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Ask HN: What are app developers buisness models?
73 points by NeilRShah on July 26, 2012 | hide | past | web | favorite | 28 comments
Hello everyone!

I am not an app developer, and I have no plans of becoming one anytime soon. This question is just for my personal curiosity. I was just downloading yet another series of apps (read: addiction) from the App store and I was wondering - can someone who runs an iPhone app company give me a snapshot of their business?

How many downloads do you get for your apps each month, and how many paid developers do you have on your team? Do you outsource most of your work or design in-house? Are the margins on apps enough to allow you to run a business?

And, I guess most of all: do you enjoy your work?

Wow, this is a great question. I run newgenapps.com We have been developing apps since July 2008, since the iPhone SDK went public.

We have seen the whole app economy grow from zero to what it is today, and we have seen some really interesting business models emerge.

1. The iPhone and iPad have opened numerous possibilities to develop some really amazing apps. Angry Birds was a game waiting for iPhone to happen. So if you are able to find a space that fits your idea, you can make some real money.Education, Music, Productivity are some really cool categories where a lot of innovation is happening.

2. A me too app seldom works

3. In app purchases is a brilliant way to monetize. This model lets an app go viral while also making revenue through good segmentation

4. If you have a successful app, the Return on Investment can be quite huge. Hence it makes a lot of sense to have a 'Portfolio of Apps' and reinvest.

5. Localization is an under appreciated feature. Many apps can double or triple revenue after being localized.

6. Apps have become an integral point of presence for any business

7. Apps also augment a number of products or services. They may not generate revenue themselves, but can help sales of the product or service

8. A successful app, designed well in a manner to provide recurring revenue stream can easily do USD 10 to 20k in revenue every month supported and maintained by a single developer.

And yes, developing apps is a highly enjoyable and satisfying job!

Agree with all points except for #2.

Me too apps are the least-risky way to make money. You are going into a known market with little technical risk. All that remains is to beat the other guy, and the smaller the market, the bigger the chump the other guy is likely to be.

Want to make a billion dollars? Don't make the 100th bible app.

Trying to pay rent? Don't make your new creative photo-sharing app.

> 5. Localization is an under appreciated feature. Many apps can double or triple revenue after being localized.

Which languages do you prioritise? How many do you need to cover to get the double/triple benefit?

Depends on the kind of apps. Japan and China are huge markets, but a western oriented app may not work there. While that same app can work when localized for France, Germany etc

These are the major languages I would look at 1. Spanish 2. Portugese 3. German 4. French 5. Chinese 6. Japanese

Sort by economic wealth, but really, why prioritize? It's only .07 per word to translate an app, less if you are creative.

Where do you get your translations done, if you don't mind me asking?

I've used gengo.com, icanlocalize.com, and also random sources - sometimes users help, our head of support speaks French, and our intern speaks Mandarin.

I have localized some of my WP7 apps using gengo.com .

The app development business is an extremely tough market to break into right now. There are two ways of approaching it.

A) Build a services company.

This can be lucrative if you need short-term cash. However be prepared to sell your ass off. Obtaining clients is NOT easy, with the amount of offshore competition.

B) Build products

Let me tell you right now that if your product sucks, this isn't worth the effort at all. Your app will drown in the sea of other apps. Do your research, focus on big markets, and figure out ways to make successful apps even better. If you put in quality time in building kick-ass products, this is the way to go.

Most importantly, try to figure out how to get the social component baked into the app. Take Draw Something for example..in order to play, you NEED to invite friends. This is genius, because it builds a viral component into the app. Oh by the way, give the app away for free and power it with in-app purchases. Only charge for an app if you've built up enough traction with a free app.

Overall, mobile app development is a hard business, and the smart move would be to spend as little as possible, and try to break even first, then reinvest.

Is there a reason you're only interested in iOS?

We do Android apps only and have completely been focusing on free apps in the Google Play market with in-app ads. Our own systems evolved into an SDK that anyone can use now and we just announced standard format banner-ads that tie in nicely with Admob mediation today: http://news.ycombinator.com/item?id=4295631

We're 4 people at the moment working only on our own projects and we're in the process of hiring more engineers.

I've got a dev team of ten, working mostly on iOS and android game apps for hire. We've done 8 iOS/android games in the last couple years, some of them AAA, some not.

Paid ($1) games of a decent quality typically generate sales between 40 and 100 thousand; and can do much better if 'everything goes right'. Development costs are roughly the same. For apps, seems around 75% of cost is on the engineering side. Design is all from third parties here but included in the above figures.

Work is enjoyable.

Can you recommend any of the third party design firms that are good with game design ? I run a shop similar to what you do, but we are mainly focussed on building products for Startups and now venturing into Enterprises.

Good question.

I run Monologix, which creates driving test prep apps for Canada, US, UK and Australia, for each state/province and vehicle type (eg - "US DMV Driving Tests" app), as well as a free webiste at DrivingTests101.com for 11 countries.

The business model is free lite version (with ads) and in-app purchase on Apple and free apps monetized by ads on Android. Business model on Apple is changing more to free and monetized by ads. O

We have the #2 education app in Canada with very high clickthrough rates and it makes peanuts, but I enjoy the passive income.

When it is a free app, you need a large market, good volume and a high clickthrough rate for ads to make any money. All in all, it is a very competitive and tough spot to make money, but there are one-off successes and the app market and global reach is incredible.

It is fun getting emails from 16 year olds saying they were able to get their driver's license by using our material.

Here's a great email from the parent who made their teenager use our website:

"I can confirm its usefullness. I required my youngest son to use this and pass 10 tests in a row with a 90 or better before we would take him to the DMV for his learner's permit. He aced his test, and has much better road knowledge than my older two sons who I only quizzed directly out of the DMV manual."

One man iOS dev here, not really by choice, I live in a mildly remote part of Alaska, which is not what I'd call a "technology hotbed" so finding co-devs is tough, unless you count my roommate who mostly just orders the pizzas. I'm not getting rich, but I'm allowed total creative freedom, and live simply so don't need to make much. Strange to think one can pull it off at all, but that's the internet for you.

I'm curious, do you build your own products or freelance?

I'm in Sitka. Where are you?


I am NOT a formal app developer myself, though I do help out a friend who owns an app dev firm (mainly with testing n design critiquing). This is how he gets work done:

He has a 3 person team who actually work fulltime with the company. 2 of them are coders and one of them is on for business development/handling the management aspects.

The coding is done inhouse, while the design is generally outsourced. (I'm from India, and getting decent design work done without blowing a hole in your pocket isn't really a big issue). The designer is paid on a per-project basis i.e as per the work.

He currently has a few apps on the app store, and he's just about reached break even on his initial investment (They started barely 6-7 months ago, so it's still early ).

... and yes, the whole team is super happy! Mostly coz they left their day jobs working with .NET (yeah, for real! :P) to work on what they love!:)

I'm solely on Android at the moment and doing free apps with admobs included.

In the 10 months since I started releasing on the market I've had an average of 400 downloads per month; and currently 1,100 active users.

I've literally made about $20 in admobs credit, it's been nothing to shout about but my apps were mainly just released to get my name on the market. I managed to get some contracts on the back of my own work.

I'm in the middle of developing my first major paid application. I'll stick it on iOS as well. Hopefully I will eventually no longer be reliant on contracted work.

I do enjoy my work. I'm at University full time and doing this part-time. It's the summer break right now and I'm working in my living room, in shorts and watching TV. It probably doesn't get much better. I'm hoping that once I graduate I will be able to do this full-time.

I am pretty sure you have seen these two links, they are currently on HN frontpage - if not they might be helpful:

- http://daveaddey.com/?p=893 - http://www.streamingcolour.com/blog/2011/09/28/results-ios-g...

I'm not going to comment on directly for profit (read: paid) apps, but there are a large number of apps that exist for benefits outside of just direct revenue generation. These benefits can include greater exposure for said company, value add to existing chain, etc.

I am a one man indie shop. My freelance work supports the time and design expense that I use for my side-projects which make peanuts.

Get Set Games here. I'm not one of the founders, but I'm the first non-founder engineer.

We released Mega Jump for iOS just over two years ago. This was after a couple of paid games that didn't really get traction. The first version was developed in about 5 weeks by one engineer and one designer.

Initially, it was priced at $0.99, but then the price was dropped to free for a weekend, to do OpenFeint's free game of the day. That weekend, the game got about one million downloads, but there was no in-game store nor ads to monetize that at the time. However, that experience caused the founders to change to a freemium model.

We currently make money with in-app purchases and voluntary ads-for-ingame-currency. We've done 17 updates to the game, and it's currently approaching 30 million downloads, split about 25 on iOS and 5 on Android. After two years, we still get about 400 thousand daily active users.

We released Mega Run for iOS on May 30, and it was designed to be freemium from the start. It's possible to play the entire game without paying anything, and we shipped with 4 themed worlds (we seem to have erred on the side of giving away too much). In any case, the game blew through 5 million downloads in a couple of weeks, and currently has over 500 thousand daily active users. We were #1 on the iTunes free charts for about a week.

Mega Run was a long dev cycle -- about 18 months total. Initially, it was just one engineer and 1.5 artists. I joined on contract for the second half of development, and by the end the whole company (3 engineers, 3 designers, 1 producer) were working on it.

In terms of conversion rate ( people who spend $ > 0 / all downloads ), we're at the high end of average. An often quoted average is 1% conversion. We find that historically Android has converted at about 1/10 of iOS, but that's changing, and we're seeing strong Android growth after just being featured in Google's staff picks. Historically, we've outsourced all Android development.

The company started with 4 active founders. About a year and a half ago they hired an intern for community support who's now gone on to do level design and artwork, as well as a producer. I came on board on contract about a year ago, and started full-time in Jan. We've just hired engineer #4.

All of the engineers we've hired so far (as well as the founders) are lead-programmer quality. The expectation is that any one of us can do any engineering job within the company. The two founding designers are brothers and did some work on Counterstrike back in the day. Several of us have taught game design and/or programming at local community colleges.

This is the best environment I've worked in. Dual 30" monitors and beastly machines all around. All expense paid GDC and WWDC conferences. Beer. No dress code (wearing flip-flops right now). Very low-ego co-workers and founders who are actively involved in production. No comment if I come in at 10:30 (but maybe if I come in at noon :). The occasional crunches are not nearly as bad as the rest of the game industry, and it's not expected. I've worked on a weekend once, the week before release.

We're completely self-funded, and growing organically as we find great people. We're in Toronto, Canada, easily accessible on foot or by public transit. We're always on the lookout for great people that we can work with, although we're not hiring for any specific roles right now.

Also, we do a lot of cross-promotion with other indie devs with high-rated games that we like.

We're an iPad travel magazine and are up to about 350 downloads a month. No paid developers, or any developers actually, we rely on a pretty cool open source tool called Baker and I've self-taught myself bits of code here and there to make it work. No profit yet, the ad selling starts next month, so we'll find out then if it will be a success. :)

Here's the website link: http://drivingtests101.com/

I'm still learning mobile (iOS) development having got back to software development last year although I've been doing Rails contract work for much of the time. I released my first real experiment http://itunes.com/apps/fastlists (yes it's another lists app but it is currently free, with no ads and has a couple of useful features making it especially useful for reusable lists for shopping, packing etc. The design is functional rather than beautiful).

I'm currently adding some in-app purchase options to test the reactions of the users.

My current idea is to offer the following options: (price tiers equate to $1 or local equivalents I think)

1) No-ads (tier 1 price)

2) Privacy - No anonymous usage collection.(tier 1 price)

3) Raise item limit (by 100 to 200 items) (tier 1 price)

4) Unlimited items (tier 3 price)

5) Everything including future in-app features (tier 5)

For me option 5 is important because I hate feeling I will need to keep paying bit by bit for something. It will include everything that doesn't need server side support and expense. I actually hope most customers choose this, the other items are there largely to justify the pricing of this item.

Ads and anonymous usage monitoring will come in releases after the purchases have become available and for ads I will probably make the first month of use add free to try and get the user stuck in. I may also add some alternate skins as in-app purchases too later although that is lower priority than using the iOS 6 social framework as a way to try to get users promoting the app for me by sharing lists.

There is currently no item limit so I will allow users with more than 50 current items to have their initial limit be 50 higher than the current level.

At the moment this is just a small scale test because I haven't done any promotion for the app yet so the current numbers of users is small although the reviews are currently very good (4.5* average in US and UK) (despite a usability issue leading someone not to work out how to reorder items and give it only 3*- but I'll add some help in the release after next).

To become self sustaining as an independent developer I'm expecting to need to keep a small suite of apps ticking over. Some will be more ambitious than this although others may be even simpler with different unique features or niche target markets.

My wife is in employed work so the time flexibility of being independent is important to cover childcare around school hours than making massive money in the short term so I can take some time to build (knowledge and users)

Any thoughts on the pricing model? Or the app?

2) Privacy - No anonymous usage collection.(tier 1 price)

I have not installed your app, but I am curious. How obvious is it to users that their usage is being "collected"?

Also, I would be really curious to hear how your pricing scheme works out. Please make a post when you have enough data to report on it.

You said you recently got back into software development. What were you doing in the mean time, and how long were you away from it?

At the moment no data is collected and I won't start until after the (non-free) opt out is in place. The only current data collection is that I've set it up to offer to send an email in a number of error conditions and even if selected the user will get to see and edit the email before it gets sent. The error email is certainly in the version currently in review by Apple but for some fatal errors it may even be I the released version although I haven't received any error emails yet.

The data that I currently plan to collect includes device type and software version, number of items in use, purchases they have made. I also plan try to analyse the extent to whether people are making use do nested lists or if that is an unnecessary complication. I may also log frequency of use and how much some particular features are used.

I do not intend to collect the contents of the lists or any personally identifiable information although I will create a unique ID for each device so that I can track usage over time.

I was a Product Planning Manager for Sony's TVs in Europe for about 4 years. I was working closely with engineers and in a technical area but was also working closely with the marketing teams and my main role was really business development. At first working with cable operators in Across Europe to get them on board with offering their services directly on the TV without using a STB (using a CI module which Digital TVs in Europe must support). Later it involved satellite and for the last 2 years it was mostly working with the channel owners and other content players to get them onto Sony's IP platform.

It was interesting and I enjoyed it but there was too much travel (a week in Tokyo 3 times a year plus probably 2 trips to Europe every month). It also started to feel slightly hopeless, even the dominant player in the TV business (Samsung) is barely making money and Sony isn't the leanest most nimble company and hadn't made a profit in TV for a number of years.

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