August 30, 2014

Why Android Developers Need a Business Model

(cross-posted from the CommonsBlog)

Android developers are quick to jump on the Android Market’s failings, from an insufficient range of countries supporting paid apps to the weak communication and promotion options within the Market itself. Inevitably, somebody points to the iPhone App Store as being the apex of financial success for developers. After all, there’s that $1 billion check they “wrote” to app developers, right?

Unfortunately, the numbers tell a different story.

According to Tomi Ahonen’s meta-analysis of published iPhone sales statistics, the mean revenue per year for an paid iPhone app is $3,050, and the median revenue per year is $682. Here, “median” means that half of all paid iPhone apps will earn less than $682 per year. The difference illustrates the “long tail” model that most content markets exhibit, where a bunch of “hits” raise the mean.

I encourage you to read the entire post, so you can find the sources of the data. Unfortunately, the second half of the post devolves into chest-thumping for WAP (ignoring that many Android and iPhone apps simply can’t be done on WAP) and otherwise coming across like a 12-year-old (e.g., calling Hilton and Walgreens “idiots” for daring to write an iPhone app).

We do not have as good of figures for the Android Market to work from, AFAIK. We do know that there are far more free apps on Android than on iPhone, and there are fewer Android devices (particularly when you factor in the limited roster of paid-app countries). I do not get any sense that Android per-app prices are significantly higher than those for iPhone apps. Hence, the Android Market is probably generating lower results. Larva Labs thinks the Android Market is generating perhaps 2% of the revenue to developers of the App Store, and while I think that is a bit low, I’m sure the numbers are not pretty.

Even if tomorrow Google would be able to turn on support for all countries (paid apps in Vanuatu, anyone?), the best-case scenario in the near term would be for the Android Market to match the results of the iPhone App Store, which isn’t exactly a money machine for most people, based on the above-cited figures.

What does this mean?

It means that if you are trying to make money on mobile, you #$#@(#) better have a business model more sophisticated than “gee, I’ll upload an app to the App Store/Market, and the cash will come rolling in”.

Of course, you have some options, such as:

  • You can have many apps, hoping that some will significantly exceed the median, to make up for the others that don’t. For example, this gentleman is pulling in six figures across double-digit Android apps.
  • You can out-hustle the competition through marketing, which, sadly, many developers seem to ignore.
  • You can focus less on making money off of individual app sales to individual users, focusing instead on other business models, like the 49 I wrote up previously. Swype, for example, has struck enough OEM deals to get on a projected 50 handsets by the end of the year. I’ll be rather surprised if they did that for free.
  • You can write Android apps for reasons other than pulling in money, such as for public service or just to scratch an itch.
  • You can switch horses to try to find another land rush, like the early months of the iPhone App Store where just about everything made serious money. A land rush occurs maybe once a decade. So, for example, while there should be more opportunities for apps on Meego now that Nokia will be using it for more devices, the conditions are not there for a land rush result, barring some incredible sales figures for these new Nokia phones. The iPhone land rush came about because ~10 million phones were out there before you could sell apps, conditions that are unlikely to be repeated any time soon.
  • You can just upload and pray your app becomes a hit, which seems to be the default approach developers take.

What is unlikely to help you much is spending lots of time fretting about the Market limitations — it’s not like iPhone apps are pulling down big bucks on average, either. You need reasons to publish the apps that do not count upon any given app making tons of revenue.