tomi ahonen has an interesting warning about the mobile/ipad apps market, comparing it to the dotcom bubble ten years ago. and the numbers speak quite clearly: according to morgan stanley, total iphone apps revenues in 2009 were 780m dollars. minus 30% to apple, that is 546m. so at the end of 2009 there were over 100,000 apps in the store – which gives us a revenue per app of around 5000 dollars.
(ahonen works with 150,000 apps, but that doesn’t seem fair since you can’t work with 2009 numbers for revenue and 2010 numbers for apps.)
so how much does it cost to make an app? ahonen says it’s somewhere in the ballpark of 15-50,000 dollars per app – i’ve heard similar figures elsewhere. meaning that last year, the average app cost 3-10 times as much to produce as it returned in revenue. ouch. so the idea of course is that one makes an app not just to sell it but to position oneself in the market, to draw attention, to get loads of users, and then, once all the users are there, money will materialize somehow… which is exactly the refrain of the dotcom bubble.
norwegian readers will recall similar comments, and figures, being made at medialaben.no earlier this spring.
at the moment there are over 200,000 apps in apple’s app store and almost 60,000 apps in android market (and quite a few other places as well, such as getjar, handango, mobile2day etc – although many of those may be cross-posted. see wikipedia for an overview). and let’s say that each of them on average cost around 30,000$ to produce. (each of the two textopia apps probably cost taxpayers more than twice as much as that, and i’d think the ones made by my colleagues in the inventio project are in the same ballpark – and these are non-commercial, open source research projects.) if so, all the apps in the app store and android market have so far cost 260,000 times 30,000$ = 7.8 billion $. ok, so i guess this is not quite of the magnitude of the dotcom burst… but someone is loosing significant money here.
part of the problem, of course, is platform fragmentation – the amount of iphone users around the world is just about 1% of all mobile phone users. which makes a compelling case for web apps – as i keep repeating and probably will keep doing for a while, and as ahonen also states.
interestingly, ahonen also slams location-based services. he has a wealth of evidence in saying that location-based is not a great business model, but it also seems a little irrelevant to me – his premise is that location can not be the primary value in any service, but only an add-on. i always thought that was pretty much a given (except for navigation apps, which do seem to thrive quite well, thank you). so sorry – that one i’m not ready to buy just yet.
update 18 june: updated numbers from apple: they have now paid out $1B to developers in total, since the opening of the app store. since the number of apps has gone up to 225,000, this gives an even lower average: just under 4,500 $ per app in the store. the economist suggests that many apps are “loss leaders” for other products – that is, basically a form of advertisement. as such, they compare the apps industry to the music industry – a few hits make a lot of money, the rest don’t. and most products are short-lived.