The average app

How much does the average app make on the iOS App Store? Can you, in fact, make a living from selling apps? As the founder of a profitable app development company, these are questions I’ve given a lot of consideration.

The default position is to take these two numbers from Apple’s 2012 WWDC keynote:

…and assume that the average app makes one 650,000th of five billion dollars, i.e. $7,692 per app.

The problem is, this simply isn’t an accurate assumption to make. Even a cursory glance at the App Store’s Top Grossing chart suggests that a very few apps are making the lion’s share of App Store revenue. So how do we get a sense of the true distribution of wealth on the App Store?

One possible insight comes via an excellent talk by Trevor Klein at last week’s Media Futures event. In his talk, Trevor referred to some research by Owen Goss of Streaming Color, who performed an iOS game revenue survey late last year.

As Owen noted (and Trevor reiterated), the data from this survey should not be taken as statistically valid. I’d add that it relates to an exceptional category in the App Store, with an unusually high top-grossing ranking relative to other categories. Nonetheless, it provides an interesting insight into the potential relative distribution of revenue in a particular category on the store.

Perhaps the most interesting observation in Owen’s research was just how heavily skewed the top end of the games category may be:

In Owen’s research, a mere 1% of apps were making 36% of the revenue. The following 19% were making 61% of the revenue, with the bottom 80% making only 3% of the revenue.

Before reading the rest of this post, bear in mind that these numbers are not necessarily accurate, and may not be representative of other categories in the App Store. However, if they were representative, the back of our napkin would give a very different split from the default assumed position:

  • 1% of apps (6,500) would be sharing 36% of revenue ($1.75bn), i.e. an average of $269,230 per app
  • 19% of apps (123,500) would be sharing 61% of revenue ($3.05bn), i.e. an average of $24,696 per app
  • 80% of apps (520,000) would be sharing 3% of revenue ($150m), i.e. an average of $288 per app

As Trevor noted in his talk, if these numbers are representative, there’s relatively little chance of the majority of developers hitting that top 1%. We’ve been lucky enough to release one such app in the UK, called UK Train Times, but it’s worth noting that this app was a £4.99 app released in 2009, in the early days of the App Store. We wouldn’t be able to make this kind of revenue if we launched the same app now, not least because the UK’s National Rail Enquiries service has since released an official (and free) competitor.

With the App Store maturing, hitting that top 1% increasingly requires sizeable investment and marketing in addition to app development skills. Successfully launching a 1% app (even with sizeable investment) isn’t something you’d bet your mortgage on, and I’d go as far as to say that this top end of the store is no longer a market that’s available to small independent developers.

The next 19%, however, is definitely a viable aspiration. Most of the paid apps we’ve released have fitted comfortably within the upper bounds of this part of the graph (beating the 19% average mentioned above), and these kinds of apps are definitely within reach of small development teams or sole developers.

I’m not sure it’s viable for a multi-developer team to make a sustainable business model from one single iOS app product without hitting the 1%. Low app purchase prices, and the absence of a paid upgrade path, make it hard to build an ongoing two-way reward relationship with your customers (offering new features on a regular basis in return for more money over time). There are exceptions, but it’s rare in the iOS store. (This is one reason why I’m not surprised to see Sparrow announce their acquisition by Google earlier this week.)

I do, however, believe it’s possible to develop a range of 19% apps, each of which is profitable in and of itself – and in fact, this is the approach we take at Agant, the app agency I run. If you keep production costs and timescales realistic; create reusable code to reduce future development costs; choose your projects and partners wisely; develop apps with a long shelf life; and balance shared product investment with paid client work; then the App Store can definitely be a profitable place to be.

(Any thoughts on the above: I’m @daveaddey on Twitter.)

14 thoughts on “The average app

  1. “…believe it’s possible to develop a range of 19% apps…” That is only, averaged out, roughly $25 per app. no? 19% of 650,000,000 apps, dividing 61% of $5,000,000,000 in revenue.

    What am I seeing wrong?

    I think this “analysis” is rather skewed and erroneous altogether because there are varying qualitative and purpose driven differences of apps that cannot just be averaged in. For example, there are many apps that are not intended to generate any income or are even just sales or promotional oriented, then there are even more that are ad driven and don’t use iAd (whether iAd revenue is included in the $6B or not). Just some thoughts. Without curation of and comparison of relevant data these calculations mean nothing at all, but yet more nonsense noise that will be repeated in ad infinitum .

    • Hi Dan,

      You’re a factor of 1,000 out in your calculations. There are 650,000 apps on the store, not 650,000,000 :)

      I completely agree that the analysis is skewed – in fact, I was at pains to note as much in the article, as there’s no such thing as reliable, statistically-valid data for the “average” app. You’re quite right too that there are plenty of apps in the 650k total which are not intending to make money. Really the point I’m making is that the distribution of wealth is definitely not even, and is most likely skewed to the top few thousand apps.

    • That’s a very good point – and the other two figures would be higher too without free apps included. If the app store split is still roughly 2/3 paid, 1/3 free (as in these 2011 numbers), then removing the free apps would certainly make a difference. That said, the whole thing is confused by the fact that some of those free apps are the highest grossing apps of all, due to the freemium model.

  2. I’d bet that the app revenues follow a Pareto distribution. Given the population and the total amount of money you could extract the exact law with one data point (eg 50% of apps make less than $450). This would even happily account for the free apps (0 revenue). With more data points, as we have here:

    1% of apps – 36% of the revenue
    19% of apps – 61% of the revenue
    80% of apps – 3% of the revenue

    you could get a very decent approximation. I can’t be bothered to go through this (exercise left to the reader, etc…), but this would probably give you a good idea of what the revenue split looks like.

  3. I wonder what the numbers would look like if we did the same calculations for websites instead of apps. Of course, it would be practically impossible to do but I bet that at least 99% of revenues would come from <1% of websites.

  4. The statistic I have heard was that 1% of iOS developers make more than $1000. This figure does not seem inconsistent to me. The App Store seems to remind me of the numbers for social game income, where you have a few “big whales” and a huge majority that doesn’t make anything. Perhaps the statistic included the cost of hardware or development.

    • I’m not sure this is the case. If you’re developing an app for a viable market and charging for it, and the app is good, I think 1k is not a difficult goal, and I’d be very surprised if your statistic is correct. I think the thesis of the article is right on: develop a portfolio of apps, and the set of them can represent a sustainable business, where putting all efforts into a single app with 1% aspirations carries a greater risk of failure.

  5. “With the App Store maturing, hitting that top 1% increasingly requires sizeable investment and marketing in addition to app development skills.”

    I’m not convinced this is true, for one simple reason: most apps in the App Store are really, really bad. Marketing can let more people know about your app, but if the App Store is full of 2-star reviews, and Google turns up a bunch of blog/twitter posts about how bad it is, you don’t need to spend money on marketing. You need to spend it on making your app stop sucking.

    People who think it’s hard to make it to the top of the store probably don’t realize how truly awful the average app is. For example, if you have an app that I can launch without it crashing 100% of the time on startup, you’re already in the top 80%.

    If you release an app, and then take the time to improve it (in any way at all!), and release a new version more than once a year, you’re in the top 50%. This is not a very high bar at all.

    The vast majority of apps I’ve ever seen look like they were written by someone who simply didn’t care at all. What they need is not marketing, but some extremely basic maintenance. $288 per app is pretty generous for a bottom-80%ile app! If they were running a buggy web page that they never maintained, and slapped Google ads on the side, they wouldn’t have made nearly that much.

  6. You should show that graph as a histogram (the one with the top 1%, next 19%, bottom 80%). It would be good to get a sense of the actual distribution.

  7. I would be very interested to know what your experience was in creating, marketing and distributing the WW2 Timeline app. It’s a fantastic piece of work. Still, as someone involved in creating educational/cultural interactives mostly online and in-gallery, I wonder if their is a strong market in non-game, educational experiences for iPad. Be happy to hear your thoughts and experiences here or offline.

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