The Majority of Today’s App Businesses Are Not Sustainable

The most I ever made was 1m over a year on 7 BREW apps we made. That's right, those old dead handsets had only 20-30 apps in their store and we owned about 20% of the market.

What made that possible is that the ecosystem was so bad and it was so hard and expensive to get apps reviewed and built for multiple handsets, you could make money as long as you just got on the device.

The relative ease of launching has made a plethora of nice but unprofitable apps on the other ecosystems... And it points to what happens in any work economy when the barrier to entry becomes hobbiest-level easy. Happened to photography, writing/publishing, and others. There are too many people relatively skilled enough to do an average job and give it away for free for anyone but the best marketed and connected to make money.

From their perspective, the purpose of your work is to enrich their platform. The difference is in the distribution of payout and work conditions. Rather than having a stable 100k salary at said company, you have the chance to earn absolutely nothing, or be an outlier and beat the 100k. Is it worth it, by expected value? Well, according to the article numbers,

Expected Monthy Payout = 24%0 + 23%50 (using half of max of ranges) + 22%500 + 19%5000 + 9%50K + 3%200K (using double the greatest lower limit)

Which gives an expected monthly payout of $11,600. Not bad! I think 30% of this goes to the respective platforms, so an expected yearly salary for an app developer might be something like $97,500. And I believe this matches up fairly well with what companies are willing to pay app developers (on average it seems higher, aside from maybe in the Valley).

What's interesting is the distribution of payoffs into the "haves" and "have nots". There are few app developers pulling that $100K or so salary. Instead, two thirds of everyone is below poverty, and a select group are killing it. This seems to be the new modus operandus of the tech economy. The implication is obvious: extreme economic inequality (especially as non-tech jobs become less relevant), which by necessity will increase social inequality.

I'd also expect that the majority of app companies aren't sustainable. But from the people I've talked to, it seems like a lot of apps are being done as something between a hobby an a side business.

A lot of the people you see selling art and jewelry at fairs work like that. They don't expect it to be their full-time job; it's a fun way to make a little extra cash. So what looks like a non-living wage can be perfectly sustainable as long as you're doing it to supplement other income.

Writing software is more profitable than writing prose (or poetry), because fewer people can do it, but at the end of the day the economics are the same: the fruits of your labor are easily copied, so making something that 10 million people read or use is not inherently much more expensive than making something 100 people read or use. Under those circumstances, it's easy for everyone to read the best content, and use only the best apps. People's differing tastes, need for variety, and imperfect awareness of their choices means the authors of the "second best" thing aren't completely screwed in either case, but it's still pretty close to winner-take-all.

(Also, social proof—people's tendency to use what other people are doing as a proxy for quality—amplifies winner-take-all tendencies, even when there are no obvious network effects.)

My thoughts on this:

1) Just about everyone is "interested in making money" from their apps. I'm not sure how they're filtering the developers in the survey, but I'm willing to bet the amount of effort put in, and the actual methods used to "make money" differ wildly among those developers. Apples to oranges.

2) 5-10k per app per month for a single developer with a full-time job doing this in his spare time is pretty good. For a 300 employees company, not so much. Similarly, millions a month will sustain a large company and make an individual developer extremely wealthy. What are we comparing?

3) I'll go out on a limb here and say that games make more than any other category on the app store. They also tend to require a higher budget and production value: better graphics, sounds, a storyline, etc... Maybe the 100 flashlight / todolist apps competing for the same spots don't make much money but they also cost nothing besides a weekend of work and the $99 / year ADC membership. I also wouldn't be surprised if most of that "1.6%" were game developers. Lumping every app together and trying to get stats out of it doesn't tell us anything about how much the developers are spending to get those apps out.

4) Obligatory plug: Storm8, the company I work for, is recruiting. We're a mobile games developer (on the App Store we tend to be better known as TeamLava) and have been profitable and fully bootstrapped for over 5 years now through rapid growth. We're all very passionate about creating new games and refining our existing ones and have a lot of interesting projects to work on. We're looking for developers interested in learning more about the mobile games industry, no experience required. Email is in my profile if interested :)

"Monument Valley costs $6 less than it's own soundtrack. That’s how dysfunctional app pricing is."

https://twitter.com/gregmaletic/status/493430279122350080

It really can't continue like this. What comes after, who knows.

Haven't they always been? They're mostly games and toys. The number of actual tools I have installed is really really low, I have a half dozen additional apps because they're currently fashionable for communication. Everything else on the store is either serving a need I don't have, or ephemeral nonsense.

I'd even lump things like pandora in with the ephmeral as disposable. I got a new smartphone a few months ago and haven't even thought of installing it until writing this post. So even if the company pandora will be around for decades, I've reached the point of diminishing returns from installing apps before I get to them.

"Game design is a highly creative art that takes a lot of practice. Angry Birds was creator Rovio’s 52nd title. It is therefore not surprising to find that those who have shipped a lot of game titles are the most successful. The 3% of mobile game developers who have shipped 50+ titles are nearly 9 times as likely to be earning over $50k per app per month than the 62% who have only shipped between 1 and 3 titles."

I was quite surprised that is was the 52nd game! Wow. That is a lot of persistence!

That sounds like great odds to me! Especially given the amount of garbage in the App Store.

HN often contemplates the power law, so it's natural a developer might have one app which is very successful (Rovio released 51 apps before releasing Angry Birds), then another app which is half as successful, then a third app half as successful as the second app, and so forth. This analysis doesn't think in those terms though, they are more of the idea that every app released by a company will be more or less as successful as the other ones it releases.

Also the report sets the bar fairly high. It calls people who make $9000 per app per month "strugglers". I'd be happy with one app making $9000 a month, and wouldn't be struggling making the resulting six-figure salary. Even if I had two or three apps making $9000 a month each I'd be considered a struggler. This isn't really struggling. Maybe for a firm with venture capital that was expected to grow quickly it would be considered a failure, but not for a bootstrapped developer, or partnership of developers.

Ideally you have a profitable business, and the app is just one way for the customer to access your business. Then the app doesn't need to be sustainable in itself.

Apple did it. They had better undo it if they don't want their iOS devices to be nothing but ad display machines or in app purchase tricks.

I think these percentages are not low at all. In fact, they're almost pretty good. This is how success is distributed in almost any profession.

I cannot imagine an app charging and being successful right off the bat unless they have a platform for advertisement (something like Vesper and Daringfireball.com) or it's made by a very prominent figure/company. The reality is there are 10 apps for every idea in the app store (in 2014) and the best app likely won't win market share if they charge from the start.

  Half (50%) of iOS developers and 
  even more (64%) Android developers
  are operating below the “app poverty line”
  of $500 per app per month.

Also, some people will just write an app as a hobby, or to pad their resume. At least for the App Store, if you make $9 per month, you've already paid off your yearly subscription fee of $99, and can safely leave your apps up forever, even if they are below the "app poverty line."

I would be interested to see what percentage of developers who are actually trying to make a living from their apps are succeeding or failing.

In gold rush times, the ones selling shovels get the real money.

Plain old bar charts might be boring, but they would have more clearly communicated the message without all the extra distractions. They would also allow the graphic to use fewer code and require fewer text (legends could be omitted). At least they did specific actual graph values in the graphs. The area graph shows how one color can be effective when the graph contains only one type of data element.

Lesson here is to think carefully and make conscious choices about how you communicate your message. It's true in pitching an investor, pitching a customer, or presenting to an audience. Make sure your message gets through. Otherwise you just have a bunch of graphs dropped on a page and the reader has to search for what you're trying to say.

Also, hire a designer. You'll be happier.

I've made some decent money off one of the apps, but definitely not enough to live on for any amount of time. Still i consider my efforts a success, because I did it as a supplemental activity to my full-time work. If I was trying to make a living, I'd probably invest in marketing, hire a designer and/or co-developer, and monetize more heavily.

Seriously, even email sucks on mobile phone let alone anything else.

Why yes, we've known this forever. It is why it is risky. :/

That is the nature of those kinds of businesses.