With Apple’s App Store and mobile apps on Android, Blackberry and the soon to be released Windows Phone 7 providing access to tens of millions of on the go customers, there’s a good chance you may be interested in moving your content from Web and into the proprietary app market.
Sadly, mainstream media is already on the app market doomsday bandwagon with Fast Company’s “Expert Blogger” Aaron Shapiro pontificating about “The Great App Bubble”. Backing his leaps of logic up by making statements that don’t correlate to his points, Aaron looks to be on a mission to save companies from this impending app bubble, where small businesses implode, VC money is lost, and developers are left homeless. He’s discovered 8 signs of the impending app bubble, all centered around Apple’s slice of the market. Let’s have a look see:
1. Apps don’t generate profit for developers.
CEO Steve Jobs has said, the App Store has generated more than $1 billion in revenue for developers. That sounds like a big number. But in this context it’s not. One billion dollars in revenue for the approximately 225,000 apps is $4,444 per app–significantly less than an app costs to develop.
How does Aaron come to this conclusion regarding profit versus development costs? Well, it follows after he’s careful to acknowledge the “well thought-out analysis” of his source:
A typical iPhone app costs $35,000 to develop.
Really? So where does that number come from. Aaron’s source, Tomi Ahonen, is kind enough to produce a disclaimer regarding the numbers he’s published, since the information they’ve used to determine these numbers is, you know, cobbled together using surveys and assumptions. Tomi states he’s prepared his report:
…with all data I have managed to find.
Now the trouble here is, if you read Tomi’s original article, you’ll see that he’s sourced his numbers from another random data gathering group, the Internet Retailer, whom he’s stated as being an “independent source” as though that makes their numbers any more accurate. Of course, Tomi hasen’t provided a link back to the Internet Retailer’s source material and I can’t find their May 1 report online, so there’s a roadblock there. But Tomi has listed his backup source (again, no link), but it’s clear it’s a press release on prMac from iPhone App Freelancer which contains the following sentence:
With companies now scrambling to find anyone capable of making these programs, some developers command upwards of $200 per hour and applications cost between $15,000 to $50,000 to create.
Surely a credible resource for these kinds of numbers since Tomi trusted them, iPhone App Freelancer lists no source for this single sentence which has made its way into a publication I previously assumed was reliable, Fast Company.
Seriously, is this the state of reporting in 2010? Back up random leaps of logic with a series of sources that have no foundation for the statements they make. It’s embarrassing.
But it doesn’t end there. To take a general statement that apps cost between $15,000 and $50,000 and conclude the average app costs $35,000, well, that’s just ridiculous. There’s absolutely no basis for assuming that the average cost of an app equates to the median of the two. If 95% of apps cost $15,000, then the average cost is nowhere near $35,000. And since we also know that some apps are completed in a matter of hours, costing nowhere near $15,000, relying on unfounded numbers to make up averages is just unacceptably lazy reporting and by no means should be considered “well thought-out analysis”.
The fact that Aaron then used these made up numbers to back up his statement that “Apps don’t generate profit for developers” is sad.
What’s worse is, he goes on to use several out of context statements to attempt to back up further statements, including item 2 in our sure signs we’re in an app bubble:
2. Apps aren’t very profitable for Apple either.
The App Store’s gross profits amount to just 1 percent of Apple’s total gross profits.
So, compared to several distinct groups within a company, one group has a smaller percentage of overall company profit and therefore isn’t profitable. Oh, sure, inject the adverb “very” in there and it’s okay to make such a ridiculous statement.
But let’s get back to Aaron’s point: this is the second “sign” that we’re in an app bubble. So, apps make up a percentage of Apple’s overall profit and therefore we’re in an app bubble. What? Oh, it’s that apps aren’t very profitable compared to other aspects of Apple’s business, that’s why we’re in an app bubble. No, that doesn’t make sense either. There is absolutely no correlation between apps as a percentage of Apple’s profit and any state of the app market whatsoever.
So here we are on just the second of 8 signs of an app bubble and I’m quite frankly worn out. If you want to deal with the rest of this useless article, you’re welcome to. Instead, I’d recommend considering what we actually know about the app market.
Let’s look at the facts without conjecture
Some App Store developers are making a killing because they’ve released quality apps that the market responds to. They don’t all require dozens of developers, or take months to make. Whether your app is $0.99 cents or $9.99 doesn’t define the potential of your app. And whether some apps cost $25,000 or $100,000 to develop is not relevant to your development requirements.
What we know is that there are a lot of apps out there and, like any business, when you’re putting resources towards a market you should do your due diligence in determining the opportunity, what resources you’ll need to reach the market, and whether you’re solving a problem that will be of value to your customer.