How to developers make any real money?

[ericinboston]

So this is not an Apple-bashing post...but I have been pondering for awhile how an iPod/Phone/Pad developer makes any real money.

Let's do some examples with the math. We all know that Apple gets a 30% cut of the price of the app.


Example:
If a developer creates an app and sells 100,000 copies of the app for $.99 (I will round up for math sake), that's $100,000. Then Apple takes $30,000 which leaves the developer $70k. $70k of course is decent amount of money to earn in 2011 in 1 year, but it's certainly not a high amount and that's pretty bland for any computer programmer developer anywhere in the USA. This example also assumes, of course, that 100,000 people buy the app. Not everyone creates an app that 100k or millions want to download such as Angry Birds. In fact, I would argue that out of the tens of thousands of apps in the Apple iOS world, maybe 20 ever sell more than 1 million copies (I'm not talking about freeware apps). Those 20 lucky developers are far, far above the norm of what an "average" developer lucks out with as far as being world famous...very similar to video games or even the few toys each Christmas that are the very top of everyone's list.

Then you have to factor in that the developer must also constantly support the app...field email complaints, fix bugs (if they want people to be happy or be repeat customers). If the developer is a game developer, surely he/she is not the only person creating the game...there are programmers who are excellent at graphics but horrible at music...or great at UI design, but poor in other areas...thus there is a very high chance that there must be more than 1 developer if the app is a game.

What if you took my example and applied it to small companies of 2-5 developers creating apps?...how can that company pay 2-5 people when the gross income is $70k? Heck, even if 1 million copies were sold for $1 each, the total company revenue would be $700k thus giving each person between $125k and $350k depending of course on how many employees and if there is a "cut" that the President/CEO gets which would lower the developers' final cut. Then of course there's a product roadmap...is this a 1 time app (I doubt it if it's a company of 2-5 developers) or is there a roadmap to produce numerous apps that hopefully sell well? It's one thing for an individual to gross $150k+ in a single year, it's another to be out of a job on year 2.

So who's actually really making true cash out there? Is anyone on this forum a developer who could chime in? Are the developers banking on each end user to own multiple iOS devices and hope each end user buys multiple copies of their app? I have 3 iOS devices and some have the same apps, but no single app is installed on all 3 devices...not by technical limitation, but because of the lack of need. There seems to be about 200 million iOS devices out there, but of course only a fraction of those devices are owned by users who buy apps in the first place (kids under 16 don't have their own credit card), folks who buy numerous apps, and folks who want to buy your app. Of course as the # of devices increases, the likelihood of selling more of your app increases.

To me, the Angry Birds of the iOS world are the Cabbage Patch Kids of the 80s or the Pac-Mans...extremely high demand and also extremely lucky that the right app was made and made well. Again, out of the tens of thousands of paid apps, I have to believe that only about 20 have sold over a million copies...and I only know 1...Angry Birds.

I also don't know exactly how many purchases are happening because Apple does not disclose that info in the App Store...the app author typically screams out "we've sold over 1 million of this app!" in their Descriptions but I see that statement so many times on apps that 1)have less than 1000 reviews and/or 2)have poor reviews...and thus I find it very hard to believe said app has over 1 million paid purchases.

Of course you can take my $1 app example and double it for $2 apps...but I remember reading somewhere that very few folks spend more than $2 on iOS apps.


Finally, maybe the answer is advertising...maybe the developers are selling these apps for $0 or $1 yet have ads embedded in the apps...which in turn yield a higher (much higher?) profit then selling the app without the ads.

 

[1458279]

I can't help much with all the numbers, but based on the research that I've done so far:
The vast majority of apps out there are what is called 'Shovel Ware' ... another term for garbage.

The truth is that this industry is very young, you look at PC apps in the 80's and how they changed after a few years. The same thing will happen with IOS apps. Back in the 80's they had what was called 'shareware' you get the program and try it for a while then buy you you want to keep using it. Most of these went nowhere.

Software companies have come and gone, from poor management, poor product, marketing, pricing, tech changes, etc... Some made huge money most didn't.

Also, concider:
Most every country is having hard times right now and have for several years with no clear path for recovery. Yet Apple came out with a product that did what others have done before (including Apple themselves, Newton?) and it's selling like crazy under harsh times.

At least two things will happen: 1. The business world will recover, it always has. 2. the app industry will mature, apps today will look funny compared to apps in a few years.
Big names today will be punchlines of jokes... Remember Ashton Tate, Wordperfect, PCFile, OpenAccess, FoxPro, Lotus 123, SuperCalc, Gupta, Berkley's screen saver, Harvard Graphics...?

Learn from the past...

By the way, I am a developer and I'm in the process of learning the tools of the trade. I haven't put anything on the market yet.

 

[psonice]

1. Many devs DON'T make any serious money. They get interested, release a few simple apps that sell limited numbers, get disheartened and go find another get rich quick scheme.

2. There are some flaws in your figures. Let's consider another case:

- The app sells for $3, not $1. Make that $200k income.
- The company doesn't make one app, but 4 per year. Make that $800k.
- In year 2, repeat that. Assume the apps made in year 1 earn half the amount because they're now getting old. $800k + $400k = $1.2m!

You can see how it can easily swing the other way.

Of course this case isn't very realistic either. For a start, supporting 8 apps takes a lot more resources than supporting 4, so you need more staff or you produce less, or you support the older apps less and sales go down faster.

On top of that, not every app is a hit. You might sell 100k copies of one app and just 100 of the next, it's hard to predict how things will go. Sales aren't constant either, you tend to get a huge sales surge at launch, then it can die down to a solid but much lower figure, or it can die down to near zero after a month. You might get more surges later with good updates, marketing, or just a bunch of people all deciding to buy the app on the same day.

Also, your income of $70k. Take tax from that, take expenses (you need to buy every new iPhone, iPod and iPad pretty much for a start, plus computers to work on, an office perhaps, and about 100 other small items that add up to a hefty %). If you're employing people, you can add employer's taxes to cut it down even more.

There's a lot of strategies to try and make money, though. The best one is to make top quality and very popular apps. That basically guarantees you a good income, problem is it's damn hard.

Alternatives to that: Some devs put lots of resources into marketing (sometimes even going to lengths like paying a dodgy company to download enough copies of a free app to get it into the top 25!) to get volume up. Some make literally hundreds of simple and near-identical apps (remember the 'battery info' type apps with loads of different versions, each identical except the background picture?) A few sales of each app adds up to a few hundred a day.

 

[brianbauer04]

With a real job, you work 8+ hours a day 5 days a week for 50 weeks a year. And you keep working as the calendar switches to the next year and the next year...

In your example, you create a single app and sell it for one year only and stop working as soon as it is done. That's not really an equivalent comparison.

You need to work continuously on new apps, update and support old apps, and renew your developer account every year so Apple doesn't pull your existing apps from the store. At a real job, there are other people at the company that are constantly analyzing the marketplace and making decisions on what the company and the developers should work on - making sure that the work product of a developer brings in more money than they pay in salary.

If you want to be independent, you have more freedom and nobody tells you what to do or when to do it. But that also means it is completely up to you to make sure you earn enough money. You have to make sure that your idea is worth pursuing before you start working on it. You are entitled to nothing, you make it happen or it doesn't happen. Don't ever think that an independent developer puts in less effort than a developer with a job at a company.

 

[LeonardTepper]

As a quick FYI, all the app stores will take 30% off the top. If your app is $1, you only keep .70, GiveMeApps.com gives you 100% of your money. I've been using it for a few days, uploaded an app, told people about it, they bought and I definitely received all of my money. Just food for thought.

 

[a.jfred]

Negligible in the grand scheme of things, but if you're doing numbers, don't forget the $99/yr Developer fee you need to fork out, just to be able to push your app to the app store.

 

[eddieGGG]

have same iusse and looking for the solve it!

 

[BaldiMac]

If you are just going to use made up numbers to justify your opinion, at least try and make an educated guess rather than picking numbers that are just nice and round.

For example, in your 100,000 app/year scenario, you are only talking about 0.05% of iOS users (200 million) purchasing the app. 5 out of 10,000.

Just 1% of iOS users purchasing an app is 2 million sales. I'd bet there is a lot more than 20 paid apps on more than 0.5% of iOS devices.

 

[doug in albq]

It has been my experience than most of the small, independent developers also have themselves a fairly well-paying "day job."

 

[ericinboston]

If you are just going to use made up numbers to justify your opinion, at least try and make an educated guess rather than picking numbers that are just nice and round.

Yeah, I just come here and post crazy statements without any thought or "educated guess".

My numbers and examples are very clear and of course can be off the mark a bit. THAT IS WHY I ASKED FOR FEEDBACK.

I could throw out 5 more examples and sit here and write a 28-paragraph thread...but I'm not...and not going to come up with every example for better or worse for the developer.

And how is 99cents vs. $1.00 (round) a non-educated guess? You're telling me you cannot comprehend the $.01 difference for the effort of making the math quick and simple?

Back on the topic, if I posted this question 6 months ago maybe my numbers (or only some numbers) would have been more accurate...again, just looking for feedback from folks out here that are developers...whether they are on their own in their basement or working for a small <5 employee company or working for a large software firm. I'm also not implying that any of the developers are looking for get-rich-quick schemes...just wondering if and how the developer, at the end of the day, is making some real money to bring home year after year.

 

[BaldiMac]

Yeah, I just come here and post crazy statements without any thought or "educated guess".

My numbers and examples are very clear and of course can be off the mark a bit. THAT IS WHY I ASKED FOR FEEDBACK.

I could throw out 5 more examples and sit here and write a 28-paragraph thread...but I'm not...and not going to come up with every example for better or worse for the developer.

And how is 99cents vs. $1.00 (round) a non-educated guess? You're telling me you cannot comprehend the $.01 difference for the effort of making the math quick and simple?

Back on the topic, if I posted this question 6 months ago maybe my numbers (or only some numbers) would have been more accurate...again, just looking for feedback from folks out here that are developers...whether they are on their own in their basement or working for a small <5 employee company or working for a large software firm. I'm also not implying that any of the developers are looking for get-rich-quick schemes...just wondering if and how the developer, at the end of the day, is making some real money to bring home year after year.

What's with the animosity? You asked for feedback. I gave you some.

I have no idea why you picked 100,000. You didn't justify it, so I assumed it was just a nice, round number that you chose at random. Nothing wrong with that. If you had a more deliberate reason, I apologize for the assumption.

You asked how developers make any real money. I pointed out that it's a lot easier than the numbers you chose made it seem. If your $0.99 app is purchased by even 1% of iOS users, we are talking about $1.4 million in revenue. That's real money!

And as your numbers show, even a $.99 app purchased by 5 out of 10,000 iOS users would still bring in $70,000. That's not bad money if you put it together in a weeks.

The real question is what percentage of apps reach different milestones.
10,000
100,000
1,000,000

 

[1458279]

I think the real answer to the question is that MOST developers aren't making real money from Apple.

Just given the HUGE numbers of people that are dumping apps on the market, there's just no way that even most of them are making real money, the numbers simply wouldn't work.

When you pass by an iceberg, you see what looks like a huge mountain of ice, however all you're seeing is the 'tip of the iceberg'

I wouldn't be surprised if the top 10 apps, Angry Birds, Inf Blade,... made up more than all the others combined.

Truth is that the vast majority of apps and developer will never see the big rewards.

 

[BaldiMac]

I think the real answer to the question is that MOST developers aren't making real money from Apple.

Just given the HUGE numbers of people that are dumping apps on the market, there's just no way that even most of them are making real money, the numbers simply wouldn't work.

When you pass by an iceberg, you see what looks like a huge mountain of ice, however all you're seeing is the 'tip of the iceberg'

I wouldn't be surprised if the top 10 apps, Angry Birds, Inf Blade,... made up more than all the others combined.

Truth is that the vast majority of apps and developer will never see the big rewards.

Just like real life!

(Though I would doubt that the top 10 apps have made more than $1.25 billion!)

 

[ericinboston]

What's with the animosity? You asked for feedback. I gave you some.

Well, when you reply to a post stating the OP has not made an educated guess after writing a pretty complete post, that's pretty rude. Hence my reply.

But, water under the bridge...I see your second post so you seem like a cool person...

I have no idea why you picked 100,000. You didn't justify it, so I assumed it was just a nice, round number that you chose at random. Nothing wrong with that. If you had a more deliberate reason, I apologize for the assumption.

You asked how developers make any real money. I pointed out that it's a lot easier than the numbers you chose made it seem. If your $0.99 app is purchased by even 1% of iOS users, we are talking about $1.4 million in revenue. That's real money!

And as your numbers show, even a $.99 app purchased by 5 out of 10,000 iOS users would still bring in $70,000. That's not bad money if you put it together in a weeks.

I think parts of the answer to my original question/topic can be described in these points to ponder:

1)Out of all the iOS apps, there are of course the very rare few that will be huge successes and make the most money while a more appropriate average of apps that make a fair amount of revenue, while some portion of apps that are complete failures. I don't know what these percentages are, but my guess is that like 1% of the apps are huge, 60% do ok (say, sell 200,000-600,000 copies) while the remaining 39% are poor sellers (less than 200,000 copies). Of course these numbers will change as the # of iOS devices increase/decrease and the # of competitive apps show up.

2)Apps like Angry Birds or games in general, have numerous developers creating the app. If they are all buddies and split the revenue evenly, that's a lot different than the same # of developers working at a "company" where the CEO gets paid to make the strategic direction and other employees need to be paid (marketing, support, etc). I believe the average programmer these days (not iOS) probably makes between $40k and $120k a year at any given USA company. Apps that do not require game design (such as a Weather app or Fart app or Recipe Organizer) can easily get by with 1-2 developers. Taking all these (and likely more) topics into consideration, the Developer at the end of the day will be taking home X money.

3)Lastly, how long does the Developer work as an iOS developer? Again, Angry Birds is a great example where they've made about 15 different versions of the same game and they (the company) make boatloads of money. But whipping up a Recipe App is a one-off thing...and that is completely fine. So if you are an iOS developer and do not have the style of apps/games like Angry Bird, are you making any money year after year? Earning $70k-$200k in 1 single year of course is pretty nice...but what about year 2? What if you leave the company and your "share of the pie" is now gone possibly. A 23 year old person making a great app in the comfort of his own home and pulling in $200k that year is great...and if it keeps selling over time even better. But there comes a time when people stop buying your app for 1 reason or another.


Again, I am not saying or implying that Apple is evil or the Developers are starving...I'm just really interested in hearing from Developers about how green this pasture is. The platform is very new...and it may be a revolving door for Developers as they move on in life and get involved in a large company that provides a lot more than hard cash (401k, benefits, friendly work environment, opportunity to move on, company stability, etc.)

 

[vettori]

Consider that an app that is in the range of top 100-120 productivity sells an average of 25 copies a day in USA. Productivity is probably a 'middle' category comparing the number of total app sold.

This app is doing about 10,000 copies / year in USA.

There are only 100 apps that sells more than this in the productivity category.
I don't know about the games category but I guess that the same numbers can be true in average for most games sub-categories and other main categories (music, social networks, etc...).

Using these numbers, my guess is that about 3500-4000 apps are doing more than 10,000 copies a year in USA.

How many apps are in the app store now ?

 

[ericinboston]

Using these numbers, my guess is that about 3500-4000 apps are doing more than 10,000 copies a year in USA.

How many apps are in the app store now ?

On a side note, According to Apple there are over 350,000 apps in the App Store. And you are thinking the same that I am...that only about 10,000 apps are actually selling well/quite well. That's about 3% of apps selling well.

I think there are so many junk apps in the App Store...so many seem to be extremely niche and were written over a weekend. I'm not saying Apple should ban them because they are not popular (Apple will gladly take the $99/year fee and 30% of the sales), but I find it very hard to find anything good via my iPhone...there isn't a good way to categorize/sort the apps. You look at the Top 25 at 1pm and it's in a completely different at 1:05pm.

Having 350,000 apps in a 100% controlled environment by Apple is very different than 350,000 apps written for Windows or Mac that you can find/buy at any website (or in the old days in a store). As a "subscriber" to the Apple mentality of the App Store being 100% controlled by Apple and Apple "approving" what is accepted, I'm annoyed that there's so much junk in it. I would argue that there should be a way for the end user to say "show me only apps that have sold more than 20,000 copies" so I can filter out all the junk that nobody wants to buy. Or "show me only apps that have a 4+ rating". And no, I am not going to go to my computer to use iTunes (or something else) to sift out the junk.

 

[vettori]

^^^
I don't think that the number of copies sold or the rating would be useful to find good apps for various reasons.

One thing that for me would solve (or help) the AppStore cluttering is to have a much higher fee to be a developer. For example $999 /year instead of $99 / year. And limit the number of apps you can submit (for example 10), then you have to pay another $999 / year for next ten apps.

 

[AdrianK]

^^^
I don't think that the number of copies sold or the rating would be useful to find good apps for various reasons.

One thing that for me would solve (or help) the AppStore cluttering is to have a much higher fee to be a developer. For example $999 /year instead of $99 / year. And limit the number of apps you can submit (for example 10), then you have to pay another $999 / year for next ten apps.

That would put off anyone doing it for a hobby/releasing apps for free, it's not good for the App Store to have very few free apps.

 

[vettori]

Wirelessly posted (Mozilla/5.0 (iPhone; U; CPU iPhone OS 4_3_5 like Mac OS X; en-us) AppleWebKit/533.17.9 (KHTML, like Gecko) Version/5.0.2 Mobile/8L1 Safari/6533.18.5)

Well, free apps (and only those) could be kept at 99$/ year or even free...

 

[mms13]

It has been my experience than most of the small, independent developers also have themselves a fairly well-paying "day job."

I sure do. I released my first paid app a couple months ago. It was developed in my free time (after I got home from my salaried day job). To the OP, you are right in that the majority of devs won't make a lot of money unless they make a really popular app. But that's never been my goal. I knew I wasn't going to be able to quit my job because of this app. However I did make about $250 in my first month, and the extra money is nice. Overall though, I did it for fun and because I wanted the features that my app provides. I now use my app very often and to me that's even cooler than making money from it.

 

[fishkorp]

Keep in mind, developers aren't only making money off paid apps. Take a look at the list of top grossing apps. A large number of them are free apps with in-app purchases.

Many developers also develop apps for other people/companies. Company x comes to me and wants an app, I get the requirements, and they pay me $x to make the app for them. I don't care if it's downloaded 1 time or 1,000,000,000 times, I get the same money.

Then don't forget about ads. Some people can make hundreds of dollars a day on ad revenue on an extremely popular free game/app.

The math isn't as simple as the example you've used.