Over $700k selling a premium mobile game
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I guess the freedom to do nothing while your app just rakes in money is great, but it seems like the probability of hitting this case is very low, and a stable job (though he would have possibly not liked the monotony) would have made him much more money.
All this said, I'm about to strike out on my own with a one man LLC, so as others have said, this information is golden.
[EDIT] - Many have pointed out that I missed the ~$280K that he gave to his partner (the content creator) -- so in his most successful year, he stood to make (had he been truly solo) ~$430K, which actually is pretty substantial, for a one time effort... But what is the probability of someone's iPhone game getting to #1 on the app store?
You've left off the biggest deduction, $280,000 to his partner. 3x more than he paid to the government in taxation.
Note I'm talking about salaries of people, not Supercell's income.
i.e. if you look at the top 10% earning doctors, lawyers, musicians etc, I don't expect the app store to look great.
And if you look at the median, the app store will likely be very, very substantially subpar.
And if you look at the bottom 10%, it's probably a complete joke.
All in all, I don't think the app store is an interesting place anymore for the average dev. But that's probably true of most entrepreneurs I feel. It's so hard to compete with big businesses, that you're either in a niche they can't conquer, doing something special, or you're losing to them. It's either great, or shit, and the great is a tiny percentage.
But I agree on the app store, the $1 market just makes it so that the average person will never make any real amount of money.
Those are choices he's made that drastically limit the upside he could earn. I respect the hell out of those choices, to be clear. But they are choices.
It's well understood that the way to actually strike gold in mobile gaming these days is to get to a point where you're arbitraging paid installs. You've got IAP hooks up and running, you've got quasi-addictive mechanics dialed in, and your blended CAC is less than your LTV on converted installs. You spend a boatload on installs every week, which are recouped by the revenue you earn from your casuals and especially your whales. Now you're in the shitty IAP/P2W business, alongside everyone else. Now your game kinda sucks. But now you're minting money.
That's pretty much the BigPublisher playbook. Indies can run it, too, albeit only to a point, and with a lot of soul sacrifice.
All of that said and done, I am impressed and inspired by what the author has been able to accomplish organically. And, while his earnings may seem depressing from an outside perspective, they are respectable, and to be respected. If he wants to build a larger business from here, again, he'll have to make some Faustian choices as outlined above. Or he'll need to raise his price points and/or adopt a high/low versioning approach.
This is the way the world is going to work until Apple and Google decide to put the smackdown on paid installs. Which they won't, because their big publishers make them so much money, and their big publishers have optimized a formula reliant on paid installs and drowning out the small guy. (Theoretically, feature placements are supposed to counteract this phenomenon -- but, as the author points out, they accrue most readily to the big publishers, who can afford to invest millions in production values, and whose games are big enough to be itemized on the App Store's monthly earnings statements.)
What sucks is the IAP are business models where you pay to win, have a limited ability to play the game on any day, and the advantage from paid goes away if you don't play on any day. Those models basically create crappy but addictive games that are essentially legalized lottery systems for minors without the cash winnings.
IAP done in a player-friendly way won't earn you P2W-level megabucks. But it'll do slightly better for you than a pure pay-once model will.
Unless those items are purely cosmetic, that's pretty much the definition of P2W.
It's a huge pain in the ass to dig through games, find ones that are IAP but not P2W (e.g. Ascension, Carcassonne, etc) and enjoy/support them, but that's how I use the app store.
Why? What's noble about leaving money on the table?
I have several very close friends who graduated cum laude from fantastic schools and chose to become high school teachers instead of lawyers or bankers. Should I begrudge them that choice, as well?
Maybe this success needed a the lack of Cruft and Crud.
Seriously, Apple have not smacked this down? Or regulators?
Technically, you can think of any marketing or advertising effort in terms of installs and daily users (and that's usually how people do, or try to, in the new "data-driven" marketing/advertising world).
There is value to simply having crazy high install numbers (even if those installs aren't daily users) - press, recognition by the app store, etc.
I doubt apple can really do much to smack this down, it's kind of a cat and mouse game -- how are they going to stop people from installing something, when mobilized through some other avenue to do so?
Publisher (him) pays a company $xx per install.
Company (ad network) offers this to its advertisers who get payed $xx-x per install.
Advertisers advertise this app with their own creatives and angles (normally have to be approved by publisher or at very least the ad network as well as their traffic source) on different traffic sources such as FB ads, Google Adverts, and other networks. The advertisers are media buyers - they buy media and sell media and use arbitrage to make positive ROI.
This is what paid installs is.
The arbitrage idea is that you generate positive ROI (return on investment) from your P2W or IAP making more per customer than it costs to get that customer playing your game.
This is not reproducible with the current App Store environment, IMHO.
After reading this article (http://www.daedtech.com/im-a-business-man/), I'm increasingly interested in starting a one man LLC "just because".
Have you found any good resources out there for the developer who decides to go it alone?
Worst case, run out of runway, and start contracting for some big company where I plan to move (or come back to the states)
I dunno if starting the LLC "just because" makes sense -- you can report side-work on your taxes even if you don't make the LLC... I didn't really look for resources on going it alone, mostly because I just don't think there's that much in it. Maybe I'm underestimating the amount of effort here, but I expect some more stress around tax time, and maybe having to create a business bank account but other than that, I get the feeling I won't think about it much.
For me personally, this was the most inspiring piece:
Publishers are not created equal. It's something I learned very quickly when trying to understand the App Store feature mechanics. If you are Warner Brothers, SquareEnix, Kim Kardashian, King, etc, you get a red carpet to getting featured. You can release whatever trash or shoddy port you want, and you'll get featured. So you have two options, accept this and play by the rules I'm about to lay out, or don't participate.
0 - http://www.idc.com/prodserv/smartphone-os-market-share.jsp 1 - https://support.google.com/googleplay/android-developer/answ...
"I'm a single person LLC with practically zero expenses (I paid a whopping $3k for my MacBook and made $700k), so Uncle Sam is going to get his money. I save a bit based on marginal tax rates, but pretty much I'm SOL because the tax system doesn't understand how a single guy can make so much."
No self employment tax on distributions from an S Corp.
The real benefit of S-Corp is to shift the cashflow from earned income (subject to self-employment taxes) to profit distributions (not subject to SE tax). But you pay the same Federal income tax on both. However, whether an S-Corp is worth it financially depends on a lot of factors, including how much you make, what constitutes a reasonable salary, your risk tolerance, and how your state taxes these different forms of income.
Had a windfall years ago and really regret not doing this.
I don't believe this is really true, would love to find some examples though.
Electricity, phone, internet.
If he worked at home, then part of his rent.
Travel if he worked at home and at an office.
Thats a huge tax deduction and I look forward to writing off my subcontractors from the tax I have to give to Uncle Sam.
if microsoft can get screwed by the FTC for bundling IE with windows, why can't apple get screwed for only allowing app store apps on their devices?
Microsoft was abusing retailers and system builders because those vendors didn't have an alternative option.
I agree the 30% is atrocious, but not likely illegal.
For instance, Apple made computers that were such sufficient substitutes for Windows computers that Microsoft chose to produce a version of one of the their core products for use on Apple computers.
That 30% cut got them 6 billion dollars in 2015.
Wal-Mart made $130 billion in profits in 2015 on $486 billion revenue, 27%. This is how stores work.
30% of the money goes to Apple for taking care of everything for you, money, hosting, servers, marketing, and more.
https://www.ftc.gov/tips-advice/competition-guidance/guide-a...
It's hard to see how Apple taking a 30% cut in their App Store meets any of the criteria.
Apple is free to charge whatever they want to play inside their walled garden. Lets say the cost of all the engineers, infrastructure & bandwidth to run the app store cost 30% of all the revenue in the app store. What right does the government have to dictate that Apple should run the app store at cost, or at a loss?
The line is a lot blurrier than that. For example, Bitcoin wallets were disallowed on the App Store... until after Apple Pay was launched when they suddenly became OK again.
And before Apple came along, to get your app published (J2ME days), you had to get a publisher who would take 70 to 80%.
For physical item retail, the creator would by lucky to get even 30% of the final retail price - wholesaling, transport, retailing, so on and so forth, they all take their own cut.
Edit: rogerbinns below has a much better list of what you get for your 30%
It's no mistake that the "golden age" of indie gaming has coincided with the availability of platforms like Steam and the mobile app stores. 30% might seem like a lot, but for many developers, it's probably much less than what the channel is worth.
I think one of the big "do's" from the article is very good advice: don't spend huge amounts of time working on an app and expect it to provide a return. The dev says 2 months of part-time work should be a target, and that seems about right to me as well. Beyond that you're just asking for negative returns if you value your time highly.
And now is going write a book and probably go on to become an "expert" and do consultation on how to successfully repeat a process that they themselves couldn't repeat in practice.
The transparency and information in the post is awesome, but I don't see any systematic path to success here, in what is the crap-shoot of the App Store. One-hit-wonders are everywhere.
Edit - They made 2.5 billion last year with nearly a billion in profit, so they may reach 10 million a day this year.
More interesting I think is to look at the average, where I very much doubt that the average developer makes anything more than a handful.
In Poland I would pay 19% linear tax + $50/month for medical and social insurance in first 2 years, $160/month after 2 years. Nothing more.
Articles like these are encouraging but skews the full picture.
For a game like this there are hundreds pieces of work with equal cost and complexity that get absolute no downloads in the app store.
This is a really insightful post, but at the same time, I don't even want to bother with all the Do's and Don'ts. See, I don't develop games. I have a total niche app product and Apple does exactly zero things for me and still wants 30%. I even drive the people to the app store through my website. Exposure? No. Payment handling? Could do this myself. New users? Not really.
Luckily, my web app makes 10x more money than the stupid app.
Also, like he said, don't complain, just deal with it. Saying they do nothing for you isn't entirely true, or you wouldn't have an app on the App Store.
I'm not complaining, but stating that I'm not happy with how things go. The only reason why it's "acceptable" to give Apple 30% is because they're the only game in town. If I gave another third party 30%, they surely had to bring a bit more to the table than what Apple is offering me (in my specific situation with a niche app).
If everybody shuts up, nothing will ever change – although expressing dissatisfaction probably won't change much either I guess.
It gives you access to its customers. That's not a bad deal for many.
I'll bite. The Romans, err I mean Apple have done nothing, except at least these:
* Maintains a user database including authentication, plus all the support costs (lost password support is very high)
* Payment handling (you dismiss it, but no one does it for free) including keeping up with tax authorities and legal systems in much of the world
* Almost unlimited (re)downloads for users to a reasonable number of devices. Bandwidth is cheap but not free.
* Backup and restore for application data. (You may not use it, but that functionality is available to apps without extra fees.)
* A curated walled garden including a review process. I'm sure your app is fine, but Apple keeping the dregs out and avoiding the place turning into a cesspool means users can be more confident about the apps and that halo effect helps all apps in the store.
* Mechanisms to extend your app such as IAP, and an advertising solution etc
* Access to a large user base, with reasonably fair rules that everyone has play by
* They make all the above work together
The case can be made that the benefits used vary by app, but in aggregate it isn't an unreasonable amount for them to charge. It is worth noting that competitors haven't done anything substantially different.
I can download an .apk directly from a developer if Google doesn't want to host it on the app store. I've done this, for example, with the Betfair app.
That's a pretty huge difference.
Maybe I can make my point more clear by saying what I expect from Apple: Let me publish an app and don't tell me how to run my business. I want to put up an app in store that uses external payments. Apple doesn't want this. Well, kind of, sort of. The App Store Guidelines section 11 are pretty clear on what Apple expects:
Don't charge people outside of the App Store, because we want a share of that pie. And if you do, we ain't gonna like it. We might approve your app, we might not. We might change our mind, too. Depends on how explicit you're selling your stuff.
And for a long time, it was simply not possible to offer apps that are paid for outside the App Store. And now, it's still very vague. You have to offer an app that also works without requiring a paid account.
Anyways, thanks for the input. I take this discussion to reconsider my position and think of a way how I can make this work. I must admit that Apple changed the rules over the recent months a bit. It's maybe a bit more flexible now.
It also isn't a bad idea from an incentives point of view. Apple make more money if their developers make more money. And the benefits accrue just over double to the developer than they do to Apple. Similarly developers being less successful also hurts Apple. At least the 30% cut means Apple have to keep earning it.
Remember that as a developer you can walk away, and support other platforms instead. You can avoid stores completely and do everything yourself. With rare exceptions, you are very unlikely to do as well.
I think this is exactly the point that gives me the bad feeling: If Apple really provided "the best service", people would buy their services from them and the price would be dictated by demand and competition (ironically, just like the price of apps in the App Store, which tends to go down over time).
But this is not how it works. People aren't free to choose which services they want to buy from Apple and whether they want to buy from Apple at all (if they want to be in the iOS playground). Apple forces their services on everybody. There is only a single package: Take it or leave it.
> Remember that as a developer you can walk away, and support other platforms instead.
Theoretically it's true, but ultimately, the customer decides. Although I put a lot of effort into a very nice mobile-first web design, which will hopefully render the app unnecessary in the long run. Together with the "always online" trend and increasingly better mobile internet connections, this might work out.
Thanks for your thoughts, I appreciate them. I don't want to sound as if I'm only arguing my position here. I'll think about the stuff you said.
There is another way to look at Apple's cut, even when you as a developer consider it unfair. For the end users it establishes a certain amount of credibility. Apple places certain hoops developers have to go through as well as taking some money. An end user is going to find a solution that can do all that far more credible than one that can't.
It is different now, but a few decades ago one of the functions of advertising was credibility. If a product was advertised, it meant there was an aura of success about it (the money to advertise has to come from somewhere and someone has to stand behind it) and that success was sufficiently great to spend some of the revenue on ads. The bigger the ad spend, the more credible/success there is perceived to be. Everyone will be a lot more skeptical about something that can't even afford to advertise, or does so "cheaply".
The same thing is happening with university education. Someone attending one, spending real money and persevering is more credible than someone taking a few online courses, even though the actual education they could get is similar.
Circling back to Apple, the app store is already saturated, and I suspect Apple will be more than happy to raise the bar some more. The most credible apps are what they and the users will want. Imagine they added a section for folks like you "these apps use none of our services and we take no cut from them". That section would smell like failure, not success.
I think easier money can be made with buying deep in the money call options on 3x versions of the S&P 500 and the bond market, which is what I and my dad have been doing for awhile with success. Don't need coding skills or luck to make money with the S& 500
And it's a no-win situation - how do you prove how long you've been working on a project? How outraged would people be to be back-taxed? After all, if you want to spread your taxes over previous years, you now need to pay more taxes for those previous years. And how do you differentiate between a 'lucky windfall' earner, and someone who has simply engaged in a lucrative new career (such as students moving into professional careers)?
The difference in marginal rates is noticeable, but not crippling, and this 'lucky windfall' pattern of earning is not very common.
The black hole in America is a pretty big one, is just that the taxes pie is big enough and there is enough for both the black hole and the good projects, but the pie is shrinking and people is starting to get angry and to make stupid decisions...
He worked on this together with the original creator.
Contrary to popular (conservative) belief, when you go up to a higher tax bracket you are not taxed on your entire income at that rate. It is only the amount in that bracket that is taxed at the higher rate. His taxes should be $48,663 not $91,245. If he was already making above $183,250 from other income then, yes it would be taxed at that higher rate. Although you can't distinguish between the income that was taxed at a higher or lower rate, so it sounds like he is misrepresenting his tax burden either way.
He does mention for the second year that he is "still at 33%" because of other contract work, so it looks like he just wants to over represent the taxes of someone pulling in a certain amount from an app.
EDIT: Oh, later in the reddit thread he does mention he "saved a bit based on marginal tax rates". A bit, my ass. He paid about half the 33% he claimed -- $42,000 LESS than the $91,245 claimed based on that income. Saying the other income is the income on which he saved the marginal tax and that he had to pay a full 33% on the app income is just disingenuous.
Like "How to start a startup" by YC