The release of the iPhone 3G in July 2008 led to the creation of an entire industry where developers worked on their own applications to sell through Apple's App Store. This trend has since been picked up by larger companies. Read about why such a phenomenon is fast becoming a success.
The release of the iPhone 3G in July 2008 changed the
telecommunications industry forever, and instantly made the device
one of the hottest products on the planet.
But it wasn't just the iPhone's cool looks and functionality
that drew customers. Where Apple really struck gold was with the
App Store, a site where iPhone and iPod users could download
applications, games and novelty programs.
The App Store has led to the creation of an entire industry. Across
the world, software developers began working on their own
applications to sell through the App Store, with application
developers splitting revenue with Apple 70/30 (in the developers'
favour). The App Store launched with about 500 applications available,
but at the time of writing there were 25,000 applications available
with over 800 million downloads recorded.
In Australia, a small group of independent developers have been
able to cash in on the iPhone craze by developing their own
applications and selling them around the world. The eclectic bunch
includes full-time software developers, IT workers tinkering in
their bedroom, and some of Australia's biggest games development
houses.
The application craze has also now spread beyond Apple, with
BlackBerry, Windows Mobile, Google and Nokia all launching their
own application stores to cash in on the trend. But Australia's leading application developers say the market
has become flooded with cheap and useless applications, and warn that
the business model of the application market will need to change.
Success stories
You will find all sorts of applications in the App Store, from
the useful to the absurd. While applications delivering news,
weather and stocks information are popular, the most downloaded
applications are games and novelty programs, such as those that
turn the device into an etch-a-sketch or a fake glass of beer.
In fact, research released recently by analysis firm Pinch Media
showed most applications are quickly abandoned by users, with less
than 5 per cent of buyers still using an app 30 days after they download
it. But just because applications are disposable doesn't mean they
are not lucrative. Self-employed application developers with little
more than some spare time have been able to create programs that
have earned them a relatively impressive amount of cash.
There was talk of money to be made, and I already did some stuff at home and thought I could try it
iPhone developer Travis Yates
In the US, developer Steve Demeter created geometry-based game
Trism in his spare time and managed to earn US$250,000 in profit
from sales of the app, which cost just US$3 per download. He has
estimated that the top iPhone developers are earning US$5000 to
US$10,000 a day.
Australian developer Graham Dawson of OzPDA developed the
OzWeather application that allows users to customise Bureau of
Meteorology data to their local area. The app has reached the
number one spot in the Australian App Store, and has consistently
remained in the top 10 since its release last year. Dawson says his OzWeather application has recorded 34,638
downloads as of 7 April, and at a price of AU$2.49 per download that
has provided him with an income of AU$60,374 so far this year, for
that app alone.
Cairns-based developer Travis Yates experienced first-hand the
type of publicity a popular application can bring after his
card-counting application was featured on CNN and even banned by
the Nevada Gaming Control Board. "I already worked from home, I'm into different internet
marketing companies and I'd done a bit of programming before," he
says. "I hadn't done any Apple programming before, and I figured I
could learn it quite easily."
Yates says that his AU$6 card-counting app recorded 1650 downloads
on its best day, netting him AU$10,000, of which he would have
received about AU$7000. "There was talk of money to be made, and I already did some
stuff at home and thought I could try it," Yates says. "That was
the main reason I started."
Keith Ahern, chief executive of development studio MoGeneration,
designed applications for News Limited before entering the industry
for himself. "Basically I liked working with the iPhone so much that I left
and formed MoGeneration and picked my own team with some
contractors," he says.
MoGeneration has created applications across a range of genres,
but its most popular is a game designed for children called
"MooShake". The AU$1.19 app reached the number two spot for kids'
games on the Australian App Store, and managed to reach number four
on the US charts.
A dynamic platform
But it is not just money that makes the App Store platform so
attractive to programming entrepreneurs. Dawson says another attraction is the fact that developers can avoid
huge advertising and marketing budgets: "If you're fortunate enough
to rank highly, you don't have to do your marketing."
Another reason is that the iPhone itself is opening up new
possibilities in the mobile sector. The iPhone's touchscreen,
simple user interface and easy-to-use software make it easy to
develop simple and practical everyday applications.
Ahern says that the iPhone's new 3.0 operating system, due for
release in the middle of the year, could lead to a new boom for
applications as developers will be able to add new features to
their applications: "One big thing is push alerts. Apple has finally made available
a system that tells the phone when there is something interesting
happening, and the user sees a pop-up that they can push it and
launch the app."
He says the other big breakthrough is the ability for developers
to sell other features or products within existing
applications. "Until now, apps are either free or it's a once-off price. Apple
hasn't had a good model for that, but now there's in-application
commerce. That's going to mean a lot more services and content are
going to be available."
Ahern says that while the iPhone's limitations have made some
applications unfeasible, the new update will allow him to do
"basically anything they ask".
Steve Fawkner of gaming developing group Infinite Interactive
also predicts the App Stores will become an even bigger platform
for gaming companies. He says developers will even look at bringing
old, out-dated games to a new format. "It's certainly built for gaming. The number of small iPhone
developers coming out tell me the iPhone game market is going to
grow," he says.
Trouble ahead
But while the App Store has created an entire community and
industry around the creation and marketing of these programs,
developers say the store's life expectancy in its current format is
short.
Ahern says the sheer size of the App Store means developers are
becoming lost. "There are too many applications now. Apple are a
victim of their own success — they've created their own information
management problem," he says.
There are too many applications now. Apple are a victim of their own success
MoGeneration CEO Keith Ahern
Ovum analyst Nathan Burley agrees: "That's a problem with the
internet isn't it — how do people find content that's relevant?
It's like any other website."
Graham Dawson is more blunt. "I can't see the existing model
surviving; it will have to change," he says. "The apps that receive the most downloads are the most visible.
Given people buy cheaper apps rather than the most expensive,
developers have pressure to put prices down."
Dawson says this means developers then give in to creating
cheap, novelty applications that sell well but lack the kind of
usability and practicability a high-end business application
offers. "If they change the system so that it doesn't reward the volume
of applications sold, and bias it towards higher prices, then you'd
find the higher quality apps would go towards the top of the
rankings," he says.
Travis Yates agrees, and worries that the small application
developers who led the development of the sector are about to be
squeezed out by larger companies that have discovered there is
money to be made. "I've only got limited resources; I'm working by myself," Yates
says. "If there are popular brand names they're going to be pushing
other titles down. That's my main worry at this stage, that it'll
get to a point where it's run by big companies."
But Fawkner says that if the individual developers can't beat
them, then they should join them with some simple business
tactics. "They need to build a brand as people will like something they
know and trust," he says. "If I build four or five applications, I should name
them all similarly. If I create a brand, it helps me stand out from
the noise and lends an aura of credibility."
Don't quit your day
job
Despite the success stories and the attractive business model
offered by Apple, Australian developers warn that building an
application is no guarantee of financial success.
"I feel I just got lucky," Yates says. "I wouldn't recommend
people quit their job and do it. It was quite easy to make a fair
bit of money early on, and that's why I was in a rush to get into
it, but it drops off over time. Some people make it big, but it'd
be wrong to expect it to be the norm."
Dawson agrees, saying that it's becoming increasingly difficult
to become known as a quality developer among the crowd. "With there being thousands of apps out there, there are a
handful that have hit the big time, but they also get the most
publicity, so people get the impression anyone can do that," he says.
"It needs to be balanced," Ahern says. "Everybody loves a story
about who had a laptop, spare time and is now a millionaire, but
not everybody is getting the million-dollar applications."
Ahern says good ideas will work if executed properly, but it's
just not enough to have the tools available to you. "Novelty apps have done very well, but follow ups have had no
attraction whatsoever," he says. "We've made apps that are more impulse buys,
and we're being very careful to spend a week or two on them, not
three months or so because the risk is far too high.
"It's not a sure-fire recipe for success, but I encourage
anybody to try it ... just don't sell your house in the process."
The future
But despite the drawbacks, these developers and analysts predict
the application market will eventually become a major industry in
its own right. "Application stores means people need to have a rethink about
how their business is going to market," Fawkner says. "The industry
is going to be huge. I suspect we'll see a lot of changes over the
next few years."
Ahern predicts that as more, smaller developer houses enter the
market, larger companies will be eager to work with them and create
new content. "Funnily, the big players are excited about that," he says. "So these big
players are distributors; when they see a small house get something
out they can talk them out and help them out. It's fantastic and
everybody is happy with that."
Dawson says that the industry hasn't even begun to explore
everything that is possible with application development: "It's all
happening very quickly, it's taken on a life of its own. Nobody can
be actually certain where it's going, but it's exciting and
evolving rapidly."
"This is definitely becoming a market in its own right," Burley
says. "There's a lot happening for developers."
This article by SmartCompany.com.au founder and publisher Patrick Stafford is replicated on ZDNet.com.au courtesy of a reciprocal publishing agreement.