Two huge disclaimers:
1. It’s early. iPhone 2.0 and the App Store are just hours old. Everything below is pure conjecture.
2. “A living” is subjective.
Where’s the market?
Pinch Media just released an initial price distribution chart for the initial 500 or so iPhone apps in the App Store.
There are always going to be lots of free apps, but what’s telling is the initial distribution of prices. Most are $10 or less with the bulk at under $5. If that’s where the market settles out, developers who planned on making a living selling iPhone software may be in for market whiplash.
It is certainly possible to make money selling software at $5 or $10 a pop, but you have to do significant volume to make it pay. $20-$49/pop can add up pretty quickly (as many successful shareware authors can attest to), but $5-$10/pop requires real volume.
So far OmiFocus is the only app priced higher than $10 in the top 35 downloaded iPhone apps. There are only four other apps in the top 100 that are priced at higher than $9.99.
However, a closer look at OmniFocus shows that the entry price for the desktop app is already $79 so their customers are used to paying higher prices for their software. It will be very interesting to see how many new players without established products will be able to command prices over $9.99. I suspect there may be some seriously vertical apps (like ForeFlight that will command top dollar.
Are iPhone apps just supporting cast members?
It’s way too early to tell, but besides games, might the big winners be the hybridizers? Salesforce.com makes their money selling web-based software — the iPhone app is just a gateway to their core service. OmniFocus will make the bulk of their money on their desktop app. Will iPhone-only developers build profitable companies or will a combination strategy (web, desktop, or both) be required to justify developing for the platform?
Of course an ad supported model is a possibility too. Twitterific, for example, already runs ads from The Deck (or you can pay $10-15 to get rid of the ads).
Another option is the Tap Tap Tap model which is to release a pile of apps for $2.99 each and make the dollars on aggregate volume.
Time will tell
I’m bullish on the iPhone and App Store. I still believe the iTouch platform will ultimately dominate the mobile space for the next 20 years. The next 3 months should set the market for iPhone app prices. I wonder where it will all settle out and where people’s pricing expectations will settle in.
Tomon 11 Jul 08
I think a major contributing factor for omnifocus is that it’s in the iPhone’s top apps, and supposedly Things is out (I just checked, it is, for $9.99) but it’s REALLY hard to find if you aren’t purposefully looking for it.
This is going to be a problem for developers to make new sales. For example, a $.99 “Flashlight” app sold over 350 copies while it has about 50 one star reviews saying that people should download the free “Light” instead. That’s $350 american dollars down the drain simply because the app started with an F and L was on the next page. That’s the sad state of things, there’s several voice recorder apps but the free one is called Voice Recorder or something and is MUCH further down the list.
They need to have a sort by rating feature.
Daveon 11 Jul 08
Couldn’t sleep eh? I can see it being easy to make money if you can establish either a suite (4-5 $10 apps that work together to do things) or make a name for yourself and sell multiple apps. The key isn’t to make a one hit wonder, but to make solid software and keep coming up with more of it.
Christchurch Cityon 11 Jul 08
A coupla guys from my city (-43.525277,172.636585) are under the influence that iphone apps will bring them fame and fortune. http://www.polarbearfarm.com
David Kanedaon 11 Jul 08
I agree with both of your beginning points—it’s too tough to tell at this point. But, as a developer of a Basecamp focussed iPhone app, I’d like to point out a couple additional considerations.
First, I believe that developers will need to have something unique and something worth a certain value to the customers. Super Monkey Ball and Twitterific both cost $9.99 and I believe both provide value for the price. Apple handles the distribution for these companies, and takes out 30% for doing so, which roughly leaves these developers $7 per app sold. Considering that some analysts project the iPhone user base to top 60 million by 2009, I believe that developing some of these apps could be quite lucrative. To sell a $10 app to 5% of these projected users, for example, would gross $21 million.
Granted, of course, these are projections. But when you consider those numbers with the ease of development, managed distribution, and the unique capabilities of the phone, it’s no wonder why iPhone development can be so appealing.
@Tom I totally agree. Those alphabetical thumbnail pages which feature the amazing “back/next” functionality are awful. Why can’t the store be more like the downloads section of the website?
Adam Houghtonon 11 Jul 08
I’m one of the developers of ForeFlight (“The AppStore’s Most Expensive App” ™), so it’s been interesting to watch the reaction today to our $69.99 pricing. Most of our target market (pilots) is thrilled to get this data on a mobile device without a $100+ annual subscription, which is the norm in the industry. The general public, on the other hand, seems a bit taken aback as to why an iPhone app could cost more than $10 or $20.
As far as desktop vs mobile: general aviation is the opposite of most types of software. In our case, the mobile device is the primary interface for our users – flight plans, weather, and airport diagrams are most useful when you’re at the airport preparing for takeoff. Our desktop version is the secondary helper app when pilots have some extra time at home, and it’s priced accordingly ($28).
Earlier tonight I posted some thoughts on pricing vertical iPhone applications on my personal blog, along with a little background of ForeFlight.
Josh Catoneon 11 Jul 08
A “living” is definitely subjective. If $40k/year is a comfortable living (and it is more than comfortable in many parts of the US where cost of living is still low), then you could make a living selling 11 apps per day at $10.
With something like 6 million iPhones out there by year’s end, that definitely seems doable for a single developer, especially if you spread out over more than one application (and if you’re trying to make a living developing solely for the iPhone, you should definitely have enough time and energy to put into more than one app).
And if you touch on one hit app as a site project (if 4000 paid downloads per year is a “hit”—also subjective), then $40,000 is pretty good side money, imho. ;)
Ethanon 11 Jul 08
Glad to see someone else followed through on the Pinch Media data to find the most expensive app. The foreign language dictionaries at >$15 seem…grabby?
I don’t fly, but if Foreflight does all it claims I’m sure more than a few pilots will pony-up for what is essentially a bargain (no subscription).
Oops, @Adam already beat me, but 2¢ nonetheless.
Paul McMahonon 11 Jul 08
According to your graph, however, there are more pay apps than free ones. It looks like there are over 300 pay apps while under 140 free ones.
Gregon 11 Jul 08
Wow, 37signals used some of our data. This is a treat for me.
Pinch Media was founded to help iPhone developers establish and grow their own independent businesses – we recently escaped from a cube farm ourselves, and we want to help others do it too. All the data we’re collecting and publishing on the market is just a part of that.
I think an ad-supported model is a possibility, and we’ve been experimenting with that, but frankly, this keeps me up nights. Get the pricing wrong, and fail to deliver enough value, and by convincing the developer to take advertising instead of charging you’ve effectively taken money out of their pocket, which is exactly what we don’t want to do. Develop advertising that’s too distracting or intrustive in an attempt to boost rates, and you end up ruining the user experience and potentially destroying the developers’ reputation. Very tricky problem.
Daniel Gibbonson 11 Jul 08
I’d say that it’s more evidence that, in general, those who create content and software are taking the route of creating for markets that have been aggregated by someone else. Under those conditions, it’s virtually impossible to make serious money unless you are the aggregator.
I don’t mean to suggest that it’s trivial to create great software for the iPhone, but living in Vancouver I can see the trends in the video game market (fantastically talented developers working themselves to the bone without controlling distribution) simply carrying over to the iPhone app marketplace.
Arturon 11 Jul 08
@Josh Catone You need to take 30% out of that. So its more like 28K/year selling 4K apps at 10$.
Besides that if you are in another country you may have to pay VAT and company taxes. And the USD is weak.
That 30% seems a little steep.
People can live of it, but it must really be a hit.
Berserkon 11 Jul 08
Those are some wicked ugly URLs. Apple needs to read some Tim Berners-Lee.
And yes, there are too many developers that don’t value their time enough. Unfortunately that leads to other people’s time not being valued either. (Not that there is anything wrong with ‘free’, per se.)
Don Schenckon 11 Jul 08
However, I believe that one must have multiple apps for sale. Think “multiple income streams”, as someone recently mentioned. :)
Tom 2on 11 Jul 08
I think its possible for a small developer to succeed selling low priced apps at volume. It doesn’t matter if you increase your volume on one app, or increase your volume by selling fewer copies of more app. It doesn’t take a year to develop an application, so I think you’ll see developers making ok money by selling 4 or 5 applications at the same time.
Just an aside, aren’t we not supposed to use mobile phones on airplanes? :)
MLon 11 Jul 08
I see the ol’ “we only need to get x% of users” argument is reappearing here. That always seems like Red Flag City: “There’s 6 billion people in the world. we ONLY need to get .00001% to use our product!”
This line of reasoning feels like statistical sleight of hand. For example, 1% of 60m is still 600,000 people you have to sell to. Percentages can make a tough job seem easy.
That’s not to say it’s not worth trying. Just make sure you’re going in with your eyes open.
Granton 11 Jul 08
My first impressions of the popular apps getting buzz in the AppStore is that they, like you said, “supporting players” to something bigger. Twitterific comes to mind. Or even OmnioFocus – an iPhone version of a piece of desktop software.
This isn’t bad, and I think many successful apps will be like this. But I bet the real money-makers are yet to come – the apps that are truly iPhone native and do something either unique to the iPhone, or something that’s not possible in a desktop experience.
Apps like that will probably be an easy sell. If I show a friend an app on my phone I now can’t live without and he/she sees the valu, it’ll be an immediate sale.
Now I just need a few of those types of ideas…
ABasketOfPupson 11 Jul 08
Paul McMahon, above, uses a quote: “There are always going to be more free apps than pay apps…”
...that no one said. “There are always going to be lots of free apps” is what the text says. Did 37signals change the text without marking the post as edited, or did Paul read what he wanted to comment on and then commented on it?
JFon 11 Jul 08
I did change the text to reflect the accurate fact, it was my mistake.
Joranon 11 Jul 08
On the iPhone being a dominant force for the next 20 years:
Just as the Internet, email, cd, dvd, digital film, etc as we know it were not around 10 years ago, the Internet et. al. as we know it now will be a thing of the past in 7 years.
On that note, an aside: Apple will be the dominant platform and OS across all devices within the next year and a half.
I doubt we will ever even see widespread adoption of the next IE 8 before things change so much.
Don’t get too comfortable. Look forward to the new telegraph. Boys, it’s coming!
Robin Hoodon 11 Jul 08
When will these apps hit the torrent communities?
Justinon 11 Jul 08
Apple won’t be the “dominant platform and OS across all devices within the next year and a half”. Not even close.
In a year and a half, I’m betting they won’t even be the dominant platform for CELL PHONES.
A year and a half isn’t that long. To shift completely in a market as mature as computing and cell phones in a year and a half is nonsense.
Not saying Apple won’t do well… they will. I’d still have my iPhone if AT&T didn’t suck so badly where we’re moving.
kryeon 11 Jul 08
It’s going to be a dog-eat-dog world come a year from now. What is it going to be like a year from now when there are 5,000 applications for sale? And there are 50 applications that do the same thing yours does? It’s going to be highly competitive. The cheapest app wins. Why pay $9.99 for Bob’s app, when Jim is selling pretty much the same thing fro 99 cents? So you lower your price to stay competitive, then next week there are 10 other apps released that are just like yours.
I think it’s going to be a lot harder to make money selling iPhone apps then everyone thinks. It may be better to sell your customers on a solid desktop application and then make a few pennies selling an iPhone version to complement it. I find it hard to think someone’s iPhone app is going to be their bread and butter.
Daveon 11 Jul 08
Well, also keep in mind that almost daily, teenagers who are used to paying $1.99 for ringtones and $4.99 for games for their traditional cell phones are getting jobs, iPhones, and start buying applications. For this market, a $4.99 iPhone app is no big deal at all. I have a feeling that this, combined with other market forces ($5 is a more than reasonable price for a mobile app) will cause the median application price to fall there over time. As you can see, many vendors have already put this as their price point, and I think that they probably have the best chance. After all, $5 at volume can yield a pretty good return, definitely enough to support a single developer for a few years. However, it’s yet to be seen whether or not the non-subscription model will keep it sustainable. I have a feeling the people who really win in this game will be those who provide a free (or cheap) iPhone app to access a subscribed online service.
MSon 11 Jul 08
Dave: I call BS. I’m a teen myself (living in a large metropolitan area) and know the demographic you are referring to. And you know what? I have only met a SINGLE teen my age with an iPhone. Seriously.
Not to mention that while they may be used to paying $1.99 for ringtones, they are used to getting cellphones FREE with their plans. $500? No thanks.
Buzz Andersenon 11 Jul 08
As someone who currently makes his entire living (and a comfortable one at that) from a Mac application that costs a mere $8, I believe it will be possible for people to make a living off a successful iPhone app. I think it’s more likely, though, that people will make a living off more than one. My personal plan is to use PodWorks (the aforementioned $8 app) as a base from which to build three or four other iPhone apps and expand my business.
MIon 12 Jul 08
@Adam Houghton: I agree completely, Jason and I were discussing ForeFlight last night and it’s exactly the kind of vertical market application that I think can do well, even with a more premium price.
klon 12 Jul 08
IMHO huge flaw is that store doesn’t make it easy to release demo versions (i.e. free app that has pay-for upgrade, rather than two separate apps that will require you to delete, find and reinstall)
I’d buy a few $5 apps, but I’m not sure if they’ll work properly. Many of the free ones are total crap and I don’t want to pay upfront to discover that paid ones are crap too.
Rob Meyeron 12 Jul 08
Yes, lack of a trial system is going to affect this marketplace. Especially for more expensive apps. I assume that OmniFocus is worth the money for example, but at $20, I’d like to try it for a day or two before I commit.
So until there’s a clean way to execute on a free trial, apps above that $5-6 price point are going to suffer a bit from the uncertainty. 3-4 screen shots aren’t really enough to judge.
danceon 12 Jul 08
Agreed re supporting players. I’ve already been introduced to two services (eReader, Zenbe) through free iPhone apps, that look worth checking into. Another app (Bubbles, I think) said in the description, “if you like this, check our other apps”, which strikes me as fairly cheap advertising to a known Mac-heavy/switcher-heavy market, for $99 and the cost of coding a quick, simple, app.
Lack of a trial system will be an issue, but not for OmniFocus. That app is aimed at people who already use OF on the desktop and want to sync to their phone, so the desktopOF trial will do fine. Other desktop apps are offering the iPhone client for free, presumably planning to make the money on potential increased sales of the desktop version. Although I think developers could be doing a much better job of sending people to their website to play with simulators, as a workaround for the no-trial issue.
But no trial period is going to make it difficult for those innovators who might imagine serious phone-only utilities that aren’t bouncing off an established desktop market. How do you decide to pay $20 for a function you never thought you needed until someone invented it?
Justineon 12 Jul 08
Many mobile developers for Palm and Windows Mobile have already made a living off low priced apps, although the iPhone app pricing (right now) is even lower. But the distribution channel for non-iPhone apps is difficult and can cost 50-70% in commissions from ESD’s or carriers, plus it can be hard to even get listed with the carriers. A $15 app for WM/Palm garners a dev $4-7.50 net and a $10 iPhone app nets $7, so the net to the dev for hasn’t really changed (unfortunately).
However, the AppStore gets the apps in front of every customer and makes it easy to install. Palm and WM apps can be installed OTA, but it’s not intuitive. The carriers also sometimes include warnings against adding 3rd party software to your devices, providing the scare factor.
I think a mix of a suite of apps on the AppStore, combined with desktop or web companions will ensure a decent source of income.
Joranon 13 Jul 08
Re: a market as mature as computing and cell phones>
Justin, you’re calling the computing and cell phone markets mature? They’re just getting started.
Re: “a year and a half” for Apple to become the dominant platform:
In the past Microsoft and the PC industry relied on cheap, mass-manufactured, commodity components (motherboards, power supplies, power cables etc) at the expense of not investing in new manufacturing processes. They traded distribution channels for ubiquity.
At the same time, Apple quietly invested in expensive manufacturing ideas that would result in the iMac, iPhone, multi-touch and even the magsafe power adapter. And opened up an armada of beautiful, remarkable Apple stores. Certainly not competitive in the short-run. But it meant Leopard could have support for multi-touch now. It brought Apple closer to the footfall.
Vista and multi-touch? That’s a problem that Microsoft had to shove into a box the size of a table, let alone Vista. Let alone a cell phone. Where is the Microsoft store on 5th Avenue with queues of people outside?
And so now, Microsoft market share is declining. Apple market share is growing. In the tech world, a year and a half is a very long time. The writing’s on the wall.
Larchambeauon 15 Jul 08
I am a psychiatrist in NW Ohio who stumbled across you guys discussing stuff that I know nearly nothing about. I was searching for avenues to make 2-4 concepts, self-help/psych area, into Apps. I’ve been working on the fundamental concepts for years and I believe that they are sound, sturdy, and useful to large numbers of people. I’m seeking a “partner” to make the concepts into actual Apps. Any interest ( or advice ) will be appreciated and open for further cooperative efforts. I thought it was worth a shot in the dark. Thanks, LJA
Don Schenckon 15 Jul 08
@Joran: As a Windows developer, I hope you’re wrong.
But as a human being, I pray you’re right.
This discussion is closed.