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« So the Smartphone 'Bloodbath' Annual Preview for Year 2015 - This is so boring | Main | Some Smartphone Market Updates - Xiaomi, Huawei, Blackberry, Palm, TCL-Alcatel, Lamborghini »

January 05, 2015

Comments

There

@Winter

"If there are customers, the services will try to accommodate them."

The customers are already using those services in the emerging countries.

"There are other services that need a more complex interface."

What services would those be? Payments are already done with SMS. Not that complicated.

"Network effects?"

We already saw that when going from 2000 to 2010. Things will be bigger once again but that's not really different. It's bigger. Growth is inevitable. It shouldn't be news to anyone. Why would it be?

"You "can" use MMS on a small screen for eReading. But it will only replace books and magazines when you can display some kind of page size of text and figures."

The same goes for movies. Those really became popular with bigger screen since 3.5" was simply too small for them.

A 2010 iPhone was hardly used for eReading. With bigger and better screens it could happen but they it wouldn't be a 2010 iPhone class device with the 3.5" screen as defined for the $10 device. With bigger and better screen it becomes something different.

"You need some level of user-friendliness before you can use interactive web sites."

Of course. There will be no need to make as light weight web sites as are done today but it's unlikely that the gap between high end and low end services would go away. We have that gap now, we had it in 2010 and we will very likely have it in 2020.

Ben

Tomi -

Like many I'm taking a wait and see approach with this. Your projection has obviously proven true up until this point so kudos for that. Potential problems I see are that $10 is below what low end phones sell for today. Using the same logic, shouldn't a phone with specs from 2005 (ie like the Razr) now retail for about that amount? I'm not too up on the market but are there currently any $10 phones with cameras and color screens? Also, does inflation play any role in Moore's law? With the way governments are printing money, $10 in 2020 could well be worth what $5 was in 2010.

Gonzo

@ John F

Some days ago you mentioned the app store figures for 2013, here are the just announced 2014 figures, funny that someone here claimed that this was a non existent business, 10 billion for developers … poor guys they are running away from apple after this catastrophe

No need to ask for the guy to supply his figures as to the decline and imminent death of the app store.

New Years Day was the single biggest in App Store sales history

More than $500 million was spent in the first week of January on apps and in-app purchases, also a record

App Store billings rose 50% in 2014

Apps generated more than $10 billion in revenue for developers

To date App Store developers have earned a cumulative $25 billion

RottenApple

@Gonzo:

Yes, if you add everything up, the app store generates revenue.
But what these numbers completely omit is who gets the money and how much it costs to produce the content.

Just read Tomi's statistics from a few months back, it really just is a measly small amount of devs who actually get some money - and that's predominantly games developers, and in this group the big studios dominate. So we just end up with 'The rich get richer.'

The run-of-the-mill app developer stands no chance to earn a living fro the app store but that's typically ignored by people like you who just want to trumpet Apple's success.

MooreMore

@RottenApple

"it really just is a measly small amount of devs who actually get some money "

Where would it be different? It's the same for mobile phone manufacturers. The rich get richer and yet very few people are saying that the mobile phones are peaking.

RottenApple

What do you expect will those devs do who have some hopes of getting some money and then finding out that the costs far outnumber the profits?

Yes, sure, unless they are hobbyists they will most certainly stop developing mobile software!
Right now the only way to get some money out of an app store is to have a high profile game or at least a recognizable brand that boosts sales.

Everything else: forget it! In order to create awareness for your app you need to run ads - which cost money. So even if an app store generates $25b of revenue, this by no means is all profit - a vast amount of this has to be spent making and promoting the content - and this number appears nowhere in the charts. Instead some people trumpet the $25b around without ever realizing that it means nothing whatsoever.

To sum it up:
If you want to make an app just for fun: good idea!
If you want to refinance your app through the app store: prepare for some disappointment.
If you want to make a living off the app store: Better look for a serious job.

I know what I'm talking about. I'm working for a small game studio and know the problems first hand that arise when trying to make money off an app store. We only manage to hold on because we were able to license a strong local brand for our games. Without that it'd be hopeless.

Oh, and btw: Don't ever expect to make enough by just targeting one platform. That's halve your earnings.

MooreMore

"What do you expect will those devs do who have some hopes of getting some money and then finding out that the costs far outnumber the profits?"

Apps are not supposed to be a profit automat anyway. For me it looks like the serious developers are making profit relatively easy compared to some other b2c industry. It's worse for movies, pc software or for authoring books.

It's hard for me to understand why some people are thinking that more developers should be able to make profit. Currently Apple's App Store alone was a $15 Billion dollars industry for 2014. If it will continue growing at the same rate it will be twice that much this year.

I don't see why it should matter how many developers are making money if the popular apps are profitable.

Most of the popular apps seem to be profitable. Apps that are not popular? Why should those matter anyway?

RottenApple

@MooreMore:

"For me it looks like the serious developers are making profit relatively easy compared to some other b2c industry. It's worse for movies, pc software or for authoring books. "


That's because you really don't know what's going on inside the app development business. Most serious developers DO NOT(!!!) make any profit by selling apps. I've been working in this business for more than 10 years now, starting with old featurephones. So I experienced the app craze right from the start, I have seen the good and I have seen the bad - and I have seen more bad than good.
A lot of projects failed, not because they were bad but because the decision-makers completely failed to understand the dynamics of the app market.
I lost my previous job because the company had no clue how to market the product I was working on and somehow thought that by continuously wasting time to make pointless improvements the customers would magically find the product. Guess what: They didn't!

If you want to sell an app, you have to advertise and advertise - and advertise. If you don't advertise nobody will ever find your app and you won't make any sales. But advertisement costs a lot of money - in case of mobile it will normally cost a lot more than you ever will get in revenues through sales.

So as a developer my advice clearly is, to either look for a paid job or seek your fortune elsewhere. Without some money backing your project you don't stand any chance.

Tgee

The implications of everyone having a smartphone are not economics. they are politics. You can already see the influence of these technologies on arabic countries'for example. And everyone having a smartphone offers strong opportunuities for non state controlled currencies such as bitcoins, but also p2p communications with migrants that can use secure channels at a scale that will become,really hard controlling, without forgetting dos attacks from weekly protected devices.

Musica

@RA

The app business may sound hard to you but it's probably because you don't know other business areas that well. Compare it to the music industry and 1% of the content developers getting almost all of the profits sounds like a fairy tale. You just think it's bad there. It's really not. In music it's about 10-100x that bad and it's without the complete amateurs you include to the 1%

RottenApple

@Baron95:

As I said: If you want to make a living from programming apps, look for a paid job or a good contract as independent developer. That's what I'm doing right now. Because trying to sell your own stuff is a hopeless endeavour.

I didn't say that there's no business programming apps, but there's no business SELLING apps, unless you can sell huge quantities. And that's where it becomes difficult.

@Gonzalo:

"Fact, apple paid 10 billion dollars to developers, "

$10 billion is not much if you think about it a bit further. That's barely enough to finance the life of a few 10000 of people a year. Worldwide!
If I took my own salary plus all additional expenses to get that salary it wouldn't be able to pay even 20000 people.
Some truly viable business! And that doesn't even factor in all the costs required to sell your stuff, like advertisement, legal fees and other things a business has to pay for. So even of the 10 billion a significant chunk is eaten up by people who don't work directly in app development.
So whatever you say, the amount of people in the world who make a living from selling apps or work for a company selling apps can be counted in the 1000's, not more.

It seems your math of swallowing Apple numbers wholesale doesn't go far...

Let's face it: Those $10bn are great news for Apple because it means that they made >$5bn of revenue themselves with considerably less costs and less risk. It seems clear who is the winner here - and it's not the developers.

No, Tomi got it perfectly right: The only way to make a profit from app stores is to sell popular games. But guess what: That's a viable business on nearly every computing platform. The only difference here is that the distribution has been monopolized by two giant corporations who are the only ones making good business.
For everybody else it's guaranteed to be a losing business and sooner or later this WILL have an impact on app availability. If there's no way to make a living off selling professional quality utility software, this software won't be made.

The only other field where money can be made is to get a contract for some service app. But these are always a special case, if you have no use for a certain service, you have no use for the app.

Musica

@RA

You are saying that one developer costs one million dollars each year? I would say that $100 000 would be closset to the truth globally. That would mean supporting 100 000 developers with full time jobs. More if you add the rest of the app stores. And even more if contract work is added.

Selling your own stuff is hopeless not only for apps but for almost any business if you have a product you are selling. Why are you trying to tell us that would be somehow unique to the app industry? It's the same pretty much anywhere.

If the apps keep growing at the same rate Apple alone will have a $30 Billion dollar business in 2016 and all the app stores combined $50 Billion dollars in 2016. That would be more than SMS is generating.

Maggan

10 billion dollars would pay my yearly salary for 200 000 years.

Or 200 000 developers for one year. My salary is in the top 20% of my country (Sweden). Not superhigh, but well above average. A good programmer would earn a bit more, but then again so would I if I weren't self-employed.

/Maggan

RottenApple

Ugh... Sorry.
I must have missed a zero when doing my calculations. If you assume a salary of $50000, yes you arrive at 200000 developers, not 20000. But you still have to factor out the significant additional costs that occur when running a business so you'll never be able to pay 200000 developers with $10 billion.

That's still pathetic for a 'thriving industry', though.

So, let's step throgh Tomi's statistics from a few months back.
According to his list the top 1.3% (i.e. 27000 developers) make up 56% of all revenues - but what is 'one developer'? Clearly not a single person but some kind of development studio with several employees. There's not much left after paying 10 salaries for each of them.
The next 2.5% make approx one salary per year. That's fine for single developers but not for a larger studio. It's impossible to finance a game this way.
The rest: mere noise that can't sustain a living.


And in case someone asks: My employer is in those 1.3% (ca. $200000 revenue per year) and it's still a shaky business to sustain. That money is barely enough to cover salaries for 3 employees, taxes and licensing costs.

So please stop with this 'apps are profitable' nonsense, if not even the top of the list can cover their expenses with app store revenue.

Winter

Handset sales are more than ten times app sales in value (almost $400B).

http://www.idc.com/getdoc.jsp?containerId=prUS25282214

Mobile operator revenues are ~$1T.
http://www.gsmamobileeconomy.com/GSMA%20Mobile%20Economy%202013.pdf

App revenues are not that big.

Maggan

@RottenApple

Here's another viewpoint, supporting your conclusion to an extent.

http://www.panic.com/blog/the-2014-panic-report/

The relevant part is headed "Low iOS revenue".

The 10 bn numbers is shaky on other grounds as well. There is no way for us to know how much development time and resources have been spent to generate that payout.

Did developers put in less than full time to create these apps? Then 10 bn is good.

Did developers put in more than full time? Then it's not so good.

The mix between creation, sales and support is also impossible to know, as is income generated by the apps that aren't tracked through the app store (sales promotions, e.g.).

Myself I think 10 bn sound like a big number, and it's probably good for Apple and for a small percentage of developers. For the major percentage of developers, they don't make money on the apps, but are probably not putting in full time efforts into it. The number of low quality and pump and dump apps that are prevalent indicates that for many developers, developing an app should be a golden ticket ... which is very far from the truth.

Cheers!

/Maggan

Winter

For the hot apps, earnings seem to be of the order of 30-50% of revenues:
http://www.businessinsider.com/rovios-angry-birds-profits-2014-4

But apps do not stay hot for long:
http://www.techtimes.com/articles/17009/20141002/angry-birds-studio-rovio-announces-layoffs-as-profits-continue-to-fall.htm

Musica

@RA

That $10 Billion is only what is made from Apple.

You still fail to tell us how the app industry is different from books, music, movies etc.

Winter

@Musica
"You still fail to tell us how the app industry is different from books, music, movies etc."

The distribution of earnings from (in-)App sales is even more lopsided than these other industries.

http://communities-dominate.blogs.com/brands/2014/08/the-comprehensive-app-economics-blog-2014-yes-peak-app-is-apt-name-sheer-disaster-industry-with-only.html

Musica

@Winter

From your link it looks like it's less than it's on books, music or films.

The comments to this entry are closed.

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