Making money in mobile apps isn't easy: Majority of app developers are moonlighters
Mobile applications have a central place in the wireless industry but despite their pivotal role, most developers who create these apps find it very difficult to succeed in this business and even harder to make money at it.
The challenges gained new context last week when Evans Data Corp. released findings from its latest survey of global developers. The company revealed that the vast majority of application developers develop their apps on a part-time basis while they earn their incomes in other ways.
The firm found that among developers who create apps specifically for distribution via app stores, just more than one-fourth (26%) are full-time mobile app professionals who derive most of their income from their apps. The largest group (41%) is made up of moonlighters who have professional, full-time jobs as software developers and create their apps in their spare time. Another 22 percent are serious "hobbyists" who do not develop software in their regular jobs but do have technical backgrounds and the skills to create mobile apps in their free time. The rest (11%) are students and recent graduates who are also developing apps in their spare time.
While the dominance of moonlighters and other part-time approaches to this business suggests that developers are not willing to gamble their careers on their mobile apps, the fact that 26 percent are making a living at it is actually good sign for an industry that is as new as this one, said Ben Hanley, senior product manager at Evans Data.
"We expect the industry to mature," he said. "Over time you will see the proportion of full-time developers grow relative to the other major profiles."
Advice for developers: follow your passion but be smart about it
Azita Arvani, principal of Arvani Group, has advised numerous companies on how to build mobile businesses over the years and offered some suggestions for those that are trying to make a mark in the app development industry.
"Whatever you do, you must be passionate about it, and not working out of your domain of expertise or level of interest," she said.
She offered this list of tips for developers:
- If you're looking for funding, the product must be scalable so that it can gain massive adoption to justify an investor's interest.
- To gain massive adoption the app must have international appeal
- The app must be high quality and not only perform well on the device but also perform well in how it connects with and interacts over the network.
- The company must continually come out with new product updates to compete with other aggressive firms.
- And finally, the company must build a strong relationship with its customers that it nurtures and maintains separately from the app store.
"You want loyal customers," she said.
Two successful app development firms to learn from: OneLouder and Riverman Media
Two firms that have built viable app businesses with very loyal customers include OneLouder and Riverman Media. OneLouder launched as a formal business with venture funding and is scaling up quickly. Riverman Media has successfully evolved out of a moonlighting business and has chosen to remain small and independent.
OneLouder, which was launched in July 2011 to build social mobile applications, was established initially to sell its initial product, TweetCaster. The company says that TweetCaster is the most popular third-party app based on Twitter. It has a handful of other products, including SportCaster and FriendCaster.
OneLouder was spun off from the mobile app distributor, Handmark. Evan Conway, then an executive at Handmark and now president of OneLouder, said that from the very beginning he and his colleagues had a very specific vision for the new business. They wanted to build a business with apps that use Android and Twitter in creative ways, that are free, and that would generate revenues from advertising immediately. This type of business can't be built without infrastructure, a technical staff, and people to manage the advertising-based monetization part of the business. The company raised funds from Handmark and several venture capital firms to support its launch.
OneLouder is already self-supporting. Since last July, Conway said, OneLouder customers have downloaded 15 million of its apps. Between four and five million people will use their products this month. More than a million use the products on any given day and a typical customer uses their app ten to 15 times per day. OneLouder is seeing more than a billion ad impressions per month.
Conway said OneLouder's business model comes down to three things: "Build absolutely the best products we can, attract an audience and monetize it through best-in-class advertising capability."
But continually winning over users and building momentum is not easy, Conway said. For one thing, there is so much going on in the industry that companies can get distracted from their core objectives. For another thing, it's really difficult work. OneLouder now has 26 employees. The team completes at least one product update every week and it is continually beefing up its marketing and advertising efforts.
"On an ongoing basis you need to have the stamina to really play this game every week," he said. "Every week is 2 percent of your year."
Riverman Media specializes in stylized and futuristic 2D mobile games. The firm has turned down two offers from prominent social mobile companies that wanted to acquire it.
Pizza Vs. Skeletons
Jacob and Paul Stevens, two brothers, started the company in 2005 as a sideline business but the business has been self supporting for the past couple years. The developers say they've delivered 2 million downloads of their products, although they won't divulge how many of those were purchased. Its most recent release, Pizza vs. Skeletons, was awarded the iPhone game of the week.
The Stevens brothers have a clear and unwavering business philosophy, and that is to stick to their aesthetic principles and maintain their independence in the industry. They focus entirely on their core skill of developing 2D games for iOS devices and they strive keep their users loyal intrigued by continuing to improve their products.
"Our goal is really to just earn enough money that we can decline outside money, fund ourselves and keep making better and better games," Stevens said.
Jacob Stevens said they keep their costs and risks low by focusing on 2D graphics and avoiding network-based games that are costly to serve and scale. They do not advertise, preferring to find their users through message boards and other "organic" means, and they have no interest in in-app purchasing. They charge from 99 cents to $2.99 per download.
Stevens said the best way to succeed in this business, from his perspective, is to observe the following: have a concept that can be explained in one sentence to people who don't know anything about apps, keep the team small and expenses to a minimum. His firm won't spend more than $10,000 on equipment and software to create a product, he said.
"If you understand that a game can come out from an AAA studio and flop on the iPhone, you have to be incredibly careful with the amount you spend making a game," he said.
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