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« So What do we Learn from Chetan Sharma's Report on Mobile Apps | Main | Pre-empting the PSP, how Apple again eats Sony's cake, now with iPhone »

March 22, 2010


Andrew Seftel

Whilst I think you're pretty much correct, I think you've made some fairly flakey assumptions in your analysis. You've assumed that th number of sales is independent of both the price and the cost of development. I don't think it's too controvertial to suggest that cheaper apps are, all things being equal, going to sell more. We can probably also make a case for a causal relationship between development cost and quality, and hence sales. I think it's therefore a bit of a stretch to make any inferences about how many developers break even.

P.S. You've confused percentile and decile in the third paragraph.

Peter Cranstone

Congratulations, the math is "good enough" for most. Building apps is a zero sum game. There's no money to be made because Apple is already taking it all. The only solution is to skate to where the puck is going to be - web apps which work across platform. I know, SMS and MMS are players but they're not rich enough (SMS) and lack context. Web apps will do it simply because they scale to all devices that have a browser. It just gives you a far larger market to monetize across.


I've got to question your thinking and your figures. How can it cost $30,000 to develop an app that makes farting noises!

Seriously though, if you're saying that you have to look at the percentile figures for app sales/downloads then you also need to look at percentile figures for development cost. The apps that sell a lot also cost a lot and the apps that haven't sold much are usually those where the developer has worked at home, during 'spare time' to knock-up something 'cool'. The cost of spare time and hobby time is low.

Romain Criton

Sure, webapps are cross platform and all,but how do you monetize them ? Tha App store at least offers a monetization Platform
i think that the reason why so few AppS are profitable is because the barrier to entry is very low so basically anyone can go and try selling their App, no matter how bad it is


The cost of developing the apps is really important here. I have no statistics but by looking around in app store it seems that majority of the apps have been mass produced with some kind of app-generating tools. For example you create tool to generate 100 different apps around different topics (basically RSS readers with hard-coded feeds about some niche content). If you sell 240 of each in average, you get 100*240*1.3$ = 31200 and have covered your costs.

It needs to be further investigated but it may happen that the average development cost of applications in bottom percentile is somewhere around hundreds of dollars.

Tomi T Ahonen

Hi Andrew, Peter, AAMP, Romain and Rumsa

Thank you all for your comments. I will respond to each individually. But please note, I added two paragraphs to the bottom of the blog, after I read the comments here, discussing the costs of development.

Andrew, I hear you. And I wish I had similar splits for the app prices and their development costs. The consumer app store style application market for smartphones is such a recent and sudden phenomenon, that there is precious little data so far. I have been trying to 'calm the waters' as soon as I detected the hysteria around it, and my purpose here is to illustrate that this is very dangerously near a bubble right now. Most developers will not get their money recovered. Before these numbers I really had very few hard facts to get to try to prove my case, but I have felt it in my gut (and the top-line numbers obviously did not result in a viable business out of it as I've said for many months here).

And I understand you do agree with my premise, that because of the skewed shape of the download-success curve, only very few apps will be hits, and most of them will be enormous hits, but the vast majority of the apps will not achieve the required success level.

I am hoping to find more info, and this blog is not an application developer blogsite, haha, its not really our mission to study the intricate details of how the apps developer community will make their money. I hope others will take this and get deeper data and explore these issues further. (we specialize on the media, advertising and digital converegence, around the mobile phone. Even smartphones overall are only a minor interest to us, and obviously apps a tiny miniscule part of the smartphones opportunity).

On your specific points, first that cheaper apps would sell more - that would make the picture even more skewed, would it not? Currently I assumed that the price of the apps was uniform, the average price between Chetan Sharma's and Yankee's at 1.95 dollars per app. If we say expensive apps sell less and cheap apps sell more - and thus the hit products in the top decile will tend to cost 99 cents then the curve becomes even more skewed where even LESS of the developers make a return. So at 99 cents the previous 'break-even point' of 24,500 downloads at the 16th percentile would not even make money. If we say hit apps cost on average 99 cents, then the break-even point moves all the way to teh 13th percentile 45,000 downloads - so 7 in 8 developers would lose money.

I hear you and take your point, but I do not have any reported data on that statistical relationship of how the price relates to download success, althought I do agree totally with you, that a 10 dollar app will have a far harder time to achieve say 50,000 downloads than a 99 cent app would. And like I mention in the blog, the marketing effort is a significant part, often far greater costs than the development cost of the app.

As to the development cost, yes I could see that a cheap simple app that has lower costs (15,000 dollars to develop) would not need to get as high download numbers as a very fancy expensive app that cost 50,000 dollars to develop. Good point. But also, today, March 2010, it is increasingly difficult to get any 'differentiation' on apps, meaning that there are likely going to be far more development costs today to get an 'above average' level of cool and attraction and interest in the app. So I would suggest that in particular for paid apps, their development costs now are rising, not falling (as I argued in the last paragraph, that I added after reading the 5 comments here). I am very interested in your thoughts on those two added paragraphs too.

Finally, thanks for reminding me of the correct term - decile (I am Finnish, I sometimes forget my statistical terminology in English haha) but yes, we got deciles (ie break points by each tenth of the total0 from Pinch Media, which then allowed me to estimate the percentiles (break points by each one hundredth). I have adjusted the blog text to use the right terminology, thanks.

Peter - hi, welcome back again. Yeah, its still early going, and the math is not perfect but am trying to illustrate the issues as we get some data points. And yes, you are totally right that currently this is not the right game. Apps will be relevant and the apps space for smartphones will evolve and grow and mature. The crazyness will subside. Many developers get burned and quit the game. The initial novelty factor in downloading every free app you can possibly lay your hands on, will also wear off. Also as first-time smartphone owners (many of the US buyers of iPhones are first-time smartphone owners vs US based Blackberry owners who often are into their second or third BB; and Europeans and Asia smartphone owners who are into their fourth or fifth smartphones already) toss the old smartphone and get a new one, they will get far more selective in what really they wanted in their apps and which are really worth bothering with.

So yes, we totally agree, skate to where the puck is. Web based apps are an important part, reaching a 3 times larger total accessable device market, than all apps - obviously more than ten times bigger accessable market than Apple iPhones and iPad Touch's. You know I feel passionately about MMS and WAP, these are very viable platforms to deliver most of the solutions that I see the typical 'innovators' who launched apps, say the hotel that lets you order room service from a smartphone app (why not WAP) or banks that tell where ATMs/cash machines are (why not use SMS or MMS or WAP) or retailers who give you access to their catalog and inventory (easily done with WAP) or restaurants with discount coupons (why not on MMS). But these skills - SMS, MMS and WAP - are very 'mobile' skills, need to know who does the short codes, or the bulk access, and you need to deal with the carriers/operators either directly or indirectly through some aggregator. Its not easy. But you reach the pockets of all consumers, not 13% who have a smartphone or the 4% who have an iPhone.

AAMP - I hear you and I totally agree with you. I wish I had some breakdown of the costs (and retail prices) of apps based on their success. I am sure at some point we'll get that data from some source. So at this point, this is an early and not very precise analysis, I totally agree. But - the point is very clear from the 'deciles' - that the mid-point app is not going to get 'average' amount of downlaods. The mid-point median app will get less than one seventh of the total downloads of the average number of downloads. This is an incredibly skewed industry, very very similar to hit music business. Most musicians who release (old-fashioned records and) CDs (I believe the new digital media are transforming the math now) will not sell enough of the CDs to become profitable artists for their record labels. But as the pop music industry is so fickle, you never know who turns into the next Madonna or Bruce Springsteen, after 100 artists who never made it, there is the one who gets a number 1 hit, who also has his album hit number 1, and the follow-up album still gets hit level sales - only then the record label typically earns back their investment. But these hit musicians then make so much money for hte record label, that they in effect subsidies the attempts at all struggling artists on that record label who try to break through..

So very likely we'll see an evolution in the apps area, where there appear app developer brands, who have families of apps, who can spread the cost of their development and marketing, and in that case, make sure that the few hit apps will help sustain the business and keep the less-successful and not-successful apps also in business. And that model itself, be adjusted by digital media, mobile phone, social networking etc factors that now hit all mass media, haha. (like we discuss here at this blog)

But the point is, AAMP, that you wont' get 'twice' the market success if you cut your development cost in half. As I showed in the blog, because the shape of the successful downloads curve is so skewed, you only gain a couple of percentile points, even if you cut your costs in half. That is an easy trap for many developers to fall into, where they are not aware of the shape of the curve, and don't recognize how much median and average are different in smartphone app store apps.

Romain - good points. On web app monetization, we are in typical web app domain, give credit card, paypal etc. Its not easy. On WAP we can get into operator/carrier billing but we then need to work with WAP's limitations. On MMS we often need to give a significant share ('onerous share') to the operator/carrier. Very valid points. But at least the market is from 10x to 50x bigger than with iPhone Apps.

On the point of low barrier to entry, very good point. Yes, this means a flooding of new apps coming in, ever diluting the space, adding noise, making it ever more difficult to be noticed - and even if your app gets some initial traction, there are hundreds of new apps joining the game daily (hourly, haha) to distract your potential customers. And the madness then means many that were intended as paid apps, get offered as free apps - just to get some 'success' which ruins the business viability for many. Others do drastic price cuts if their app is not successful initially, again, resulting in vicious price wars in similar app areas. Not a pleasant market space.

Rumsa - very good point and I agree with you. I hope that we will soon see that kind of info also to make a more educated analysis. I would suggest, that if you are Hilton Hotels or Mastercard, that kind of both paid and branded app, that we see now flooding the market, they will tend to be made by 'reputable' digital agencies, with very high production values, and trying to do some branded and distinguished 'benefits' to their customers. That is not cheap app development. Or like we saw the UK conservative party and then the labour party both release iPhone apps (and then even the health department release an iPhoen app? idiots. To serve what, 3% of the British population, what moron authorized that development? For the same money they could have had a decent WAP app that works on every UK phone of every UK citizen)

So yes, there are cookie-cutter apps. I would suggest - having not analyzed this, only by my gut feeling - that they are most prevalent in the free apps space. In the paid apps, we are now seeing a flood of major brands, who try to do a differentiated apps. That will almost certainly cost nearer the 50,000 dollar ceiling than the 15,000 floor as described by prMac in the costs of developing iPhone Apps.

Thank you all for writing

Tomi Ahonen :-)

Steve J

90% of apps cost $0 to develop. Your figures given are guestimations and are way off and discredit your whole article.


MM I understand your point, but I think you have to cluster more ( amount high quality games/ low quality etc. ).

It seems that a top ten selling game reaches 9000 a day? Seeing that 9000*6.99 (gameloft pricing ) = 62910 cross per day not bad imho.

I agree the for small companies and indie devs it is very very difficult to break even, but big names like EA and gameloft can make a nice buck out o f the appstore.

One thing apple should do ASAP split the appstore between indies/ small companies and HQ developers

Tomi T Ahonen

Hi Steve and ja

Thank you for the comments.

Steve - You make a statement which has no valid reason and no evidence. Do you mean that apps just suddenly appear, out of the 'apple tree' ? No, there are software engineers who write the code for the app. I did not pull these numbers out of my head. It was prMac website which stated very clearly that the cost to develop apps for Apple iPhone apps ranged from 15,000 dollars to 50,000 dollars as of this past November. If you Steve can show me some credible source who can verify that 90% of apps cost nothing to develop, then we can start a discussion. IF you come here to post totally meaningless and erroneous comments, we will delete them as spam. Please consider what you write. But I will leave this comment here, if you Steve J want to come back, we are happy to talk with you.

ja - Sure, a top 10 game can reach 9,000 per day. Sure, lets say they stay in the top 10 for a month, thats 270,000 downloads per month, and they're up there among the very wealthy. But also - that puts them in the 2nd or 3rd percentile of the most downloaded apps of all time, passing a quarter million downloads.

Remember that only 21% of all paid apps achieve 9,000 downloads - in their LIFETIME, not in one day. Only one in five achieves 9,000 downloads in their existence. And even they won't break even - they lose over 18,000 dollars with the assumptions in this blog. So yes, a super duper hot product, like a Top 10 app will yes, definitely make enough money to return its software programming investment. But even if we allow half of the Top 10 to rotate to new content every week - its only 265 such games in a year, which is zero point 5 percent, one half of one percent - of all paid apps. You really REALLY have to be lucky to get there. And then - did you see my addendum comment - you're probably throwing at least a quarter of a million dollars in just Admob ads to try to get to that Top 10 (whether you land there or not, is not up to Admob, you also need luck and a good game). Its not sure even at that level..

Thank you both for writing

Tomi Ahonen :-)


Point I want to make is that on all console platforms only a small percentage break even: source:

And because the iphone is a very easy target to step into for developers you see a lot of crap ( far to many apps and games ) that doesn't even would or could be published on any other platform.

Some volumetric wise ( games ) Iphone is the biggest console. So its logical only 5 % breaks even because only 5% is worth looking at

Thats why I hope apple can somehow apply a filter for HQ and or LQ apps/games.

Sander van der Wal

How about comparing the apps industry to, for instance, the DJ/pop/rock/house music industry? Most of those people do not make any kind of money either and their equipment is at least as expensive as that of the app developers. But as it is a hobby, with the added bonus of a small change of becoming rich&famous, most people don't care about that. Their time doesn't cost them anything.

Also, the article about the real gold is a bit short on the pitfalls that exist when creating all these SMS/WAP/MMS services. Given the capital investments that are needed, I doubt that app developers will be able to turn themselves into SMS developers. Simply because the nature of both businesses is so very different it is not likely that somebody with the choice of starting a business in either apps or SMS services will use the amount of money that might be made as the only differentiating factor.


The best thing to do is to look at the market you want to advertise in, the demographics of your audience, the objectives of the campaign and the best way to execute all of that.

Should you use apps the right boxes are ticked? Yes.
Should you use MMS/SMS/WAP if the right boxes are ticked? Yes

That's how you do good work, you keep a open mind and use the best tools available based on your needs.

Do you want to lead a fashionable and happy life?
Do you want to have a new apperance that show you life standard?
And do you want to different from people around you ?
So, please find and choose what you want, good commedities and better quality, you have to love them,
hurry up !
You noticed that your life pace have accerelated very fast in the past several years, and you may feel annoyed because all the people around you persuit a highly life standard . They buy fashionable clothes, handbag, persume and so on. I think you have no need worring this situation, you also have this chance to buy the fashionable and cheap things. It’s a good chance! Action now!

John Clark

This whole thing is very interesting, but you shouldn't lose sight of the fact that the development of an app may be simply an 'added value' conduit to some other service - such as an established product, or service, or whatever. A 'juicy carrot', if you will.

Therefore, assessing the monetary benefit should also include the possible bump in interest and therefore potential revenue to that existing product or service...


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Dollar Stores

Love this movie as well as the serial. Really funny, thanks for sharing it with us.

Laptop Batteries

90% of apps cost $0 to develop.Good job.


Does this model change for B2B apps?

baza firm

About this 0$ to develop - you need to spend like 100s of hours to write/code it. 100s x 30$-50$ isn't 0$ :-) Simple math.


Hi Andrew, Peter, AAMP, Romain and Rumsa

Thank you all for your comments. I will respond to each individually. But please note, I added two paragraphs to the bottom of the blog, after I read the comments here, discussing the costs of development.

Andrew, I hear you. And I wish I had similar splits for the app prices and their development costs. The consumer app store style application market for smartphones is such a recent and sudden phenomenon, that there is precious little data so far. I have been trying to 'calm the waters' as soon as I detected the hysteria around it, and my purpose here is to illustrate that this is very dangerously near a bubble right now. Most developers will not get their money recovered. Before these numbers I really had very few hard facts to get to try to prove my case, but I have felt it in my gut (and the top-line numbers obviously did not result in a viable business out of it as I've said for many months here).

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