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Full Analysis of iPhone Economics: Bad News?

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Re: Full Analysis of iPhone Economics: Bad News?

#51
I think a lot of us are instinctively reacting negatively to this article, and I don't think it is because it's news we just don't want to hear. There is one point that the author fails to take into consideration: future growth.

Anyone who has used iPad or iPhone or an Android device can tell that devices like these, not Symbian or WAP or Brew or whatever, are the future. Those other platforms might catch up, but for now they lag abysmally behind in terms of user experience. And so while they might outnumber iOS and Android for now, that numerical advantage can not last.

Walk around a Y-Combinator event (or CES, or E3, or anywhere else where leading edge alpha geeks congregate) and count phones. I'd be willing to wager a lot of money you'd see a bunch of iOS and Android devices, a few blackberries, and a smattering of ancient nokia and samsung free phones held by users who "just want to make calls" (and thus aren't going to be reachable by any apps at all, WAP or Java or otherwise).

So, yes, a company developing an app today for iOS or Android isn't going to make their money back on the platform as it stands in any reasonable amount of time. But a company or developer who positions themselves to be on top of a platform that is rising meteorically (and will displace literally billions of feature phones over the next decade and a half as moore's law drops silicon costs by a factor of 1000) is going to do well.

Hype is about future expectations. When expectations rise above exponential growth in our industry, those expectations usually turn out wrong. But the mobile market has a current penetration of over 3 billion people and I'll wager practically every phone on the planet will be a "smartphone" in under 15 years. That's a lot of headroom for growth.

Re: Full Analysis of iPhone Economics: Bad News?

#52

> Half of all developers will earn less than $682 per year. Do you still think this is a good business idea? I'm one of those developers. And do you know why? Because it's not my business. I wanted to make some apps. I didn't put in a huge effort. For the numbers to mean anything, you should filter out the 90% (or whatever) of apps that aren't intended to be part of a serious, profitable business.

The numbers, assuming his inputs are reasonably accurate, still mean something - most people trying to make money selling iPhone apps don't make a great deal. It's easy to distinguish between apps that are trying to make money and apps that aren't - apps trying to make money are not free. The sort of filtering you want is next to impossible - you're asking that only the apps that are trying to make money but really mean it are to be considered.

He doesn't address something that maybe you're touching on, indirectly - unlike the markets where someone makes zillions on SMS voting for a popular TV show or selling Tetris to feature phone users, the iPhone app market is very accessible to J. Random Hacker. Compared to the previous age of mobile development, it's a major improvement - same device (more or less), same screen size (more or less), same framework, no complicated permission needed from the carrier, payment taken care of, etc, etc. Plus, you never hear of anyone saying they program J2ME or BREW or Symbian apps for fun.

Re: Full Analysis of iPhone Economics: Bad News?

#53

I'm not sure I buy that a typical iPhone app costs $35,000 to develop. Considering the simplicity of most apps, combined with the fact that many apps are effectively the same program with some content alteration, it seems like a really inflated figure.

I agree. It obviously possible to spend that much, but many apps could be a damn site cheaper (you can put together a lot in something like Lua/Corona in a few days). It reminds me about from in 2000, people were saying the average e-commerce website costs $250k-$1M to develop. I think it depends who you ask. If you ask the average BigCo, how much it costs, you might get that answer, but the average hacker will probably give you a very different one.

Re: Full Analysis of iPhone Economics: Bad News?

#54
post #52

> Half of all developers will earn less than $682 per year. Do you still think this is a good business idea? I'm one of those developers. And do you know why? Because it's not my business. I wanted to make some apps. I didn't put in a huge effort. For the numbers to mean anything, you should filter out the 90% (or whatever) of apps that aren't intended to be part of a serious, profitable business.

The numbers, assuming his inputs are reasonably accurate, still mean something - most people trying to make money selling iPhone apps don't make a great deal. It's easy to distinguish between apps that are trying to make money and apps that aren't - apps trying to make money are not free. The sort of filtering you want is next to impossible - you're asking that only the apps that are trying to make money but really m…

> [all] apps trying to make money are not free.

No, 3 of my 4 apps are paid, even though I'm not making a serious effort to make money. Why shouldn't they be? I don't mind making a little money.

Just because filtering the numbers to get useful results is infeasible doesn't mean we should pretend averages across the entire store mean anything for a person who sets out to build an app store oriented business.

It reminds me of all the psychological studies that use inadequate controls just because adequate ones for what they want to do would cost trillions of dollars. Then they claim to have done legitimate science. But the standards of science don't lower themselves to what data we can easily get.

Re: Full Analysis of iPhone Economics: Bad News?

#55
My main issue with this article is that the author assumes that all developers operate equally. He averages the individuals who build apps in their spare time and might make thousands of dollars as 'extra' income, with the large app companies who spend tremendous resources on building apps that get high returns. When he crunches his numbers, he gets results that are probably very far from the actual reality of things.

Re: Full Analysis of iPhone Economics: Bad News?

#56
post #28

Earlier quoted context omitted.

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?

Yes, I did. What I was expecting to see for free apps was something along the lines of using, say, AdMob metrics (http://metrics.admob.com/) and his estimate of the number of free apps to come up with some rough idea of what the average iPhone ad-driven app makes as revenue. That would have been more in line with the section of the post about paid apps.

Simply saying that targeting an iDevice leaves out 97% of the total population might be meaningful to an advertiser trying to gain a wide reach, but it means less to a developer, who is mostly interested in 1) getting an app installed on the device and 2) getting impressions. The fact that the average iPhone user has downloaded 80 free apps is a good thing for a developer.

Re: Full Analysis of iPhone Economics: Bad News?

#58
It's interesting that he's a big business guy. I would restate his title as: "the Apple store is for suckers or smallfry, if you're a big company."

And, he's right. Big companies do take $50k+ to create mobile apps. Big companies do have much better things to do with their money; they can add far more value at greater scale. Of course, Jane developer might not be in the same boat.

Another interesting confounding variable: he clearly conceives of developers as 'one-app' developers. And, he's right that this doesn't pay on the apple store. There is just, frankly, some randomness in which apps tip on the store -- most developers have figured this out already, and of course Apple gives links so that developers have an easier time cross promoting.

Re: Full Analysis of iPhone Economics: Bad News?

#59

I thought it was already understood that the model of "create a $1 app and sell 10k of them per month" was long over. The App store is still a relatively new market, so people will continue to learn how to be successful on it. I just got an iPad and started using the App store for the first time in my life and guess what? Out of the 5 things I wanted to use the pad for, 3 of them didn't exist at all. There is plenty…

Care to share what those 3 things were you want to do but can't find apps for?

Re: Full Analysis of iPhone Economics: Bad News?

#60
I'd have preferred to see a more detailed breakdown of apps. It may be a terrible market for utility apps. Or, for apps that are more feature than product. How many apps are truly products with solid business models? How do these apps do?

Or, how does the picture look for games? Especially now that game developers can embrace a virtual currency / goods business model. They can get all the distribution benefits of being a free app while still making (potentially much more) money over a longer period of time. Or, do these apps not count as apps because they're too close to the web-based games that are doing so well on Facebook?

If you're a developer, looking at industry-wide numbers is good, but it's better to research the apps in the niche you plan on entering.

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