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Comment by webwright | Hacker News Reader

This is very very true. Their overall top grossing US rank (on iPhone) was stabilizing in the 500-700 range (after generally declining for months[1]), which equates to tens of thousands of dollars per month from my understanding. I'm sure they made some from their Mac app as well. This is GOOD MONEY, don't get me wrong. But you'd have to really love self-employment to take this over a $2M payout and a $200k comp package (stock, benefits, etc).

If I were to guess, these guys were also buried in support from paying customers who felt entitled to it. What are the economics of technical support for a $2.99 app?

[1] Source of the rank data-- requires an account but worth it if you're interested in this stuff: http://www.appannie.com/app/ios/492573565/ranking/history/#v...

Here's a screenshot if you don't want to create an account: https://skitch.com/webwright/eenji/sparrow-rank-history-app-...

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Mac app had a run rate of over $1m its first six months, per this interview: http://articles.businessinsider.com/2011-08-26/tech/30036420...

Who knows what was happening internally, but on the surface: strong team of 5, $1-1.5m revenue their first year, tremendous reputation and another product in the pipeline. What more could you ask for to make a long term go of it?

The article says they made "more than half a million" in the first six months on the Mac App Store, not $1M. Since then, they've consistently been in the Top 50 on the Mac App Store, so the numbers have likely sustained over time.

$1-1.5m per year is a realistic estimate, IMO. Of course, if Google was offering the rumored $25M, taking a 25x payday is pretty hard to resist.

Talking about run rates in the first 6 months is iffy. The run rate difference between #5 and #26 (where they are now on the Mac App Store) grossing are huge. Order of magnitude huge. How much of that $500k was when they were featured and making their initial splash? What's their daily run rate now at #26? What's the trend? I'd wager it's been down steadily if it's anything like the iOS app store.

I don't know about the Mac App store, but on the iPhone, their daily revenue was in a state of decline. There is SO much gravity in the app store. Stuff falls-- it's the natural state for almost all apps unless you have an ARPU or some marketing hack to counteract it.

I'm not saying they were in a crappy position-- though I'm not sure that a $2.99 / $9.99 email client is a good business bet for 5 engineers. Email is complex/weird and users will want support-- with a LTV of $2/$6, it's really hard to afford to support them well. You can't afford marketing. You're competing with $200k comp packages for your team.

The Mac App Store has a lot less competition and high quality apps have a lot more staying power compared to the iOS App Store. There are fewer apps to crowd you out of the market, and the high quality ones (of which Sparrow definitely qualifies) stand out a lot more.

As a matter of economics, $25 million in one lump sum is always better than the same $25 million spread out over more than one year.

With the lump sum, you can do whatever you wanted to do, now. With the "annuity", you must continue earning the annuity each year, which significantly limits your options.

What does "stabilizing in the 500-700 rank" mean?

There's a Top 1000 Grossing Apps list for iPhone that is track-able. They are in that list in the 500-700 range. Here's a screenshot of their graph so you don't have to create an appannie account: https://skitch.com/webwright/eenji/sparrow-rank-history-app-...

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