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IOS app success is a lottery: 60% (or more) of developers don't break even (arstechnica.com)
158 points by jvc26 on May 4, 2012 | hide | past | web | favorite | 110 comments

That does not make it a lottery. It makes it a business.

The business of making and selling apps is not very different than the business of making and selling shoes, clothes, radios, or hardly anything else you can name. Standard business practices apply.

If you make one app and throw it into the marketplace hoping to get rich, then yes you are treating your business like a lottery and your business will probably fail. If, however, you understand that 9 out of 10 apps lose money, you should either make sure that you have done your homework on the niche you are targeting so that you can ensure your app is as good or better than everything else in that niche, or you'd better market the heck out of your app via every medium you can afford to do so on.

Alternatively you could do what early-stage Venture Capitalists do and spread your risk with the knowledge that most of your investments will never turn a profit, but with the hope that one or more of them will be so successful that they more than make up for the failures.

Again, the app economy is not a lottery. It's a business.

Well put.

The App Store is a lottery, but only if you treat it like one.

It's a lottery if you just throw an un-polished app into the mess and hope Apple picks it out of the bunch like a BINGO ball for their "Featured" categories.

That's how a lot of people go about it. Submit and hope. Submit and hope. Submit and hope.

Regular updates, improvements, gorilla marketing, polish, press, promotion, etc, are all required to make your app a success, especially if you are a small business that doesn't have a huge marketing budget.

I went through this with my Android games whose free versions have been downloaded millions of times now, and I'm doing it all over again with my 2D platform game Scorched Monster on iPhone.

Sometimes you have to get down and dirty to make it work. Day in and day out I'm marketing in some way, by tweeting, submitting the app for reviews, making videos, posting in forums, doing blog interviews, whatever I can think of... I'm working for it, and I plan to make it a success.

It's just business.

Polite correction: Guerilla marketing. n.n

Right. If you build a game app, name it "Words Play" and your marketing strategy is to hope that people find it, you're playing the lottery - and losing.

I have two apps and a third about to launch. One has kind of flopped so far - too wide a niche and it hasn't gotten on any external review sites yet. But the other floats between 500-1000th place in revenue in its category - one of the smaller categories. That's on track to bring in roughly $10,000 a year. Not bad for a first app that would take me a week or two to build now. That's not winning a lottery, but it's a business - a small business.

If you want to run a small business - on the web or in the app store, you need to target a narrow niche. It has to be narrow enough that there's not much well-established competition. It has to be wide enough that there's a profitable market. Then it has to be a market that's willing to spend money. It's not easy to identify those niches, but if you don't even try, you end up throwing out apps and hoping something happens. A class like Ed Dale's Challenge (free) is a big help in identifying niches and testing those markets: http://www.challenge.co/

These numbers are useless. Things to keep in mind:

- This research is provided by a company that sells an app marketing service.

- No detail on methodology and how value was assessed. Are part time/garage developers tallying their opportunity cost? Multiplying their hours spent by an idealized consulting rate? What about free/low cost apps that leverage an existing paid service? How does that fit in? What about long-term ad revenue?

- Reported backing evidence is anecdotal.

Startup success is a lottery: 82% (or more) of entrepreneurs never succeed. [1]

That said, I personally think that 40% is a high success rate compared to other things in work and life, so I pretty much disagree with the op.

[1] http://onstartups.com/tabid/3339/bid/79/Six-Interesting-Stat...

Out of interest have you actually read the paper?

Our analysis focuses on data covering investments from 1975 to 2000

Not startups at all. In fact this paper is only about the success rate of VC backed companies pre-incubators.

For the purposes of this analysis, we examine the founders (henceforth referred to as “entrepreneurs”) that joined firms listed in the Venture Source database during the period from 1986 to 2000.

VC backed companies are not the totality of entrepeneurs and any conclusions about them is moot in terms of discussion of small bootstrapped ventures which a lot of iOS developers will be, VC operate by a completely different strategy than normal people do, they want the lottery hit.

One of the numbers were:

"90% of apps don't generate enough revenue to support a standalone business."

While it might be true. I don't think it's very difficult for anyone coders on HN to release 8 "meh" apps and make enough to sustain a modest lifestyle. The "app" doesn't have to be the business... The business can be nurturing a number of apps... both big and small.

40% odds would be the best lottery ever.

That's 40% odds to break even, not to hit the jackpot.

Which is still way better than any lottery I've heard of.

I'm not sure that's true. http://users.stat.umn.edu/~geyer/lottery/

Summing up our conclusions, it's much better to play in a week with a big jackpot than a small one (duh!) but even in a week with a near record jackpot (second largest in history) the lottery is only almost but not quite a break even proposition.

Interesting, but this does not mean a 40% (or better) chance of break-even.

Scratch-offs? Certainly the payout isn't as great, but not all of the 40% is hitting a big jackpot either.

Really? Because if so I'd be happy to sell you lottery tickets in which you have a forty percent chance of breaking even...

Yes, that's why the state you live in is happy to sell you lottery tickets. There's a sucker born every minute.

Mathematically, I agree. Psychologically, many people are paying for the fantasy and it may be what helps them cope with an otherwise pretty tough life. The idea/fantasy that "all this could change one day thanks to the lottery" may very well be worth the ticket price to those people. I'll hold my judgment and not call them suckers on this basis.

These are actually very good odds

"risk" is actually probability x payoff (for one event like a bet on throwing a dice) If it's bigger than 1, congratulations.

In this case you would have something like Integral(payoff x probability,dprobability,0,1) (sorry about this syntax)

For a real probability distribution, this means you have a 40% chance of breaking-off or do better

The second issue is that your risk is (very) limited. It's cost of equipment + dev licence + cost of your time + 3rd parties

It's not like the risk of cutting the wrong wire in a bomb about to go off.

Most of the risk, I assure from experience, is not getting to the store in the first place. That is, not finishing the product, or coming up with something bad

iOS app success is pretty much guaranteed - if you're smart enough to take your skills and start selling them at market rate to every Tom, Dick, and Harry who wants to hit the iOS lottery.

In a gold rush, the guys who do the best are the ones selling picks.

Selling your time and skills isn't selling pickaxes. That's just offering to dig for gold at a cost above what you'll find when you dig.

Exactly. In the app gold rush, the ones selling pickaxes are Apple and Google with iOS and Android.

Or writing books, holding seminars, training sessions, selling development tools, etc.

RubyMotion is a great recent pickaxe example. Write for the App Store using Ruby for only $150 now or $200 later! Buy Now!

I have two iPad music apps in the store that both had long stints in the "what's hot" section and one was as high as #13 in the US music category and #7 in the UK.

When I consider how much time they took to write I would have been much, much better off spending that time on oDesk contracts at $20/hr, and don't even talk about what I could have made on a real developers salary in that time.

Selling your own apps now is a fool's game. Apple trumpets the successes because it helps them sell hardware.

Did you make too few sales, or not enough money per sale?

Perhaps the iPad music category is too niche, unless you can justify a high price-point.

Hard to say. As other people have reported, total profit seems to be loosely correlated with price. I sell more at lower price points but total revenue is similar.

Some music apps make do really well but they're generally much less complex and technical than mine.

Working for every Tom, Dick and Harry sounds like a fucking nightmare.

> Much like music or book sales, there are a few huge winners, a bigger handful of minor successes, and a whole lot of failures."

Could read, "much like every industry in the history of mankind..."

How many apps are developed by existing businesses that wish to extend their service to the iOS platform? I'd bet this is a significant number. Dropbox, Facebook, all of Google's apps, many newspapers and old media channels, online travel services, and many others have an iOS app to supplement their existing business. How many apps in the App Store are barely more than a nicer mobile interface for an existing website?

How does this "study" account for these cases? If you release a free app, how many additional conversions are required via the app to justify the development costs?

We bought our lottery ticket last week. After releasing our app we got picked up by some big blogs but when the buzz died down, we immediately saw a dip in sales. We don't have a budget for marketing but we did notice that when your app is of a sufficient quality and you tell passionately about it, reviewers are willing to write about you.

It's a roller coaster ride, but nothing beats seeing people enjoy your product.. America watch out, next week we will targeting you with our marketing :)

Plug: www.invyapp.com

Your app name should be something like "Invy - pick a date with friends and family" instead of just "Invy". Makes it much easier for people to see at a glance what it is, especially from screens with lists of apps. I think it also gives you a little SEO boost in the app store for those keywords.

I love the use of the white iPhones in the screenshots. That matches the design well and stands out from all the screenshots with black iPhones.

If you're willing to share, did you get picked up by any blogs outside the U.S.?

Yes, mostly outside of the US. We got picked up by majority of the Dutch blogs (we are a dutch company) and some German blogs. We also found that when you are on a blog, other blogs tend to read those and then they contact you.

We also tried connecting with old media, but there was almost no spin off from that.

Was your contact with them in English or Dutch and German? I'm wondering because we have a new iPad travel magazine and I'm going to try and start spending a portion of my time pitching outside the U.S. Have you had any success in Asia?

Dutch we contacted in Dutch, others in English. Not tried to contact anyone in Asia yet, but I can recommend Brazil. Think that's also a good market.

Minimal, clean, lots of white space... very European in design. I like the design a lot.

> we got picked up by some big blogs

What was your method? Cold emails?

Yes, cold emails, keeping it short and personal. Also a lot of contact was made through Twitter.

To those who think 60% is low: how many apps of the 100,000+ in the App Store were made by a small team of maybe 3 or fewer people? How much could their development costs be? A few thousand? Certainly modest apps can be developed for less than $100,000 (substantially less in most cases). I'd believe that most (say, oh 60%) of these apps can attract a few thousand customers to pay the $0.99 for their app.

A lot of this has to do with the fact that app discovery on the iOS platform is broken. Granted it's a lot better than Google Play (or whatever that market is called now), but it's still skewed. Small indie developers without huge marketing budgets or paid people in China to download their app stands little chance of cracking the top 1000, or 100, where the financial goal of "break even" is achieved.

I agree that if I'm looking for an app that finding it can be a pain right now. But, are there really scores of amazing apps from small indie developers that are languishing because they can't afford to pay people in China to get them into the top 1000?

I feel like what you are describing are the faddish/scammy types of apps that people attempt to make a quick buck on and not the great indie apps by a small team. Great apps will be found and bubble to the top. Bad apps that are trying to make a quick buck by just being popular are always going to be fighting an uphill battle.

I've been in the Top 1000. I've been as high as #1 in the Social Networking category in certain countries (though just top 20 in the category in the USA). My peak earnings were ~$1000 per year. About enough money to hire a developer for a day ($120/hr was the going rate, especially at that time).

Despite my best efforts and what I thought seemed like decent rankings, I ultimate had to chalk it up as a failed business. You could argue the quality of my app was not there, but I definitely poured what I could into it with entirely honest intentions.

Unless you have something really special, it's hard out there. The more niche your product, the harder it becomes to get noticed amongst the cruft.

My first app has been in the top 1000 of its category most of the time. Never made it to the top 200 yet (been to 203 and 205 - argh). That's with zero marketing budget, no external reviews (yet), and just keyword matches and the occasional social media hit. It's kind of blind luck on my part, but having an app that sits in an underserved niche is key. Getting good keywords was a big boost.

Google Play has been a waste for me. I even launched a free ad-supported version of the same app there and it gets less downloads a day than I sell on iOS or Nook. Yes - more people buy the same app on Nook than download it for free from Google Play. That shows how broken discovery is on Google Play. Well that and how small the Nook store inventory is.

I think that's because 60%+ (it's definitely more imho) doesn't understand marketing. I made a simple game, not very original to try out the Appstore. It was downloaded 4 million times, raving reviews and it made $100k+ (and makes thousands every month still) while it took me 2 weeks to make and 3 weeks to market (in monetary terms in the Netherlands that would be; 5x5x8x100 = E20k ~ $26k; i'm a developer, so I underestimate, so $26k x π = $80k, still nice profit) . I did do a LOT of marketing and most developers just upload it and wait for it. Build it and they will come doesn't work in the Appstore. Everyone in the top charts put a lot of time/effort/money into marketing; some have more luck than others, but without marketing, you won't get anywhere.

Basically I would say if you develop something for the Appstore you need $50k for developing something well built and $75-100k for marketing it. I got lucky as I know the right press to market, but that's basically it. If you don't have $150k to spend, don't expect anything then it will always turn out nice :)

is http://www.contactjam.com/ your web site? All the admin tools are kind of fully open to the public. phpinfo() and stuff. running on Windows NT

Hi, no, it was last year, but not anymore. Thanks for the heads up, I'll mail the owner.

My experience with the Windows Phone Marketplace seems to fit this pattern. A little over a year ago I started teaching myself C#, so I starting creating WP7 apps and releasing them.

As of today I have released 10 apps for the WP7 store (and two for Android), making a total of seventeen 99 cent sales for the paid apps and about $2500 in ad revenue for the ad supported apps. The total download numbers for all ten apps is about 17,000 (1500 Android), with about 500k impressions for the last 7 months. At best, when the apps were most popular, I was making $35 a day in ad revenue which has settled down to about $5.

However, I must note that the apps are not very good. As I was new to C#, each app took less time than the last, but the first took about 3 months of my free time. It was a cool way to learn to code while giving myself a tiny boost in income. However, now that I know I can write crappy apps, I would like contribute to something bigger/better and work with a team. It would be monumentally helpful to have a designer to work with as that is the hardest part for me.

This seems like as good a place as any to add my own experience. I wrote an iOS card game:


It has made me about ten thousand bucks to date.

Certain things I did seem to have helped a lot. For example, I nearly killed myself to make sure my app would be ready on iPad launch day. Being one of only a few native iPad apps at the beginning really boosted my sales for awhile.

Probably the worst thing I did wrong: It's not pretty enough. If there are any designers reading that would like to collaborate on a prettier follow-up app, my contact info is in my profile.

How many small businesses don't get off the ground and end up closed shortly after opening?

How much higher do you think that number would be if it only costs $100 to get store space in the local strip mall instead of thousands?

I think the main reason for such a high failure rate is the ridiculous number of "me too" apps. This is true of many categories, but especially games.

There's some huge market gaps on iOS that are just sitting there waiting for someone to come along and fill. For example, people are always complaining about how the iPad isn't good for content creation. Why not create a product that lets people do some of the stuff like this that they're still stuck to their PC for, instead of making another puzzle game?

What's the percentage of crappy apps on the AppStore?

I'm sure that there are less than 40% of really good apps. So if 40% of the apps, including not-so-good ones break even, that's still a goldmine.

That's an optimistic way of looking at it. I like that perspective. However based on my experiences I feel the article is pretty accurate. I've had a couple of base hits and several more strikeouts. Although lottery is probably not the right term.

Keep in mind too that the top 40% of good and crappy apps looks more like the long tail. Not all 40% achieve "gold mine" revenue

To the original point of OMGPOP being almost out of business - the fact that they have other apps no one has heard of and one big success also supports the article's stats closer than not.

Nothing surprising here.

- 1149 € iMac

- 100 € One year License

- daily rate € x amount of days required to develop and release

Now how many customers have to buy the app at 1€ to break even?

Same thing on the Android side (just the PC is cheaper to get)

In other news, 95 percent of the apps in the app store suck.

I agree with other posters, 60% is a pretty good rate for businesses to succeed. I develop some as a hobby developer and two of my apps - Toy Cash Register -- and Kids Writing Pad have made over $6,000 each -- I develop myself and sometimes outsource design (which could use a lot of improvement) -- as for marketing, it's a waste of money. You need to find the right company to provide the right marketing, and to be honest-- it doesn't exist. There are companies to mass market, but you aren't going to win in the mass market -- it took Rovio years to get a success like Angry Birds--and in the niche markets there isn't enough experts--you need to make it your own way and not lose money on people trying to market you. I wrote apps because I needed them-- and it pays for my Apple device addiction.

Infographic: "52% had $0 set aside for marketing, despite 91% believing marketing is necessary for success"

Can people talk about their experience using paid marketing for their iOS apps? So much depends on "top 25", "featured", and App Store search. How can paid marketing really help bring about success?

Paid marketing has never really worked for me. I've had a few apps reach number 1 in their categories and they key was getting lots of downloads in the first 24-48 hours. Once it's up there it's not much work to stay there.

I have a few hundred followers on Twitter and sent out several promo tweets a day. I gave out 10-20 promo codes. I left comments on forums which relate to the app (some forums will ban you but with some you will get good interaction.

So basically you need to get as many sales as possible out of the gate. I've found that if you don't make the top 25 in your category within the first few days it's never going to happen.

In the "freemium" app world, which relies on in-app purchase, the big players pay for installs of millions in users in hopes that a few percent of them will become payers.

In order for that to pay off you need to know what your conversion rate and ARPU are, and optimize your new-user funnel with tracking and A/B tests.

Yes. Complete waste of time.

Fostering relationships with bloggers might be useful. But the advertising networks, so far, no success.

I'm not saying it can't work, it just didn't work for us.

The main reason is that ads (google or mobile) are priced for traditional sales (e.g.: cars or whatever) products and apps are just way too inexpensive to make it viable.

I would think that the massive amount of inventory ad networks have would allow you to run $0.01 or cheaper clicks, which would be viable for apps--- but it seems they'd rather not have inventory than take less than $0.15 a click.


Besides cultivating relationships with bloggers, have you found any other form of effective online marketing to boost app adoption? We've gotten some newsletter signups and downloads off of our front page and blog page (I've been creating a lot of topical content that relates to what our app does) but the numbers aren't that big. Maybe two or three people clicking off to the iTunes link on a typical day.

If your app has a particular market of enthusiasts (e.g.: a pet grooming app, for instance) you could seek out forums of those people and participate in those forums (constructively) while having a link to your site in your signature (if the forum allows it.)

I don't know if that's effective or not, its just an idea.

Making apps easier better to market is something we think about a lot and hope that we'll eventually have a MUCH better answer to in the future.

Apps, even those that make very little profit, are great until you factor in customer service. I spend far more time than I'd like answering the same questions over and over again, even though I post several of those answers in the app description and on the website. Sure, I could do a better job of this, but most of my customers don't take the time to read the FAQ and go straight to the customer service email.

I can only imagine how many emails arrive for those with apps selling more than a few hundred/day.

Maybe you can improve the app's design so that those support questions don't come up? It sounds like your customers are giving you a gift.

Yes it's a gift, but this view is far too simplistic to be reality.

High quality apps with high quality marketing will do just fine, just like every other business.

You can still win the lottery though. Look at Draw Something. The company was basically out of business, then the app hit it big, it went viral, and they made millions.

The app store is great for managing app downloads and updates. It's even okay for showing off popular apps. It should never be the ONLY way that anyone tries to drive sales.

They had millions investments in that company and the almost broke seems to be a 'nice story telling'; 'we were almost broke and then ...' appears often on HN; seems people like this all-or-nothing attitude. To me, as a person who wants to pay his employees and who does not want the trouble of being broke, it means you are not watching, or you don't have a bottom line. What's great about that? I don't understand that attitude of burning millions on the off chance you'll make billions.

We were thinking of hacking together a simple Android app for sale however looking at huge marketing budgets how would you compete with the big boys?

Can you complete on features alone? Do you generate any decent revenue being outside the top 10?

Seems to me the article is trying to portray the iOS app market in the same way I've seen complaints of the Android app market; that users are cheap or want free apps. Has anyone else claimed this because that's a first for me.

How did they come up with the numbers? I may have missed it but I don't see their methodology. (Do they have someone on the inside at Apple?) Until I see the methodology, this article is no better than making a random guess.

when you're donating a third of your revenues to a megalomaniacal corporate cult of personality, you kind of get what you deserve, don't you?

i'd say the number is closer to 90%, not 60%.

Based on what data?

So 40% do break even. I'd guess that is better than web or other platforms.

Read the article, it says close to 90% don't break even.

Though the survey's methodology is a bit on the light side, numerous developers that we spoke to agree that the results—59 percent of apps don't break even, and 80 percent of developers can't sustain a business on their apps alone—are close to accurate.

So still better than the conventional wisdom that "90-95% of business fail".

Do they source their claims on anything other than conjecture?

I just gotta say, I think 40% success rate is PRETTY GOOD.

How does this compare with other entrepreneurial pursuits?

Using the term lottery and pointing out that 60%+ don't break even makes a very inaccurate assumption: that all of those apps are equal in quality of production and marketing. They aren't.

High quality apps which are combined with a high quality marketing and PR push have a far greater chance of success than the 912th Angry Birds ripoff that was built in two hours.

See Instagram for an app this author probably thinks hit the app store lottery. In some respects they did get lucky, however all of the work that went into releasing and publicizing the app gave them the potential to have the kind of luck most apps could never have, because millions of people would not download those apps, use them daily, give them 5-stars and rave to their friends about them even if their app were the top result for every search, chart and list in the app store.

tl;dr: the better your app is and the harder you work to market it, the 'luckier' you will get.

Downvoting. What does the nationality of the crappy app author have to do with anything?

Good comment, except the xenophobic racism.

Sorry, but did the article get edited to remove the racism? I'm embarrassed to admit that I can't find anything even potentially racist here.

Yes it did, the "crappy app" was original attributed to a "17-year-old Pakistani" I believe.

I didn't realize "Pakistani" was a race.

This article is silly. The idea that you can't make any money from an App if you aren't in the top of the charts is false.

One of my apps has only occasionally and then briefly, broken the top 200 in the US in its CATEGORY. (So nowhere near top 200 overall) and it still reliably pays out every single month. Further over its lifetime-- about 2 years at this point, the amount it pays every month has gone up, not down. The experiments we've done show that several things we could do would make it pay even more.

For instance, if we'd done a single bit of marketing that might have helped. The closest thing to "marketing" we do is to give promo codes to anyone who asks for one because they want to review the app. (nobody in the USA has yet reviewed the app.)

The idea that you need hundreds of thousands of dollars to develop an app is also kinda silly. A team of two developed our app over the course of a month. In the intervening 2 years, another month or two has been put into the app. At this point, the app has gone well more than a year without an update and it is still earning the same income- in fact, its income has gone up in the past several months.

There are somethings that you should do to have success though:

1. Have a good UI. The team of 2 was an engineer and a designer and we spent a lot of time on the design.

2. Make the app good. The star rating is a factor in the app doing well.

3. Make the app useful. Have something unique about it... but this doesn't have to be super unique. (our unique value is quite terrible. Paul Graham would throw me out of his office or a YC interview if I pitched him on it... its barely a differentiator, but its enough.)

4. Learn from your app and then do another one. Over time you can build a nice stable of apps and a nice income.

5. Update your app regularly. You experience a sales dip when the app is first updated, but after there are sufficient ratings on the new version the update seems to boost your sales. (or at least ours have, though we stopped updating it to focus on other things.)

6. Make your app sticky. About %80 of the people who buy our app never use it, and that's unfortunate. But the %20 who do, do for a long time and use it quite a bit. I think not every app is for everyone. But if your app is going to be useless after awhile, there's not much point (remember the vevuzula? lots of apps came out to make that sound. wonder how they're selling now?)

Hits come and go, and the big money may go to the hits. But viewing an App as a dividend that pays out every month, in my experience the returns are quite well worth it.

Some more points

-- Don't spend $100,000 on an app. Or even $10,000. IF you count our cost of living, our app cost us $3,400. We did spend a couple hundred on an outside designer that didn't work out, and about $500 on the app down the road after it was already making good money each month. That $3,400 we "spent" on it-- we get more than half of that back each month.

-- If you're a big business expecting to gross $1M a year from an app, then maybe it is a lottery. I dunno.

-- A high price is not a problem. We sold our app for $3 the first year, then $5 the second. No real change in income. We experiment with pricing a bit. You get a lot more downloads at $0.99. And you can have a big boost to your app by running a sale... but that also affects the amount of "juice" apple gives you.

-- Since we're not in the charts, our sales come because Apple is recommending our app to people. Think about that. The store does work, even if you'd never see us in the store by just browsing.

-- I think the idea of focusing on a few apps is a very good one. don't just throw crap out there and see if it sticks. That's the biggest problem with the store-- too much crap. But Apple is getting algorithmically better at figuring out whats crap and what isn't. Make your app good. Doesn't have to have all the features you could possibly want in the first version, an MVP is fine, but make it polished.

I think that the app store is a huge opportunity for people who would like to work for themselves but aren't in a position to raise funding to do a startup.

I think its a lot easier to get a good app discovered than an obscure website.

If I'm reading you correctly, you definitely made money on the App Store. But it sounds like you are still tens of thousands of dollars underwater in opportunity cost. Is it wrong to think about it that way?

You get "more than half" $3400/month, let's call that $1700/month over the last two years, for $40,800. The two of you spent two man-months developing the app originally, and maybe a month or two since then. Let's call that 3.5 man-months. In some sense, your only cost was about $4,100 (cost of living + failed designer + $500). However, you could also have just worked for someone else. Two years ago (when you developed the app), it looks like iOS development was getting billed at about $150/hr (in Austin, SF, and elsewhere, though one guy in Ann Arbor quoted $75/hr) [1]. 3.5 work months is about 595 work hours which is about $89,250. (Put another way, if your contracting hourly rate would have been $70/hour, you would have just broken even now.) If that math is correct (and I've made all sorts of assumptions), you would have done financially better to work for someone else (especially someone at the top of the charts), no? In a sense, did you "spend $100,000 on an app" in opportunity cost? How long do you estimate your app will continue paying out a "dividend"?

It sounds like you are saying: apps don't make that much money, so don't spend lots of money developing them. But apps seem to take at least a few months to develop, so it seems inevitable that apps will cost a lot of money if the developer/designer time is market price. (A <$10,000 app in 3.5 months would be an hourly rate of <$17/hr, for example.) Is that true, and if so, do you think aspects of that will change over time?

[1] http://news.ycombinator.com/item?id=1251155

You can't just sit down and start coding for your $150 or even $70/hr though. Here are some factors I can think of that change the calculation substantially:

- You have to take time and put in effort to find good contracts. Not all work is billable.

- You will probably want to be able to show clients an app you've already created. If you can make that app a $40k earner then you are in great shape.

- You will most likely have to be willing to put up with less fun and less flexible work for clients.

I think the $40k from 3.5 months of work is amazing and would be a no-brainer for a huge number of people. The big downside is the level of risk involved and the difficulty in duplicating that level of success.

That's also time they spent working for themselves instead of for someone else. Which is valuable.

Plus the possibility of this app immediately enriching their life if it's something they developed to scratch their own itch instead of the theoretical itch other people have, or the itch that the person who hired them has that they don't share. (Like the time my not-driving self worked on a promo site for an app designed to crowd source the problem of finding a parking spot in a busy city. Fucks given beyond the minimum to satisfy the client enough to get paid: 0.)

Most valuable piece of info here for App developers: Make your app universal. It doubled our sales.

If your thesis is that you'd be better off as an iOS contractor than making your own apps, then you might be right. But this was our first app, and my partner went from someone interested in design to being an actual designer as part of this experience. I consider that alone to be worth more than $89,250, because it is a multiplier on what we have been able to do subsequently.

Also, the first months this app was doing around $200 a month. It took effort on our part to change that. We have done multiple things that caused the sales of our app to double as a result. In fact, every major release of our app has caused sales to double. In fact, this leads to one of the big secrets of the appstore. There are 600,000 iPhone apps but only 200,000 iPad apps. We get equal sales from the iPad as iPhone. We stared out as iPad only, then added iPhone- boom, sales doubled. (I was hoping for a triple or more because there are so many more iPhones, but alas, no.) Make a real universal app, you'll do better.

I believe there are some things we could do that would double our sales a couple more times-- for instance adding some social aspect to the app, adding iCloud support might both result in a doubling, which would throw your numbers off for the comparison.

I didn't put this app out as an example because I think its an example of what one could potentially make-- I put it out there as an example of what could happen if you do an app that never makes it into any of the top lists or gets any marketing. It was meant as a minimum example, not a maximum example.

This app is was also an experiment and has been used as such. It would have been easy to put out a revision in the last year (and there's a feature we really need to add) but by waiting a year we've observed how not updating the app has affected sales. Now when we put out the revision we'll be able to confirm our hypothesis about past revisions.

I expect this app to continue paying out this dividend for the foreseeable future, which I'd say is about 2 years.

This "dividend" is completely dependent on the way Apple markets apps to people. We don't show up on any lists. When Apple changes their algorithm, we feel it, much like google changing their algorithm impacts websites. So far, Apple has been changing the algorithm to highlight quality apps, and that's a good thing so this has benefited us, but at some point we may run afoul of one of the rules in the algorithm. (the one year without an update was a test to see if there was a rule like that-- and I think there is, I think we've been punished for going so long, but the slack has been taken up by growth in the total addressable market.)

With any business effort the question really isn't whether "apps" make "money", but how much leverage you get. What makes money is work and smarts, right? You can spend X amount of time and make Y amount of money a year building a SaaS Website, or building an App or working a job. Apps give your more leverage than SaaS Websites which give you more leverage than employers-- but that's just a generalization. It really depends in part on how well you understand the market, but also a great deal on how much effort you put into it.

I was pointing out here that we have an app we haven't put much effort into that has made rather good money given the level of effort.

I think its a lot easier to get a good app discovered than an obscure website.

Really? What exactly is the app store doing for me if I'm buried on page 18 in my category? It's may be true that the App Store is no worse a proposition for the average app than the web. But if that's true why exactly should I pay Apple 30% of my revenue when I could host my own code and process my own sales for a small fraction of that? When I release updates on my own timetable and build unmediated connections with my customers?

You're right. You'd be better off building a website.

Also — almost all businesses tend to have a mediocre success rate (the average food service business goes under in five years, the average business goes under in ten). I doubt most shareware apps make money. Most books. Most music recordings. Most TV shows. Most anything.

And if there was an area where most businesses can make money people would enter the market until the average business didn't make money.

This is good stuff. Thanks nirvana.

Where did you find your designer (the one you liked)? And did this person also design the image assets as well as the overall app look&feel?

The designer-- my cofounder-- is someone I've known for over a year, who had an interest in being a designer but wasn't "really" a designer at that point. We sought an external person who was a "real designer" to do the icon, but they didn't really seem interested in the project and so we cut our losses and paid them.

I've been a user experience person going way back to the 1980s, so I've got quite a bit of an opinion on these things and we hashed out all the usability type stuff between us. The designer had a huge impact on the look, and produced all the image assets.

We went with a skeuomorphic design. One of the things we want to try (when we get some time) is redesigning the app with a more modern look and seeing what the impact is.

I've worked for a lot of startups in my career and one of the top two things that kills a startup is conflict between the founders[1]. I was fortunate to have someone I knew a long time as a co-founder, and previously I'd attempted to do a startup as a solo founder.

I think if you're a solo engineer, finding a co-founder with design skills and building business skills in yourself (and/or in them) is the way to go.

But best to know them for a couple years, so you might look for people you've known for awhile, if you can.

[1] the other is bad advice being forced onto them by the investors.

"Don't spend $100,000 on an app. Or even $10,000."

I think that's easy to say if you are a developer. If you are a designer, how is possible to not spend at least 10k on a developer?

This might be obvious but you could potentially try to partner with a developer.

Apparently its not obvious because he seemed to feel that there wasn't an easy alternative. I understand that perspective.

If I were a sole developer or designer, who wanted to participate in the app store, seeking a complement that I could get along with well would be a high priority.

Out of curiosity, how many of your apps have had this curve? (I'm assuming you've done this more than once, given your point #4.)

All to varying degrees of success based on how well we executed the points I tried to highlight. I picked our oldest app as the example, because I frankly expected that after a year it would have died out, and now after 2 years and a year without updates, I would expect it to be making less, not more, than it was a year ago.

We've tried other models than the paid app -- for instance a free app that is advertising based. Went nowhere ($0.30 a month from ads.) It was unexpectedly features by a "free apps" service/site recently and had a massive boost in downloads-- 10k a day for a few days- so we'll see if that does anything. It was meant to be an experiment to see what a free, well designed app of limited functionality would do in the market. Other than those big boost days its not getting as many downloads as the paid app- and I think that's simply a factor of it not having as many ratings or the continuous stream of ratings that the older app is getting.

Every quarter right now Apple is selling more iOS devices than the total addressable market was at the time our oldest app was originally released.

We're getting a smaller proportion of that market, but the tide is rising so fast that we're still earning income from it.

I'm pretty curious by now what your app is. Would you mind telling me (e-mail is in my profile) or us?

I'm confused. I don't see a link to your company or apps on your HackerNews profile or your Twitter profile.

Maybe you could increase your sales by using some of your karma to link to your companies?

um..where do you live ? (country)

Earth. Seriously, we have been full time nomads for the past several years.

That’s impressive, actually.

Whether or not you succeed in lotteries is out of your control. There is a certain probability your lottery ticket will win and there is nothing you can do to change that probability. Your success in winning the lottery is independent from you as a person.

That’s likely not the case with apps. I’m sure there are some factors that are out of your control (some would call it luck), but others are most certainly not. Put another way: Those 40 percent of apps that at least break even probably are more likely to have certain properties that make them successful and that the 60 percent lack.

The success of your apps is dependent on you as a developer. Certainly not completely, but much more than your success in winning the lottery.

Given that the barrier to entry in the App Store is incredibly low, given that making apps is so hip, I’m actually surprised by that 40–60 split. Those 40 percent (more realistically you want to aim a bit higher, breaking even isn’t exactly sexy) are a big juicy target, and unlike with lottery tickets you can actually aim for it.

(By the way, this headline is perfect for many absurd re-writes to illustrate my point: “Success in school is a lottery: 50 percent or more of students only get Cs or worse.)

That seems to be pretty good odds. What percentage of startups actually succeed? I'm in the wrong app business.

This is wrong in two levels:

"Success is a lottery" means that all apps are of the same quality, polish, usefulness or wow factor, etc, and only chance determines the success.

What they probably meant to say is that success is RARE (something different than "lottery"), and occasionally unpredictable -- but is not "chance", as to be a lottery. Even the unpredictable hits have explanations (e.g. users liked their concept --even if was just fart noises--, they got a good review, etc), while lottery is pure chance.

"Success on the app store is like a poker game" would be far more correct.

Also: in actual lotteries, FAR MORE than 60% of participants don't break even. That's how lotteries make money.

I agree. Lottery is probably the wrong term.

"52% set aside $0 for marketing despite 91% believing that marketing is necessary for success."

pardon if I'm grumpy, but doesn't this imply that 50% of the devs contacted in the survey were not serious about being in business in the first place? if the main lesson here is "hobbyists are mostly not making money with their hobbies," it's not really such big news.

If you consider making $1 a success, that is amazing odds. Try releasing a software product for any other OS and I'm sure that climbs to around 90% if not more.

If you have the actual numbers, it would probably obey the Pareto distribution. Essentially few rockstar developers make big money and most of them don't succeed.

\Didn't read the article.

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