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.)