

Who Gets the Mobile Money? Not Developers. - ldayley
http://www.tbray.org/ongoing/When/201x/2012/03/04/Mobile-Money

======
polemic
This comes off as very self-entitled.

1.) $12 is a lot more than $0 pre-smart phone era. The platform is the vehicle
for selling software, not the income stream.

2.) App development (for your average iOS app) requires almost no capital
investment, R&D, finance costs or marketing. Compared to the risk shouldered
by hardware makers and network operators, the average app developer really is
getting mostly a [mutually beneficial] free ride.

3.) Why is mobile app development special? Why does the same argument not
apply to PCs. Or cars. Or _any_ product with an after-market ecosystem?

EDIT: I'm not saying that the OP is self-entitled, and the numbers _are_
interesting, to highlight where the treasure actually lives.

~~~
alvarosm
2) Investment? how about the time all the independent developers put in all
the apps you can download? how's that for an investment? Free ride you say? is
this some sick joke?

~~~
polemic
Bluntly: wishing it were otherwise does not make it so.

There is an entirely valid economic method for valuing the investment of the
developer. It's call the app store. The answer is $12 per device.

The 'sick joke' is that so many independent developers continue to pile into a
saturated market in the expectation that they'll make a small fortune.

------
wallflower
I know many developers who make a living from the App Store. Yes, they usually
have a spouse to help cover health insurance and they may disappear for weeks
on client projects.

The catch is that they make money by writing and maintaining apps for
organizations, large and small. From small non-profits to Fortune 500. They
handle everything, including walking the client through the initial App Store
registration process. You would never know they wrote the app because it is
always under the official client account.

------
MrEnigma
The developer also has the lowest amount of money in the game generally.
Anyone can start a hardware company, but it takes a lot of money, time, etc to
make money like apple does on things. Apps probably have much much faster ROI.

$12 x 100 million devices is still a lot of money to be had.

~~~
orbitingpluto
Consider that there are 400k active apps on the Android Market. Apple is about
the same.

That's not a lot of money earned per app.

Many developers haven't put a lot of money in, but they have put in a lot of
time!

If every app only took 1 developer 1 day to make, that's still ~1/4 minimum
wage.

Edit: I'm not suggesting min. wage for indy smartphone devs. I'm just noticing
a discrepancy and strongly keeping in mind that the existence of hundreds of
thousands of applications is used by Apple & Android marketing departments all
the time.

~~~
funkah
Well, maybe that's the market saying they don't really want or need your app.
A tough lesson to learn, but there's no reason to assume that the world wants
something just because you took the time to build it.

~~~
orbitingpluto
Well that went unnecessarily ad hominem.

A harder lesson to learn is that 250,000 users don't make you a lot of money.

~~~
funkah
Sorry, I didn't mean "you" "you", I meant "one" "you".

~~~
orbitingpluto
funkah: I assumed. Please excuse the obtuse sense of humor.

I was just trying to stress that a modicum of success writing apps doesn't
necessarily pay out that well. (I've avoided some of the more distasteful
privacy-agnostic and annoy-ware revenue streams however.)

------
arscan
So there's the idea in business of creating vs. capturing value. You want your
product to create value for the user, but you also want to be the one that
captures that value (in the form of $$).

IBM in the 80s/90s created a massive amount of value with the PC, but let
Microsoft and Intel capture just about all of that value. Bad move on their
part.

Apple, on the other hand, has positioned itself in such a way that it captures
a huge percentage of the value that its mobile products create. Its pretty
amazing what they did, particularly in the US where historically the power in
the mobile industry was in the network providers, not the device companies.
And as you've pointed out, they've somehow convinced app developers to work
for almost nothing to add lots of functionality to their products (which helps
sell more products).

Obviously not a groundbreaking recommendation here: pay attention to what
Apple did. When you generate value, be sure to line things up so that you
capture a fair amount of it.

This can be applied for both your business and your career. IMHO developers
tend to create far more value than they capture in the workplace.

------
DrJokepu
It's not like there's some kind of secret deal or something that limits that
number to $12 / phone, it's just that it appears that in average that's how
much iPhone users are willing to spend on apps currently. Apple and AT&T have
a much larger marketing power than indie app developers. If Facebook suddenly
started to charge $0.99 for their app, I bet that number would bump up to
$12.70 fairly quickly.

------
johngalt
I question the assumption that this is zero sum. Just because Apple makes
money doesn't mean they are taking it from developers.

If you're still stuck on how unfair it is, I encourage the you to move up the
risk chain. If you want more of that 'river of gold'; All you have to do is
design, manufacture, distribute and service complex devices across disparate
networks globally. Do this better than anyone else, and then you can decide
how fair you want to be. Don't forget that anything short of the top three and
you've probably wasted a large fortune.

~~~
orbitingpluto
Apple is making money off of the developers. That registration fee 8x more
than the average one will ever make.

And that money has been side funnelled into something far more lucrative -
infrastructure for distributing books and movies.

~~~
AllenKids
What? Your math seems wrong.

The registration fee is $99, Apple has paid out $4 billion as of February this
year, and there are ~.25 million registered iOS developers in US, let's be
generous and say there are 1M registered developers worldwide. It still
averages out $4K pay out per registered developer.

How can you use the $12 per iOS device app revenue to extrapolate average
developers' income is totally beyond me.

~~~
orbitingpluto
Oh wow my math is wrong. Also 25 billion downloads across 315 million devices
is frightening. Each device has downloaded almost 80 apps?

<http://www.wired.com/gadgetlab/2012/03/app-store-25-billion/>

(And thanks for correcting me on the reg fee. I thought it was $200 for some
reason.)

~~~
signalsignal
How is it frightening?

------
phil
Strange to see a Google comms person claiming that "modern Internet-connected
phones exist mostly to run apps."

I'm a big fan of apps, I write apps, but I still think modern Internet-
connected phones are basically for browsing the web and getting directions.

~~~
harryh
And also text messages.

~~~
signalsignal
And telephone calls.

~~~
harryh
Fewer of those than you might think these days. Especially with the kids.

------
jscottmiller
Horace's numbers do not include revenue generated by in-app advertising,
third-party services (rdio subscription), non-apple in-app-like purchases
(think of the Amazon store app), and the growth in the mobile web.

The rapid growth of mobile devices spurred by the iPhone/iPad has generated
far more value for developers than $12/phone suggests.

~~~
the_bear
Yeah, this seems similar to complaining that Microsoft makes so much money on
a PC, but Google doesn't make any money because no one directly pays Google
through a Microsoft-owned app store.

------
abraxasz
Very, very biased article:

\- What about you divide the prices you mention by the number of people
required to make the product. An app developper's team is often less than 5
people. Apple's iphone team is probably more than 150 people including all the
overhead. Well make the math, you'll see that developers are pretty well off,
thanks.

\- It's already been mentioned but there are heavy costs involved in both the
creation of the device, and the Network. These overhead costs have to be
included in the price.

\- And finally, it's still the law of the market. If these prices weren't
right, you can be sure that they would change. Why do developers keep doing
what they do if the pay is shitty as you seem to imply? Well they do it maybe
because it's actually not all that bad. Maybe they do it because that's a
relatively easy way to monetize the great skills they have (no need to build a
company, blabla.. you make a great app, you sell it). Oh, and by easy I don't
mean that anybody could do it, far from it. I'm just saying that for a guy
incredibly gifted like some of these developers, creating apps is probably a
much better deal than having a regular job.

~~~
tikhonj
My understanding was that the $12 is per phone across _all_ apps. So the app
developer "team" is really the union of all the teams who sell apps rather
than just one team. Which is probably much bigger than _all_ of Apple.

Also, invoking the law of the market in a market tightly controlled by one
company (Apple) should be done with caution. The app store is _very_ far from
a perfect free market, so making broad generalizations about it from an
economic standpoint is more difficult. (I certainly don't know enough to
generalize anything :P. I just know enough to tell that it isn't exactly a
free market.)

------
biot
If you ever find yourself in another gold rush, consider building shovels
rather than panning for gold. Or consider a gold-panning services company
where you hire out experienced gold panners (who are in short supply) for a
very nice hourly/daily fee plus a cut of the proceeds should your
app^H^H^Hmining stake hit it big.

------
joedev
This risk-reward axiom holds true for almost all aspects of business. Lower
risk, lower investment == lower return.*

Of the many economies and business environments created throughout history,
this system of reward makes for the best so far.

\---

(* Not saying app development is without risk or investment. It's just that
clearly Apple and AT&T have an order of magnitude larger investment and risk
than the average developer).

------
ChrisFingaz
Post build and deployment, it's essentially free money you are making off the
app. You don't have to deal with distribution, maintaining the network, or
anything else really. Granted I would love more of it and apple makes a
killing off of developers even if they don't deploy a successful app, but it's
a whole new marketplace they created.

~~~
alvarosm
Only top apps can afford to d that, and then losing much revenue. Anyo ther
app is prone to become irrelevant in am atter of months without updates or
promotion. And again, what you said applies to any other platform such as PCs,
where app prces are fair and the market is not so manipulated.

Why do you fail to see that apple and google control pricing by controlling
distribution and discovery of apps?

------
ChrisLTD
This will change as the smart phone market matures. App developers won't make
more money, but device manufacturers and network operators will make less due
to increased competition.

We're already seeing the signs of maturation with Android and some the cheaper
carriers like Virgin Mobile.

------
dmbaggett
How odd that the parties controlling distribution reserve the greatest payoffs
for themselves.

------
lnanek
> total amount that the average user spends for apps

This is like complaining about the total amount the average user spends on web
sites. Most of the web is free to the user and not supported by direct
purchases of content by the user...

------
Yarnage
This is akin to saying "PC manufacturers make $200, Microsoft makes $100 and
app developers get $5 on each PC. I think some of the wrong people are getting
rewarded".

I'm not sure what the point of this entry was.

~~~
alvarosm
Except that app developers don't get $5 on each PC, they get more.

------
alvarosm
I don't understand why everyone here appears to be "on the side of" the
carriers, google, apple, etc. The app developers give a smartphone a sizeable
part of its value (half? more?), and they're getting screwed because the other
players hold a strong position.

That the carriers and makers invest a lot only means they get the chance to
screw the weaker players, not that they deserve the bigger part of the pie,
that argument is absurd.

Does nobody see this?

I commented on this situation before in this other thread too:
<http://news.ycombinator.com/item?id=3635861>

------
pushtheenvelope
I wonder how the "$12 per iOS device" changes when considering iPad versus
iPhone apps. I tried looking around but couldn't find anything definitive.
Anyone know?

------
dirkdk
and even worse, the revenue for developers is totally skewed: those publishers
that end in in a top 25 do well, the rest not. My guess: top 5 % does 90 % of
all income.

Publishing apps for a living is hard. Better to move to build apps for
existing companies and become a services agency that charges by the hour

------
tzm
The article confuses app development with publishing. There is a clear market
for developing apps for stakeholders.

------
georgieporgie
Mobile development pricing became a race to the bottom. In a market where
people see $0.99 as too expensive and _still_ pirate software, how is money
going to be made by the average developer? Even if primary cashflow isn't your
goal, who wants the support headaches for such measly compensation?

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funkah
Maybe the proprtions are screwed, but, _shouldn't_ those entities be making
more of the money? There are huge outlays involved in running a network and
designing and building a mobile device. Also, I heard a rumor that Apple has a
few software devs on campus.

------
nknight
The premise isn't exactly bulletproof.

My modern internet-connected phone exists mostly for web, email, SMS/iMessage,
books, music, and tethering to my laptop. I don't use many other apps much,
the ones I do use are mostly just optimized substitutes for a web interface
(e.g. my banks' apps).

There are a lot of people that play games or use other substantive apps on
their phones, but I'd say there's also a lot like me that really don't spend
much time in third-party apps to begin with.

