This article is silly. The idea that you can't make any money from an App if you aren't in the top of the charts is false.
One of my apps has only occasionally and then briefly, broken the top 200 in the US in its CATEGORY. (So nowhere near top 200 overall) and it still reliably pays out every single month. Further over its lifetime-- about 2 years at this point, the amount it pays every month has gone up, not down. The experiments we've done show that several things we could do would make it pay even more.
For instance, if we'd done a single bit of marketing that might have helped. The closest thing to "marketing" we do is to give promo codes to anyone who asks for one because they want to review the app. (nobody in the USA has yet reviewed the app.)
The idea that you need hundreds of thousands of dollars to develop an app is also kinda silly. A team of two developed our app over the course of a month. In the intervening 2 years, another month or two has been put into the app. At this point, the app has gone well more than a year without an update and it is still earning the same income- in fact, its income has gone up in the past several months.
There are somethings that you should do to have success though:
1. Have a good UI. The team of 2 was an engineer and a designer and we spent a lot of time on the design.
2. Make the app good. The star rating is a factor in the app doing well.
3. Make the app useful. Have something unique about it... but this doesn't have to be super unique. (our unique value is quite terrible. Paul Graham would throw me out of his office or a YC interview if I pitched him on it... its barely a differentiator, but its enough.)
4. Learn from your app and then do another one. Over time you can build a nice stable of apps and a nice income.
5. Update your app regularly. You experience a sales dip when the app is first updated, but after there are sufficient ratings on the new version the update seems to boost your sales. (or at least ours have, though we stopped updating it to focus on other things.)
6. Make your app sticky. About %80 of the people who buy our app never use it, and that's unfortunate. But the %20 who do, do for a long time and use it quite a bit. I think not every app is for everyone. But if your app is going to be useless after awhile, there's not much point (remember the vevuzula? lots of apps came out to make that sound. wonder how they're selling now?)
Hits come and go, and the big money may go to the hits. But viewing an App as a dividend that pays out every month, in my experience the returns are quite well worth it.
Some more points
-- Don't spend $100,000 on an app. Or even $10,000. IF you count our cost of living, our app cost us $3,400. We did spend a couple hundred on an outside designer that didn't work out, and about $500 on the app down the road after it was already making good money each month. That $3,400 we "spent" on it-- we get more than half of that back each month.
-- If you're a big business expecting to gross $1M a year from an app, then maybe it is a lottery. I dunno.
-- A high price is not a problem. We sold our app for $3 the first year, then $5 the second. No real change in income. We experiment with pricing a bit. You get a lot more downloads at $0.99. And you can have a big boost to your app by running a sale... but that also affects the amount of "juice" apple gives you.
-- Since we're not in the charts, our sales come because Apple is recommending our app to people. Think about that. The store does work, even if you'd never see us in the store by just browsing.
-- I think the idea of focusing on a few apps is a very good one. don't just throw crap out there and see if it sticks. That's the biggest problem with the store-- too much crap. But Apple is getting algorithmically better at figuring out whats crap and what isn't. Make your app good. Doesn't have to have all the features you could possibly want in the first version, an MVP is fine, but make it polished.
I think that the app store is a huge opportunity for people who would like to work for themselves but aren't in a position to raise funding to do a startup.
I think its a lot easier to get a good app discovered than an obscure website.
If I'm reading you correctly, you definitely made money on the App Store. But it sounds like you are still tens of thousands of dollars underwater in opportunity cost. Is it wrong to think about it that way?
You get "more than half" $3400/month, let's call that $1700/month over the last two years, for $40,800. The two of you spent two man-months developing the app originally, and maybe a month or two since then. Let's call that 3.5 man-months. In some sense, your only cost was about $4,100 (cost of living + failed designer + $500). However, you could also have just worked for someone else. Two years ago (when you developed the app), it looks like iOS development was getting billed at about $150/hr (in Austin, SF, and elsewhere, though one guy in Ann Arbor quoted $75/hr) [1]. 3.5 work months is about 595 work hours which is about $89,250. (Put another way, if your contracting hourly rate would have been $70/hour, you would have just broken even now.) If that math is correct (and I've made all sorts of assumptions), you would have done financially better to work for someone else (especially someone at the top of the charts), no? In a sense, did you "spend $100,000 on an app" in opportunity cost? How long do you estimate your app will continue paying out a "dividend"?
It sounds like you are saying: apps don't make that much money, so don't spend lots of money developing them. But apps seem to take at least a few months to develop, so it seems inevitable that apps will cost a lot of money if the developer/designer time is market price. (A <$10,000 app in 3.5 months would be an hourly rate of <$17/hr, for example.) Is that true, and if so, do you think aspects of that will change over time?
You can't just sit down and start coding for your $150 or even $70/hr though. Here are some factors I can think of that change the calculation substantially:
- You have to take time and put in effort to find good contracts. Not all work is billable.
- You will probably want to be able to show clients an app you've already created. If you can make that app a $40k earner then you are in great shape.
- You will most likely have to be willing to put up with less fun and less flexible work for clients.
I think the $40k from 3.5 months of work is amazing and would be a no-brainer for a huge number of people. The big downside is the level of risk involved and the difficulty in duplicating that level of success.
That's also time they spent working for themselves instead of for someone else. Which is valuable.
Plus the possibility of this app immediately enriching their life if it's something they developed to scratch their own itch instead of the theoretical itch other people have, or the itch that the person who hired them has that they don't share. (Like the time my not-driving self worked on a promo site for an app designed to crowd source the problem of finding a parking spot in a busy city. Fucks given beyond the minimum to satisfy the client enough to get paid: 0.)
Most valuable piece of info here for App developers: Make your app universal. It doubled our sales.
If your thesis is that you'd be better off as an iOS contractor than making your own apps, then you might be right. But this was our first app, and my partner went from someone interested in design to being an actual designer as part of this experience. I consider that alone to be worth more than $89,250, because it is a multiplier on what we have been able to do subsequently.
Also, the first months this app was doing around $200 a month. It took effort on our part to change that. We have done multiple things that caused the sales of our app to double as a result. In fact, every major release of our app has caused sales to double. In fact, this leads to one of the big secrets of the appstore. There are 600,000 iPhone apps but only 200,000 iPad apps. We get equal sales from the iPad as iPhone. We stared out as iPad only, then added iPhone- boom, sales doubled. (I was hoping for a triple or more because there are so many more iPhones, but alas, no.) Make a real universal app, you'll do better.
I believe there are some things we could do that would double our sales a couple more times-- for instance adding some social aspect to the app, adding iCloud support might both result in a doubling, which would throw your numbers off for the comparison.
I didn't put this app out as an example because I think its an example of what one could potentially make-- I put it out there as an example of what could happen if you do an app that never makes it into any of the top lists or gets any marketing. It was meant as a minimum example, not a maximum example.
This app is was also an experiment and has been used as such. It would have been easy to put out a revision in the last year (and there's a feature we really need to add) but by waiting a year we've observed how not updating the app has affected sales. Now when we put out the revision we'll be able to confirm our hypothesis about past revisions.
I expect this app to continue paying out this dividend for the foreseeable future, which I'd say is about 2 years.
This "dividend" is completely dependent on the way Apple markets apps to people. We don't show up on any lists. When Apple changes their algorithm, we feel it, much like google changing their algorithm impacts websites. So far, Apple has been changing the algorithm to highlight quality apps, and that's a good thing so this has benefited us, but at some point we may run afoul of one of the rules in the algorithm. (the one year without an update was a test to see if there was a rule like that-- and I think there is, I think we've been punished for going so long, but the slack has been taken up by growth in the total addressable market.)
With any business effort the question really isn't whether "apps" make "money", but how much leverage you get. What makes money is work and smarts, right? You can spend X amount of time and make Y amount of money a year building a SaaS Website, or building an App or working a job. Apps give your more leverage than SaaS Websites which give you more leverage than employers-- but that's just a generalization. It really depends in part on how well you understand the market, but also a great deal on how much effort you put into it.
I was pointing out here that we have an app we haven't put much effort into that has made rather good money given the level of effort.
I think its a lot easier to get a good app discovered than an obscure website.
Really? What exactly is the app store doing for me if I'm buried on page 18 in my category? It's may be true that the App Store is no worse a proposition for the average app than the web. But if that's true why exactly should I pay Apple 30% of my revenue when I could host my own code and process my own sales for a small fraction of that? When I release updates on my own timetable and build unmediated connections with my customers?
Also — almost all businesses tend to have a mediocre success rate (the average food service business goes under in five years, the average business goes under in ten). I doubt most shareware apps make money. Most books. Most music recordings. Most TV shows. Most anything.
The designer-- my cofounder-- is someone I've known for over a year, who had an interest in being a designer but wasn't "really" a designer at that point. We sought an external person who was a "real designer" to do the icon, but they didn't really seem interested in the project and so we cut our losses and paid them.
I've been a user experience person going way back to the 1980s, so I've got quite a bit of an opinion on these things and we hashed out all the usability type stuff between us. The designer had a huge impact on the look, and produced all the image assets.
We went with a skeuomorphic design. One of the things we want to try (when we get some time) is redesigning the app with a more modern look and seeing what the impact is.
I've worked for a lot of startups in my career and one of the top two things that kills a startup is conflict between the founders[1]. I was fortunate to have someone I knew a long time as a co-founder, and previously I'd attempted to do a startup as a solo founder.
I think if you're a solo engineer, finding a co-founder with design skills and building business skills in yourself (and/or in them) is the way to go.
But best to know them for a couple years, so you might look for people you've known for awhile, if you can.
[1] the other is bad advice being forced onto them by the investors.
Apparently its not obvious because he seemed to feel that there wasn't an easy alternative. I understand that perspective.
If I were a sole developer or designer, who wanted to participate in the app store, seeking a complement that I could get along with well would be a high priority.
All to varying degrees of success based on how well we executed the points I tried to highlight. I picked our oldest app as the example, because I frankly expected that after a year it would have died out, and now after 2 years and a year without updates, I would expect it to be making less, not more, than it was a year ago.
We've tried other models than the paid app -- for instance a free app that is advertising based. Went nowhere ($0.30 a month from ads.) It was unexpectedly features by a "free apps" service/site recently and had a massive boost in downloads-- 10k a day for a few days- so we'll see if that does anything. It was meant to be an experiment to see what a free, well designed app of limited functionality would do in the market. Other than those big boost days its not getting as many downloads as the paid app- and I think that's simply a factor of it not having as many ratings or the continuous stream of ratings that the older app is getting.
Every quarter right now Apple is selling more iOS devices than the total addressable market was at the time our oldest app was originally released.
We're getting a smaller proportion of that market, but the tide is rising so fast that we're still earning income from it.
One of my apps has only occasionally and then briefly, broken the top 200 in the US in its CATEGORY. (So nowhere near top 200 overall) and it still reliably pays out every single month. Further over its lifetime-- about 2 years at this point, the amount it pays every month has gone up, not down. The experiments we've done show that several things we could do would make it pay even more.
For instance, if we'd done a single bit of marketing that might have helped. The closest thing to "marketing" we do is to give promo codes to anyone who asks for one because they want to review the app. (nobody in the USA has yet reviewed the app.)
The idea that you need hundreds of thousands of dollars to develop an app is also kinda silly. A team of two developed our app over the course of a month. In the intervening 2 years, another month or two has been put into the app. At this point, the app has gone well more than a year without an update and it is still earning the same income- in fact, its income has gone up in the past several months.
There are somethings that you should do to have success though:
1. Have a good UI. The team of 2 was an engineer and a designer and we spent a lot of time on the design.
2. Make the app good. The star rating is a factor in the app doing well.
3. Make the app useful. Have something unique about it... but this doesn't have to be super unique. (our unique value is quite terrible. Paul Graham would throw me out of his office or a YC interview if I pitched him on it... its barely a differentiator, but its enough.)
4. Learn from your app and then do another one. Over time you can build a nice stable of apps and a nice income.
5. Update your app regularly. You experience a sales dip when the app is first updated, but after there are sufficient ratings on the new version the update seems to boost your sales. (or at least ours have, though we stopped updating it to focus on other things.)
6. Make your app sticky. About %80 of the people who buy our app never use it, and that's unfortunate. But the %20 who do, do for a long time and use it quite a bit. I think not every app is for everyone. But if your app is going to be useless after awhile, there's not much point (remember the vevuzula? lots of apps came out to make that sound. wonder how they're selling now?)
Hits come and go, and the big money may go to the hits. But viewing an App as a dividend that pays out every month, in my experience the returns are quite well worth it.
Some more points
-- Don't spend $100,000 on an app. Or even $10,000. IF you count our cost of living, our app cost us $3,400. We did spend a couple hundred on an outside designer that didn't work out, and about $500 on the app down the road after it was already making good money each month. That $3,400 we "spent" on it-- we get more than half of that back each month.
-- If you're a big business expecting to gross $1M a year from an app, then maybe it is a lottery. I dunno.
-- A high price is not a problem. We sold our app for $3 the first year, then $5 the second. No real change in income. We experiment with pricing a bit. You get a lot more downloads at $0.99. And you can have a big boost to your app by running a sale... but that also affects the amount of "juice" apple gives you.
-- Since we're not in the charts, our sales come because Apple is recommending our app to people. Think about that. The store does work, even if you'd never see us in the store by just browsing.
-- I think the idea of focusing on a few apps is a very good one. don't just throw crap out there and see if it sticks. That's the biggest problem with the store-- too much crap. But Apple is getting algorithmically better at figuring out whats crap and what isn't. Make your app good. Doesn't have to have all the features you could possibly want in the first version, an MVP is fine, but make it polished.
I think that the app store is a huge opportunity for people who would like to work for themselves but aren't in a position to raise funding to do a startup.
I think its a lot easier to get a good app discovered than an obscure website.