Most app developers aren't even breaking even, but still keep going

Most app developers aren't even breaking even, but still keep going

Summary: The arrival of mobile computing hasn't altered the laws of economics for developers, a new survey confirms.

TOPICS: Apps, Mobile OS

First, the bad news: most app developers aren't seeing a dime from their creations. Now, the slightly better news: with some marketing and reaching out to advertisers, there are revenues to be made.

iPad photo by Joe McKendrick 5-2013
Photo credit: Joe McKendrick

App Promo (who, as their name suggests, is in the business of helping software authors bring in revenues from their apps) recently conducted a survey of 365 app developers and came up with a bunch of sobering findings, displayed in their infographic, below.

Things are getting tougher out there in the app world. The survey finds that the majority of respondents (67%) indicate that they are not yet breaking even with the revenue they are generating with their app compared to the costs of operating it. This is up from 59% in a similar survey conducted a year ago at this time.

In addition, 68% of survey respondents indicated their app has earned less than a $1,000 since launch, with 29% of the respondents indicating that their app has yet to generate any income at all.

It appears that the direct-payment model for apps is collapsing as well. There has also been a huge shift away from attempting to collect revenues directly from users. Sixty-three percent say they are providing their apps for free, up from 35% a year ago. 

It probably shouldn't be too surprising that many app developers are struggling -- the market is glutted, and app stores are bulging at the seams with hundreds of thousands of look-alike apps. A few years ago, anyone that came up with a simple app (such as turning an iPhone into a flashlight) stood out. Now, it's almost impossible to be original, and then to be heard above the ruckus. In fact, the survey shows half the developers complain that it's a challenge just to make their apps discoverable.

The survey's authors also identified some very successful app developers in the bunch as well. What do they have in common? Most have been in this game for three or more years; and most have some type of marketing budget, usually about $1,000 a month. And they're more likely to be iOS app developers versus Android (68% versus 45%). Oh, and some have earned more than $500,000 in total revenues over this multi-year span.

The takeaway here is the arrival of mobile hasn't altered the laws of economics when it comes to software publishing. As developers have learned over the decades, you can have the most sophisticated and elegant application ever created, but if it isn't publicized and marketed, it will remain on the shelf. 


Design+Illustration: Menk Andemicael

Studio: Nicole Chiala

Topics: Apps, Mobile OS

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  • Interesting case

    Competition is good for consumers and very challenging for the suppliers - in the case, the app developers.

    Develop the software and then spend about $1000.00 a month on marketing, which could be only one of the seven important parts of marketing, is also very interesting and disheartening.

    I think what the app developers need to, firstly, do a proper marketing research, that helps them to understand if there is a demand for what they want to develop. If the result indicates that there is a demand or a need to be satisfied, then they should start developing the app.
  • competition is tough when incremental cost is zero

    One of the odd things about software, is that for many applications, the cost is mostly in initial construction, once released, it doesn't have a cost of good sold that is related to its distribution count. Create a plastic widget, each one needs some packaging, shipping cost, and a tiny cost for the extruded plastic itself, so if your competitor goes out of business or ends production, there are no more of those plastic widgets. OTOH, as long as we're not talking about some game with massive art requirements, Bob the Bored can write an app to do job A, release it free-add-supported, or even just free, and that app will never go away; Bob can get completely bored of it, or uninterested, and it will still be there, and you will still have to compete against it.

    This puts a bottom of zero on the price that your competitor is charging. Thus the market will always be driven towards zero purchase price apps. Google model here eventually wins through the thousand tiny cuts strategy.

    nb. I prefer to buy apps, but I'm a professional developer and don't begrudge other developers their pay when they produce stuff *I* like/use. I do think I'm in the minority though....
  • Most apps aren't worth anything

    As a lifelong professional developer of enterprise software I am not surprised that folks writing trivial entertainment apps for phones aren't making a lot of money. Why would anyone think they ever would?
    • A little attitude

      ... but TRUE nonetheless.
    • Not the whole story

      True, but these apps make it harder for consumers to find more serious apps. That is part of the problem, as the article indicated. It's really hard to get people to find your needle in a hay stack.
  • Wow! How times don't change!

    For at least 50 years, economists have known that most businesses do not make profits. Within any given industry, most businesses struggle to break even. This is true now, and so far as anyone knows, has always been true, since the beginning of time. App-Promo's figure for non-profitability of around 60%, give or take, is entirely in line with previous research - and indeed with ATO figures.

    I assume that the only reason that anyone is amazed by App-Promo's figures is that some people look at the profits recorded by the biggest and most profitable companies, and imagine that somehow they are average. Sort of like looking at professional footballers, and imagining that they are typical, average examples of Aussie males.
    • Soccer is for little girls

      Football is what they play in the NFL
      • AnalojJoystick

        What is called soccer in the US is called football by most of the rest of the world. Any game where a player can pick up the ball and carry it is not real football.

        Since you think real football (soccer) is for girls, then you haven't been taking note of how serious the game really is.
  • Creating Apps Just to Create Apps

    There is money to be made if you are making games sure, we all know about Angry Birds but not every app is Angry Birds. The real money when it comes to making apps is in creating private b2b and enterprise level apps for other companies. Creating an app for the market place is just an exercise in proving you know what you are doing. M2M apps will be a big money maker in the future as M2M and the "Internet of Things" starts to really take off. Everything else is just an exercise in proving you know your way around...

    Unless you have the next greatest idea for a game...
    Aaron Shapiro