5 to perform all the tasks.

Now, this could have been a smokescreen to cover the fact that they didn't have their native app infrastructure finished yet, but going at face value, Apple didn't want native apps.

gdilla• 14 years ago

Well, this might not be that accurate. There are several app/companies that generate revenue outside of iTunes run transactions. Apple's in-app purchase rules only apply to digital content and services; they do not apply to physical goods and servicse. So, Kayak, Expedia, Hotels tonight, Viator, Amazon's store app, etc are all quite popular and earn money from their iOS apps that wouldn't be recorded or "taxed" by apple.

Ologn• 14 years ago

Yes, the Register headline does not match the content

Headline: "Half of all app store revenue goes to just 25 developers"

In article: "total revenue generated from paid app downloads and in-app purchases in the US"

Looking at my Google Play developer console, at daily device installs across categories for all apps in the store, non-US downloads account for 75%-82% of all downloads, depending on the category. So just watching the US gives one a false picture (especially for the Japanese-Korean market, which are quite large and have their own big players).

Also, only paid apps and in-app purchases are counted. Pay apps are not as popular a monetization scheme with Android as it is (was?) with iOS. In-app and freemium apps are a little more popular. Tapjoy has an increasingly popular monetization scheme for some of the top games on Android ( http://www.appbrain.com/stats/libraries/details/tapjoy/tapjo... ) which wouldn't even be counted by this survey.

This 2012 Cambridge study ( http://techcrunch.com/2012/03/06/in-mobile-apps-free-aint-fr... ) says 58% of Android apps support themselves with ads. So this survey doesn't account for that. All of my current Android revenue comes from ads, for what that's worth.

CesareBorgia• 14 years ago

Seems like a misleading title to me. "Disney, Electronic Arts, Gameloft, Glu, Kabam, Rovio, Storm8, and Zynga," employ many developers; certainly more than 25.

polemic• 14 years ago

So, really, just like all the other long-tail internet market segments?

wildranter3• 14 years ago

Like monkeys trapped in a little room, we killed ourselves until there was just 25 smart monkeys left. Kudos to us in markeiting and pricing strategy.

In this process we also programmed people to relate software to free content. Good luck trying to revert this damage.

We should all quit coding and go to business school. Rule or be ruled.

teh2• 14 years ago

Developers are a commodity (700k+ apps) so the prices go down. Unsurprising and good for the consumer.

Are you proposing devs stop competing and fix prices in order to keep our jobs? (I am a developer)

wildranter3• 14 years ago

Just because developers have been treated as a commodity it doesn't mean we are. Sure I don't feel so. Do you? Anyway, we have to change this as it is not right. We put a lot of effort to make good software, and cutting each others throats in a mindless price war isn't going to pay anyone's bills.

What you find unsurprising and good for consumers is extremely bad for developers. The AppStore Price Wars Attack of the Clones was catalyzed by basic naïveté towards widely known business practices. Worst, we could've fixed it by reading some business books before committing to such low price tiers. But, unfortunately the damage is done.

It is inconsistent with our intellects that we developers behave like mindless monkeys. Also, unacceptable is the fact that any guy selling bananas at any given farmers market understands more about pricing, and the facts of microeconomics, than most of us. This should've been fixed in the universities, but even so there's time for that.

I'm not proposing price fixing as that's immoral, and against law. What I'm stading for instead is for us as a community to start behaving more intelligently regarding business matters. Also, I crave for us developers to value more the sweat and tears we put into our craft.

Programs aren't just code, instead they're the materialization of our ideas through hard work. I think that worthy more than a buck.

I am a developer too.

shimfish2• 14 years ago

As an indie dev, I'm way more worried by this development: http://www.usatoday.com/story/tech/personal/2012/12/05/new-a...

If everyone moves to this subscription model, the indies won't even be invited to the party.

angryasian• 14 years ago

this is just for renting content. While there is the possibility for games, I'd find it unsettling that an app is installed on my phone one day and they uninstall a bunch of apps if I cancel my subscription.

shimfish2• 14 years ago

The article mentions that apps are included also.

dirkdk• 14 years ago

This will hurt Apple in the long run.

Soon app innovation will stifle because only a very few companies are making money. Indie/mid size developers will stop working on innovative apps and start working for bigger risk aversing boring companies.

Biggest reason imho is that these top 25 are one big self fulfilling prophecy: A top 25 position guaranties big download numbers. And to get there you need either a collection of apps already out there for cross promotion or buy lots of ads and installs.

Switching to a metric that indicates quality much like engagement measured by # sessions or # minutes use/month will make quality apps stand out much more.

tsotha• 14 years ago

>Soon app innovation will stifle because only a very few companies are making money. Indie/mid size developers will stop working on innovative apps and start working for bigger risk aversing boring companies.

I doubt it. The real problem with the app store is 99% of what's there is either crap nobody could want or a me-too version of one of the big sellers. People developing that kind of stuff don't deserve sales, and if they drop out of the business, well, no harm done.

WhaleBiologist• 14 years ago

The biggest problem is when the 1% of good apps get overlooked, or have 90%+ piracy rates.

nicholassmith• 14 years ago

I think the assumption is "there's no one making hundreds of thousands but these people", but I'm willing to be there's plenty of people making a living from apps on the app store. Maybe not as good as they could make taking a corporate wage, but probably more satisfying.

ZeroGravitas2• 14 years ago

I wonder if Steve Jobs came to regret the famously ambivalent attitude Apple had to gaming on the Mac?

There's a great scene in the (generally great) BBC dramatization of Sinclair vs Acorn in the 80s, where Acorn are disappointed that all the games are being made for the Spectrum, meanwhile Sinclair is annoyed that his amazing machine is being reduced to a games console.

The greatest achievement of the iPhone (despite it's many amazing feats) appears to have been producing a socially acceptable Gameboy, just as Sony managed to associate the Playstation brand with nightclubbing and other grown-up pursuits in the early 90s to great success.

lyaunzbe• 14 years ago

The Playstation really used to be associated with nightclubbing? Jeez, how'd they pull that one off..

89a• 14 years ago

Wipeout was one of the launch titles in the UK and featured techno/dance music on the soundtrack

MrJagil• 14 years ago

Well, isn't it the same with desktop software? I bet the big desktop-software developers (Apple, Microsoft, Adobe etc) get about half the revenue of that market as well.

That doesn't mean there isn't room for smaller companies/products, as is clearly evident looking at my own applications folder (Flux, Transmission, Switch, Appcleaner etc).

Tloewald2• 14 years ago

How much non app store shrinkwrap software revenue goes to the top developers? I would imagine a far bigger proportion than 50%. Just consider Microsoft, Adobe, EA, Activision, and how much is left for everyone else? (B2B is probably the same but it's harder to figure out.)

For example, Adobe (usually considered number 2 in shrink wrap desktop software) has roughly $10B in annual revenue, Autodesk is barely a fifth of that. Microsoft is $70B, a good deal of that is just MS Office. Activision is maybe $5B, EA less than $4B. Pixelmator — one of the standout success stories of indie Mac development — probably has under $5M. If there are 100 indie devs as successful as Pixelmator I'd be surprised — MS Office alone is 7000x bigger.

If anything the iOS App Store sounds far more democratic

An article like this is worthless without context and it offers nothing new.

paulhauggis• 14 years ago

What do you expect when customers expect apps < $5?

The only way to make a living is to get tons of purchases, which isn't easy.

Half of all app store revenue goes to just 25 developers

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