iPhone App Store Developers aren’t getting rich, and why that’s not a problem

Wed, Oct 7, 2009

Analysis, Featured, News

Newsweek recently published an article premised on the argument that most developers in the iTunes app store, contrary to popular public opinion, aren’t in fact getting rich.  The problem with this argument is that it rests entirely on the ill-conceived notion that all developers should be getting rich, simply by virtue of releasing an iPhone app on iTunes.

The iTunes App Store has been extremely lucrative for some, and has even prompted many to abandon their day jobs in the hopes of churning out the next big iPhone hit.  But somehow along the way, perception of the iTunes App Store has morphed into a marketplace where people think that everybody is making it big, when in reality, the iTunes App Store simply gives anybody the opportunity to make it big.  And that’s a big difference.

Newsweek naturally begins with the story of Steve Demeter, a computer programmer who famously made over $250,000 in just 2 months with his popular iPhone app, Trism.  Demeter’s success was so inspiring that Apple chose to profile him on their website and also at the most recent WWDC.  But then the story notes that Demeter was really able to make it big by investing in Palm when its shares were really low.  That’s all well and good, but how exactly does that prove that the app store isn’t a potentially lucrative endeavor?  Because Demeter made more through investments than he did with Trism?  Call me crazy, but $250,000 in 2 months is the definition of hitting the jackpot.

So thus far it’s Reality:1 and Newsweek 0.

Next, Newsweek profiles Davd Barnard, a developer who quit his job and borrowed a ton of money to build Trip Cubby.  The app garnered critical acclaim, earned a spot on the highly desirable and visible “What’s Hot” list on iTunes, and raked in impressive $45,000 in less than 3 months.  But all told, the app was a losing venture for Barnard who spent over $74,000 during the apps development on things like programmers, marketing, and legal expenses.

But the story doesn’t end there.

Barnard, undeterred by debt, went on to develop Gas Cubby, an app which went on to earn him well over $200,000 in revenues, less expenses which he claims total more than $100,000.  Still, that’s quite a lot of moolah to take home.

Reality 2: Newsweek 0.

But Barnard’s story is illustrative of a common misconception about the iTunes App Store – namely that everyone is entitled to succeed simply because they have a useful app, business logic be damned.

If I know I can produce an app that will earn me a projected $500,000 in revenue, but actually developing that app would cost around $700,000, going forward with the project would be idiotic, no matter how useful or popular that app might be.

And you know what, the iTunes App Store is a business.  There’s no guarantee of success.  Devoting a lot of resources towards development is risky.  Quitting your day job to program full time for the platform is risky.  There’s no getting around it, which is why a Newsweek article on the topic seems a bit like stating the obvious.

Interestingly, Newsweek brings up the story of iShoot developer Ethan Nichols, who was one of the first iPhone success stories.

Today, the App Store icon from North Carolina is himself staring down the barrel of a gun, struggling to produce another hit game after iShoot was buried by competitors and copycats. “It’s terrifying,” says Nicholas, who says he is “not a millionaire” and describes iShoot’s success as “pure luck.” Despite spending eight months and more than six figures developing a second shooting game to be released this month, he says that he is still “very worried about being a one-hit wonder.”

A valid concern, to be sure, but that scenario is no different from the millions of entrepeneurs who enter a multitude of business ventures each and every year.  Hard work, in and of itself, does not ensure profitability.  You have to have a product that people are willing to pay for, and unfortunately, betting the farm on what the public may or may not be interested in is always a risky proposition.  The stakes are high, but so are the rewards.  Business 101.

In the end, its hard to take pieces like the one in Newsweek seriously because they’re premised on the faulty assumption that because some people succeed on the iTunes App Store, everyone should be profiting and watching the money roll in by the thousands.

The fact of the matter is that the iTunes App Store has put everybody on a level playing field.  You don’t need to work for Gameloft to help develop a popular iPhone title.  You can work on it by yourself on sleepless nights spent in a quiet apartment.  You might put thousands of man-hours into the project and actually end up with a final product that works – and in the end, you might only get $500 for your efforts, if that.  But the key thing about the app store is that it actually gives you ( a small guard) the opportunity to get in a game dominated by 7-footers.  It gives you the opportunity to to strike it rich.  Actually accomplishing that, however, is entirely different story.


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9 Comments For This Post

  1. AdamC Says:

    At least the Apple’s app store gives everyone a chance.

  2. Louis Wheeler Says:

    More than that, the App store is an efficient market place where the developers get paid.

    Consider the difficulties on the Wintel side. You have to everything you did in the App store plus market it. You must market it at five times the price as you would on the App store because you know that 80% of your apps will be stolen from you. You have to invest years of time just to get a return on your investment. No wonder, it’s the big boys who do Wintel Apps.

  3. Guy Teague Says:

    what the developers need to be pounding their fists on apple’s desk about is the limit on the number of apps i can have at one time on my iphone. i have only about 4 or 5 slots open and i would buy dozens, perhaps hundreds, more apps except i have no place to put them. of course this would mean a utility to manage the apps and i’m not talking about the lame comb over apple recently provided on itunes.


  4. Macbones Says:

    It’s part of the notion in this country that entrepreneurs deserve to be rich- not wealthy, but filthy rich. Your cardiologist is a crook if he makes more than 300K/ year, but some 24 year old is a pauper if he doesn’t make multiples of that on a widgit.

    When you turn your eye toward Wall Street, and what has happened there over the past year, you can begin to see why thats a problem- We over value some segments of our economy hurting those left behind- and God help Wall St. if they can’t offer 15 million dollar bonuses- they won’t be able to attract, “the brightest and the best”. Tell that to your local neurosurgeon.

  5. Serenity Says:

    Totally agree with this article. Devoting tens of thousands of dollars into a project that won’t make that much back is foolhardy. As an indie dev, I push hard to keep expenses (and contractors) to a minimum, while still doing good work. It’s also a lot about experimentation. Our first app, a Twitter geolocation app (http://bit.ly/twitdar) hasn’t made us any money, but we learned a lot from the development process and how the App Store works (it isn’t easy). We are using those lessons to develop better and better apps that (hopefully) more people will like and buy.

  6. MrCairo Says:

    I’m really grateful for an article like this that puts it in perspective. I’m an indie developer working long days in order to get my app up into the store. There has to be some “carrot” that motivates us – its not all for the good of humanity you know. But thinking that you can simply put an app up and make millions is a bit of a pipe dream. Even the early developers who were lucky enough to make some serious money did so with the fear of being a one-hit-wonder. Of course, being there early for a starving public didn’t hurt either. Its also been good to hear some of the comments that other people have made regarding their experience with Apple and the approval process. Thank you all for that.

    Anyhow, great article and thanks for casting a realistic eye over this whole stigma.

    – Cairo

  7. Ben Says:

    Yeah, this is a no-brainer. There are a finite number of iPhone/iPod users, and each of those users is willing to spend an average of $X on mobile apps. With the constantly-growing volume of apps in the store, that would mean that X would have to be pretty high in order for all developers to get rich.

    Me, I’ve downloaded about two dozen free apps and paid for three of four full versions, ranging from two at $0.99, one at $2.99 and one at $4.99. If I’m anywhere near representative, then it is, as I say, a no-brainer that a relative minority of app sellers will do really well, many will break even, and some will lose money. It’s just like any economy.

  8. Craig Says:

    I thought my app iLineup would catch on and it didn’t.

    FAIL 🙁

  9. iPhone Jones Says:

    Interesting iPhone post. I’ve subscribed to the rss feed for the page, I think you’ve some good posts. I look forward to reading more of your blogs pages in the near future. To your success with your blog, regards John

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