In a world full of answers you start your journey by asking the right questions
This should be a must read article for anyone thinking about developing iPhone apps today.
You should also take a look at Chubby Brain’s reported on what the Venture Capital industry has been investing in: The iPhone Inspired 2nd Economy: Over $100 Million Goes from VCs to iPhone Startups.
It is interesting to compare what the VC’s are getting excited about with what customers are downloading from the app store.
As I suggest in my post What’s on the Radar for Apple? it would appear that the trend is towards the iPhone becoming an entertainment platform first and an applications platform second.
I say this because, although developers and the media having been buzzing with iPhone fever ever since the app store was launched in mid-2008, it now appears that the iPhone Apps marketplace is just like the web. It suffers from a very,very long tail.
When I prepared this chart earlier in the year it was immediately apparent that only the Top 100 apps were really delivering any kind of return on investment on any given day. So success in the app store, as always in the media industry, depends on how long you can stay on top of the charts.
At the time this chart was prepared there was only 40,000 apps in the store. Today there are over 100,000. So maybe today we are talking about Top 250 to 500 Apps but that is still less than 0.5% of the total iPhone App market. Plus I haven’t made a distinction between Paid and Free Apps in the Long Tail… but you would expect from our experience with the web the Free Apps would more popular than Paid Apps.
Mobile Orchard prepared this chart to support their discussion on how 99 Cent iPhone Apps are not significantly more popular than $1.00+ Apps. You can see how at that time the Free Apps were more popular than the paid apps.
The economics of Free vs Paid apps has also been discussed by Jonathan Wegener. While Pinch Media have posted a report on Paid Applications. In it they suggest that although paid applications make up 30% of the downloads, they make up about 77% of the 100,000 titles available in App Store. So I guess that means the 33% of the titles which are made freely available make up 70% of the downloads.
Again this should not come as a surprise to anyone who has followed the economics of the web over the past 15 years.
The harsh reality is, in their pursuit of the Gold Rush, most of the iPhone developers have been left prospecting the iPhone’s Long Tail.
The thing that always continues to fascinate me about Apple is the passion of the Apple developer community. We saw it in the original Apple Mac, earlier this decade with OS X and now the iPhone.
Most business people would have looked at the Mobile Phone market and thought “If we’re going to develop mobile apps we’re better off developing apps for the largest possible market”.
Not Apple’s iPhone Developers and I guess that’s what makes Apple more than just a brand. It truly is one of the world’s great Lovemarks
[Updated 28-12-2009] See also this March 2009 post from Flurry: Can Developers Still Make Money in the iPhone App Store? – What is a hit worth? Well, how does $750,000 in three weeks sound?
[Updated 13-1-2010] Giga Om’s TheApple App Store Economy provides sales figures for December 2009 that suggest the iPhone/iTouch’s 56 million + users download just under 1 paid app* each with apps priced at 0.99 making up 50 % of those sales. Paid apps represent 25% of all downloads.(*0.925 Apps)
[Updated 19-5-2010] Techcrunch’s iPhone App Sales Exposed delivers a comprehensive analysis of the app market’s economics based on the sales metrics provided by small sample of developers. These figures suggest the bottom 25% of paid app developers sell less than 2.75 units per day. While the top 10% sell more than 275 units per day.
[Updated 9-6-2010] Techcrunch’s Winning the App Store Lott0 provides an in depth review of the downloads for 1 week at the top of the app store for the “freemium” app Air Horn.