The App Store bubble: How much does an App earn today?

The rise and fall of Internet riches

Within the last 15 years on the rise of the Internet we have seen many a phenomena gracing technology circles promising great riches to early adopters and investors. It first started out with a gold rush land grab for domain names where in this era a 3-letter domain name like was able to earn millions a year just by providing a holding page hosting adult-related advertising banners and was eventually sold for 14M.  Then came the dotcom boom where anything Internet related were the most sought after prize on the stock market where traffic and the size of your user base was the hard currency of the day and was rewarded with over-inflated valuations never mind that many had no visible path to profitability. The preferred sport of many startups at the time was who had the highest burn-rate which were fueled by expensive Aeron chairs and Sparc servers.

The Bigger They Come, The Harder They Fall

But just as quick as the riches came to dotcom companies, they vanished again almost entirely within one weekend (which this author remembers quite well as an eager investor on the friday before black monday). Eventually the market corrected itself and only businesses with viable business models were the focus of cautious investors whose fingers were still smarting from the bursting of their dotcom investments.

In time faith was restored in the online advertising market spurred largely by Google’s foray into the area of targeted advertising. Confidence was restored in Internet companies and a smaller bubble is starting to emerge that many casual observers are labelling Web 2.0.

Cometh the App Store, Cometh the riches again

Out of the all the events to show up on the technology radar recently, none has been as exciting and show as much promise as the introduction of the App Store by Apple. With the introduction of their revolutionary smart phone, Apple for the first time put the power of a desktop operating system in the palms of technophiles (with above-average discretionary incomes). Although its potential wasn’t realized until Apple put the first version of the iPhone SDK in developers hands and opened the much publicized App Store on July 10, 2008. Within months of its introduction stories or riches started to be told of hobbyist programmers earning $600,000 in just 1-month enough to quit their full-time job to pursue a lucrative career in developing mobile apps for the App store. Soon enough a new economy was created and in pretty short order a growing number of developers made it to the App store millionaire club. This brings us to where we are today where as of September 1, 2010 there were 250,000 third-party applications with over 6.5 billion total downloads generating its developers over USD $1 billion in revenue.

The reports of App Stores death are greatly exaggerated

With now over 250,000 applications available for sale and many of them free many people have chimed in with their opinions some proclaiming the app bubble is bursting and the path to easy riches is over while others maintain the App store maintains a fruitful future. Unfortunately the ubiquity of the Internet has made opinions cheap and plentiful where it looks like anyone with a keyboard can pluck 2 numbers out of the air to show a downward trend.

An App Store Developers story…

As a developer on the App Store I wanted to weigh in on the state of the App store with some empirical evidence of my own as it evolves. My story dates back 18 months ago when it took me 3 weeks to learn enough Objective-C to submit my first app. Within a couple of weeks, inspired by the success of iFart apps I put aside my morals and pursuit of software excellence and ended up submitting my own cookie cutter apps. Although my own fart apps didn’t do nearly as well as notable others my translator app earned a noticeable side income where it managed to pay off its development effort many times over. Unfortunately around this time I joined my first startup and between the all nighters and 12 hour work days my free time was sapped and my once App making machine days were over. That is until my recent resignation which saw the return of my free time and I was finally able to open xcode again after an 18 month hiatus. After tying up some loose ends on my open source project I got to work on a new App.

How much does an App built today earn?

So that Non-App developers can get an idea of what they can expect when developing an App today, I’m going to be completely open and transparent about the development and the financial results of my latest App that has just been approved today (14th Sept UK). I will keep this blog updated with live financial results as I get them.

Coming up with an idea for an App

Developing a successful app in this age can be a tricky balance to get right where the subject and appeal of your app is every much as important as its features and quality. Because of this, I’m not a true believer of investing a lot of time in developing an App before I see some ROI. So I’m always on the lookout for small, quick wins with short development cycles. It just so happen that at the time I was seeking inspiration for my new app, I also spent a large portion of my free time playing Words with friends – an enjoyable, network-enabled SCRABBLE® clone. Although many would see my poor scrabbling skills the result of a long absence from participating in any academic curriculum, I saw it as an opportunity to build an App to improve my scrabble game! (read: cheat) After a quick sanity check to make sure there weren’t a hundred free apps already available on the App store that did the same thing: Word Mate was born – a collection of word finding utilities that help you play SCRABBLE® like a computer 🙂

Development efforts and total cost

Word Mate took me roughly a week full-time to develop which included downloading all the latest SDK’s and tools, a bit of reading designed to re-ignite my love with the Objective-C language and its Cocoa inspired frameworks as well as creating all the App and website graphics. As the website is freely hosted on Google App Engine and the only 3rd party icons used were free, no costs were incurred into making this app other than the $99/year iOS Developer Program fee and my own time.

App Store submission process

Although the language and tools haven’t improved much, the app submission and code-signing process has improved significantly. When it was first released, code-signing your app so it can be submitted to the App store was considered a black-art which thanks to my careful literal following of every word in an online tutorial caused me to be stuck with the embarrassing title of ‘iPhone Developer: Demis Bellot’ for the name of my developer profile. Anyway I submitted my app on the 1st September and it was only approved at midnight on the 13th September. Where the QA staff that Mr Jobs says approves most apps within 7 days are? I don’t know – I’ve never had an any of my apps approved within 2 weeks.

Regardless today will be my first full day on the App Store market. Like all my apps, Word Mate will be free for the first week. I like to do this as it gives a chance for my friends and anyone else who wants one a chance to download my app for free. Making an App for free and then charging for it will also give you an idea of the Free vs Premium download ratio. From the experience of my first app the difference was about 6-9% where for every 100 free apps that were downloaded (when it was free) only 6-9 were paid for (when I started charging USD $0.99 for it). It will be interesting to see if that trends continues with Word Mate.

Live Financial Results

I’m going to maintain a live list of results on the table below, so you can check back on this post to see how it develops. iTunes Connect (where we login to get our sales reports) doesn’t publish daily results until 12pm GMT the next day. You can follow @demisbellot on twitter to find out as soon as the latest results have been added.

Period Ending Cost Qty Sold Earnings
14th Sept $0.00 118 $0.00
15th Sept $0.00 118 $0.00
16th Sept $0.00 41 $0.00
17th Sept $0.00 28 $0.00
18th Sept $0.00 24 $0.00
19th Sept $0.00 21 $0.00
20th Sept $0.99 15 free/1 $0.99
21st Sept $0.99 1 $0.99
22nd Sept $0.99 0 $0.00
23rd Sept $0.99 2 $1.98
20-26th Sept $0.99 4 $3.96
27 Sept-3rd Oct $0.99 5 $4.95
4th-10th Oct $0.99 2 $1.98
11th-17th Oct $0.99 3 $2.97
18th-24th Oct $0.99 2 $1.98
25th-31st Oct $0.99 5 $4.95
1st-28th Nov $0.99 5 $4.95

*NOTE: Word Mate will be free until 20 Sept 2010, so if you think you might find this app useful now would be a good time to get it for free 🙂

Follow the conversation

A discussion thread has started in hacker news which you can get involved in at:

SCRABBLE® is a registered trademark of Hasbro, Inc. in the United States and Canada, and Mattel, inc. elsewhere. I’m not affiliated with either company.

Update 23/09/210

It’s just come to my attention that I may have stuffed up the SEO of my app in the App Store as Word Mate can’t be found with the words ‘Word Finder’ or ‘Word Cheat’  2 of the most popular searches for finding like apps. Unfortunately Apple wont let you change it after you’ve added it so I’m going to have to submit a new app. Unfortunately SEO is just as important as having a quality app as if users can’t find it, they can’t buy it.

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  1. Thanks for posting this, of course, making it known that the app will be chargeable after a week will in itself distort the download figures

  2. Hello there,

    Hope I ain’t asking too much, but could you please update the income for the current month?
    Thanks in advanced,

    Matt D.

  3. Hi Matt, I’ve updated it with the latest results. The results have been pretty disappointing lately which is why I haven’t been tracking them.

    I still need to update the keywords for better SEO in the App Store but haven’t found the time to do it yet.

    • Hi Joshua,

      The sales for ‘Word Mate’ are basically non-existent, by far my worse performing app.
      I’ve updated it to show I only got 5 for the entire month of November.

  4. Thanks for posting! Interesting info… about to burst my bubble of creating an app. Still, I’ll give it a shot as I think it’s a useful tool at least.
    Are you still developing more apps then?

    • Hi Claire,

      I haven’t been developing many apps lately since between working for a startup and my Open Source efforts I haven’t had any free time.
      But it looks like I’m running into some free time in the near future so I will be picking it back up again!

      Good luck with your efforts 🙂