The Majority of Today’s App Businesses Are Not Sustainable

http://techcrunch.com/2014/07/21/the-majority-of-todays-app-businesses-are-not-sustainable/

by uladzislau • 12 years ago

130 85 12 years ago

techcrunch.com

th0br0• 12 years ago

I wish they'd split up the revenue percentage by app category...

T-A• 12 years ago

Look at pages 22 and 25 of the report: http://www.developereconomics.com/reports/developer-economic...

dredericktatum• 12 years ago

App stores are just download managers now. Still a huge win - remember how hard it was to get your software into a users hands, free or not, 10 years ago?

ronyeh2• 12 years ago

  Half (50%) of iOS developers and 
  even more (64%) Android developers
  are operating below the “app poverty line”
  of $500 per app per month.

Maybe it's because there are so many clones and one-off experiments on these stores. For example, how many versions of Piano Tiles / Don't Tap the White Tile are there??? I can't even tell which one is the original at this point.

Also, some people will just write an app as a hobby, or to pad their resume. At least for the App Store, if you make $9 per month, you've already paid off your yearly subscription fee of $99, and can safely leave your apps up forever, even if they are below the "app poverty line."

I would be interested to see what percentage of developers who are actually trying to make a living from their apps are succeeding or failing.

forgotpasswd3x• 12 years ago

Accounting for 47% of app developers, the “have nothings” include the 24% of app developers – who are interested in making money, it should be noted - who make nothing at all.

This kinda implies they're filtering out people releasing apps just for fun, but I'm not sure how "interested" you have to be to qualify as an "interested in making money" developer.

ronyeh2• 12 years ago

Yeah, I sorta feel like "everyone" is interested in making money. Why not? :-)

I'm curious about those who really want to quit their day jobs, or who have already quit their day jobs to start a company, who are still struggling to turn a profit.

zxcvvcxz2• 12 years ago

Is it worth it to be an App developer? How about versus working at Google or Apple?

From their perspective, the purpose of your work is to enrich their platform. The difference is in the distribution of payout and work conditions. Rather than having a stable 100k salary at said company, you have the chance to earn absolutely nothing, or be an outlier and beat the 100k. Is it worth it, by expected value? Well, according to the article numbers,

Expected Monthy Payout = 24%0 + 23%50 (using half of max of ranges) + 22%500 + 19%5000 + 9%50K + 3%200K (using double the greatest lower limit)

Which gives an expected monthly payout of $11,600. Not bad! I think 30% of this goes to the respective platforms, so an expected yearly salary for an app developer might be something like $97,500. And I believe this matches up fairly well with what companies are willing to pay app developers (on average it seems higher, aside from maybe in the Valley).

What's interesting is the distribution of payoffs into the "haves" and "have nots". There are few app developers pulling that $100K or so salary. Instead, two thirds of everyone is below poverty, and a select group are killing it. This seems to be the new modus operandus of the tech economy. The implication is obvious: extreme economic inequality (especially as non-tech jobs become less relevant), which by necessity will increase social inequality.

tomjen32• 12 years ago

I think you are underestimating what the really big guys are pulling in. I doubt twice is high enough for the tail end, three or four times is likely better.

zxcvvcxz2• 12 years ago

I also think we underestimate just how many apps are being created with the intention or desire of generating revenue that fail to do so.

It's a fairly arbitrary calculation anyways, the point is the expected value is on the same order of magnitude as that of a stable company man. The big question is what implications this new "career salary distribution" will have as it becomes more popular.

Ologn2• 12 years ago

There are few app developers pulling that $100K or so salary.

The article and report (which admittedly are not very clear) says there are very few app developers pulling in over $100k per app. Someone with an app making $250k a year and two more apps making $10k a year each would not be in the $100k-per-app bin as this report lays out the data,

Avalaxy• 12 years ago

On Windows Phone / Windows 8 this problem is even bigger. No matter how much effort you put in to build the best app in its genre, earning even $100 per month is extremely hard. I know a lot of Windows developers who are serious about building apps for those platforms, and none of them makes $100 per month or more from those apps.

lifeisstillgood3• 12 years ago

Have you more on this - I assumed winphone would be so limp in the market that no one would develop for it, leading to the big wins for the few that bothered.

I am assuming I have been proven wrong by the market. But would like to know

jbigelow762• 12 years ago

There are a handful that seem to get touted as the poster children for viable Windows app developers. Atley Hunter who has 500+ apps in the ecosystem (currently all phone targeted but a recent podcast mentioned he was moving to Universal development so that they can run on Win 8 too), he looks for trends (like "Don't tap the white tile" type stuff) and then implements them in the Windows Phone store.

Then there is Rudy Huyn, another full time Windows Phone dev that targets the "flagship" type apps that MS is dinged for not having on their platform, think Instagram or Vine before they finally released an "official" app and now Tinder. His MO seems to be reverse engineering the HTTP apis and delivering a client app that works with those services.

I'm not aware of any Windows Phone app developers like iOS's Marco, where a single well executed app was enough to sustain a developer over a long cycle. But I could be missing somebody in one of the other markets, Windows Phone does well in GB, France and Italy among other non-North American markets.

gfd54ydfgf• 12 years ago

Looks like income inequality is FAR worse in the app store compared to the rest of our economy. Will the Apple loving leftists speak up about this?

fyolnish• 12 years ago

Most apps are terrible and nobody wants to buy them.

PeterisP• 12 years ago

When in the future the same happens to workers - when most workers are terrible at the (very few) skills that are still needed and nobody wants to hire them - then we'll have a problem.

Houshalter• 12 years ago

Well many people find the level of inequality in the economy surprising, but it really isn't that surprising it occurs in app stores. Even if we discount all the apps that are objectively terrible, the system very much favors apps which are already successful.

And I'm not saying that it's a bad thing. Why would you want to download some obscure game with 2 reviews over the game your friends are playing and you know is good and successful?

tomjen32• 12 years ago

Well neither are most startups - in the sense that most of them will crash.

That is the nature of those kinds of businesses.

nwenzel• 12 years ago

Shame they didn't put more thought into their info graphic to better communicate their point. Different graphs using the same color scheme to represent slightly different sized bins of what may or may not be the same measure. Lower to higher is left to right. But on a different graph it's right to left. No explanation of time period for Revenue Distribution graph. Choice of graph type seems somewhat arbitrary. Donut charts and stacked bar charts become harder to interpret as the number of bins go up and the trend line gets buried. The colors seem to be the dominant feature of the graphic.

Plain old bar charts might be boring, but they would have more clearly communicated the message without all the extra distractions. They would also allow the graphic to use fewer code and require fewer text (legends could be omitted). At least they did specific actual graph values in the graphs. The area graph shows how one color can be effective when the graph contains only one type of data element.

Lesson here is to think carefully and make conscious choices about how you communicate your message. It's true in pitching an investor, pitching a customer, or presenting to an audience. Make sure your message gets through. Otherwise you just have a bunch of graphs dropped on a page and the reader has to search for what you're trying to say.

Also, hire a designer. You'll be happier.

r_singh2• 12 years ago

"However, states the report, only the top 1.6% of developers make more than $500,000 per app per month, but of those who do, some are earning tens of millions per month. The next 2% – those who make between $100,000 and $500,000 per month."

I think these percentages are not low at all. In fact, they're almost pretty good. This is how success is distributed in almost any profession.

chrishallquist2• 12 years ago

"This is how success is distributed in almost any profession."

No—only in professions where the marginal cost of serving an additional customer is low.

rahimnathwani4• 12 years ago

Are these figures net of both the App Store's cut and paid ads?

r_singh2• 12 years ago

The language of the article (& the report) suggests that it's what the developers earn.

I may be wrong though.

forgottenpass• 12 years ago

As Apps Disappear, Will They Be Seen As Disposable?

Haven't they always been? They're mostly games and toys. The number of actual tools I have installed is really really low, I have a half dozen additional apps because they're currently fashionable for communication. Everything else on the store is either serving a need I don't have, or ephemeral nonsense.

I'd even lump things like pandora in with the ephmeral as disposable. I got a new smartphone a few months ago and haven't even thought of installing it until writing this post. So even if the company pandora will be around for decades, I've reached the point of diminishing returns from installing apps before I get to them.

wpietri• 12 years ago

Doesn't this title conflate "app businesses" with "developers"?

I'd also expect that the majority of app companies aren't sustainable. But from the people I've talked to, it seems like a lot of apps are being done as something between a hobby an a side business.

A lot of the people you see selling art and jewelry at fairs work like that. They don't expect it to be their full-time job; it's a fun way to make a little extra cash. So what looks like a non-living wage can be perfectly sustainable as long as you're doing it to supplement other income.

Donzo2• 12 years ago

Releasing apps seems increasingly pointless. Unless you get featured, there is pretty much no visibility and almost 0% chance of discovery. At least with web based apps your ranking can improve overtime for a variety of keywords and traffic can begin to find you. I have not had a similar experience with development for the app store.

Donzo2• 12 years ago

I see that I am getting down voted for my sentiments, so perhaps I should better explain my experience.

I programmed an app that was featured in several publications including the Washington Post and coverage by one of the writers for the Guardian. These favorable reviews led to a handful of sales. If this were a web app, these valuable links would have given my product a real boost.

With the app store, there's almost no way for a third party to influence the discovery of your app. Everything is sold through the app store and Apple holds all the keys to the kingdom. Who knows what mysterious process they use to select their favorites, but if they don't select yours, that's pretty much it. No recourse. The web, on the other hand is much more open and many different people can influence and contribute to a developers success.

watwut2• 12 years ago

What app did you made?

snowwrestler• 12 years ago

Did you have a website to promote your app?

Edit to add: no judgment implied; I'm just curious.

LunaSea• 12 years ago

A few month ago someone introduced me to appstore SEO which basically is old-school key word optimization and other tricks but for apps.

So in a way you can improve your discoverability.

opendais• 12 years ago

This seems to go a long way to basically say "90% of new businesses/apps/[insert here]" fail.

Why yes, we've known this forever. It is why it is risky. :/

visakanv• 12 years ago

I know right? Life on Earth isn't sustainable. The Sun will eventually blow up and destroy it. The universe isn't sustainable, either. Eventually all the stars will go out and there'll be a lukewarm nothingness...

Sustainability is such a fairy tale.

facepalm• 12 years ago

500$/month for an app that took me a month to develop would be OK. Maybe I could earn more as a freelancer, but you also have to take fun into account. It's valid to trade fun for money, otherwise people should never go on holidays.

gregpilling• 12 years ago

from the PDF (downloadable):

"Game design is a highly creative art that takes a lot of practice. Angry Birds was creator Rovio’s 52nd title. It is therefore not surprising to find that those who have shipped a lot of game titles are the most successful. The 3% of mobile game developers who have shipped 50+ titles are nearly 9 times as likely to be earning over $50k per app per month than the 62% who have only shipped between 1 and 3 titles."

I was quite surprised that is was the 52nd game! Wow. That is a lot of persistence!

philiphodgen• 12 years ago

This sounds like the app developer's equivalent to the "10,000 hour" rule of thumb.

Fifty attempts to hit the nail with a hammer is likely to improve your aim.

In addition, anyone willing to try 50 times is likely to be a survivor. Those unwilling to persist will go try their luck elsewhere.

It is oddly inspiring to see the "try 50 times" story and the payoff for the doggedly persistent developer.

fulafel• 12 years ago

They started on mobile games way before iOS or app stores though. And millionaire family for funding. And they did AB as a side project while doing many other games for pay for other publishers. And AB didn't get a anywhere in the asp store at first, picked up months later due to marketing tricks & luck & relatively early days of iOS games.

Ologn2• 12 years ago

They analyze the data on a per app basis, which may not be the best way to do it. Let's take the Facebook developers on Android. The Android Facebook app has been downloaded over 500 million times. Facebook's Android Slingshot app has been downloaded less than half a million times. With the way Visionmobile/Techcrunch break down the data, on an average per app basis, the existence of the Slingshot app drags the achievements of the flagship Facebook app way down - it halves it, basically. This doesn't really bear any relation to how much success Facebook has had though.

HN often contemplates the power law, so it's natural a developer might have one app which is very successful (Rovio released 51 apps before releasing Angry Birds), then another app which is half as successful, then a third app half as successful as the second app, and so forth. This analysis doesn't think in those terms though, they are more of the idea that every app released by a company will be more or less as successful as the other ones it releases.

Also the report sets the bar fairly high. It calls people who make $9000 per app per month "strugglers". I'd be happy with one app making $9000 a month, and wouldn't be struggling making the resulting six-figure salary. Even if I had two or three apps making $9000 a month each I'd be considered a struggler. This isn't really struggling. Maybe for a firm with venture capital that was expected to grow quickly it would be considered a failure, but not for a bootstrapped developer, or partnership of developers.

tsunamifury• 12 years ago

I built apps for android, iOS, windows incarnations, and even bb10. In aggregate maybe 25-30 branded apps on the iOS store could make 10k per month. The rest were garbage.

The most I ever made was 1m over a year on 7 BREW apps we made. That's right, those old dead handsets had only 20-30 apps in their store and we owned about 20% of the market.

What made that possible is that the ecosystem was so bad and it was so hard and expensive to get apps reviewed and built for multiple handsets, you could make money as long as you just got on the device.

The relative ease of launching has made a plethora of nice but unprofitable apps on the other ecosystems... And it points to what happens in any work economy when the barrier to entry becomes hobbiest-level easy. Happened to photography, writing/publishing, and others. There are too many people relatively skilled enough to do an average job and give it away for free for anyone but the best marketed and connected to make money.

x0x02• 12 years ago

I wonder what is the admixture between

- hobbyist apps getting better

- vc funded businesses willing to lose piles of money for a shot at winning the app lottery introducing apps/services far below cost

- deliberate deception on the part of app store owners about true prices of apps leading to very heavy use of iap and deceptive business practices

dredmorbius2• 12 years ago

What's "BREW"?

fmela• 12 years ago

http://en.wikipedia.org/wiki/Binary_Runtime_Environment_for_...

b3b0p• 12 years ago

I was wondering the same thing. I had no idea. I am almost certain the commenter is referring to: https://www.brewmp.com

eclipxe• 12 years ago

Be thankful you never have to write for BREW.

billions• 12 years ago

Before iPhones the battle was between Java and BREW for the language of mobile apps. This was 2000-2005 when Motorola and Nokia were heavyweights.

Iftheshoefits• 12 years ago

The "labor supply" side isn't the only factor in downward pressure on the value of apps--it's also the quality of the demand side. People tend to the cheap side when it comes to paying for apps. The result is that each marginal increment of "value" in an app comes with a geometric increase in cost to produce it. It's also a feedback loop: people aren't willing to pay (very much) even for good apps because there are a sufficient number of developers doing it "just good enough" and giving it away for free, and so developers who could make an even better app shy away from doing so since the prospective benefit doesn't merit the risk.

walterbell• 12 years ago

Pages 4/5 of the Stardock 2014 report have a couple of graphs on mobile revenue and PC game revenue vs. sales ranking, https://news.ycombinator.com/item?id=8092753

"Once a game of piece of software leaves the very top of the sellers, the income fall-off is severe. Our poorest selling DLC for PC games generates more income than nearly every iOS or Android developer app we've gotten numbers for."

pnathan• 12 years ago

The relative ease of launching has made a plethora of nice but unprofitable apps on the other ecosystems... And it points to what happens in any work economy when the barrier to entry becomes hobbiest-level easy. Happened to photography, writing/publishing, and others. There are too many people relatively skilled enough to do an average job and give it away for free for anyone but the best marketed and connected to make money.

Quoted for truth and that it bears repeating. When anyone can do it, anyone will. And if `$your` specialty becomes that easy, it won't be in high demand. This is something that we must be on our guard against, as professionals, and to continually self-improve our way such that it keeps a competitive moat between us and the hobbyist.

chasing• 12 years ago

Am I to understand from those charts that over 25% of iOS apps make more than $5,000 per month?

That sounds like great odds to me! Especially given the amount of garbage in the App Store.

hayksaakian• 12 years ago

That seems like a convenient average skewed by the top 1% of apps

Bamafan• 12 years ago

Not so great if it took 10 employees to create it.

Silhouette• 12 years ago

Not so great if it takes even one full-time employee to maintain it (and any dependencies it has) on an ongoing basis, either.

megablast• 12 years ago

The top 25% of apps did not take 10 employees to create them, unless there are 2.5 million iOS app developers running around.

x0x02• 12 years ago

Bill Gates walks into a bar. The average patron is worth more than $1B.

analog31• 12 years ago

Replace "app business" with "musician."

abk2• 12 years ago

I feel like to a large extent this is just techcrunch being techcrunch and writing link-bait articles.

My thoughts on this:

1) Just about everyone is "interested in making money" from their apps. I'm not sure how they're filtering the developers in the survey, but I'm willing to bet the amount of effort put in, and the actual methods used to "make money" differ wildly among those developers. Apples to oranges.

2) 5-10k per app per month for a single developer with a full-time job doing this in his spare time is pretty good. For a 300 employees company, not so much. Similarly, millions a month will sustain a large company and make an individual developer extremely wealthy. What are we comparing?

3) I'll go out on a limb here and say that games make more than any other category on the app store. They also tend to require a higher budget and production value: better graphics, sounds, a storyline, etc... Maybe the 100 flashlight / todolist apps competing for the same spots don't make much money but they also cost nothing besides a weekend of work and the $99 / year ADC membership. I also wouldn't be surprised if most of that "1.6%" were game developers. Lumping every app together and trying to get stats out of it doesn't tell us anything about how much the developers are spending to get those apps out.

4) Obligatory plug: Storm8, the company I work for, is recruiting. We're a mobile games developer (on the App Store we tend to be better known as TeamLava) and have been profitable and fully bootstrapped for over 5 years now through rapid growth. We're all very passionate about creating new games and refining our existing ones and have a lot of interesting projects to work on. We're looking for developers interested in learning more about the mobile games industry, no experience required. Email is in my profile if interested :)

thegeomaster• 12 years ago

Can't see your email mate... Put it in your "about me" field if you want peopleto see it, the email field is private.

abk2• 12 years ago

Thanks!

onmydesk2• 12 years ago

The app store that came with iOS6 totally destroyed the income of developers on iOS. Many developers pointed out the problems, many left the platform. With iOS7 apple plainly ignored the problem. With iOS8 some changes are coming which might help.

Apple did it. They had better undo it if they don't want their iOS devices to be nothing but ad display machines or in app purchase tricks.

archagon• 12 years ago

IMO, if you're relying on the App Store app for all your marketing and discoverability, you're probably doing something wrong.

onmydesk2• 12 years ago

The apps themselves are marketing channels of their own with cross promotion, social network sharing etc and word of mouth.

Paid advertising is not possible when you make 70 cents per sale. It costs more to advertise a copy than you make from a sale.

A way around this is to increase your lifetime income per download, which is where IAP comes in, which is where candy crush etc show the way.

If Apple don't want the store to only be that, they've got some work to do.

habosa• 12 years ago

Like others have said, it's hard to separate the 'App Businesses' from the 'App Hobbies'. For example, I have published 4 Android apps with about 250k combined downloads. On two of them I did not monetize at all, I just did them for the exercise and because I like to code. The other two I did monetize, but only in ways that kept non-time costs to $0 so it was all profit (aka no marketing, no employees, no paid services).

I've made some decent money off one of the apps, but definitely not enough to live on for any amount of time. Still i consider my efforts a success, because I did it as a supplemental activity to my full-time work. If I was trying to make a living, I'd probably invest in marketing, hire a designer and/or co-developer, and monetize more heavily.

danbucholtz3• 12 years ago

These numbers are actually quite rosy in my opinion. When I built PaperBox (www.gopaperbox.com), our chief competitor was getting about 50K downloads per day - this compared to maybe 50 a day for us back then. We knew we had a better offering - but we also knew that charging right off the bat would shoot us in the foot. Instead, we've opted to go the free route to build our user base & brand, and figure out the business model later on.

I cannot imagine an app charging and being successful right off the bat unless they have a platform for advertisement (something like Vesper and Daringfireball.com) or it's made by a very prominent figure/company. The reality is there are 10 apps for every idea in the app store (in 2014) and the best app likely won't win market share if they charge from the start.

thrownaway2424• 12 years ago

What about Paper? Not only did they charge from the start, they charged a rather high price, and entered a market full of existing competitors, some free.

CodeCube• 12 years ago

Sometimes ... just sometimes, a fantastic product, and good lifestyle-type marketing (at least, from the videos on their site) can make all the difference. Paper is just leaps and bounds better than any other similar app ;)

otisfunkmeyer• 12 years ago

Unless you are talking about a different Paper, Paper was a free app with an in-app purchase of tools (different brushes) available.

I know this because I downloaded it because it was free and then bought the tools. I wouldn't have tried it if they wanted the (I think) $4.99 up-front.

danbucholtz3• 12 years ago

Good example definitely. I wonder what kind of money they're making. I also wonder if they would be able to do the same thing in 2014 that they did a few years back when they launched. I perceive the landscape as far more competitive, but I could be wrong.

mmanfrin• 12 years ago

A majority of today's small businesses are not sustainable either. Isn't it something in the range of 85% of small businesses fail after a handful of years?

bjelkeman-again• 12 years ago

That was an interesting thought. I had to look at the numbers a bit. In Sweden in 2012 69,216 companies where created [1]. In all of 2012 7,471 companies were declared bankrupt [2], about 10%. If 85% fail, then another 75% should have shut down voluntarily. That is out of 1.1 million companies of which 888,000 had some turnover last year [3], Can't find the statistics for the year on year growth though right now.

Edit: found the stats. Seems the number of companies have only grown by 10% in total or so in six years [4]. So maybe you are right then.

(all references in Swedish, sorry)

[1] http://www.tillvaxtanalys.se/sv/publikationer/statistikserie...

[2] http://www.tillvaxtanalys.se/sv/publikationer/statistikserie...

[3] http://scb.se/sv_/Vara-tjanster/Foretag--och-myndighetsregis...

[4] http://www.statistikdatabasen.scb.se/pxweb/sv/ssd/START__NV_...

rahimnathwani4• 12 years ago

Not all small businesses are intended to be sustainable. Let's say I start a company in order to bill my freelance clients, but 2 years later I get a job and shut down the company (which never had recurring revenue as I was just selling my own services). That would show up in those figures.

So would a company which was set up to operate, say, a restaurant. If the company sold the assets (lease, fixtures & fittings etc.) to another individual or company, so that the owner could move to another country or start and run a different business, that would also look like a small business failure, even if the guy lived well for those years and came out on top before moving on.

rokhayakebe• 12 years ago

This just means "most" businesses are not fully ready yet to run critical functions primarily on mobile and tablets.

Seriously, even email sucks on mobile phone let alone anything else.

pjmlp• 12 years ago

The ones making a living are actually the consulting firms selling trainings, mobile developer certifications and doing apps alongside enterprise deployments of the main application,

In gold rush times, the ones selling shovels get the real money.

patmcguire• 12 years ago

There was a good glib observation I saw today:

"Monument Valley costs $6 less than it's own soundtrack. That’s how dysfunctional app pricing is."

https://twitter.com/gregmaletic/status/493430279122350080

It really can't continue like this. What comes after, who knows.

kumarm• 12 years ago

Thats not a fair argument. It appears soundtrack has less than 1K downloads where Game has around Million downloads (Approximation based on number of ratings).

So it appears to me Soundtrack generated 10K where as Game Generated 3M.

watwut2• 12 years ago

Just because one like the soundtrack does not mean one wants to play the game.

chrishallquist2• 12 years ago

I find this completely unsurprising. Maybe because I'm someone who used to (kinda sorta) make a living as a writer?

Writing software is more profitable than writing prose (or poetry), because fewer people can do it, but at the end of the day the economics are the same: the fruits of your labor are easily copied, so making something that 10 million people read or use is not inherently much more expensive than making something 100 people read or use. Under those circumstances, it's easy for everyone to read the best content, and use only the best apps. People's differing tastes, need for variety, and imperfect awareness of their choices means the authors of the "second best" thing aren't completely screwed in either case, but it's still pretty close to winner-take-all.

(Also, social proof—people's tendency to use what other people are doing as a proxy for quality—amplifies winner-take-all tendencies, even when there are no obvious network effects.)

perlgeek• 12 years ago

An App is often just a tool, and tools aren't a sustainable business on their own.

Ideally you have a profitable business, and the app is just one way for the customer to access your business. Then the app doesn't need to be sustainable in itself.

The Majority of Today’s App Businesses Are Not Sustainable

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