Financial realities of the iTunes App Store(appcubby.com)
appcubby.com
Financial realities of the iTunes App Store
http://appcubby.com/blog/files/financial_realities.html
2 comments
That blog post has some Holy Mother of Accounting issues. We could start with 32k loaned from family NOT being income. The business is funneling money the wrong way, guy! Actual income does not cover your dev expenses! And you need paid marketing!
yeah , it was interesting. It is a little difficult to actually see what they are making , but it appears they have paid for some marketing either 12K or 7K depending on if the 5K free marketing 'income' is applied to the expense
Here's my attempt:
Income:
Realized Sales: $32,000
Accounts Receivable: ~$7,000 (reading graph)
Subtotal: $39k
Expenses:
Programmers: $29,000
Advertising: $2,000
Administrative[1]: $5,000
Artists: $4,000
Debt Service: $1,800
Subtotal: $41,800
[1] I smell a new MacBook, or someone severely overpaid for lawyers.
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Total: ($2,800)
Ignore the charity -- that is not a business-related expense. Ignore the source of your starting capital -- I don't care whether it is a loan, selling your car, or using cash you have on hand, it is not income. Ignore the salary paid to yourself -- transferring money from one pocket to another pocket does not improve or hurt your financial situation.
What does this simplified picture produce? The correct conclusion: this business is losing money. Sales are in a downward spiral while advertising is active and the blog author apparently thinks that taking a month off of advertising and then turning it back on again is going to goose himself to profitability.
That is fantasy.
I think everyone who sees dollar signs in their eyes when they hear of the App Store needs to be sent to read this article. Here is a guy who has sold almost $40,000 worth of software and STILL LOST MONEY. At the moment all he has to show for it is a swiftly declining residual revenue stream (it will probably fall below the costs of debt service by the end of January) and a pile of money owed his family.
Income:
Realized Sales: $32,000
Accounts Receivable: ~$7,000 (reading graph)
Subtotal: $39k
Expenses:
Programmers: $29,000
Advertising: $2,000
Administrative[1]: $5,000
Artists: $4,000
Debt Service: $1,800
Subtotal: $41,800
[1] I smell a new MacBook, or someone severely overpaid for lawyers.
----
Total: ($2,800)
Ignore the charity -- that is not a business-related expense. Ignore the source of your starting capital -- I don't care whether it is a loan, selling your car, or using cash you have on hand, it is not income. Ignore the salary paid to yourself -- transferring money from one pocket to another pocket does not improve or hurt your financial situation.
What does this simplified picture produce? The correct conclusion: this business is losing money. Sales are in a downward spiral while advertising is active and the blog author apparently thinks that taking a month off of advertising and then turning it back on again is going to goose himself to profitability.
That is fantasy.
I think everyone who sees dollar signs in their eyes when they hear of the App Store needs to be sent to read this article. Here is a guy who has sold almost $40,000 worth of software and STILL LOST MONEY. At the moment all he has to show for it is a swiftly declining residual revenue stream (it will probably fall below the costs of debt service by the end of January) and a pile of money owed his family.
you're making a quick assumption without knowing more about his methodology and long-term strategy. I talked with him at length last night at a developer meetup, and he's now in a position to capitalize on the technology assets he had developed for $30k. He's in a much, much, much better position than half the gumball developers on the store now.
I wouldn't be so quick to write-off people's real-world testaments like that, especially when they are courtesy enough to open their books for other people to evaluate and apply. You sound like the armchair critics on TC, TBH.
I wouldn't be so quick to write-off people's real-world testaments like that, especially when they are courtesy enough to open their books for other people to evaluate and apply. You sound like the armchair critics on TC, TBH.
I am 150% in favor of real-world evidence and sharing information with other entrepreneurs. That is why I make all my businesses financial numbers public, too. (Not the usual sense of the word "armchair critic".)
What I am not in favor of is sugar-coating assessments out of social concern. Why do we put things in graphs? To draw conclusions out of them. The conclusion you draw out of a downward-sloping sales graph is not "Things are looking up!" The long-term strategy, which is laid out in the blog post, is to repeat the tactics (advertising) that failed before, seemingly without regards to understanding why they failed the first time.
(Which is fairly simple: it is virtually impossible to achieve a conversion ratio high enough to justify that price point with a ten-cent ad. You need to either charge much more or have a back end revenue stream. The App Store is not conducive to either. I pay six cents a click and sell an app for $25 and it takes significant work to make money and those numbers.)
He's in a much, much, much better position than half the gumball developers on the store now.
I agree with this assessment, which should be tattooed to the inner eyelids of anyone thinking of publishing for the store.
What I am not in favor of is sugar-coating assessments out of social concern. Why do we put things in graphs? To draw conclusions out of them. The conclusion you draw out of a downward-sloping sales graph is not "Things are looking up!" The long-term strategy, which is laid out in the blog post, is to repeat the tactics (advertising) that failed before, seemingly without regards to understanding why they failed the first time.
(Which is fairly simple: it is virtually impossible to achieve a conversion ratio high enough to justify that price point with a ten-cent ad. You need to either charge much more or have a back end revenue stream. The App Store is not conducive to either. I pay six cents a click and sell an app for $25 and it takes significant work to make money and those numbers.)
He's in a much, much, much better position than half the gumball developers on the store now.
I agree with this assessment, which should be tattooed to the inner eyelids of anyone thinking of publishing for the store.
More assumptions. The App Store does not conform to any discernible business norms. The downward slope looks grim, but sales can bounce back at any moment and for any number of reasons. One of which is that we will be featured on wired.com tomorrow!
We've got some amazing new features that will be released before the end of the year (again, already paid for), and could spark another few weeks of above average sales. Even if the sales don't bounce back to the peak levels, we're leveraging our existing code base and will be releasing several new apps in the coming months.
As far as my long term plans... did you read the whole article? I said that I'm NOT going to do any major marketing until something changes. I'm focusing my efforts on what has worked so far: creating great apps and working with Apple and the press to get free marketing.
We've got some amazing new features that will be released before the end of the year (again, already paid for), and could spark another few weeks of above average sales. Even if the sales don't bounce back to the peak levels, we're leveraging our existing code base and will be releasing several new apps in the coming months.
As far as my long term plans... did you read the whole article? I said that I'm NOT going to do any major marketing until something changes. I'm focusing my efforts on what has worked so far: creating great apps and working with Apple and the press to get free marketing.
David - App Cubby