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.
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.
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/
- 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.
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.
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.
"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.
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.
"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
In a gold rush, the guys who do the best are the ones selling picks.
RubyMotion is a great recent pickaxe example. Write for the App Store using Ruby for only $150 now or $200 later! Buy Now!
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.
Perhaps the iPad music category is too niche, unless you can justify a high price-point.
Some music apps make do really well but they're generally much less complex and technical than mine.
Could read, "much like every industry in the history of mankind..."
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?
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 :)
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.
We also tried connecting with old media, but there was almost no spin off from that.
What was your method? Cold emails?
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.
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.
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.
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 :)
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.
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 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?
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?
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.
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.
- 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)
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?
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 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.
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.
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.
I can only imagine how many emails arrive for those with apps selling more than a few hundred/day.
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.
Can you complete on features alone? Do you generate any decent revenue being outside the top 10?
So still better than the conventional wisdom that "90-95% of business fail".
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.
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.
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) . 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?
- 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.
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.)
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.
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?
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?
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. 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.
 the other is bad advice being forced onto them by the investors.
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?
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.
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.
Maybe you could increase your sales by using some of your karma to link to your companies?
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.)
"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.
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.
\Didn't read the article.