Now, looking back on all this analysis, one question still remains unanswered. Is there a fool-proof way for developers to make money out of the App Store?
Well finally, after 9 months worth of observations and calculations, I think we can safely say that we have discovered enough data to answer to that question with some measure of confidence.
You may recall from my last post on what Apple can teach Google about market disruption that Tomi T Ahonen’s in-depth analysis of the economics of the App Store revealed the average development cost per app was $35,000. Now consider this…
Apple’s share price at the time of the launch of the App Store was around $170. Today it hovers around $270. So if the developer had invested the $35,000 in Apple shares – rather than developing the iPhone App – they would now be able to pocket $55,000.
That’s a very healthy capital gain of $20,000 at an average annual rate of return of 28%. And yes, if they had purchased the shares when the iPhone was originally launched in 2007 then they would have made even more. Much more.
Now compare this average rate of return with the $682 that Tomi T Ahonen has estimated to be the annual revenues generated by the average iPhone App.
Clearly, with the benefit of 20/20 hindsight, it appears the average developer would have been significantly better off giving the App Store lottery a miss and just investing their money in Apple directly.
But then again, if the majority of developers had taken this pragmatic approach to making money would the iPhone, and therefore Apple’s share price, be the success story it is today?
Further Reading
[Update 11-10-2010]
“Tomi’s analysis uses good data and good reasoning but it misses the forest for the trees. This doesn’t mean everyone should pile on the mobile app bubble. My point is simply that this type of by-the-numbers analysis misses the point of why so many have gotten into mobile development” – Simeon Simeonov iPhone economics, startup economics, angel investing economics
Kyle Conroy takes this analysis to the next level by examining the ROI on Shares vs. Product across the whole of Apple’s product range since 1997.
August 1st, 2011 → 12:45 pm
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