Tag: Business models

How to Make More Money with Enterprise Apps

Post author By Mark Wilcox
Post date March 12, 2015
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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?

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].

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.

Tags app business, app developers, app monetisation, app revenues, Business models, enterprise app

Tools

21 tools behind the success of King and Halfbrick Studios

Post author By Dimitris Michalakos
Post date February 25, 2015
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King and Halfbrick Studios are some of the most successful mobile game developers. Their best-selling games, i.e. Candy Crash Saga (King) and Fruit Ninja (Halfbrick), rate in the 100M – 500M download tier on Google Play and rank among the Top 100 on iTunes. Did you ever wonder which tools they use and how they compare? Do they use the same SDKs available to the rest of us mortal developers and what can we learn from their tooling choices?

We analysed 39 apps (iOS and Android) from King.com and Halfbrick Studios to determine which SDKs they are using and what tools makes them tick. We ‘ve broken down the results by tool sector for easier comparison. Note our analysis technology is still in beta, so let us know how we can improve it.

	Halfbrick Studios	King
Ad networks and exchanges	Google Ads Apple iAd InMobi Native Ads Platform Millennial Media MoPub Vungle	Google Ads Apple iAd
Game development	Apple GameKit Amazon Game Circle Google Play Games Services	Apple GameKit Google Play Games Services
MV* frameworks	Angular
Crash analytics and bug tracking	ACRA	ACRA Crittercism
User analytics	Google Analytics Kontagent
App monetization	Amazon In-App Purchasing Google Play In-app Billing Google Wallet	Amazon In-App Purchasing Google Play In-app Billing Google Wallet
Social Tools	Facebook Google+ Twitter4J	Facebook Google+ KakaoTalk

Let’s consider these tooling choices one sector at a time.

1. Ad networks and exchanges

Starting with Ad Networks, you can tell HalfBrick Studios employs a handful of tools, while King uses only the major networks of each platform, i.e. Google Ads (Android) and Apple iAd (iOS). This is indicative of the reliance of the two companies on ad revenues. King has long abandoned advertising as a revenue source with a clearer focus on in-app purchases.

Bear in mind it is quite common for app developers to use multiple ad networks. If demand is not met by the first network’s supply, you move to the next network and so forth until you find a medium to display. That is why Halfbrick Studios uses multiple ad networks, and indeed they have chosen high performance networks.

2. MV* frameworks

Halfbrick Studios using AngularJS, a popular JavaScript MV* framework, might strike as a surprise. What does JavaScript have to do with Fruit Ninja and Jetpack Joyride? Digging a bit deeper we discover Halfbrick is using web technologies to implement BrickNet – a service that allows transfer of scores and saves across multiple devices. The BrickNet service is bundled with all the company games we examined.

This strikes another chord: there has been a lot of talking on how web technologies are not suitable for mobile apps due to mainly performance reasons. Well, this case is a testament that technologies are not good or bad per se – it all depends on the use case.

3. User analytics

Regarding user analytics, we were unable to detect any SDKs on King’s games. They could be using a custom in-house solution, or an unknown-to-us tool.

Halfbrick Studio uses the notorious Google Analytics in combination with Kontagent (rebranded as Upsight), which is better positioned for mobile games. The takeaway here is that the most popular tool of the category, i.e. Google Analytics, works perfectly for top as well as indie developers. [tweetable]The difference is in not in which tool you use, but how you use that tool[/tweetable], i.e. how do you interpret the analytics data and use it to grow your company.

4. Social tools

While Halfbrick Studios uses all the popular western social networks, King is more picky. They don’t seem to like Twitter, at least on the apps we found in the US stores. They do however use KakaoTalk on the iOS version.

Anything we missed?

So, this wraps it up. What did you learn from the tooling choices of King and Halfbrick studios? Is there anything we missed? Want to see more of these tooling deep dives? Leave a comment below and let us know.

Tags app business, Business models, developer tools

Business

Are Freemium Apps Killing Game Developers?

Post author By Ted Nash
Post date December 2, 2014
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The rise of freemium games has been ferociously quick and it continues to accelerate at an incredible pace. It’s estimated that adults now spend, on average, 5 hours and 46 minutes online and on their mobile devices. Time spent online has now surpassed time spend watching TV.

With more consumers than ever playing games on their mobile devices, developers have had to “evolve” to find the most efficient ways to monetise their potential customers and, from a revenue perspective, [tweetable]the ‘freemium’ model has almost completely killed ‘paid-for’ games[/tweetable].

Putting morals and ethics aside, the freemium route is absolutely genius. Freemium, especially on mobile, can generate vast amounts of profit for developers who manage to create popular applications.

When we ask the question, “are freemium apps killing game developers?”, it always generates an interesting debate. Let’s understand why.

What are freemium apps?

The term freemium can be defined as:

“A business model that provides a game to players free of charge, but charges a premium fee for special features, powers, or content.”

Take a look at the App Store whilst reading this post and you will see the overwhelming majority of top grossing applications are free to download.

To developers, these applications would be classed as “freemium” apps, but the majority of users who download these type of applications believe the developer is making it as difficult as possible to progress within the application in order for you to purchase ‘upgrades’, ‘coins’ or ‘power-ups’ that allow you to progress within the application.

Freemium applications started as an experiment, but very quickly became mainstream. In fact, it was reported last year that 76% of all iPhone app revenue came from in-app purchases.

From a developer’s perspective, freemium games are the preferred route. It’s where the majority of download volume exists and the highest earning revenue streams can be found. Most importantly, their prospective customers’ mindset has shifted. If you are not a ‘free’ game or application, you will have a much harder time selling yourself.

When you speak to independent game developers, they will tell you that more and more revenue could be generated from a free-to-download application. Take an example of a subscription-based game which might charge $20 a month to play. Only a few people might ever be willing to spend that – but far more would be willing to spend 10% of that on a freemium type game. The reality is, when you look at the metrics, there is little to no comparison. Free apps with in-app purchases are potentially much more lucrative.

On the other hand, there may be customers who, even if they were spending $20 a month on a game, would be willing to spend even more if they had the opportunity to. Legacy games never offered that type of flexibility, but things have changed and the top games developers are reaping the rewards.

The thought of ‘what if?’ really did start a new line of thinking. A line of thinking that eventually took the freemium model mainstream.

Why is Freemium seen as bad?

When you look at games from a hardcore gamers point of view, with the above scenarios in mind, you soon realise that the freemium trend is a real negative for them and their style of playing.

[tweetable]The core underlying aspect of freemium games is that you have to pay to continue playing[/tweetable]. Rather than pay a one off fee for a game which would take even the most dedicated gamer a while to complete, there are now deliberate parts of a game or application that force you to spend money in order to overcome a problem.

Roadblocks deliberately placed by a developer force a gamer to spend if they want to continue progressing. It’s this understanding, which has led to many negative reviews of freemium games and the mobile gaming industry in general.

When it comes to developing, freemium games are, arguably, easier for much larger game publishers to make, because these types of games require much more iteration than a traditional paid-for game might demand.

This means that the true independents have a higher barrier to entry than they did before. People expect a lot for free, and if you are not monitoring your audience with a deep level of detail, it’s very difficult to understand when the best time to monetise might be.

Example of the freemium model

Examples of the freemium model taking place inside a game can be found in many different scenarios:

Energy bars are everywhere. The new ‘World of Warriors’ game and ‘Clash of Clans’ from Supercell are good examples of energy meters. In both games, you have ‘food’ and various other ‘elixirs’ which are essentially energy meters. If you have ‘0’ food, you can’t play until it recharges. Regardless of what shape these roadblocks come in, they all serve an identical function: to slow down a player’s progress.

Mobile games would also appear to be getting easier and easier. The majority of these games would not work if a gamer could engage with them and play them for an hour at a time.

Energy meters and time constraints mean that you can only really play an app in small chunks. Unless you pay.

Naturally, a percentage of all users don’t want to wait for their timers to be refilled, so they will pay to get passed what was intended to be a roadblock.

In older, more traditional games, if the player was stuck at a specific part of the game, they would work hard to try and find a solution to the problem they face. However, now if you run into a problem, no matter the quality of the gamer, to get past what might once have been a complex problem – you can pay.

Another very common freemium model is charging for virtual items.

It’s difficult for game developers to understand what is a fair price to charge for various virtual items, but developers are now moving towards simpler monetisation tactics. For example, skipping a level or buying a considerable item which gets them past what was supposed to be a difficult level.

The problem with this is that items like ‘level skipping’ could be free, because it doesn’t actually cost the developer anything to offer hints.

If you compare this with a game we all know, Call Of Duty, giving a player the opportunity to buy new weapons or customise a character has cost the game developer/designer time and money.

Are freemium games killing developers?

Whilst consumers have obviously voted with their wallets that freemium games and applications are what they want to buy, some of us at Tapdaq believe that this has squeezed independent developers into a corner they might not necessarily have wanted to end up in.

There is no doubt about it, I think it’s harder to devote time into creating a game which is long and complex simply because of the natural shift to more casual gaming.

As with all markets, there are two sides to it. In this particular market, you have developers and you have players. If game players are so anti freemium games, then they need to do their bit. They need to start spending money on items which actually cost the developer resources to make, as opposed to buying hints and level-skipping upgrades which defeat the object of playing the game in the first place. They need to value the mobile gaming experience.

New freemium games come out every week in today’s quickly evolving mobile gaming market. This is a business model that, for the foreseeable future, will impact the games we all play. Therefore, game players need to go out and support games that are fair as well as fun to play. Players passionate about game sustainability must vote with their wallets as well as their words.

Looking at the graph below, freemium is proving to be great for developers, but it might have adverse effects, and who knows when we might start to see diminishing returns.

Freemium still has a large share of the market, but it’s unlikely to make you rich.

I think we’ll continue to see larger game developers dominate the top grossing in various app stores for the foreseeable future, and I don’t think freemium as a business model for games gives a fair platform for genuine independent studios to thrive. However, individuals and small studios who create games are usually far more dynamic and should adapt to evolution faster than larger corporations.

So, is freemium killing developers? The answer is, we can’t be sure yet. One thing is certain, though,the industry will continue to be driven by its customers and customer perceptions of “free” games. Recent events have shown that there is a split between those who are happy to pay for games and additional content within them, and those who expect the game or updates to be free.

A winner for preferred business model has not yet emerged on the mobile platforms, and it is very possible that mobile gaming will evolve in a similar vein to its desktop/console brethren – with games adopting different monetisation methods based on their audience, content and personal preferences.

Let me know what you think in the comments below.

Tags app business, Business models, freemium, in-app purchases

Business

Is the Indie App Opportunity Gone?

Post author By Mark Wilcox
Post date September 3, 2014
No Comments on 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.

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.

Tags android, app business, app developers, app revenues, Business models, ios, pleco, profits

Business

A guide to building your app business

Post author By Mark Wilcox
Post date April 3, 2014
No Comments on A guide to building your app business

So you want to start a business developing apps? Or maybe you have an app business but want some advice on how to grow or improve it? [tweetable]Simply building an app and publishing it on app store as a paid download is extremely likely to result in disappointment[/tweetable]. This shouldn’t be news to you if you’ve been following the industry in the last few years but what should you do instead? In this article we’ll look at some strategies to increase your chances of building a successful app business.

Risk versus reward

Building a product to sell is exciting and full of creative possibilities but it’s also always a risky approach. If your primary interest is in designing and building apps and solving problems then a far lower risk app business is a software services business. Developers who make most of their revenue from contract development work have the highest median wages by far, in other words, very few of them can’t pay their bills! That said, if you’re planning a software services company it makes sense to use any downtime from client work to build your own products. It can not only generate some additional income but also gives you something you can show potential clients publically (a lot of clients won’t let you publish the fact that you built their app). In our previous surveys, developers who’ve earned a small fraction of their revenue from app stores and the rest from contract work have done significantly better than those doing 100% contract work.

Of course the trade-off with a services business is that the upside is very limited. Global competition makes it hard to charge significantly in excess of typical developer wages. On the other hand, there are several examples of small teams with a hit app that has made them millions of dollars. Our survey data consistently shows that these successes are very much the exceptions. [tweetable]Only a small minority of app development projects are significantly profitable[/tweetable]. Even if you think you’ve got a great idea and a great team then, unless you’re spending your investors money, seriously consider balancing your product development work with some contract development.

Businesses versus consumers

If you’re building products, consider your audience carefully. [tweetable]Who you build your apps for has a massive influence on how successful you’re like to be[/tweetable]. In general businesses are much more willing to pay for software than consumers. As I’ve written before, developers targeting enterprises make four times as much as those targeting consumers on average and yet the latter face much greater competition. Don’t think that targeting organisations rather than individuals means you’re limited to automating business processes. There’s lots of complex and interesting software that businesses need, for example visualization tools to help sell product and projects, or even to help construct things in the real world. There are also extremely simple but valuable pieces of software that can make a positive difference in the lives of lots of people; I’ve met one entrepreneur who’s made a small fortune selling eye-testing software. Additionally, you may be able to target your product idea to an enterprise rather than consumers and have significantly greater success. There have been some relatively small scale successes for developers selling educational software on Apple’s App Store but most of the big successes in educational apps are selling to schools instead of or as well as direct to consumers.

If you’re determined to build consumer apps or your category of choice leaves you with little option (e.g. games) then go big or go home. [tweetable]The app stores only consistently reward the best[/tweetable]; an occasional viral hit may do very well for a short while but they’re impossible to create reliably and they rarely last. If you don’t truly believe you can make an app worthy of the top ten in your category of choice then you should probably relegate this particular passion to a side project or hobby. You don’t really need to make the top ten to earn a decent living (although doing so isn’t sufficient, you’ve got to stay somewhere near the top) but it’s best to allow for some overconfidence!

Be creative with business models

Whether you’re building games for consumers or productivity apps for businesses, design your business model along with your app or service. If you design and build the product first then try to bolt a monetization scheme on top, you may find yourself with relatively few options. A large fraction of developers are still using paid downloads or advertising as their primary revenue model despite the fact that these are the least successful options. There are exceptions where other models are not suitable (e.g most kids apps really ought to be paid download only) but [tweetable]much less than 10% of all revenue paid out by app stores comes from paid downloads[/tweetable]. Developers relying entirely on advertising rarely do much better either.

The ideal business model is some kind of subscription or annual license that produces recurring revenue. This is relatively common with services aimed at businesses but certainly won’t fit every consumer app. Most apps that are aimed at consumers need to be free to download.
There’s simply too much competition. Whether you then get paid through in-app purchases or selling some related product or service is still an area open for experimentation. We’re seeing some games developers experiment with physical toys that unlock content. Amazon wants developers to sell their products and earn a commission. There are plenty of unexplored possibilities and new technologies create new ones all the time. You’re not limited to one revenue source either, mix and match! Whatever you do, don’t copy the strategies that aren’t working for most other developers unless you have a very good reason to believe you’ve got a special case. Either copy strategies that are working or try new ones.

First balance your risks according to your finances. Select your audience carefully. Then design the business model to maximise your chances of getting the audience to part with their cash then. Do all three and you’ll have a much greater chance of success than the vast majority of your peers. Now all you need is excellent execution and a bit of luck.

Tags app business, Business models, revenue model

Business

4 Reasons Not to Build Enterprise Apps

Post author By Mark Wilcox
Post date December 24, 2013
No Comments on 4 Reasons Not to Build Enterprise Apps

In an earlier post we showed how enterprise app developers make 4 times the revenue of those developing consumer apps on average. Targeting enterprises with apps can be very different from building consumer apps and not all developers prioritise revenue, so it’s not for everyone.

Do you want the indie developer lifestyle, or to build a company? What sort of contact do you want to have with your customers? Do you like consulting work or do you prefer to build your own products full time? Do you have a strong development platform preference? Depending on your answers to these questions you might find one of the 4 reasons below keeps you focused on consumer apps for the foreseeable future.

1. You like to work alone

The creation of the app stores enabled vast numbers of individual developers to create and monetise their own apps. Amongst the revenue earning developers targeting consumers, almost 43 percent are in one person companies and practically all of those don’t involve anyone else in development. Of the developers building apps for enterprises, only 13.3 percent are in one person companies and those are almost exclusively doing contract work. The one person enterprise development companies earn 24% more revenue than the equivalents building consumer apps but it’s definitely not the independent developer lifestyle they’re living. In general the enterprise developers earn more than those developing for consumers at every team and company size, with the difference increasing with team size up to the 500 employee mark. Above that revenues from app development per person drop significantly, although on both sides a lot of large companies developing primarily for reasons other than earning revenue are included here.

2. Direct sales repels you

As you can see from the charts above, enterprise app developers tend to work in larger companies than those targeting consumers. There’s also a bigger company size to team size ratio. The difference here is likely to be sales, marketing and support teams. In general, larger customers need more direct contact. In the consumer apps space it’s possible, although unlikely to be successful, to launch an app and sell it without ever having contact with anyone that uses it. However, although the costs of direct sales staff may seem high, consumer apps with large revenues and user bases typically pay to acquire a decent fraction of users (e.g. via in-app ads, Facebook app install ads, cross-promotion networks). We don’t have any data to compare the cost of sales for these developers but I wouldn’t bet that the average cost of sales as a fraction of revenue for the successful consumer app developers was significantly lower.

Whilst subscription revenue is by far the best earner for consumer app developers, it is one of the worst revenue models for enterprise developers. In the enterprise market per user/device licensing and other sales outside of app stores is a key revenue component for most successful businesses. This aspect of a business can often be very unattractive to developers.

3. You want complete creative control

On average [tweetable]enterprise app developers earn a much greater fraction of their revenue from contract work[/tweetable] (consulting). The most successful enterprise app businesses earn 25-75% of their revenue in this way (we only have 25% bands). It’s likely that there’s a lot of custom integration work involved in selling to larger enterprises. Even those selling to SMEs often offer customizations.

Developers who consider their apps an art-form and build them primarily to earn a living doing something creative they love will probably want to stay away from areas where a lot of contract work is involved. Those same developers are also not very likely to be inspired to help automate business processes or other similarly mundane but useful enterprise app functions.

4. You love Android development

There are some very major differences in the revenue models and revenues of enterprise app developers depending on their primary platform. The really big revenues are currently being earned by HTML5 developers (> $100k per developer per month). Next highest revenues are for iOS developers (a little over $50k per developer per month) but it seems that [tweetable]a lot of iOS app enterprise development is currently outsourced[/tweetable], since more than 70% of these earn >75% of their revenue from contract work and 40% earn 100% of their revenue in that way.

Compared to these two, the Android developers are the poor cousins. Despite having a much wider range of revenue models, their average revenue per developer is much lower (about $14k per month). Enterprise development still pays very slightly better on Android than building consumer apps but given the other trade-offs discussed above, it might seem like a relatively poor deal.

Running out of excuses?

When we published the last article, showing that enterprise developers make 4 times as much revenue as those targeting consumers, a lot of responses suggested that this difference was all in the large enterprise sales market and required large direct sales teams. While there is definitely some advantage to scale, this is certainly not the case. Not all enterprises are large and there’s a very big market of SMEs looking for mobile software to make their businesses more efficient or convenient. Although the most profitable enterprise app development companies are in the 51-500 employee range and solo developers are only marginally better off targeting enterprises, a 2-5 person company makes more than 4 times as much revenue on average by choosing to build enterprise apps. The 2-5 person enterprise app business is much more likely to be building HTML5 hybrid wrapper apps rather than the native iOS or Android apps of a similar sized consumer focussed business. They are also likely to be spending more of their time (although far from all of it) doing contract work. If neither of those things bothers you then it might still be worth considering the enterprise market for your next app.

Tags Business models, Enterprise, HTML5, Market selection, Platform selection, Revenue

Business

Are you using the right app revenue model?

Post author By Mark Wilcox
Post date November 19, 2013
No Comments on Are you using the right app revenue model?

The most popular revenue models appear to be those that are easiest to implement. The developers using them tend to have lower revenues. This may be due to greater competition or it might just be a result of less sophisticated app businesses producing less valuable apps. There are some interesting differences between platforms but [tweetable]subscriptions appear to be a relatively untapped gold mine everywhere[/tweetable], although maybe not for everyone.

Revenue models versus average revenues

Our research shows some significant variation in average developer revenues depending upon the revenue models being employed. An investigation of the relative popularity of revenue models versus revenue generated across the major platforms produces some useful input for app development strategy and planning. Unsurprisingly, the simplest revenue models to implement, like paid downloads and in-app advertising, tend to be the most popular. The often repeated stereotype that “Android users don’t pay for apps” also leads to a strong preference for ad-supported apps on Android, while iOS developers prefer paid downloads. Slightly more surprising is that although Android has a larger user base who seem less inclined to pay up front for their apps, freemium and other in-app purchase schemes are less popular than on iOS. It would seem that on average [tweetable]iOS developers are more sophisticated in their approach to the app business[/tweetable].

Revenue distribution

When considering revenues it’s important to note that the distribution of revenues in the app business is highly concentrated at the top and there are a lot of hobbyists who earn nothing. We exclude most hobbyists, those who’ve not started earning revenue yet, the mega-rich chart toppers and large publishers from our analysis by only counting developers with between $1 per month and $5 million per month in revenues here. Even so, there is a fairly large “middle class” of smaller independent developers with a lot of users and high revenues. As such there’s a massive difference between mean and median revenues even in this subset.

The revenues shown in the chart above don’t necessarily all come from the platform or revenue model they are linked to – [tweetable]developers use multiple revenue models and multiple platforms[/tweetable]. For example, amongst developers who target iOS first the in-app advertising model appears to do much better than for those who target Android. Although iOS advertising rates are higher, this isn’t the primary cause, since very few of our iOS respondents derived most of their revenue from ads. The actual reason is that many of those using ads also used a freemium upgrade model (presumably paying to remove the ads and possibly add features) and derived a significant fraction of their revenue from that also. The same strategy does not appear to work as well on Android. Although not entirely accurate, we’ll refer to revenues by platform and revenue model as a shorthand in the rest of this post because it’s a reasonable approximation in most cases.

Less popular, more people, more revenue

Interpretation caveats aside, one thing that seems clear from this data is: [tweetable]the more popular the revenue model, the less successful the developers using it[/tweetable]. The exception here is contract work, which shows much higher revenues on iOS and lower on Android relative to its popularity. Although there’s some evidence that contract development rates for iOS are slightly higher, the difference is mostly due to where the platforms are most popular with developers. Otherwise, most revenue models show slightly higher mean revenues on Android but significantly lower median revenues. There’s also a link between the average number of people involved in app development in an organisation and the revenue model. More people involved, may signal more complex development for the associated apps. The fact that this is also associated with increased revenue is possibly related to using the extra development complexity (or team size) on a more sophisticated revenue model. It is not the case that more people involved results in higher average revenues per person in general. In fact, there is a very strong peak in mean revenue per person for organisations with 6-10 people involved in development – there are probably some significant efficiency losses above this size.

The subscriptions gold mine

Across both Android and iOS, [tweetable]subscriptions generate by far the highest mean revenues[/tweetable]. Median revenues for subscriptions are also higher than every revenue model except contract development. At the same time, only just over 10% of developers use a subscription model and the average number of people involved is lower than for all but the simplest revenue models. Mean monthly subscription revenues for Android-first developers are 3 times higher than for their iOS-first counterparts. It seems that Android users not paying doesn’t apply to subscriptions. However, median monthly subscription revenues on Android are less than half those on iOS, so there are a smaller number of very big winners with Android-first subscription businesses.

Should more developers be trying to build subscription-based businesses? Almost certainly yes, but they’re not for everyone. While 53% of developers using the paid download model and 45% of those using in-app advertising are in 1-person companies, that’s only the case for 20% of subscription businesses. In fact 53% of the subscription businesses in our survey had more than 5 people, not all of which are directly involved in app development. This is because many popular subscriptions include continuously updated content and there’s significantly more work (and cost) involved in providing ongoing content for subscribers. Our survey has also shown that money is not a primary motivator for lots of developers and managing the content side of the business may not be something they’d want to be involved with. For entrepreneurs looking to build successful app businesses, the subscription model is definitely worthy of further investigation.

– Mark

Tags Advertising Revenue, Business models, Costs, In-app purchase, Revenue, Revenue Distribution

Business

App monetisation: Games vs. Enterprise and Business Apps

Post author By Mark Wilcox
Post date October 7, 2013
No Comments on App monetisation: Games vs. Enterprise and Business Apps

The mobile apps business is maturing and while most of the media attention is still focussed on the latest app store success stories, developers are finding lots of better ways to improve app monetisation. Considering all revenue sources, which categories of application are generating the most money and what’s the competition like on each platform?

App Stores not the answer?

In our last developer economics survey we asked developers to give us a breakdown of their revenue from different sources. Of the 1,695 developers earning between $1/month and $5 million/month who reported their revenue breakdown to us, 55% generated some of their income from app stores. There is a negative correlation between the fraction of revenue an organisation earns from app stores and the total revenue they earn per person involved in app development. That is, the more you rely on app stores for revenue, the less you are likely to make any. By excluding those with revenues above $5 million/month, we’re ignoring the very top of the store charts where the bulk of app store revenue is made. However, this is just a handful of developers, who would otherwise have an extremely disproportionate effect on the average. It’s also worth noting that [tweetable]there are limited costs involved in app store publishing but it produces the lowest average revenues of all sources[/tweetable] in our survey – it’s clearly not the easiest way to build a profitable app business.

Is there gold anywhere but games?

With games accounting for around 75-80% of all app store revenues it’s possibly not surprising that they were the most popular category of app amongst the developers in our survey. Given the chart above it shouldn’t be surprising that they are far from the most profitable (~$2,500/person/month more than the lowest mean income and the lowest overall median income). So [tweetable]which were the most profitable app categories? Business Productivity and Enterprise apps[/tweetable]. However, there are some significant differences between platforms so it’s worth playing with the interactive chart below to spot any opportunities that might be of interest.

[tweetable]Median developer revenues are higher on iOS than Android across all categories[/tweetable], but in some categories mean revenues are higher on Android. This shows that there are some developers managing to exploit the much larger market on Android successfully but most developers are still financially better off on iOS, including revenues from outside the app stores. Where average revenues across all platforms were higher than either iOS or Android, web developers were usually making the most revenue in that category.

The averages in the charts above still hide a lot of potentially interesting detail on where the best opportunities in the apps market are. Those wanting a more complete analysis should look at our App Economy Forecasts report.

Tags Business models, Market selection, Platform selection, Revenue, Revenue Distribution

Business

Mobile Advertising versus App Store Promotion: a tale of woes and wins

Post author By John Cooper
Post date May 27, 2013
No Comments on Mobile Advertising versus App Store Promotion: a tale of woes and wins

As an independent developer, I ‘ve had my fair amount of successes and failures – examples of the former are TVPyx (Symbian, Windows Phone, Web) and TubeBusBike (Symbian).

Having developed apps on iOS, Android, WP, Symbian, Bada and Web – my experiences of all stores has been mixed. As an independent developer it is increasingly difficult to get noticed in the sea of apps that are available on the various stores. I have had a fair amount of trial and error experiences with both advertising and merchandising across those stores. I ‘m here to share my experiences with both.

There are a number of techniques available to developers that can be used to promote your app and increase downloads. Some of these you will need to pay for, some of which are just down to hard work and slick execution. Of course there is always an element of luck and right place right time usually built upon previous failures, think Rovio. I am going to concentrate on two methods of promotion.

Advertising and cross promotion – The method of promoting an app either through paid in-app advertising i.e. in someone else’s app/website or cross promotion through apps developed by the same publisher.

App store promotion – The practice of promoting an app via app stores. Merchandisers (app store owner staffers) select apps by country/region to appear as featured or promoted apps on the store. Various ‘slots’ have different success rates where ‘featured’ is usually the Holy Grail in terms of maximizing eyeballs and downloads.

Advertising

Advertising using one of the mobile ad networks like Admob or an ad exchange like Inneractive is a paid-for activity i.e. you would pay for a campaign of ad impressions to promote your application in the usual advertising model. While someone like Admob may be excellent in a market like the Germany, they may lack in a specific region like Vietnam. This is where an ad exchange comes in. If you have a truly global application or specific regional needs that no one ad network can provide the required local content, an ad exchange barters on your behalf with local inventory and then serves the ad that gives you the most return.

Not all ad mechanisms are created equal, so you should take care whilst selecting one. While the fill rate may be excellent compared to a single network, the downside is that you may not be getting premium content that would be served by a truly local provider i.e. lower CPM. So while a fixed ad network can provide targeted delivery in terms of locale, an ad exchange can level the playing field especially in those maybe hard to reach areas of the globe. You need to understand your market and choose accordingly.

My personal experience of using paid-for app promotion was very disappointing. For £1000 one of my apps was involved in a campaign that consisted of a carousel with 4 ads shown in succession. The campaign as a whole garnered 260,000 impressions. My ad was the 4th on the carousel meaning that it would be the 4th ad served once the app the ad was in was invoked. Quite far down the pecking order. From this campaign there were 82 clicks of which it is unclear whether any of these actually resulted in any downloads. No spike, no step change, just noise. The ad was targeted at UK mainly but a few other countries were involved. So quite a high customer acquisition rate!

Anecdotal evidence suggests that in some markets, advertising in apps might even have an adverse effect on downloads, as they use data which comes at a cost to the user.

App Store Promotion

Being a ‘featured’ app on any store will dramatically increase downloads. Naturally being featured in a store is likely the result of one of the following; it’s a great app, it’s a great experience, great PR, a relationship with a journalist on a national newspaper, major marketing budget, lots of hard work and maybe a bit of luck to name a few.

To get noticed by a store owner – especially an OEM – you need to consider what they as the builder of the devices are currently trying to push. For Nokia it may be imaging or mapping i.e. you are more likely to be promoted if you are harnessing one of the strengths of the business, what makes them unique. For Samsung it may be an app that integrates with their TV solutions. Segmentation considerations also work e.g. apps for a demographic that are being targeted by a particular device or devices. Building a relationship with an app store owner is a means to get promoted but this is likely to be the result of an app that meets the needs of a campaign or some quid quo pro between the developer and the likely OEM. A strong relationship or understanding of needs is required regardless of approach. I am privileged enough to have been involved a number of OEM programmes and have some close relationships with a number of OEM’s and platform providers so this approach has very much worked for me.

There are a number different areas on a store where you can be promoted; featured, staff picks etc. Some OEM’s have mini stores that usually link to their platform stores like Windows Marketplace or Play. This gives the OEM the ability to merchandise their partner apps without seeking the permission of the platform owner. Nokia has the App Highlights app shipped with all their phones, other OEM’s have their own offering.

My experience of being featured on Windows Marketplace was great for downloads as I suspect being featured would be on other stores. App Highlights worked well until Nokia changed the app due to having to try to promote more apps themselves. This meant my app started to get lost in the sheer number of apps being promoted. The latter being the inherent problem of managing app promotion on store.

Below is a graph of my own experience of being featured on Windows Marketplace and being promoted through App Highlights. There is no halo effect, as soon as the promotion stops the graph returns to the usual run rate. The implication is that you have to continue to promote and market the app to get downloads. As you can see the experience is far more positive than paid-for app advertising. Being featured represented a 1000% increase (800 downloads/day) in downloads whilst being included in App Highlights represented a 200% (160 downloads/day) increase in downloads.

There are other spikes on the graph that are not either Featured or App Highlights. The honest answer is I don’t know what caused them. I only know that my app was featured or highlighted because a) someone told me or b) I happened to know the right people. The other spikes could have been caused by promotion on other parts of the store that I was unaware of or a blog picked up on the app etc. It is usually the case that the developer is not told that their app is being promoted which seems a shame for the developer and the store owner not to be able to capitalize on the promotion.

Conclusion

To get downloads, you need to continuously promote and market your app. I experienced no halo effect, as soon as the promotion stops the graph returns to the usual run rate. For me, getting featured and highlighted was a far more effective solution than paid-for advertising. The key is to build close relationships with multiple OEM’s and platform providers and use it to deeply understand their marketing needs.

Tags ASO, Business models, Cross-promotion, Discovery, Promotion, Reach

APIs Tools

Which apps make more money? App monetization insight from our Developer Economics 2013 report

Post author By Andreas Pappas
Post date April 9, 2013
No Comments on Which apps make more money? App monetization insight from our Developer Economics 2013 report

[This post by Andreas Pappas, Senior Analyst at VisionMobile, first appeared on the VisionMobile blog on April 3, 2013.]

[How do app developer revenues vary by country, or platform? Does the number of platforms make a difference to app revenues? Which models bring in the most revenues? We revisit Andreas Pappas’ November analysis of app monetisation with more insights from our Developer Economics 2013 survey across 3,400+ developers – while launching our latest survey, which is available here]

Back in November, we looked at which apps make money based on research on how app revenues vary by platform, app category, country and more. In this article we update our analysis on app monetisation based on the latest research from Developer Economics 2013 across 3,400+ app developers, including analysis that did not make it into the report.

We ‘re also proud to launch our very latest Developer Economics survey, which reaches across thousands of app developers and provides the data for our famous state of the developer nation reports. Thanks to the sponsorship by BlackBerry, Mozilla, Intel and Telefonica it possible to provide these reports and additional insights, for free, to the entire mobile community.

Take part in the survey, spread the word and help us drill deeper into the app economy and what makes it tick. We have prizes aplenty for developers, with 7 devices up for grabs (one iPhone 5, two Samsung Galaxy SIII, two Nokia Lumia 920 devices and two BlackBerry Dev Alpha handsets) – plus an AR Drone 2.0, a Nest Learning Thermostat and a Nike Fuel Band for participants who also subscribe to our developer panel. Last, but definitely not least, our friends at Bugsense are giving away one month of free crash reporting to each and every participant.

Developers in North America lead the revenue leaderboard

We’ll start by taking a look at income distribution by the region where app developers are based. Last time we saw that US developers earned almost double the revenue of UK developers. Based on our Developer Economics 2013 data, North America (and particularly the US) is still in the driving seat of the mobile app economy with developers in North America generating about 30% more than their european counterparts, who in turn generate 47% more revenue than developers in Asia. To some extent higher revenues for NA developers are explained by higher consumer spending in the US and higher penetration of iOS, which as we will see later on, still generates higher revenues than other mobile platforms. Note that across this analysis we are restricting our sample to mobile app developers, and have excluded the top 5% of revenue earners in order to minimise the effect of outliers.

While app development activity is booming in Asia, the average app-month revenue is quite lower than in the US and Europe, although developers in Asia develop, on average more apps and use more mobile platforms. As we explained in the previous article, there are multiple reasons for this revenue gap, but the prevailing reason is the fact that paid apps are not popular in most of Asia, the country that drives the Asian app economy. Instead, developers in Asia rely much more on advertising revenue, which, according to our findings is the least profitable revenue model.

iOS still monetising better than other platforms

iOS continues to dominate platform revenues, generating, on average, 30% more revenue per app-month than Android. The revenue gap has reduced by 5 percentage points compared to that reported in our Developer Economics 2012 report in June 2012.

At the same time, Windows Phone has caught up with Android and seems to be doing slightly better. Although the 5% advantage is arguably within the margin of error, Windows Phone has significantly improved its position relative to the figures reported in the Developer Economics 2012 survey, when it generated, on average, about half as much revenue as Android. How has the landscape of platform monetisation changed in Q2 2013? Join the survey and help us track the state of the developer nation.

Multi-platform developers earn more

There is a wide revenue gap between developers/publishers using 6+ platforms and those using 5 or fewer platforms, with those developing for 6+ platforms generating, on average, 75% more revenue. However, only a small part of the developer population (4%) develops on 6+ mobile platforms; these are probably established services with a large footprint that want to ensure that their apps are universally available (e.g. Facebook, Skype etc.) or large software houses with a large enough pool of resources to target multiple platforms for their customers.

Those developers employing just one platform are probably solo, amateur developers or have not yet had the success that warrants (and allows) an expansion onto more platforms. As developers become more successful, they will expand onto new platforms and generate more revenue. So while, expanding on more platforms is not sufficient to generate more revenue on its own, those that do find success are likely to invest in a multi-platform strategy.

Extending apps to new markets is a profitable strategy

We asked app developers how they decided on which apps to develop or work on next and then looked at the way revenues vary depending on their strategy. While most developers will develop apps they want to use themselves (50%), this is apparently the least successful strategy and should not become the sole deciding factor for your next app.

Developers that use some form of market research such as discussing with users, monitoring apps stores or directly buying market research are much better off, generating at least double the revenue of those who just develop the apps they want to use. However, market research is not widely used among the developer population: only 24% of developers discusses with users, highlighting a lack of business maturity and also a gap in frictionless 2-way communication channel between developers and users.

Overall, the most successful developers are those that extend apps to new markets, either to new geographies or different verticals. To some extent, these strategies rely on copying the recipe of an already established and successful business: these are apps that have been tried and proven in at least one market and are generally less risky options or “low hanging fruit” for developers. Why start from the ground up when you can stand on the shoulders of giants?

The most lucrative revenue models are off limits for most developers

When talking app monetisation, there are over 10 different revenue models to chose from. Device royalties and distribution licensing fees are the top-grossing models but are quite rare among app developers due to their high barriers to entry. These models imply deals with device manufacturers and distributors which means long, expensive sales cycles and a successful app to start with. Among the rest of the revenue models, commissioned apps (development for hire) come on top since they come with a low risk and guaranteed income for developers that work under contract.

The next most lucrative revenue model is the subscription-based model but this also comes with caveats: a subscription service implies a significant investment in licensing, and maintaining quality content or services that keeps users engaged on an ongoing basis.

Among the revenue models that are most popular and more accessible to developers, In-app purchases come on top, generating, on average 34% more revenue than Freemium and 43% more revenue than Pay-per-download. In-app purchases and Freemium models are becoming increasingly popular, now being used by a quarter of developers as they seem to be appealing to consumers. We ‘re revisiting the topic of most lucrative revenue models in our latest survey. Join in and help us size the app economy.

Smart developers use smart tools

Finally, we take a look at how developer revenues correlate to the use of third party tools and services. It’s interesting to see how app revenues correlate with usage of performance tracking and management tools like user analytics and crash reporting. Developers using crash reporting and bug-tracking tools such as Crittercism or BugSense generate on average, three times more revenue than developers who don’t use these. Similarly the usage of User Analytics (e.g. Flurry, Apsalar) services is also associated with much higher revenues, with those using user analytics services generating 168% more revenue than those who don’t.

Both user analytics and crash reporting services are used by experienced developers who recognise the importance of optimising for user acquisition, activation and retention, while reducing in-the-field crashes and the resulting user churn.

Track the state of the developer nation

[tweet_this content=’App developer? Take the new Developer Economics survey and win prizes!’ url=’ http://www.visionmobile.com/DS13PortalBlog’]These insights are made possible by our ongoing surveys. Join the latest Developer Economics survey to help us draw deeper insights into monetisation, the size of the app economy and the debate of HTML5 vs. native. In this survey we ‘re focusing on the population of iOS, Android, WP, BlackBerry and HTML5 developers, across countries, app categories and developer types. If your are a developer take the survey, or otherwise spread the word and watch this space for an update on revenues, platforms and the state of the developer nation.[/tweet_this]

And don’t forget to fire away with those comments, rants, criticism, praise or simply feedback on what you ‘d like to see next.

Andreas (follow me on twitter @PappasAndreas)

Tags Business models, Localization, Market selection, Platform selection, Revenue, Revenue Distribution