Think your app is the road to riches? Chances are you're very, very wrong

Think your app is the road to riches? Chances are you're very, very wrong

Summary: The proportion of apps that actually make money can only be seen with a microscope, according to analysts.

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Don't mistake the number of mobile apps out there for a sign there are profits to be made, according to analyst firm Gartner, which is predicting only a tiny minority of apps will end up as financial successes.

If you're building a consumer app in the hope of finding riches, think again is Gartner's advice. The company is predicting that through to 2018 a mere 0.1 percent of apps will fall be considered a financial success by their creators, with free apps set to reign supreme over the next few years.

The shift towards free apps, supported by either in-app advertising or in-app payments, has to a large extent already occurred, but the trend will accelerate due to the sheer number of apps available.

With Google Play and Apple's App Store now home to around a million apps each and hundreds of thousands more being made each year, consumers are only going to find it harder to separate the wheat from the chaff. One common response from developers to the problem is making more apps free.

Free apps already dominate downloads, according to Gartner's figures, but are on the rise compared to paid-for apps. In 2013, free apps accounted for 91 percent of 102 million downloads, and are expected to climb to 94.5 percent of the 225 million downloads made in 2017.

The hunt for cash gets even harder amongst the small percentage of paid-for apps that are downloaded each year — Gartner analyst Ken Dulaney noted that 90 percent of such apps are downloaded fewer than 500 times per day, generating less than $1,250 a day for their makers.

"There are so many applications that are free and that will never directly generate revenue... This is only going to get worse in the future when there will be even greater competition, especially in successful markets," he said in a statement.

That apps aren't considered a success financially doesn't necessarily make them an out and out failure though. As Gartner notes, there are thousands of apps that were never intended to turn a profit, namely apps by retailers designed to generate loyalty or gather data about their customers to improve promotion targeting, apps from government agencies to raise public awareness, and gaming apps, which have increasingly favoured in-app purchases, which Apple began supporting in 2009.

And while today paid for apps still generate more revenue than apps that rely on in-app purchasing or advertising, Gartner last year forecast that revenue from in-app purchases will surpass paid-for app revenues by 2017.

Since the chances of an app directly delivering financial success are minute, Gartner advises developers in pursuit of money from their apps to thoroughly assess the concept, costs and opportunity of their creation.

More on successful app-making

Topics: Software Development, Mobility

Liam Tung

About Liam Tung

Liam Tung is an Australian business technology journalist living a few too many Swedish miles north of Stockholm for his liking. He gained a bachelors degree in economics and arts (cultural studies) at Sydney's Macquarie University, but hacked (without Norse or malicious code for that matter) his way into a career as an enterprise tech, security and telecommunications journalist with ZDNet Australia. These days Liam is a full time freelance technology journalist who writes for several publications.

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14 comments
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  • What a stupid article

    The reality is, there is good money in apps. If, you know, you actually make an app people want. Throw a piece of garbage out there that nobody wants and, well, duh, you won't make any money. All Gaertner has proven is that Theodore Sturgeon was right: 99% of everything is crap.
    baggins_z
    • Developers acting stupid

      According to the article 99.9% of apps fail. This is appalling. You would think ISVs and other developers would fight this trend. Instead they act like lemmings, and still crank out software for nothing.
      P. Douglas
    • Not really so stupid

      Agreed: There is good money in GOOD apps that people actually want.

      Agreed: There is a lot of garbage out there.

      Agreed: Garbage no one wants doesn't make anyone money.

      But that's an incomplete view of the article.

      Part of what consumers WANT is for the app to be free, and the data cited in the article indicates that demand for free apps is increasing.

      In other words: there is good money in good apps, but the money may be shrinking.
      Tom007
  • Let's do some math...

    You quote a study saying that 90 percent of paid apps will generate less than $1,250 a day for their makers. According to my calculator app, $1250 per day is $456,250 a year. To me that says "Start cranking out the apps!"
    bob362
    • Fuzzy math

      If the author meant $1,250 per maker (note the singular on the word "maker"), then you have a point. Assuming your expenses for your app business are well under $456,250 per year, $1,250 a day would be a good living.

      However, since he used the word makers (plural), it looks like the point Gartner and this article's authr is making is that the $1,250 a day is being split among the 500 downloads a day of paid apps. That's about 91 cents per year.

      I will say though, the writer definitely did not make clear which meaning he intended, but given that this isn't one guy's opinion but one guy reporting on a Garner study, it is more likely that he didn't mean it to be taken as you took it.
      Tom007
      • Oops!

        Looks like I'm the one with the fuzzy math. That should be $912.50 per year which still speaks to Gartner's point: this isn't the road to riches for most people.
        Tom007
        • I'll take it

          If I publish a nonsensical beer app and it pays me a case of beer per week, I am willing to declare it a success. At that point, I try to sell the rights to a beer company, complete with a beverage replenishment clause. Double success. Onto the next app.

          Words is words. We have no idea of the scope of this study.
          ron_r_a
  • Create a sort sort for paid apps app

    I am not a developer -- so I will leave this to those who do -- I look for paid apps --
    The advertising and redirection I find in free apps make most of the too slow and intrusive to be useful --- But manually sorting through all the search results for a paid "Music Notation" or "Marine Weather" app is often more trouble than it is worth --- I find myself using my various Android devices for fewer things than I might --- JAS
    jsanacore
  • Rats

    guess my 5 year plan is down the tubes again....

    I guess they figured 1250 a day to cover a 5-10 man team? Didn't think a common app like tasker would have that many working on it...

    I think the author of the article should have demanded/provided more data. 1250 a day for a 40 dollar app isn't many purchases, but healthy for sure, whereas 1250 a day from a 99cent app makes it a runaway success.

    Plus
    " a mere 0.1 percent of apps will fall be considered a financial success by their creators, "

    first I'm not sure what "apps will fall be considered" means.... fa[I]l [TO BE] considered a financial success?

    well that's ambiguous!
    "If this app doesn't make me a millionaire!! ITS A FAILURE!!" while others may be happy it just somewhat supplements previous employment income level. (doing 60k a year for something you hate vs say 40k a year for something you love)
    dosmastr@...
  • Same thing is happening in ebooks

    Because many of the usual "barriers to entry" have largely been eliminated in a digital distibution system there are lots and lots of garbage apps/ebooks being churned out that never would have seen the light of day in the old physical media distribution system. Luckily it is digital media and the freemium system exists, otherwise the app market would have long since cratered in an "Atari 2600" remeniscent implosion.
    oncall
    • Great point

      Both the mobile app market and ebook market are completely cluttered with low quality products that make finding the good stuff hard...

      And the reverse is probably true too.

      There are real gems out there that can't be found for the clutter.

      It's an interesting time to live in.
      Tom007
      • Indeed interesting

        Different, but the same. The core principle is the same. You still need a superior idea coupled to a superior product with superior marketing to make real money. That much hasn't changed. What has changed is the vetting system that used to keep the chaff from ever reaching the consumers eyes. Now that vetting is being done in the open market. Pre-ebooks the vetting process in book publishing only accepted 3 in 10,000 manuscripts for publication and the majority of those that made it about 90% were "failures" economically (i.e failed to recoup publishing costs). So a paltry 0.03 percent actually "made money". Stack that against the 0.1% number above.
        oncall
      • Vetting!

        Maybe the way to real money is to create a service which can find the gems amongst the clutter!
        johnd126
  • I'd settle for a trickle

    I'd be happy with a constant trickle of money from an app but even getting to the trickle level requires doing marketing which either takes a fair amount of time or a fair amount of money. I may have better luck making my fortune the old fashioned way: winning a lottery!
    johnd126