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Full Analysis of iPhone Economics: Bad News?

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Re: Full Analysis of iPhone Economics: Bad News?

#21

Post by 1gor »

Why does the author assume normal distribution (bell curve) for apps' revenues? In reality app sales are similar to those of books and follow power law distribution. A few bestsellers will account for large chunk of overall app sales. Then there will be a very long tail of unprofitable apps.

Therefore all of his numbers and his final conclusion are wrong. People do not write iPhone apps in order to achieve some sort of 'average' income. They hope to strike it lucky and get a disproportionately large payoff.

Re: Full Analysis of iPhone Economics: Bad News?

#22

Post by wallflower »

jroes wrote: post #4
illumin8 wrote: post #3

His entire analysis is basically taking the revenue total for all apps, divided by the number of apps, and saying each developer only makes an average of $3k per year. Sorry, this is not a good analysis. Some people give their apps away for free. Some quality apps make millions. This doesn't mean the opportunities are not there. A similar analysis could be done of PC shareware software authors, with similar results.

He has data that indicates 73% of total apps on the store are paid. He then bases his remaining calculations on that paid app number.

Count of total apps paid compared with Count of total apps free has probably very little correlation with app store revenues. The best case (equal sharing) isn't realistic, as we all know that some apps generate hundreds of thousands of dollars over their lifetime.

> So the best case of how few apps get to divide that 1.43 Billion dollars over the past 2 years, is 164,000 actual apps

Re: Full Analysis of iPhone Economics: Bad News?

#23

Post by briancooley »

roel_v wrote: post #16
briancooley wrote: post #14

"Full Analysis" seems like a bad title for this post. First off, in app purchases are not included. Secondly, his argument against free apps is simply that the reach is smaller than other platforms. Finally, he acknowledges that the median paid app get fewer than 1000 downloads. The 25-50K number for development costs is way off for the median app. Something like $5K-$10K is more in line for most of the apps I'm seei…

None of this refutes his point, which is that developing for iphone is a suboptimal use of marketing/advertising dollars. Even if you'd assume his numbers had a 100% error margin, you still couldn't get iphone apps to work.

His analysis of free apps doesn't really do that segment justice. He totally ignored the mobile ad network space and addressed only a portion of what the market seems to be by focusing on Hilton and Walgreens. I'm not sure those cases are worth refuting.

Re: Full Analysis of iPhone Economics: Bad News?

#24

Post by Retric »

Manfred wrote: post #17
rpledge wrote: post #12

Interesting analysis, but I'd like to see the numbers for apps that are actually maintained and marketed vs. some guy who hacked up an app and never fixed any bugs or improved it based on feedback. I suspect the number get better if you filter out the crappy unmaintained apps (but of course, this isn't an easy data set to obtain)

I agree, there are a lot of apps that didn't take the developer more than 5 hours to put together. Earnings made by well made apps is probably much higher.

Yep, Half of all developers will earn less than $682 per year assumes the average developer produces 1 app. Also, most apps revenue falls off over time so a more realistic number is 80% 682 * 2 probably 1091$ in the first year and 272 in the second.

If someone is churning 20 in a month and then getting 1364$ * 20 = 27,280$ over two years for one months work that's not bad.

PS: The average app has probably only been out for 1 year so it may be reasonable to double these numbers. Basically, anything released yesterday is unlikely to have generated much revenue, averaging ALL apps over a 2 year earning period is silly.

Re: Full Analysis of iPhone Economics: Bad News?

#25

Post by jasongullickson »

mgkimsal wrote: post #11
pvg wrote: post #8

Earlier quoted context omitted.

It doesn't really make much difference, for the purposes of his analysis. Let's say a typical app costs $1500 to develop. If his other numbers are right, that typical app would take about 2.5 years to break even. His argument is that, on average, developing an iPhone app is, in itself, a fairly dismal economic proposition.

However, making, say, 80, spending time promoting them, and perhaps having a few of those be moderate successes may make this a much more viable option. I have a friend who's pursuing this option of making multiple apps (not sure he's to 80 yet, but will likely surpass that in the next year). I agree, the chance of one app being the runaway success that affords one an early retirement is pretty remote, but the tech p…

You got it.

You can treat apps the way the music industry treats songs with the ambition that 1 in 100 is a "hit", and cover your losses with the success of the few...

...or you can provide a unique app that serves an existing need and charge a reasonable price (far above the typical app store prices).

There are countless examples of the latter, and not only are they successful financially but they serve to raise the standards of quality and compensation for the other type of participants.

Re: Full Analysis of iPhone Economics: Bad News?

#26

Post by alttab »

1gor wrote: post #21

Why does the author assume normal distribution (bell curve) for apps' revenues? In reality app sales are similar to those of books and follow power law distribution. A few bestsellers will account for large chunk of overall app sales. Then there will be a very long tail of unprofitable apps. Therefore all of his numbers and his final conclusion are wrong. People do not write iPhone apps in order to achieve some sort…

Where are you getting the normal distribution information from?

"This is the average, remember, it is not the median. The average skews too high because of the long tail. There are a few who make several millions, who distort the average number, so it is not true that half of iPhone App Developers earn more, and half less, than $3,050 per year."

He references the long tail you mention, and describe exactly what you mean about some people making a lot, but because of distribution and how users find and download apps - its more akin to say - the lottery - than actual market strategy.

Some will make money. Most of them will be development/contractor shops that charge out-the-ass for mobile apps to companies who want a "mobile presence." These medium to large companies won't realize that the money they are losing isn't worth it until its happened a couple of times. Then they'll stop coming back.

That said, independent developers making money on that app store directly is a complete crap-shoot. Very few get rich, lucky ones make a very modest living, more get a hobbyist return, most get dick - and some don't even get the money they did earn from Apple.

Therefore all of your rebuttal and final conclusion are wrong. How many books have you written on the subject?

Note: The reason he uses a normal distribution is because it would actually help DISPROVE his thesis, a normal distribution would make it easier for an app developer to make money, not harder. When the normal distribution showed a shitty return - he reminded us it was actually worse.

Re: Full Analysis of iPhone Economics: Bad News?

#27

Post by powrtoch »

1gor wrote: post #21

Why does the author assume normal distribution (bell curve) for apps' revenues? In reality app sales are similar to those of books and follow power law distribution. A few bestsellers will account for large chunk of overall app sales. Then there will be a very long tail of unprofitable apps. Therefore all of his numbers and his final conclusion are wrong. People do not write iPhone apps in order to achieve some sort…

People play the lottery for the same reason. The point (don't waste your time) still stands.

Re: Full Analysis of iPhone Economics: Bad News?

#28

Post by alttab »

briancooley wrote: post #23
roel_v wrote: post #16

Earlier quoted context omitted.

None of this refutes his point, which is that developing for iphone is a suboptimal use of marketing/advertising dollars. Even if you'd assume his numbers had a 100% error margin, you still couldn't get iphone apps to work.

His analysis of free apps doesn't really do that segment justice. He totally ignored the mobile ad network space and addressed only a portion of what the market seems to be by focusing on Hilton and Walgreens. I'm not sure those cases are worth refuting.

Did you even read the entire post?

Re: Full Analysis of iPhone Economics: Bad News?

#29

Post by pvg »

1gor wrote: post #21

Why does the author assume normal distribution (bell curve) for apps' revenues? In reality app sales are similar to those of books and follow power law distribution. A few bestsellers will account for large chunk of overall app sales. Then there will be a very long tail of unprofitable apps. Therefore all of his numbers and his final conclusion are wrong. People do not write iPhone apps in order to achieve some sort…

Why does the author assume normal distribution (bell curve) for apps' revenues?

He doesn't. He tries to estimate the median precisely because he doesn't actually know the distribution although in several places he specifically mentions that it's likely not 'normal'. He's going for the median because it's more informative than the average, given the uncertainty about the distribution. It's a little moot, anyway, since the average figures are pretty lousy and given the most likely distribution, the median just makes it worse.

Re: Full Analysis of iPhone Economics: Bad News?

#30

Post by adolph »

"former Nokia executive" [number froth] "What I have been telling my readers and followers and this blog and in my books, that the real money is in true mass market services like SMS, MMS and WAP. That is where the REAL money is."

This guy makes a strong case for skating to where the puck used to be.

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