Who Gets the Mobile Money? Not Developers.(tbray.org)
tbray.org
Who Gets the Mobile Money? Not Developers.
http://www.tbray.org/ongoing/When/201x/2012/03/04/Mobile-Money
24 comments
I think polemic brings a valid point of view here. The phone maker has huge costs that they are recovering, the network has lots of costs, both on-going and sunk, that it is covering. The developer, well he's got his time and if you want to include his depreciation of his development setup.
Lets say the developer spends $10K on equipment to do development, and maybe $2,400/yr on net access and developer subscriptions, etc. So with a 3 year straight line depreciation they have maybe $5.7K in costs for the year. And in that year they make an application which sells for $1. At a 60/40 rev share that is 5700/.66 or 8636 sales to cover their annual cost and 20K sales if they want to have a 55% gross margin on their software business.
Of course $13K/yr for an app isn't a living wage. But then again if you only make 1 app a year and sell it for 0.99 you're not exactly as productive as say someone who makes 4 apps in the same time frame.
Business analysis aside however, the App market does seem a bit like it shot itself in the foot. I mean the typical ASP per game on a game console is north of $35. Why are iPhone Apps $0.99?
Lets say the developer spends $10K on equipment to do development, and maybe $2,400/yr on net access and developer subscriptions, etc. So with a 3 year straight line depreciation they have maybe $5.7K in costs for the year. And in that year they make an application which sells for $1. At a 60/40 rev share that is 5700/.66 or 8636 sales to cover their annual cost and 20K sales if they want to have a 55% gross margin on their software business.
Of course $13K/yr for an app isn't a living wage. But then again if you only make 1 app a year and sell it for 0.99 you're not exactly as productive as say someone who makes 4 apps in the same time frame.
Business analysis aside however, the App market does seem a bit like it shot itself in the foot. I mean the typical ASP per game on a game console is north of $35. Why are iPhone Apps $0.99?
In my mind it's not a matter of fairness or entitlement, it's a matter of "is working on this worth my time?"
Perhaps it's because I don't live in Silicon Valley or because I live in a huge cell phone dead spot, but I've stayed completely out of mobile apps. They've always looked like a fad to me.
Perhaps it's because I don't live in Silicon Valley or because I live in a huge cell phone dead spot, but I've stayed completely out of mobile apps. They've always looked like a fad to me.
Outside the US it was quite possible to make decent sums pre-smartphones, however, there was an art to getting your foot in the door, but that was less work than the marketing now needed to stand out among the vast competition.
Generally the hardware makers are getting screwed too. Only Apple aren't because they also own their ecosystem and exercise enough muscle to scare operators.
Generally the hardware makers are getting screwed too. Only Apple aren't because they also own their ecosystem and exercise enough muscle to scare operators.
2) Investment? how about the time all the independent developers put in all the apps you can download? how's that for an investment? Free ride you say? is this some sick joke?
Bluntly: wishing it were otherwise does not make it so.
There is an entirely valid economic method for valuing the investment of the developer. It's call the app store. The answer is $12 per device.
The 'sick joke' is that so many independent developers continue to pile into a saturated market in the expectation that they'll make a small fortune.
There is an entirely valid economic method for valuing the investment of the developer. It's call the app store. The answer is $12 per device.
The 'sick joke' is that so many independent developers continue to pile into a saturated market in the expectation that they'll make a small fortune.
I know many developers who make a living from the App Store. Yes, they usually have a spouse to help cover health insurance and they may disappear for weeks on client projects.
The catch is that they make money by writing and maintaining apps for organizations, large and small. From small non-profits to Fortune 500. They handle everything, including walking the client through the initial App Store registration process. You would never know they wrote the app because it is always under the official client account.
The catch is that they make money by writing and maintaining apps for organizations, large and small. From small non-profits to Fortune 500. They handle everything, including walking the client through the initial App Store registration process. You would never know they wrote the app because it is always under the official client account.
The developer also has the lowest amount of money in the game generally. Anyone can start a hardware company, but it takes a lot of money, time, etc to make money like apple does on things. Apps probably have much much faster ROI.
$12 x 100 million devices is still a lot of money to be had.
$12 x 100 million devices is still a lot of money to be had.
Yes I don't understand what he was getting at by putting these numbers together. The prices and profit are controlled by markets, not by "fairness". The deal app developers sign up to is an easy-to-use platform with built-in payment and distribution infrastructure. If you don't like it you don't need to play ball, but many do because actually it's not a bad bet as an indie dev. Plus, even if you want to talk "fair", I'd say the cost of developing the iPhone is well more than 30 times the cost of developing the average app.
Tim's assertion that smart phones "exist mostly to run apps" ignores that Apple supplies all the apps the average user needs out of the box. If he's angry that users are only buying 20 apps on average instead of 1000 apps, or that apps cost $0.99 instead of $50.00, well, neither of those things are Apple's fault.
Tim's assertion that smart phones "exist mostly to run apps" ignores that Apple supplies all the apps the average user needs out of the box. If he's angry that users are only buying 20 apps on average instead of 1000 apps, or that apps cost $0.99 instead of $50.00, well, neither of those things are Apple's fault.
Consider that there are 400k active apps on the Android Market. Apple is about the same.
That's not a lot of money earned per app.
Many developers haven't put a lot of money in, but they have put in a lot of time!
If every app only took 1 developer 1 day to make, that's still ~1/4 minimum wage.
Edit: I'm not suggesting min. wage for indy smartphone devs. I'm just noticing a discrepancy and strongly keeping in mind that the existence of hundreds of thousands of applications is used by Apple & Android marketing departments all the time.
That's not a lot of money earned per app.
Many developers haven't put a lot of money in, but they have put in a lot of time!
If every app only took 1 developer 1 day to make, that's still ~1/4 minimum wage.
Edit: I'm not suggesting min. wage for indy smartphone devs. I'm just noticing a discrepancy and strongly keeping in mind that the existence of hundreds of thousands of applications is used by Apple & Android marketing departments all the time.
True, but not all developer days are created equally :D
It's not a lot of money earned per app but good apps have been able to achieve decent success.
There's no reason why the hardware manufacturers should ensure every single developer that signs up makes a decent living. Make an app, market it well and you may well be rewarded.
There's no reason why the hardware manufacturers should ensure every single developer that signs up makes a decent living. Make an app, market it well and you may well be rewarded.
Well, maybe that's the market saying they don't really want or need your app. A tough lesson to learn, but there's no reason to assume that the world wants something just because you took the time to build it.
Well that went unnecessarily ad hominem.
A harder lesson to learn is that 250,000 users don't make you a lot of money.
A harder lesson to learn is that 250,000 users don't make you a lot of money.
Sorry, I didn't mean "you" "you", I meant "one" "you".
funkah: I assumed. Please excuse the obtuse sense of humor.
I was just trying to stress that a modicum of success writing apps doesn't necessarily pay out that well. (I've avoided some of the more distasteful privacy-agnostic and annoy-ware revenue streams however.)
I was just trying to stress that a modicum of success writing apps doesn't necessarily pay out that well. (I've avoided some of the more distasteful privacy-agnostic and annoy-ware revenue streams however.)
You can spend a lot of time digging a hole in the ground. Spending a lot of time on a project is not sufficient in and of itself to create wealth.
That's an important point. The work Apple puts into making an iPhone is enormous. They do research, design, manufacturing coordination. They made the operating system, police the App Store, operate a content delivery store, manage licensing deals. The list goes on and on.
So there's the idea in business of creating vs. capturing value. You want your product to create value for the user, but you also want to be the one that captures that value (in the form of $$).
IBM in the 80s/90s created a massive amount of value with the PC, but let Microsoft and Intel capture just about all of that value. Bad move on their part.
Apple, on the other hand, has positioned itself in such a way that it captures a huge percentage of the value that its mobile products create. Its pretty amazing what they did, particularly in the US where historically the power in the mobile industry was in the network providers, not the device companies. And as you've pointed out, they've somehow convinced app developers to work for almost nothing to add lots of functionality to their products (which helps sell more products).
Obviously not a groundbreaking recommendation here: pay attention to what Apple did. When you generate value, be sure to line things up so that you capture a fair amount of it.
This can be applied for both your business and your career. IMHO developers tend to create far more value than they capture in the workplace.
IBM in the 80s/90s created a massive amount of value with the PC, but let Microsoft and Intel capture just about all of that value. Bad move on their part.
Apple, on the other hand, has positioned itself in such a way that it captures a huge percentage of the value that its mobile products create. Its pretty amazing what they did, particularly in the US where historically the power in the mobile industry was in the network providers, not the device companies. And as you've pointed out, they've somehow convinced app developers to work for almost nothing to add lots of functionality to their products (which helps sell more products).
Obviously not a groundbreaking recommendation here: pay attention to what Apple did. When you generate value, be sure to line things up so that you capture a fair amount of it.
This can be applied for both your business and your career. IMHO developers tend to create far more value than they capture in the workplace.
It's not like there's some kind of secret deal or something that limits that number to $12 / phone, it's just that it appears that in average that's how much iPhone users are willing to spend on apps currently. Apple and AT&T have a much larger marketing power than indie app developers. If Facebook suddenly started to charge $0.99 for their app, I bet that number would bump up to $12.70 fairly quickly.
I question the assumption that this is zero sum. Just because Apple makes money doesn't mean they are taking it from developers.
If you're still stuck on how unfair it is, I encourage the you to move up the risk chain. If you want more of that 'river of gold'; All you have to do is design, manufacture, distribute and service complex devices across disparate networks globally. Do this better than anyone else, and then you can decide how fair you want to be. Don't forget that anything short of the top three and you've probably wasted a large fortune.
If you're still stuck on how unfair it is, I encourage the you to move up the risk chain. If you want more of that 'river of gold'; All you have to do is design, manufacture, distribute and service complex devices across disparate networks globally. Do this better than anyone else, and then you can decide how fair you want to be. Don't forget that anything short of the top three and you've probably wasted a large fortune.
Apple is making money off of the developers. That registration fee 8x more than the average one will ever make.
And that money has been side funnelled into something far more lucrative - infrastructure for distributing books and movies.
And that money has been side funnelled into something far more lucrative - infrastructure for distributing books and movies.
What? Your math seems wrong.
The registration fee is $99, Apple has paid out $4 billion as of February this year, and there are ~.25 million registered iOS developers in US, let's be generous and say there are 1M registered developers worldwide. It still averages out $4K pay out per registered developer.
How can you use the $12 per iOS device app revenue to extrapolate average developers' income is totally beyond me.
The registration fee is $99, Apple has paid out $4 billion as of February this year, and there are ~.25 million registered iOS developers in US, let's be generous and say there are 1M registered developers worldwide. It still averages out $4K pay out per registered developer.
How can you use the $12 per iOS device app revenue to extrapolate average developers' income is totally beyond me.
Oh wow my math is wrong. Also 25 billion downloads across 315 million devices is frightening. Each device has downloaded almost 80 apps?
http://www.wired.com/gadgetlab/2012/03/app-store-25-billion/
(And thanks for correcting me on the reg fee. I thought it was $200 for some reason.)
http://www.wired.com/gadgetlab/2012/03/app-store-25-billion/
(And thanks for correcting me on the reg fee. I thought it was $200 for some reason.)
How is it frightening?
Reviewers are expensive.
Strange to see a Google comms person claiming that "modern Internet-connected phones exist mostly to run apps."
I'm a big fan of apps, I write apps, but I still think modern Internet-connected phones are basically for browsing the web and getting directions.
I'm a big fan of apps, I write apps, but I still think modern Internet-connected phones are basically for browsing the web and getting directions.
And also text messages.
And telephone calls.
Horace's numbers do not include revenue generated by in-app advertising, third-party services (rdio subscription), non-apple in-app-like purchases (think of the Amazon store app), and the growth in the mobile web.
The rapid growth of mobile devices spurred by the iPhone/iPad has generated far more value for developers than $12/phone suggests.
The rapid growth of mobile devices spurred by the iPhone/iPad has generated far more value for developers than $12/phone suggests.
Yeah, this seems similar to complaining that Microsoft makes so much money on a PC, but Google doesn't make any money because no one directly pays Google through a Microsoft-owned app store.
Haven't there been something like on the order of 200million iOs devices sold? $2.4 billion to app developers in total doesn't seem so bad. Once you add in Android and the other platforms, that's a fairly big sector I'd say.
Very, very biased article:
- What about you divide the prices you mention by the number of people required to make the product. An app developper's team is often less than 5 people. Apple's iphone team is probably more than 150 people including all the overhead. Well make the math, you'll see that developers are pretty well off, thanks.
- It's already been mentioned but there are heavy costs involved in both the creation of the device, and the Network. These overhead costs have to be included in the price.
- And finally, it's still the law of the market. If these prices weren't right, you can be sure that they would change. Why do developers keep doing what they do if the pay is shitty as you seem to imply? Well they do it maybe because it's actually not all that bad. Maybe they do it because that's a relatively easy way to monetize the great skills they have (no need to build a company, blabla.. you make a great app, you sell it). Oh, and by easy I don't mean that anybody could do it, far from it. I'm just saying that for a guy incredibly gifted like some of these developers, creating apps is probably a much better deal than having a regular job.
- What about you divide the prices you mention by the number of people required to make the product. An app developper's team is often less than 5 people. Apple's iphone team is probably more than 150 people including all the overhead. Well make the math, you'll see that developers are pretty well off, thanks.
- It's already been mentioned but there are heavy costs involved in both the creation of the device, and the Network. These overhead costs have to be included in the price.
- And finally, it's still the law of the market. If these prices weren't right, you can be sure that they would change. Why do developers keep doing what they do if the pay is shitty as you seem to imply? Well they do it maybe because it's actually not all that bad. Maybe they do it because that's a relatively easy way to monetize the great skills they have (no need to build a company, blabla.. you make a great app, you sell it). Oh, and by easy I don't mean that anybody could do it, far from it. I'm just saying that for a guy incredibly gifted like some of these developers, creating apps is probably a much better deal than having a regular job.
My understanding was that the $12 is per phone across all apps. So the app developer "team" is really the union of all the teams who sell apps rather than just one team. Which is probably much bigger than all of Apple.
Also, invoking the law of the market in a market tightly controlled by one company (Apple) should be done with caution. The app store is very far from a perfect free market, so making broad generalizations about it from an economic standpoint is more difficult. (I certainly don't know enough to generalize anything :P. I just know enough to tell that it isn't exactly a free market.)
Also, invoking the law of the market in a market tightly controlled by one company (Apple) should be done with caution. The app store is very far from a perfect free market, so making broad generalizations about it from an economic standpoint is more difficult. (I certainly don't know enough to generalize anything :P. I just know enough to tell that it isn't exactly a free market.)
If you ever find yourself in another gold rush, consider building shovels rather than panning for gold. Or consider a gold-panning services company where you hire out experienced gold panners (who are in short supply) for a very nice hourly/daily fee plus a cut of the proceeds should your app^H^H^Hmining stake hit it big.
This risk-reward axiom holds true for almost all aspects of business. Lower risk, lower investment == lower return.*
Of the many economies and business environments created throughout history, this system of reward makes for the best so far.
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(* Not saying app development is without risk or investment. It's just that clearly Apple and AT&T have an order of magnitude larger investment and risk than the average developer).
Of the many economies and business environments created throughout history, this system of reward makes for the best so far.
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(* Not saying app development is without risk or investment. It's just that clearly Apple and AT&T have an order of magnitude larger investment and risk than the average developer).
Post build and deployment, it's essentially free money you are making off the app. You don't have to deal with distribution, maintaining the network, or anything else really. Granted I would love more of it and apple makes a killing off of developers even if they don't deploy a successful app, but it's a whole new marketplace they created.
Only top apps can afford to d that, and then losing much revenue. Anyo ther app is prone to become irrelevant in am atter of months without updates or promotion. And again, what you said applies to any other platform such as PCs, where app prces are fair and the market is not so manipulated.
Why do you fail to see that apple and google control pricing by controlling distribution and discovery of apps?
Why do you fail to see that apple and google control pricing by controlling distribution and discovery of apps?
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This will change as the smart phone market matures. App developers won't make more money, but device manufacturers and network operators will make less due to increased competition.
We're already seeing the signs of maturation with Android and some the cheaper carriers like Virgin Mobile.
We're already seeing the signs of maturation with Android and some the cheaper carriers like Virgin Mobile.
How odd that the parties controlling distribution reserve the greatest payoffs for themselves.
> total amount that the average user spends for apps
This is like complaining about the total amount the average user spends on web sites. Most of the web is free to the user and not supported by direct purchases of content by the user...
This is like complaining about the total amount the average user spends on web sites. Most of the web is free to the user and not supported by direct purchases of content by the user...
This is akin to saying "PC manufacturers make $200, Microsoft makes $100 and app developers get $5 on each PC. I think some of the wrong people are getting rewarded".
I'm not sure what the point of this entry was.
I'm not sure what the point of this entry was.
Except that app developers don't get $5 on each PC, they get more.
This is akin to saying "PC manufacturers make $200, Microsoft makes $100 and app developers get $5 on each PC.
I've spent literally thousands of dollars for PC software. Bought a copy of Vegas Pro 11 last night (yes, just for home videos. And to tie into this story, it's because my VP 9 won't work with the latest Quicktime update), and yet another Steam game. It is endless.
On the smartphone, however, people have been acclimated that anything great than $0.99 is too much money. It's bizarre. I'm not agreeing with Bray -- in fact I haven't even read the article -- but it is bizarre seeing all of the people defending the various players in the industry. Apple makes enormous profits. Far more profit than hardware makers have ever historically made.
I've spent literally thousands of dollars for PC software. Bought a copy of Vegas Pro 11 last night (yes, just for home videos. And to tie into this story, it's because my VP 9 won't work with the latest Quicktime update), and yet another Steam game. It is endless.
On the smartphone, however, people have been acclimated that anything great than $0.99 is too much money. It's bizarre. I'm not agreeing with Bray -- in fact I haven't even read the article -- but it is bizarre seeing all of the people defending the various players in the industry. Apple makes enormous profits. Far more profit than hardware makers have ever historically made.
That not enough money goes to non-evil advertising networks.
I don't understand why everyone here appears to be "on the side of" the carriers, google, apple, etc. The app developers give a smartphone a sizeable part of its value (half? more?), and they're getting screwed because the other players hold a strong position.
That the carriers and makers invest a lot only means they get the chance to screw the weaker players, not that they deserve the bigger part of the pie, that argument is absurd.
Does nobody see this?
I commented on this situation before in this other thread too: http://news.ycombinator.com/item?id=3635861
That the carriers and makers invest a lot only means they get the chance to screw the weaker players, not that they deserve the bigger part of the pie, that argument is absurd.
Does nobody see this?
I commented on this situation before in this other thread too: http://news.ycombinator.com/item?id=3635861
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I wonder how the "$12 per iOS device" changes when considering iPad versus iPhone apps. I tried looking around but couldn't find anything definitive. Anyone know?
and even worse, the revenue for developers is totally skewed: those publishers that end in in a top 25 do well, the rest not. My guess: top 5 % does 90 % of all income.
Publishing apps for a living is hard. Better to move to build apps for existing companies and become a services agency that charges by the hour
Publishing apps for a living is hard. Better to move to build apps for existing companies and become a services agency that charges by the hour
The article confuses app development with publishing. There is a clear market for developing apps for stakeholders.
Mobile development pricing became a race to the bottom. In a market where people see $0.99 as too expensive and still pirate software, how is money going to be made by the average developer? Even if primary cashflow isn't your goal, who wants the support headaches for such measly compensation?
Maybe the proprtions are screwed, but, shouldn't those entities be making more of the money? There are huge outlays involved in running a network and designing and building a mobile device. Also, I heard a rumor that Apple has a few software devs on campus.
The premise isn't exactly bulletproof.
My modern internet-connected phone exists mostly for web, email, SMS/iMessage, books, music, and tethering to my laptop. I don't use many other apps much, the ones I do use are mostly just optimized substitutes for a web interface (e.g. my banks' apps).
There are a lot of people that play games or use other substantive apps on their phones, but I'd say there's also a lot like me that really don't spend much time in third-party apps to begin with.
My modern internet-connected phone exists mostly for web, email, SMS/iMessage, books, music, and tethering to my laptop. I don't use many other apps much, the ones I do use are mostly just optimized substitutes for a web interface (e.g. my banks' apps).
There are a lot of people that play games or use other substantive apps on their phones, but I'd say there's also a lot like me that really don't spend much time in third-party apps to begin with.
1.) $12 is a lot more than $0 pre-smart phone era. The platform is the vehicle for selling software, not the income stream.
2.) App development (for your average iOS app) requires almost no capital investment, R&D, finance costs or marketing. Compared to the risk shouldered by hardware makers and network operators, the average app developer really is getting mostly a [mutually beneficial] free ride.
3.) Why is mobile app development special? Why does the same argument not apply to PCs. Or cars. Or any product with an after-market ecosystem?
EDIT: I'm not saying that the OP is self-entitled, and the numbers are interesting, to highlight where the treasure actually lives.