Apple did a very great result this trimester, and I’m pretty happy, too (read: stock trading was good).
The iTunes store performed pretty well, reaching $1Billion (gross profit). This allows me to disclose some confidential numbers without breaking any NDA from other analysts and consulting firms.
We’ll try to quantify the average income of an AppStore application to see if it’s convenient or not. It’s not a fair way to quantify things but at least helps to see things in perspective.
We start with a great simplification: music and other medias has no influence in the iTunes store. That’s not true, music and other medias are a big deal on iTunes, but let’s consider a very best case: everything they sell are Apps.
The AppStore has 91.000 active applications as now.
We can further simplify things, saying that every application can earn about $1.000.000.000 / 91.000 a year. That’s about $11.000 a year, rounded up. Those are gross incomes and still includes the 30% Apple takes for itself due to their uselesess priceless marketing. So you will end up with an average expectancy of circa $7.700 a year. That’s a gross profit, man!
Now we’ll think about how much time you have to invest to make an application.
In average, an application takes about a month to build for a professional, full-time staff of about 3 people. A game usually takes about 3 to 6 months for a team of the same size.
The estimate doesn’t count the approval waiting time, that can be very long. Since the approval process almost always asks you to fix stuff and resubmit, you should keep some the staff around. Outsourcing development to a sweatshop may seem smart but it’s a bad way to lose expertise and to candidate your app to be swamped by clones. A smarter way should be to start to develop another application. The smartest is to have at least three titles in the pipeline, for multiple platforms. It will help in case one of them busts or is lost in the quirks of Apple (or everyone else) approvals.
Another wrong assumption is that your app will be able to net $7.700 a year. AppStore doesn’t know honor the long tail rule typical of shareware and indie sales, it honors a special and very interesting sales model that sees spikes of about one or two days every time your app is updated. Chance and sheer luck play a fundamental role in this model. Being the last published title between a pause of several hours can be better of any paid advertisement! Be realist and consider that you can’t support every application you launch indefinitely. The approval is still time-consuming, so supporting an app will be costly. It’s up to you to invest in new titles or promote the older ones. Remember that newer titles can advertise older “hits”. Another nice way to keep your Apps fresh is to hire a marketing firm to keep the buzz going. They are not cheap, though. They come in the hundreds of thousands.
Believing that your app will stay afloat due to pure quality is naive, there’s simply too much noise to hope your app will be profitable because it’s good. Nobody will brave the backlog of AppStore to reach your App: chances are that he will find something similar before reaching your six-months old title. And it will be probably free!
Don’t be influenced by iPhone success stories. Despite the huge quantity of applications, individual success stories are almost always confined to the early days of AppStore. Just remember that, more than often, success stories are marketing stunts to attract customers and investors. Even when they happen in respectable newspapers and website. You aren’t iFart.
Be wary of the Apple (or other publishers) success: it’s not yours. Success stories of publishers with hundreds of titles under their belt aren’t necessarily encouraging for developers. That’s called shotgun strategy: produce and promote a lot of different stuff, since every copy sold is an earning and the development risks are taken by someone else (YOU, in this case). To be more clear: an application that sells only one copy is a catastrophe for you but it’s just another 30% gross income for Apple, strong of thousands of other titles. You can’t win this war.
My evaluation is, of course, purely instrumental to quantify how big the AppStore is and how difficult is for anyone to emerge. Despite music there’s no way a start-up can promote something sold only in AppStore outside AppStore. That’s why most indie games are coming to AppStore after they reached success in more accessible marketplaces, like Steam, WiiWare or Xbox Live and AppStore game developers pretty much stay and die inside the platform.
Just look at the weekly iPhone top tens: estabilished brands pushed by strong publishers sell well. But they’ll sell pretty much everywhere! 🙂
Rockstar Gamer 