iPhone Developers Are Wasting Their Money?
By Anna Johnson on July 7th, 2010Tomi T. Ahonen has written a rather sobering blog post about the economics of developing applications for Apple’s iPhone platform. His basic contention is that, for most developers, creating either a paid or free app for the iPhone is a huge waste of money.
Tomi explains his viewpoint with a convincing breakdown of the costs and revenues faced by a typical iPhone app developer. I won’t repeat Tomi’s analysis here, but, after taking all the relevant figures into account, he concludes that:
- A typical paid app will generate just $682 in revenues per year.
- Assuming typical iPhone app development costs of $35,000, it will take 51 years for the typical app to break-even. (And it’s pretty obvious that even if costs were ZERO, $682 ain’t much chop).
- Developing free apps for the purpose of mass-marketing is also futile, since the costs don’t justify the limited market opportunity. Whilst, using Tomi’s figures, there are 80 million iPhone compatible devices in use today, that’s just 13 percent of the installed base of smartphones at the end of 2009. (Recent Nielsen figures estimate iPhone’s share at 28 percent of the smartphone market).
Meanwhile, there are even more users of web enabled phones – i.e. 2.8 billion – in use today, making the iPhone user base just 3 percent of the worldwide user base of web enabled phones. And that’s not to mention the even greater number of phones with WAP, MMS and SMS enabled.
So why on Earth would you devote marketing dollars to developing an app for just 80 million mobile users, when you could build, say, a browser based application (or make your website mobile-friendly) and reach 2.8 billion mobile users?
No question, Tomi’s article throws a ‘spanner in the works’ when it comes to the hype about Apple’s iPhone. Whether or not his argument holds true as iPhone sales continue to grow (and they are continuing to grow) remains to be seen. Also, the case against iPhone app development doesn’t apply to any target market where most members use an iPhone.
Even so, I also question the idea that, long-term, the iPhone (or any closed system) will beat the open web. So much effort has gone into creating a world where, as long as we have a browser, we can access or use any web app. Have we come so far only to go back to platform dependence?
That aside, let me give Tomi the final word and encourage you to check out his analysis:
“(The App Store) is currently in hype mode, it is a bubble where most developers will not recoup their costs, and in the case of paid apps, will for the vast majority, never reach desired usage levels, and for free apps, will never achieve reasonable reach. Doing advertising that is iPhone specific is like doing TV ads that only work on Sony branded TV sets – except that Sony has a far better global market share than iDevices. (and iPads, at 2 million installed base, don’t even mention it.)”
