Can Developers Still Make Money in the iPhone App Store?
Posted by Simon Khalaf on Fri, Mar 20, 2009
The App Store's unprecedented success has certainly created "poster-child" success stories like iShoot and Trism (for the record, we love and play the both of those games!). At the same time, Apple recently announced that over 25,000 applications are available in the iPhone App Store and that over 50,000 paid developers are in their SDK program. Given these figures, many wonder if increased competition has created an insurmountable barrier-to-entry for additional success stories.
First, let's get the definition of "success" out of the way. For some - fame, recognition, or capturing lots of users is success enough. But let's focus on money. We asked: Are most apps we see in the App Store little more than fun distractions during a consumer's busy day, or is there a solid business behind them? Inquiring minds would like to know and we have an answer.
Based on our data, there still remains a significant opportunity to make solid money with iPhone applications, especially for games. However, like traditional video game, movie and music industries, the iPhone App market is a "hit-driven industry" meaning that total market revenue is concentrated among a few big winners.
That said, there appears to be more of a middle class in the App Store; that is, more companies bringing in respectable revenues. This is particularly true when comparing revenue distribution across iPhone Apps versus what games and apps earned on traditional carriers like Verizon and Sprint. This is due in large part to the free trial, better navigation, community ratings and superior discovery solved by Apple in their store. What this means for developers is that if they release a title with a strong concept and solid production values - even if it doesn't have a known brand associated with it -- and they market it well, they can have a hit and make money.
But how much money? What is a hit worth? Well, how does $750,000 in three weeks sound?
It doesn't yet beat U2's expected revenues from their new album, No Line on the Horizon, but it's getting close.
To demonstrate this, we studied a puzzle game that was released with both free and paid versions. In this case, both versions made the Top 25, in their respective categories.
Within three weeks, the game had over two million installs and generated an estimated $750,000 USD in revenue. Not bad for a puzzle game. However, the bigger puzzle remains, how did that application make that much money while 25,000 others didn't?
Studying the questions, the answer came down to a matter of basic execution: a great concept, a good user experience, tight marketing and a smart distribution plan. Those factors helped "thrust" the title into the "orbit" of the Top Sellers category. Then the real "booster" of superior merchandising placement kicked in.
While we know that hits will continue to emerge in the App Store, the space is maturing quickly. To succeed, developers need to think about their total offering and how to market it effectively.
The good news is that there is money to be made, but it's time to bring your A game. Stay tuned as we share more on this topic, including best practices and tips to succeed.