Tag: app revenues

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Business

Developer Corner: Why successful indie developers are becoming a dying breed

I started developing iOS apps 5 years ago, which can be loosely equated to 50 years in a different, non-tech industry, where the pace of growth is much slower. As a sign of the warp speed at which things are moving within the app economy, simply consider that when I started, back in 2010, there were only 300.000 apps and those were only in the Apple App Store; right now there are over 3 million apps across all stores, which goes to show the phenomenal pace with which the app economy is skyrocketing. During this time I’ve developed over 12 apps at Anlock as an indie dev, which have seen 2 million downloads, and more than 4.000 reviews with an average rating of 4.0 across 110+ countries.

indie-devs

Aside from app development, I’ve also been very active in the kids’ educational developer community, starting as a member of Moms with Apps in 2011. Later, I co-founded the Know What’s Inside™ program, dedicated to helping family-friendly app developers implement best practices around privacy and complying with privacy rules. And for many years I was head of the App Friday program, which was created by family-friendly app developers who simply wanted to raise visibility around kids’ educational apps.

Due to this active involvement, I have seen many fellow indie developers come and go. At first, some of them made it big for no reason that I could fathom, but later, as the industry matured, it became increasingly harder to succeed and a very small number of indie devs actually made it. [tweetable]Success in the app industry is the product of hard work and continuous efforts[/tweetable], and most of the indie devs I know eventually tire out and throw in the towel; a couple of months ago it was my turn.

Because of this extremely fast pace with which the industry is growing, I have always been on the edge, trying to cope with the curveballs the App Store has been throwing. At the beginning, the challenge was simple – all you needed to do to succeed was put together a decent app that was centered around the revolutionary concept of users interacting with content through touch on their phone screens. Soon the challenge shifted and the focus was on having appealing graphics and marketing your app. Very quickly, marketing become predominant, if you did not have a marketing plan in place before you even started developing your app you had no chance. At the time, that meant actively using Facebook (before its IPO, when posting was free), Twitter, YouTube, cross-selling between apps, etc.

And then, a few months ago, I realized that the last curveball the market had thrown was beyond our small team at Anlock. Having a good idea for an app, a good UI/UX execution with excellent coding skills and a marketing plan was simply not enough any more. The app idea itself had to be exquisite and its UI/UX execution brilliant to even have the slightest chance of success. Which absolutely makes sense when you consider there are 3 million apps out there. Of course there will always be Flappy Birds that are beyond “logic” and hit a nerve with users and go viral, but that is one app in 3 million, quite literally.

As far as I was concerned, [tweetable]the app market has just reached that hyper-competitive stage[/tweetable] that was simply beyond our team at Anlock, despite our years of experience, our extensive app portfolio and our 2 million downloads. So, when the opportunity presented itself I opted out and left Anlock.

There I was with 5 years of solid iOS development faced with either having to start all over again in a hyper-competitive market or get a job as a freelance iOS developer. Having closely followed the debate about tech talent shortage the past year I decided to go freelance.

It only took me about a month to realize that are a lot of job openings out there and I actually got to pick the role I found most fascinating and challenging. I have now joined Daredevil Project that “makes mobile social games for the ‘real word’”, in charge of the iOS development of Duel that will be launched in the coming months, effectively putting an end on my indie years … for now at least!

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Business Platforms

How to Make More Money with Enterprise Apps

enterprise apps

According to our latest developer research, 20% of mobile app developers primarily target enterprise apps. This decision produces a significant boost to their revenues, with 43% making more than $10K per month versus 19% of those who target consumers above the same revenue level. Similarly at the $100K+ per month revenue level we have 18% of developers who target enterprises versus just 7% of those who target consumers. Aside from selling to businesses, government or non-profit organisations rather than consumers, what are these developers doing differently?

profiling-enterprise-app-devs

Custom apps

Although it’s far from the only thing developers are building to sell to enterprises, 64% of enterprise app developers are making enterprise-specific apps. In some cases this will be apps that are common to a particular vertical that are either re-skinned or sold as part of a service offering. In other cases these will be entirely custom apps designed and built for one company. Automating or streamlining parts of business processes that naturally happen away from a desktop computer via mobile apps can enable significant efficiency savings that businesses are very willing to pay for. Allowing developers to do more of their work whilst mobile can also improve productivity and company efficiency. This type of development can also cover apps that are explicitly designed to help make more money, for example, sales aids, such as product visualisation or demonstration solutions.

The second most popular category for enterprise developers, at 52%, is business & productivity tools. This is likely to include typical cross-vertical apps for functions such as human resources, customer relationship management and accounting. Also, 20% are making more general utilities and 17% are developing communications and social networking apps for enterprises. In the latter case we see [tweetable]some of the innovation in the consumer apps space being brought to the business world[/tweetable].

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Better revenue models

Enterprise app developers have a very different mix of revenue models to consumer app developers. By far the most popular revenue model, used by 49% of enterprise developers, is contract work. Part of this is the bespoke app development discussed above but even those selling products into enterprises will often have a significant customization component. In general, the larger the company, the more likely they are to have complex integration needs for a new software product. Subscriptions, in the form of Software-as-a-Service is the fastest growing segment of enterprise software spending and 27% of enterprise app developers are already using this model. Moving software to the cloud, where upgrades and maintenance are continuous and shared with other users, makes a lot of sense for most businesses. Once key software a business uses is in the cloud it’s often highly desirable to have it accessible from mobile devices too, giving SaaS providers with a strong mobile offering a major advantage.

It’s not so surprising that we have to wait for 3rd place in the revenue models list to find app store sales, with 21% of enterprise developers using it. Indeed, although Apple has special volume discount programs for businesses and schools, it’s slightly surprising that the percentage is still so high. For some SaaS offerings, the mobile client or extra utilities to interact with the service are paid extras. This will probably reduce as mobile support becomes the norm rather than a differentiator. App stores for businesses and education are probably still working as discovery mechanisms for some too. This is also likely to reduce, just as the consumer app stores became so full that it’s almost impossible for most apps to get noticed, so will enterprise app stores. Also higher than average in terms of preference for enterprise app developers are selling physical goods and royalties & licensing. Having an app as a component of a larger hardware product is increasingly popular. A tablet can be incorporated into all kinds of kiosk or point of sale systems. Developers can then capture some of the value of the software through higher margins on the hardware. Alternatively, high value software is often sold to enterprises on a per-seat or per-device licensing basis – mobile is no exception. For high value software where sales are typically made directly it’s entirely sensible that this is done as a licensing deal rather than sold through an app store with the store owner taking a cut.

More platforms, much more web

Enterprise app developers are more likely than average to support each of the major platforms. The majority of them support Android and iOS. Most also support at least one other platform too, with the mobile browser and Windows Phone being the top candidates for that. When we look at priorities though, the picture is slightly different. [tweetable]Enterprise developers are slightly more likely to prioritise iOS than average[/tweetable] (with 33% doing so versus 31% for all developers) and slightly less likely to prioritise Android (39% versus 42%). When we consider only full-time professional developers though, these differences are not significant. The major differences are further down the platform mindshare list, with enterprise app developers being significantly more likely to target and prioritise the mobile browser. Also, whilst they are slightly more likely than average to target Windows Phone, they are less likely to prioritise it. Overall the platform picture is one where more platforms must be supported to serve enterprise clients and there’s a heavier emphasis on the web.

Heavier tool users

In order to support more platforms, enterprise app developers turn to cross-platform tools much more frequently than their consumer app developing peers. 41% of them are using cross-platform tools to reduce the cost and complexity of supporting multiple platforms. However, it’s not just cross-platform tools that are more frequently used to create enterprise apps. Other important tools are push notifications (28%), crash reporting (28%) and mobile Backend-as-a-Service (18%). User analytics, at 46%, is still the most popular tool amongst enterprise app developers, as it is in the developer population as a whole, although used slightly less than average. Heavy use of user analytics and crash reporting tools suggests a greater emphasis on quality. Push notifications are key workflow and efficiency enablers, providing access to timely updates and the latest info available at a glance. Last, but not least, mobile Backend-as-a-Service lets developers rapidly build out cloud services to accompany their apps. The features of these BaaS solutions for enterprise apps are likely to become increasingly differentiated from those designed for consumer apps. Most legacy backend systems were designed before mobile access was even a consideration and they often aren’t very suitable for direct interfacing. We expect to see significant growth over the next 5 years or so for solutions that can simplify the integration of legacy systems whilst enabling rapid development of mobile apps. Where we’ve seen consolidation in the consumer tools sector giving rise to mega-SDKs for solving multiple needs, it’s not surprising that several enterprise focused tools vendors are already covering most of these developer needs in a unified package.

Enterprise developers clearly have slightly different tools and tactics from consumer app developers for good reasons. Consumer app developers looking to switch their primary audience in search of better revenues should re-evaluate what they build, how they build it and how they sell it.

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Business Community

Developer corner: Lessons from a one-man app business

app business

For the last two and a half years I’ve been building and selling apps directly on the iOS App Store, however only in 2014 I committed to some substantial effort on this. I’d like to share some numbers about my experience last year and draw some insights about what things went well and which ones didn’t.

Hopefully this analysis will be useful to others and will give me some insight about where to focus in 2015 to grow my app revenue.

How do you monetize your apps? Take the Developer Economics Survey and let us know. You may win awesome prizes and gear.

one-man-band

Apps Summary

January 2014 brought along my most successful app so far: My Oyster. This app has been in development since October 2013 and even though it had a rough start on the first few months of the year, it is now my most consistent app in terms of downloads and revenue. Along with it, I started selling My Oyster Pro as a 69p ad-free alternative as I wanted to evaluate how well the freemium and paid pricing models would work for the same app. As it turns out, this paid version contributes to sales figures comparable to the ones of the freemium app.

Alongside this, I have been working on improving Camera Cube, which has been live since 2012 and takes the second spot for this year on revenue. Most notably, I released a major update with iOS 7 compatibility in July and added support for iPhone 6 and 6 Plus in December.

In August, I also released Perfect Grid as an iOS port of a simple puzzle game I previously made for Android.

Finally, in November I launched Pixel Picker, my first app written in Swift!

Alongside these new entries, my two old apps Puzzle Camera and Camera Boom are still live on the App Store, however I have not been updating them this year.

My App sales numbers in 2014

Total Revenue
Paid Downloads
IAP Revenue
Ad Revenue
£ 584.23 £ 151.80 £ 199.21 £ 233.23

AppAnnieRevenues2014

App Annie Yearly Revenues 2014 – Source: Musevisions blog

The first important observation is that 86 % of my total revenue comes from the My Oyster and My Oyster Pro apps which both went live in January and brought in 504.86 £ by the end of the year. Overall the freemium version accounted for 70% of these sales (fairly equally split between in-app purchases and ad revenue) and the paid version for the remaining 30% of sales.

This shows that the choice of differentiating my revenues across advertising, in-app purchases and paid downloads has paid off and I plan to keep all these streams going for My Oyster in the future and try them with my other apps as well.

AppAnnieRevenueGraph2014

App Annie 2014 Revenue Graph – Source: Musevisions blog

The graph above shows how my revenues have changed over time during this year. For various reasons, I had to remove My Oyster from sale during the January, February and April timeframes, and this shows clearly in the revenue graph.
For the rest of the year, revenues have been varying between 1.5 to 2£ per day on average and peaks of 4 to 6£ per day.

Expenses

In 2014, the costs of running my app business have been as follows:

Apple iOS Developer Program: 60.00 £
Domain Hosting: 102.47 £
Facebook Ad Campaign: 200.00 £
Outsourcing services: 408.69 £
iOS icons pack: 16.10 £
Total Expenses: 787.26 £
Total Revenue: 583.86 £
Net Loss: 203.40 £

The biggest expense has been some outsourcing work I’ve done to create UI artwork for my apps, however this was necessary to create some high quality UI elements and I’m happy with it.

Marketing

This year I have tried a few marketing strategies to give my apps more visibility. These three have been the most effective:

  • Keywords optimisation Particularly for My Oyster, the number of downloads has had a high correlation with the ranking of the keyword “Oyster” in the UK App Store. The app has been ranking third for this keyboard through the whole year and averaging 50 to 70 downloads per day.
    On one occasion it jumped up to second spot due to one of the competitor apps being temporarily removed from sale and the downloads spiked to over 300 a day as a result. This shows that direct search ranks are fundamental for user acquisition on this app.
  • Facebook advertising In an attempt to get My Oyster to the top of the UK Travel rankings, I ran a Facebook Ad campaign in the London area for 10 days, allocating 12£/day initially and spiking this to 40£/day towards the end. The campaign succeeded in boosting the app from position 200 to the top 50 in the UK Travel category, however as soon as I stopped the campaign, the ranking dropped again to its previous levels. With a cost per mobile app install of 0.12£ and an average revenue per download of 0.01£, I would have had to generate 12x more revenue per download, or decrease the cost per install by 12x in order to break even with this strategy.
  • Hacker news I have promoted Perfect Grid and Pixel Picker by sharing the apps’ iTunes links on Show HN and asking some friends to upvote them. I did this for Perfect Grid on the day after launch, managed to get 14 upvotes and stay on the Hacker News front page for a few hours, but this only resulted in 180 downloads on that day, which I presume could be attributed evenly to Hacker News traffic and the app just having gone live.
    Pixel Picker fared much better and managed to get 2200 downloads in one day, largely attributable to Hacker News traffic.

MyOysterRanks2014

My Oyster UK Travel Ranks 2014 – Source: Musevisions blog

MyOysterFacebookCampaignMay2014

My Oyster Facebook London Ad Campaign May 2014 – Source: Musevisions blog

MyOysterDonwloadsMay2014

My Oyster Downloads May 2014 – Source: Musevisions blog

PixelPickerHackerNewsNovember

Pixel Picker Downloads generated by Hacker News traffic, November 2014 – Source: Musevisions blog

Additionally I have been spreading the word about new releases of my apps on Twitter and Facebook, however I haven’t noticed an increase in downloads as a result.
Writing to bloggers to request a review for My Oyster also proved ineffective and a big time drain so I’m not going to invest more effort on this going forward.

Overall, I have been quite impressed at the number of downloads that a high traffic site like Hacker News can generate, however in my experience this only helps in getting a spike in downloads. I haven’t yet found a way to sustain high download numbers over time, other than through paid advertising which is an unsustainable model given my current ROI.

Going forward I’d like to share my apps on other high traffic sites such as Product Hunt and Reddit, as well as trying other advertising platforms.

User Engagement

So far, My Oyster is the only app that shows promising engagement metrics with around 5000 MAU and good retention rates:

APP
Period
AVG session
duration (min)
Monthly active
users
Returning
Users (%)
New users
per month
My Oyster November 6.47 5441 94.4 2116
Pixel Picker December 2.06 738 41.1 575
Camera Cube November 1.18 681 50.0 N/A
Perfect Grid November 3.05 98 86.1 N/A

Having around 640 daily active users and an average session duration of over 5 minutes, My Oyster performs much better than my other apps in terms of ad impressions and revenue.

MyOysterAdsReport2014

My Oyster Ads Report 2014 – Source: Musevisions blog

As outlined in the graph above, My Oyster received 3000 clicks at a cost per click of 0.06£. Next year I plan to experiment with Ad Networks other than AdMob to determine if a higher CPC is achievable.

Customer Support

To facilitate user feedback, all my apps have a help/about screen with an option to contact customer support via email.

One peculiar aspect of the My Oyster app is that it lets users check their Oyster card data which comes from a 3rd party website. As the content can be unavailable at times and users sometimes have issues with their accounts, some time is required to answer customer emails, so the revenues from this app aren’t completely passive.
The positive side of this is that a lot of customers get in touch with me directly and their feedback helps me improving the app over time.

As download numbers and engagement metrics are not good for my other apps and I very rarely receive emails from customers that have downloaded them, I can infer that those apps are not as discoverable as I’d like them to be and they don’t generate much interest from customers. From a business perspective perhaps I should focus on My Oyster instead and try to grow its user base and functionality.

Conclusions

As many others have noted, [tweetable]bootstrapping a consumer app business on iOS is hard[/tweetable]. My personal experience so far has been that from a purely financial standpoint this is unsustainable and I should be investing my time in something more lucrative like consulting, which at the time of writing brings in 30x to 50x more revenue per hour worked.

However, I believe there are a lot of intangible benefits in making and publishing apps:

  • They make for a good portfolio Prospective clients will be able to assess the quality of my work and my apps always help me getting jobs and consulting gigs.
  • I keep acquiring new skills Making apps is by nature a creative process, and I have the freedom to choose all the latest tools and technologies for the job at hand.
  • Full product lifecycle Making apps forces me to think about the whole product: development, UX, support and marketing.
  • Flexible workload I get to choose how much or how little I work on my apps, as well as choose what I want to work on. For me this is very valuable as I can enjoy working on these side projects without having too much pressure.
  • I get to talk at events Sometimes I feel it’s worth sharing my findings and experiences as an app developer, and this also is beneficial for building my brand and network.

Goals for 2015

In 2014 I was hoping to hit and maintain 100 £ in revenue per month. I have missed this mark by about 50%.
As most of my revenue came from the sales my My Oyster, I plan to focus on further developing this app and try a few more marketing channels to improve its visibility.

While I plan to do some more independent app development in 2015, my app business so far has struggled to take off and I feel that I could invest more of my time in other relevant activities, including:

  • Open Source development I’d like to focus more on creating small and reusable iOS libraries and components and share them with the community. I find that such projects are very well suited for giving presentations of technical nature. Additionally, I’m reading a lot of stuff on functional programming and I can’t wait to share a lot of functional stuff on my GitHub page.
  • More consulting work I see consulting as an opportunity to see what challenges companies face and work on problems that I would not have the chance to take on as an indie developer.
  • Write technical material, courses and seminars This could be a new exciting venture for me and I feel that there is a great community around iOS development and software programming in general. As I become a better developer, I’d like to share some of the lessons I learnt in a format that can be most useful to others. Further down the line, I would like to start running my own courses and seminars.

Time will tell how things will go, but I feel very privileged to be an iOS developer in 2015 I can’t wait to build more products and awesome stuff this year!

 

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Business

How to make money with apps

A major theme in our State of the Developer Nation reports is an increasingly gloomy picture of typical developer revenues. [tweetable]The vast majority of developers make very little money from their apps[/tweetable]. However, there are a lot of developers out there and a decent fraction of them make a good living, some are building thriving businesses on the app stores and a few at the top are even creating multi-billion dollar companies. So, what’s different about the developers that are succeeding financially versus those that are living in app poverty?

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Are you making money from your app? Let us know and you might discover new tools that can make you even more profitable. Start here.

There are two major risks when analysing groups of successful individuals or companies to try to work out why they succeed when others fail; the first is survivorship bias – ignoring the many failures that may have done exactly the same things, the second is confusing correlation with causation. In the latter case there are many things that developers do because they have a successful app, like porting it to lots of other platforms, that are completely unrelated to how they became successful in the first place. [tweetable]There isn’t a magic formula for success on the app stores[/tweetable] but we can try to avoid falling into these traps by looking at factors that might increase your chances of success.

In our last report we showed two major factors that correlate with higher revenues, targeting enterprises rather than consumers and using 3rd party tools. The former is almost certainly a direct cause of financial success, the later is probably indirectly related, tool use indicates a more sophisticated approach to app development as a business. There are many more factors that can make quite a significant difference to the chances of financial success with apps, so lets take a look at some of them.

As our benchmark we’ll use the rather modest (but challenging) goal of making more than $5k per app per month. This is a revenue level that would allow a single app to support a developer in the US or Western Europe but is below a typical employed developer salary in those places. In some countries it would support a whole team living very comfortably. How much more likely are developers to be earning above this level depending on which platforms, categories and device types they target or what revenue models they use?

Platforms

It’s been widely reported that iOS is still ahead of Android for revenues but there are suggestions that Android is closing the gap. Looking at overall revenues from the platform or the earnings of the very top developers, this may be the case. Some even earn more on Android than iOS. However, revenue is more concentrated at the top on Android than iOS, so the chances of earning above the $5k per app per month level are still much higher for those who primarily target iOS. Despite the decreasing popularity, targeting the mobile browser is quite far ahead of building Android apps too. In this case though, many targeting the mobile browser may already have successful desktop web businesses, so this might not be so easy to replicate for those starting new businesses. Windows Phone and BlackBerry 10 are both offering very low chances of a decent financial return as primary platforms. Note that this doesn’t imply that there’s no revenue available on either of these platforms, it could all be going to apps that succeeded on other platforms first and then ported.

App categories

It’s no surprise to see enterprise apps and business and productivity software at the top of the high earning app category charts. What’s more interesting is the “other” category between them. Developers who seek out and dominate niches outside the standard app categories are doing very well; it’s not the route to a billion dollar company but it’s a smart strategy for a small business. Despite the many reports of fitness trackers ending up unused in drawers after a few months, health and fitness related apps are doing quite well. It’ll be worth watching how the major platforms health and fitness data platforms impact this category. The success of the communications and social networking category at this revenue level is slightly counter-intuitive, this is a category with significant network effects favouring a few big winners. It seems that this is such popular use case for mobile devices that there’s room for a lot of developers to add value. To contrast with these, the categories at the bottom of the list are Kids (16%), Games (17%) and Education (17%). These bottom categories are pulled down by their popularity with hobbyists, giving full-time professionals targeting these categories a lot of free competition.

Device types

Smart TVs and set-top boxes are a surprise leader in terms of device types to target first. Only a tiny fraction of developers in our survey had these as their primary target, so this isn’t a reliable sample. It’s hard to get visible on TV platforms and you usually need content, so this might not be a strategy to emulate. The Internet of Things is also unexpected at number 2 considering how immature the market is. It may be the case that hardware sales are involved in many of the higher revenue earning businesses here, in which case there are much higher costs associated than for pure software businesses. While smartphones are a massively more popular primary target than tablets, the chances of an app earning above the $5k per month level are quite a lot higher on tablets. There are likely to be several factors involved here; less competition, more tablet apps targeting enterprises and with the reliance on free apps making most of their money from a small fraction of users, it can pay to provide an optimum experience for the heavy users on a larger form factor. This last point is valid right up to the highest revenue levels – Supercell have built their games tablet first with a scaled down experience on smartphones.

Revenue models

At the top of the revenue model tree is per device royalties or licensing fees.This is likely to be a mixture of enterprise apps and successful apps that have managed to get pre-installs on devices. This is a highly desirable revenue source but certainly not available to all apps. The next best is contract work at 30% of developers earning more than $5k per app per month. Contracting gives a decent chance of making higher revenues but of course the app belongs to whoever it is built for, so the upside is also very limited. At the same time this is by far the lowest risk model, with twice the chance of making more than $5k per app per month than the worst model, advertising. Subscriptions and e-commerce are tied for third place at 29% and affiliate and CPI programs are not far behind at 28%. These models are often harder to implement but our data suggests that the effort is likely to be worth it if they can fit the app concept.

Finally, an interesting comparison towards the bottom end of the revenue model scale is paid downloads (18%) versus free apps with in-app purchases (19%). There is very little difference between the two revenue models at this level of revenue. This is a very strong contrast with the total amount of revenue earned through each of those models. This probably reflects the fact that getting a freemium model with in-app purchases to work is difficult – there’s a very big risk of just giving a free app to a massive majority of users and getting no more paying users than for an equivalent paid app.

Conclusion and warning

There are a number of different ways you can target your apps and select your revenue model to increase your chances of financial success. What we haven’t analysed here is how these combine. Some of them probably won’t, for example, tablet first and iOS first is a good combination, but tablet first and Android first probably isn’t. Our analysis in the State of the Developer Nation report has also shown that some of these combine in an additive way, for example, building enterprise apps for iOS has very high chances of financial success.

 

Take the Developer Economics Survey, test your skills and compare them to the global average. You can work on those skills that need improvement and become more competitive. Cool, right?

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Business

North American App Developer Trends 2014: Insights into the app economy powerhouse

North American app developer trends

North America plays a very central part in the app economy. Firstly, it is home to the companies that create all of the leading mobile platforms. These include some of the largest developer communities.  Secondly, it is the largest creator of app revenues. We estimate that in 2013, North American app developer trends contributed 42% of the world’s app economy. Developer mindshare in the region is also considered particularly valuable by OEMs and tools vendors. This is due to the disproportionate global shares of both venture capital and media coverage focussed on the region. North America is often the starting point for new developer trends with high smartphone penetration and relatively mature 4G networks.

07-NA-App-Economy 1200x900

For those that seek to understand developer trends and preferences in North America we have created a new report which compares the region to the rest of the world. The report covers developer mindshare for platforms, languages and tools. It also includes revenues and deeper dives into enterprise and game developer markets.

North America App Developer Trends report: Questions answered

  • Why are developers in North America more likely to target mobile browsers than those in the rest of the world?
  • Android mindshare is higher than iOS in North America. But by how much?
  • Despite lower mindshare, iOS is prioritised by more North American developers than Android. But how many?
  • How much more revenue does a developer in North America earn on average than one elsewhere in the world?
  • How is that extra revenue distributed amongst the developer population and across platforms?
  • Which revenue models are most popular and which are the most successful in North America?
  • Enterprise developers in the region make significantly more revenue than those targeting consumers. How many times greater is the average revenue?
  • Which revenue models do these enterprise developers favour? What’s their share of the total revenue pie?
  • Games are also monetised differently than other apps. Which are the most popular revenue models for North American game developers?
  • Ad networks are the most popular category of tool globally but not in North America. What’s more popular there?
  • What’s the breakdown of developer tool usage across platforms in the region?

The North American App Developer Trends 2014 report includes many more insights and explanations of key trends. If you need to know more about developers in the region then this report is for you.

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Business

Is the Indie App Opportunity Gone?

The app stores created an opportunity for any developer to build their own products and reach a global audience with them. For some developers this offered the promise of an independent app business, giving them creative control of their work and hopefully a comfortable income. Recently there have been lots of posts (great summary list here) from current and former independent app developers about the state of the market and how much harder it is to earn a living from your own apps. If it’s tough for established indie developers then is it still possible to get started? We’ll look at how the market has changed and share some data on the revenues of over 500 solopreneurs and small indie developers versus their bigger rivals.

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The indie developer gold rush

[tweetable]A key advantage of small indie app developers is their agility[/tweetable]. They can shift their strategy to take advantage of new opportunities incredibly quickly. The success story that may have started the iOS app gold rush was built before there was an official SDK or App Store. Steve Demeter was working on ATM software for a bank and built the game Trism in his spare time, initially releasing it for free to the jailbreak community. When the App Store launched it was initially a $5 paid download that earned $250,000 in profits in the first two months. Demeter quit his day job to become one of the first full-time iOS indie app developers. Trism was reduced to $3 to stay competitive but went on to sell around 3 million copies. Four months of evenings and weekends, just a few weeks equivalent in full time development, earned a life-changing amount of money.

It’s the overnight success stories like these that continue to drive lottery-like behaviour from some developers. Playing for the outside chance of winning big. Even the media coverage at the time noted the increasing competition with more than 1500 iPhone games available in the App Store! Today’s developers would love so few apps to compete against; there are now hundreds of times as many.

Raising the bar

By 2011 life-changing solo developer success on the app store looked rather different. A $5 app created in a matter of weeks wouldn’t stand a chance. Andreas Illiger is a gifted musician, artist and coder. His Tiny Wings took 7 months of full time effort to create and sold for just $0.99. The increased scale of the platform meant he was able to sell more than 10 million copies. In 2014 it’s debatable whether a solo developer will ever repeat the feat. Monument Valley looks like the modern benchmark for a chart topping paid game title but developer UsTwo primarily serves clients in three countries and has over 100 staff in the London studio that created the game. Sirvo’s Threes! is a better comparison yet it was created by three people over a 14-month period (not full time). Threes! was almost immediately copied with numerous free alternatives to the $1.99 original springing up. Whilst Tiny Wings enjoyed a year as a top 10 game and another two inside the top 50, Threes! is already in danger of heading out of the top 100. [tweetable]There’s just so much free-to-play competition[/tweetable]. Making a more complex game to differentiate from the crowd is just beyond the scope of most small independent developers.

Not just games

Those examples have focussed on games and it’s tempting to think non-game apps might be a different story. However, consider that our data shows only 33% of developers are making games. Those developers collectively earn over 80% of store revenues across iOS and Android. So [tweetable]67% of developers are competing for less than 20% of store revenues[/tweetable].

Lets take a look at what Hunters (our name for developers that are aiming for direct revenues from their apps) can expect to earn at different company sizes.

As you can see, iOS is still a much healthier place for an indie app developer to be than Android but unless your cost of living is very low then the chances of making a comfortable living aren’t great. The bigger developers are taking over the top charts. [tweetable]If you’re outside the top app charts then it’s incredibly hard to get noticed[/tweetable]. Some of the successful smaller developers in our survey already have established apps with a strong history of downloads and ratings that keeps them high in the search results. If you’re just starting out, is it still possible to join them?

Find the right sized niche

The key difference with non-game apps is that they don’t all compete for the same attention. If your indie developer dream is to build the app you really want to use and be richly rewarded for it, you’d better have a fairly unusual problem that you want solved. Jared Sinclair’s Unread is the cautionary tale for those wanting to build for other technology lovers like themselves. An RSS reader (or client for any popular internet activity), however beautifully executed, has to compete with a vast array of free alternatives. Many of those other apps will have been built by hobbyists with no need to make any revenue at all. Anyone wanting to succeed as an indie developer today needs to think like a small business. Trying to compete with hobbyists is as futile as trying to compete with Google.

The right sized niche for an independent app is one that’s small enough not to be interesting to much bigger competitors but big enough to earn a living. Even winning the niche is not going to support a big team. The best niches will need specialist knowledge or intellectual property that make them both unattractive to hobbyists and defensible. Ben Thompson provides a great case study of Pleco, a Chinese dictionary app with some high-value in-app purchases. This example has two key advantages worth replicating: unique licensed content and a natural channel to market outside of the app stores.

What about getting rich?

If that sounds more like hard work than the indie developer dream of becoming an overnight app millionaire, it is. It’s also many, many times more likely to succeed. [tweetable]If you want to be an app millionaire then build contract apps for businesses and grow a team[/tweetable]. Then build some products for enterprise customers in niches that won’t attract immediate competition from much better funded rivals. Or get some venture capital and think really big! If you prefer the dream of being a millionaire, stick to building apps in your spare time. Better yet, buy a lottery ticket, it’s much less effort for about the same odds.

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Business

The European App Economy 2014: Europe is losing ground to Asia

We have just published a research note with an update to last year’s an European App Economy report. The good news is that Europe’s app economy still accounts for 19% of global revenues and is growing strongly at a 12% annual rate. The bad news is that the rest of the world, particularly Asia, is growing much faster. The global app economy is growing at 27% annually and the share of revenues captured by developers in the EU28 is falling. We estimate that around 1 million European jobs have been created by the app economy so far. If policymakers want to see this job creation continue then there’s a lot more they could do to support developers attempting to create businesses.

European-App-Economy-2014_final

A $16.5 billion market

In our App Economy Forecasts 2013-2016 report we estimated that apps and app related products and services would generate $86 billion in revenues globally in 2014. The 19% share of this generated by European developers will contribute $16.5 billion to EU28 GDP this year. This is many times more revenue than is generated directly in the app stores. However, the EU is home to the top 2 app store earners globally in Supercell (Finland) and King (UK) – masters of the Free-to-Play games market. At the same time, European policymakers are some of the most vocal in attempts to enhance consumer protection with respect to the Free-to-Play model. So far there is only strong encouragement to reform practices around cost transparency but this could (justifiably) lead to regulation if insufficient voluntary action is taken. Significant changes in this area would undoubtedly impact the revenues of Europe’s most high profile app market success stories.

1 million jobs

We estimate that the number of direct European app economy jobs is up 26% from 2013 to 667,000, this breaks down as 406,000 professional developers and 261,000 non-technical roles in app-related business. Using a conservative multiplier we also estimate another 333,000 jobs have been created indirectly by the app economy in the EU28 for a total of 1 million jobs. A large fraction of these jobs are in software services companies taking the low risk route to profitability building apps on a contract basis. Contract software development is the most popular revenue model in Europe, favoured by 31% of developers. This may be partially due to the relative lack of seed capital for startup ventures in the region along with a relatively high cost of living versus most global competitors, making bootstrapping products more difficult.

2a

Slower growth

Although the European app economy is growing at less than half the global rate, some loss of share was unavoidable. Europe was very quick to reach high levels of smartphone penetration and most of the device sales growth is in developing markets. A significant fraction of demand for apps will always be filled by local developers with better market knowledge. As smartphone penetration increases in developing countries their local app economies are growing rapidly. European developers are well placed to export to English-speaking markets and South America but it’s not so easy for them to succeed in Asia. It’s likely that developers based in the EU will need specialist support or local partners to maximise app export opportunities in some of the fastest growing markets.

The enterprise opportunity

As smartphones reach saturation, businesses will play an increasing role in the growth of the app economy in Europe. In our Business and Productivity Apps report we forecast that this sector would experience rapid growth, reaching $58 billion globally by 2016. We have identified 5 areas where app developers and startups can add value in the business & enterprise app sector:

  • Vertical market specialisation
  • Productivity/BYO apps
  • Mobile SaaS
  • Bespoke enterprise apps
  • Mobile application and device management

While European developers are well placed to win bespoke enterprise app development business, they may struggle to compete with better funded rivals from other regions for the larger opportunities. Starting a technology business has never required less capital but scaling an enterprise software business is incredibly expensive to do quickly. The biggest mobile SaaS, application management and vertical market opportunities are likely to be venture capital fuelled land grabs. To ensure that Europe makes maximum gains from the future growth of the app economy, policymakers need to do all they can to keep app entrepreneurs from relocating to Silicon Valley in order to access the expertise and capital they need to compete.

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Platforms

Building a business not just an app? Start with the revenue model

The number of app developers using business models that don’t rely on app store payments is increasing. In some cases this is sophisticated app developers adapting to the market. In many cases it’s simply a greater number of existing businesses starting to use apps as a channel to reach potential customers. We can use the data from our Q1 Developer Economics survey to examine which strategies carry the most risk and which have the greatest chances of success. Could you use one of the more successful models for your next app?

business models - mobile platforms

We asked developers to tell us all of the revenue models they use and also whether their business was loss making, breaking even, making a slight profit, or generating comfortable profits. Revenue model popularity and a sample of profit & loss distributions are shown below.

Build apps for other people

[tweetable]Contracting is the most popular revenue model and also the one associated with the second lowest probability of making a loss[/tweetable] and third highest probability of comfortable profits. Of course, contract work also has strictly limited upside – it’s not really possible to build a scalable business around contract work without becoming a global giant consulting company. That said, the [tweetable]majority of developers would be better off if they spent most of their time on contract work rather than their own apps[/tweetable].

App store payments and advertisers

The next most popular revenue models, in-app advertising, paid downloads, in-app purchases and freemium are all relying on directly monetising an app. Together they are the four most risky models with the lowest chances of profit. [tweetable]Paid downloads are the least successful revenue model[/tweetable]. Although easy to implement there are very few cases where offering a straight paid download will create a financial success. Even on iOS, despite a still growing user base, the paid download market appears to be contracting fairly rapidly in the face of free app alternatives with in-app purchases. Despite the advantages of the in-app purchase model, it’s still quite far behind other models.

Selling services

Subscriptions are the next most popular and also relatively low risk and successful. However, implementing subscription based services is usually more complex than selling apps or virtual goods. Many subscription based businesses are simply using an app to sell subscription content. Another interesting possibility for developers in this area is to resell generic cloud services by adding value on top. As very basic (and already well served) examples, re-sell storage by adding document collaboration or photo management features on top.

Providing services that app developers can resell is one model for those selling developer services. Others include tools or services that help developers design, build, market or monetise their apps. This is one of the lower risk models with a good probability of profit. It follows the classic advice that when there’s a gold rush, the best thing to do is sell picks and shovels. There are still plenty of opportunities in this space (where are all the tools that help me prototype animations?) but also others with too much competition (some BaaS providers are already shutting down).

Selling stuff

[tweetable]Apps that make money through e-Commerce are the most successful in terms of making comfortable profits [/tweetable]and have by far the lowest risk of making a loss. Most developers using this model had existing e-Commerce businesses and have just added mobile apps as another sales channel. There are some startups with mobile first commerce apps though. More than 50% of developers using this model make comfortable profits related to their apps, so the cost of building apps is more than paid for by sales through them.

Affiliate and CPI programs allow developers to sell other people’s stuff. Using an affiliate program could be selling products related to your app through Amazon. Alternatively, a travel guide app might integrate a flight search SDK that provides a native search experience within their app – the developer gets paid whenever anyone books a flight. Affiliate programs were very popular on the web and their native counterparts are likely to be as well. CPI programs are for selling other developers apps, or at least getting users to install them. The top free-to-play games have extremely high ARPU and as they try to grow rapidly it makes sense for them to pay almost anything less than their ARPU for a new user (since new users boost chart ranking and thus organic installs). Other apps are a good place to advertise apps, so this is likely to be quite a lucrative option until either there’s an oversupply of quality advertising inventory or a crackdown on free-to-play games.

Royalties or licensing

We skipped per-device royalties or licensing in the middle of those last two. Overall this doesn’t have much lower risk than relying on the app stores or ads. However, this is inherently a higher risk strategy with bigger rewards for success. It usually involves building a product for large companies or even OEMs. The downside is that the number of direct customers in the target market is usually quite small. This is usually a model for those with great connections, a lot of funding, or both.

Build a business, not just an app

The app stores made it really easy for developers to sell software to a very large audience for the first time. With over a million apps each for iOS and Android, that is no longer the case. Discovery is hard and larger, more sophisticated organisations are dominating the top charts. If you have a great idea for an app, see if you can find a great revenue model to fit it. If not, try to come up with another idea. Outside of the VC-funded startups, developers that succeed will be the ones that think about where their revenue will come from before they’ve started building the app.

For more information of the success recipe of mobile apps, check out our App Economy Profits report.

Categories
Business

How much does it cost to create a successful app?

The app stores contain a range of apps from hobbyist creations built for fun to the carefully crafted output of venture backed startups and mega-corporations that have had millions of dollars spent on their development.

05 App Profit & Loss 2014

Even though the market is maturing and exceptionally well-funded developers have taken over the store charts, the occasional small independently developed app that goes viral can still break through and achieve a decent level of success. The question is, how likely is a small budget developer to succeed? What platforms give them the best chance of success? Where should the budget be spent? With all the competition out there, how much does a bigger budget improve your chances of turning a profit?

What are the odds?

In order to look at how budget can impact profitability it’s worth calibrating by the average chances of making a profit on each platform.

The figures in this chart are probably more positive than most industry observers would expect. Looking at the data it seems likely that many solo developers have valued their time at zero when reporting costs. For hobbyists and explorers, working in their spare time this might make rational sense. They don’t expect to be paid for the time anyway and their small app profits more than cover their other development costs. This is reflected in the slightly lower level of Android developers losing money versus iOS (there are far more hobbyists on Android than iOS).

Leading platforms

On the most popular platforms – iOS, Android and HTML5 – there’s a general correlation between spending more on an app and making more revenue. However, not all spending produces equal results. Spending more on development only slightly increases the chances of making a profit, while increased spending on design and marketing are strongly correlated with higher probability of making significant profits. Higher spending on customer service is almost always associated with greater profit probability but here the causation is almost certainly in the other direction; successful apps incur greater customer service costs because they have a lot of customers! These platforms show very similar patterns but they aren’t identical. The biggest difference between them is that spending more on design for HTML5 apps seems to produce much less of a boost to profit probability than for either of the leading native app platforms.

The second tier

BlackBerry 10 and Windows Phone show similar patterns of spending versus profit probability that are very different from the leading platforms. For small amounts of spending, there are similar patterns to the leading platforms. More investment, greater chance of a profit, with better returns from design and marketing spend. However, before reaching a level that would sustain a full-time designer or developer, the trend reverses; investing large amounts in any aspect of apps for these platforms reduces the probability of a profit and increases the chances of making a loss. This suggests that these platforms have not yet reached sufficient scale in terms of app revenues to sustain many highly complex or polished apps.

Opportunities everywhere

On the leading platforms, developers with budgets in the multiple thousands of dollars a month have roughly twice the chance of turning a profit on their apps as those spending minimal amounts. Even at lower spending levels, the probability of breaking even or better is reasonably high across all platforms, particularly for those investing in design and marketing. While it’s clear that only some of the platforms discussed above are likely to support scalable app businesses at the moment, there are plenty of opportunities to build profitable apps on any these top 5 platforms.

Want to know more?

I’ve only scratched the surface of our data here. What scale of profit or loss can be expected on different platforms with different levels of investment? Are there optimal investment levels to maximize the chances of success? Which app categories are most likely to product a profit. What do successful app development companies look like at different sizes? All this and more is covered in our App Economy report.

Categories
Business

Fame From a Game: 5 Game Developers Dealing With Overnight Success

successful game developers

The mobile app market has completely overhauled the video game market. In an industry that once required thousands of dollars and a legion of programmers to produce a product, individuals and small groups of entrepreneurs can now produce games grossing millions of dollars from their bedrooms. However, the success of a #1 selling game does not come easy and sometimes causes more problems for the now wealthy developer. Here are five examples of successful game developers who had to learn how to handle success almost overnight.

Which game development tools help you become successful? Let us know of your favourites in the Developer Economics Survey.

Halfbrick Studios (Fruit Ninja)

Image via Flickr by Rosenfeld Media
Image via Flickr by Rosenfeld Media

Before Fruit Ninja, most people had never heard of Halfbrick Studios. They had worked on a handful of games like Rocket Power: Beach Bandits, Age of Zombies, Monster Dash, and a variety of Avatar — The Last Airbender installments. However, Fruit Ninja had the right combination of addictive and visceral gameplay to make it a virtual overnight success. For others dealing with a windfall of cash, Halfbrick Studio’s story is a good one to follow. Instead of tripping over their own feet after a massive growth spurt, the close-knit group of developers decided to focus on quality over quantity, avoiding the route companies like Zynga took (how many “___-ville” games can you name?). The developers said the success of Fruit Ninja has given them breathing room to perfect games they want to make.

The new Developer Economics survey is live – featuring thousands of developers all over the world! Join them now and voice your thoughts!

OMGPop (Draw Something)

Image via Flickr by ljguitar
Image via Flickr by ljguitar

Second in our list of successful game developers comes the OMGPOP team. A mobile gaming take on the classic pen-and-paper game of Pictionary, Draw Something is a study in how persistence can lead to huge success in the app industry. Before their top-selling drawing game took off, developer OMGPop had produced around 30 games that quickly fell into relative obscurity (do you remember Hamster Battle? No? Didn’t think so). A short time after Draw Something started topping charts relatively overnight, Zynga bought OMGPop for roughly $200 million, and the CEO of OMGPOP, Dan Porter, later went on to work for them as the vice president of their mobile division for a little over a year. Porter now continues to climb the corporate ladder and currently serves at the Head of Digital at William Morris Endeavor, the world’s largest diversified talent agency.

.GEARS Studio (Flappy Bird)

Image via Flickr by naka_hide
Image via Flickr by naka_hide

Not all overnight success stories end well as the tale of .GEARS Studio’s Flappy Bird shows us. Dong Nguyen’s creation was pulling in $50,000 a day—a veritable golden goose—making it one of the most popular games for smartphone users. However, a litany of complaints ranging from the game’s addictiveness, difficulty and resemblance to Super Mario 3 was too much for Nguyen to handle. Something about the fame mixed with user criticisms struck a nerve with the overnight app celebrity, who ultimately took down the game from app stores in mid-February 2014 without selling out to another company. It also begs the question—Was success too much for Nguyen, or was it all a stunt to generate interest for his next title?

King Digital Entertainment (Candy Crush Saga)

Image via Flickr by David Guo's Master
Image via Flickr by David Guo’s Master

Candy Crush Saga, produced by King Digital Entertainment, is one of the mobile gaming world’s most addictive releases yet. To capitalize on their virtual overnight success, King decided to try their luck on Wall Street by announcing their intent to file for an IPO, following Twitter’s example.

Rovio Entertainment (Angry Birds)

Image via Flickr by Garrett Heath
Image via Flickr by Garrett Heath

The Angry Birds franchise is the most successful smartphone game the world has ever seen. The series’ multiple installments have garnered over two billion downloads worldwide, but things weren’t always up for Rovio. It took them 51 tries on other apps before Angry Birds came around. Rovio’s strategy to deal with the success was simple—diversify. Expanding beyond the mobile platform, Rovio now produces Angry Birds clothing, books, cartoons, educational materials, movie franchise tie-ins, and more. They’ve even been eyeing the Hello Kitty franchise, looking for some indication in how they can expand their own enterprise.

Overnight success in the gaming industry is happening more and more everyday thanks to mobile technology. However, millions made in a night is no guarantee for smooth sailing. Developers soon discover they need savvy business acumen to stay afloat.

– Joe
Joe Fortunato is a tech writer based out of Tampa, FL. His extensive work for T-Mobile has afforded him the opportunity to explore many different avenues of the mobile world. App development, NFC technology, and new device specs are some of his favorite areas to cover. To get in contact with Joe, give him a shout on Twitter at @joey_fort.

If you are trying to hit the successful game developers list, then you first need to understand the Science of Mobile Game Marketing.

Which are your best and worst game development tools? Let us know and you might win amazing prizes and gear, in our Developer Economics Survey.