Striking It Rich In The App Store: For Developers, It's More Casino Than Gold Mine

For every developer making millions in Apple's app store, there are thousands who've had their dreams smashed into a million little pixels. What makes the App Store so popular with developers—and how can you succeed? One developer's tale of hitting the Apple jackpot.

They are the Appillionaires: Smart, ambitious dreamers in bedrooms and garages across the world, plotting the future of mobile apps. Their tools are inexpensive—a MacBook Pro and an iPhone—but overnight the Appillionaires can amass a fortune from selling software on the iTunes App Store. They lead a revival of the hobbyist programmer. Not since the days of the Commodore 64 and Atari 2600 has indie software been sold by such tiny teams of programmers to such massive numbers of consumers.

The money flows to the Appillionaires even as they sleep. While they dream their Angry Bird-dreams, invisible electronic transfers push money into the Appillionaires’ bank accounts from App Stores in over 80 different countries. As much as $250 million gets spent at the App Store in a single month. Over 10 billion apps have been sold on the store to date and it’s estimated that Apple has signed up at least 79,000 software publishers to the iOS (iPhone and iPad operating system) club.

 The App Store had established some kind of intravenous connection to my body and was pumping me full of Apple-branded heroin.

What’s remarkable is that Apple’s credibility was bolstered so much by the success of the iPod and iPhone that the rise of the iPhone app was widely predicted. Even before the launch of the App Store back in 2008, Wired magazine speculated, "iPhone software development may spark a software gold rush not seen since the heyday of PC-platform development in the 1990s."

It’s this label "gold rush" that has been most often applied to the App Store. The potential for success, and risk of failure, is so great that in many ways the App Store has provoked a gold rush among developers. Although the successes are spectacular, the failures are apocalyptic. The mainstream press focuses on the glorious few and gives very little attention to the money being lost on the App Store—a problem compounded by the embarrassed silence of those struggling to turn a profit on their work. In a climate where approximately 540 apps are submitted for review every day, it’s easy to see why the Appillionaires are an exclusive and rare breed.

Back in the '80s, a catastrophic failure to sell software was a more obvious and public humiliation. Take Atari’s "E.T. the Extra-Terrestrial" (1982), a failed video game which left the company with losses of over $100 million and the embarrassing problem of what to do with 3.5 million unsold E.T. cartridges (the answer, apparently, was to bury them in a New Mexico landfill). But today such failures are even harder to see with the naked eye. For every Appillionaire, there are several thousand invisible, failed app developers. These developers have had their dreams of app superstardom cruelly smashed into a million little pixels.

Given its unpredictability, what makes the App Store so popular? One theory is that we enjoy the strange psychological lure of uncertainty. Researchers have discovered that we often find relationships more compelling if the object of our affection is mysterious and non-committal. The image of a girl sat on a lawn picking petals from a flower and musing, "He loves me, he loves me not" is a fairly accurate depiction of a developer’s relationship with Apple. On one hand the girl with the flower hopes that "he" loves her, but on the other hand a lot of the fun is down to not knowing. It’s human nature that we are attracted to the thrill of never being quite sure where fortune will smile, and there are few businesses where that feeling is more acute than iOS development. Everything about the process is uncertain.

Developer Daniel Markham calls iPhone development "App Store Roulette," and Andy Finnell of the software studio Fortunate Bear cautions against hoping for App Store success. "You’re betting a lot of this on luck, and the odds are stacked against you," Finnell says. "You’d have better odds playing slots at a casino."

Indeed, as much as app development has been called a gold rush, there is an equally loud theory that it operates more like a casino.

"The closest thing I’ve seen to a ‘business model’ for marketing iPhone apps is to advertise like crazy until you get into the top 50," says David Barnard of AppCubby. "Once you’re there, the top 50 list will start generating its own buzz...But that’s not a business model, that’s like rolling the dice at a casino."

The counter-argument is that life itself is hard, very much like rolling a dice at times. It might be that the App Store simply gives developers the illusion of an ordered system, with top-ten lists and sales-tracking, but ultimately it is human nature and the unpredictable whim of the masses that determine the success of an app. The App Store might look like an ordered system, but really it’s just a layer over the messy reality of selling anything.

I know first-hand the extraordinary rush of creating a global hit on the App Store. I was one half of the two-person team that created Alice for the iPad. The book became so popular that it was a star guest on the Oprah Winfrey show in the week the iPad launched in the U.S.

Around 3 a.m. the day after Alice for the iPad made us a fortune, I finally switched the computer off, stared at myself in the mirror, and wondered what the hell I had become. The App Store had established some kind of intravenous connection to my body and was pumping me full of Apple-branded heroin. More people than I could actually visualize—hundreds of thousands of people—were playing with an app we created and, what’s more, they were paying for it. The thought sent me into the throes of a weird manic episode caused by people I didn’t know tapping the "Install" button next to Alice on their iPad screens. This was my first taste of the Appillionaire buzz, and it’s a feeling that’s since been described to me by many of the people I interviewed for my recent book. The Appillionaire buzz is more powerful than anything on the streets. It’s a hugely enjoyable sense of excitement mixed with satisfaction, but it is a disgusting sight to behold: a man cradled in the arms of his own ego being rocked to sleep.

It’s this sensation, or the aspiration to feel this sensation and the financial rewards that come with it, that drives many people to create apps for Apple devices. However, I’m not cynical enough to believe that it’s the only reason. There is pleasure to be had from the simple act of creating a product and selling it. However, an increasing number of entrepreneurs have begun looking to the App Store purely to cash in on the amazing popularity of mobile applications.

Although the term "gold rush" was initially used by the press as a simple label for the sheer volume of developers flocking to the iPhone platform, it has recently become an oddly prescient historical reference point for the way the app scene is developing. The store has become a magnet for the over-optimistic with money to spend on getting their app built. I’ve sat in meeting after meeting with recent university graduates who have scraped together thousands from friends and family with the intention of making a fortune on the App Store. Almost without fail their ideas have been vague, or based on gut instinct, rather than the commercial realities of the world’s most competitive software market. The illusion persists that there’s gold in them hills but, for the majority, there is nothing but dust. It’s a reality that seasoned developers are only too familiar with.

What then has caused this huge chasm between the average programmers experience on the App Store and the public’s opinion that apps are easy money? Most likely it is the gap between the cost of building an app and the potential reward. Just like a casino, app developers are aware that the majority of apps fail, but there remains a glimmer of hope that they could be the one; that this time the winning hand will be theirs. It’s a sense of hope compounded by the media’s love affair with Apple’s products.

Many online forums are filled with developers who cannot understand why the gold-rush narrative peddled by the mass media is not reflected in the reality of selling software on the App Store. The masses were sold the Appillionaire dream, but the reality was a few hundred dollars in a jam jar—and that’s if they’re lucky.

"Making a high-quality app is hard enough," says Simon Oliver, creator of hit app Rolando, "but making one that is successful presents another set of challenges. I’ve seen some great games that just haven’t been noticed, or that might pop up in the charts briefly, only to be buried by the avalanche of new apps released every day. Creating something that stands out and is able to sustain success is not easy."

It’s sometimes difficult to know whether to react with sympathy to the repeated failures on the App Store—I’ve been there myself with some apps—or to simply shrug and dismiss it as the way of the world. While many developers accept defeat with good grace, with others you feel a sense of entitlement that is suffocating. But, for a sobering comparison, you might take a look at the number of scripts submitted to Hollywood every year compared to the number of screenwriters actually making money. Or look at the number of novels submitted to publishers, compared to the number that turn a profit. The truth of the matter is that success in any creative discipline is exceptionally difficult and the bulk of profit tends to come from a tiny niche of super-successful titles. For every Doodle Jump or Cut The Rope there are several thousand flops. The App Store is littered with dreams of app superstardom that ended in catastrophe, and this is just the beginning.

Perhaps it was inevitable, when the company behind the marketing success of the iMac and the iPod turned its hand to promoting independent software development, that the public image of developers would change forever. Apple has literally transformed the social acceptability of programmers and overseen the rise of the geek.

As Daniel Wood, owner of indie app studio Runloop, explains it, "Apple has done the seemingly impossible: they’ve made developing cool. A few years ago the man on the street didn’t want software, or talk about software. Now suddenly everyone’s like, ‘Have you seen this app, have you seen that app? It makes your face into a fat person!’ People have been trying to do this for ages, make programming cool. They used titles like ‘creative developer,’ but it basically just means programmer. Somehow Apple did the impossible."

It is this, the "cool-ification" of programming, that might be the greatest trick Apple has ever pulled. At dinner parties where the job title of programmer was treated with about as much interest as surveyor, now suddenly we have entered an era of programmer as superstar.

Adapted from Appillionaires: Secrets from Developers Who Struck It Rich on the App Store, with permission from John Wiley & Sons, Inc.

[Image: Flickr user prayitno]

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26 Comments

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  • Kel Bloomer

    Dr. Tune,
    Curious to know more.  We are interested in developing multiple apps.  One thing for certain; hard work often brings good luck.  Contact me at kel@mysmokinride:disqus.com when you have a moment.

  • PierreA

    My experience is that there is also some people doing some good money but are not millionaire (I'm am one of those and you can check this blog post that relate my story and figures: http://bit.ly/tZJyq0 )
    As of being successful, It's clear that you need a little bit of luck but you have to look for luck - most people don't even create a PR for their app and release app that are not polished. If you've got a great product and you do promotions (PR, contact reviewers, facebook,..) , good support, update your app to make it better (especially according to user feedback) it is possible to make some money -at least that how I do it in the education market. But it is a full-time job and you need a lot of skills: coding,marketing,user experience/user interface, graphics, sound,...

  • DrTune

    My perspective:
    a) I work with a team whose last two iOS titles both made the US appstore top 20 by revenue (one was #1 briefly) and (as far as I know) no money was spent on advertising. b) The team is comprised of seasoned games industry pro's (some of us have been doing games since the late 80's) 
    c) We did regular marketing (press releases, reviews, etc) as well as getting some great reviews and have got almost entirely 5-star ratings in the store. 
    d) Both games were very polished (plenty of work on textures, animation, modelling, gameplay, testing, etc)
    e) Both titles got a week of front page promotion on the store. Apple did this simply because they really liked both games.

    I'm speaking off the record here, so I can't name titles and give hard numbers. 

    Our experience is that you need to produce an immensely polished product but there's no subterfuge, bribery or anything other than a lot of hard work in hitting the top 20. 

    We did it twice in a row (with two very different titles) so you'd be hard pushed to call it luck.

  • Mike F

    I take issue with the general theme here. I develop apps for multiple mobile platforms, and what I see are all app stores (including the famed iOS one) that are full of mediocrity and junk. Of course, the ratio of successes to failures will be dismal with so much junk in the markets. I also see a mentality where people get in for supposedly easy money, where there is an "exit strategy" before the app is even developed.

    The apps that succeed are those that are unique, truly useful, beautiful, competently executed, competently marketed, and patiently guided toward success. These apps are few and far between and are typically not the ones being developed by the "exit strategy" crowd. In this way, the marketplace for apps isn't unique, and the path toward success is neither random nor mysterious.

  • Anne Ominous

    I am a developer myself, and though I agree in general that quality is intentional and not something just slapped together, I think the point of the article was that even if you build a quality app, your success in the app market is far from guaranteed. The example of Angry Birds is telling. It might be that they "accidentally" hit the sweet spot with their popular app, but they didn't progressively improve quality 52 straight times until they did.

    And the point I was trying make is that there are also many competent programmers who do not have money to burn, and can't afford to keep advertising or pushing their app until maybe it catches on... especially at a 30% cut for Apple. If most businesses had to pay 30% for distribution -- shipping, let's say -- they would simply not be profitable.

  • Anne Ominous

    Matt McHugh:

    I still disagree. While it's true that many software companies do not have the same kinds of expenses that other companies do, some do. Not all of them are kid-in-his-garage type companies: they have developer wages to pay, office space to rent, insurance, equipment, and utilities to pay for. No, for this kind of distribution don't have "inventory" to deal with, but then there are lots of businesses that don't carry inventory. That doesn't mean no expense. I don't have inventory, for example. But that doesn't mean I don't have expenses.

    And yes, 30% is HUGE. You say that means 70% goes to the company... okay, fine. But why are you ASSUMING that 70% is mostly profit? For most companies, it doesn't work that way at all. I can turn that back around and say that after shipping, most companies still have 90% + of their revenue left, **before other expenses**, which is the point here. We're only talking distribution. Not even promotion, because the App store sucks at promotion. Besides being an all-around clunky application in itself, with a interface that appears to have been designed by a 10-year-old.

    And again: don't misunderstand me. I like Apple products in general, and use them myself. But with this big a cut -- and add in that Apple is insisting that in future, all applications be sandboxed -- and it ain't all so rosy. For the last couple of years, Apple has been acting like it wants to go all Microsoft on us, and I have no reason to appreciate that attitude on their part.

    So tell me: if it's so easy, how successful have YOU been in the app store market?

  • Matt McHugh

    Yes, 30% of gross sales is cheap.  For global distribution on the fastest-growing software platform in history -- with zero shipping, no inventory requirements, and no overhead operating expense or start-up cost (other than your apartment, computer, and the $100 Apple developer fee) -- 30cents on the dollar is an insanely cheap price for a business venture.  Try opening a flower shop or dry cleaner or restaurant with that expectation.

    Flip it around.  From Day 1, you get 70% of every customer purchase.  No business on the planet will give you that kind of margin.  Oh, except for publishing on the Amazon Kindle, another inventory-less, zero-investment business opportunity piggybacked on a global electronic distribution channel developed by a huge company at a cost of hundreds of millions.

    The same opportunity is given to everyone for peanuts.  Success is your problem.

    -- mm

  • Anne Ominous

    And by the way, Mr. "zato": I develop professionally on a Mac. I love Macs and OS X. But I call BS when I see it.

  • Anne Ominous

    zato: How is 30% "cheap"? Do you own a business? Do you know how much a full 30% of revenue can cut out of your profits?

    I mentioned earlier that 20% is lucky... that was an understatement. A lot of businesses count themselves lucky if they can swing a 20% MARKUP on goods, much less 20% profit.

    I'm not a hater, by any stretch of the imagination. I'm simply talking about the reality of doing business. And in reality, 30% is HUGE. Most conventional businesses would not -- could not -- even consider it.

  • zato

    "And the point I was trying make is that there are also many competent programmers who do not have money to burn, and can't afford to keep advertising or pushing their app until maybe it catches on... especially at a 30% cut for Apple." 

    What do you mean "especially at a 30% cut for Apple"??  If your app is not selling, Apple gets nothing. If it is selling, the 30% for Apple is cheap. You claim to be a developer, but what you say sounds like gamer/hater to me. 

  • Anne Ominous

    Amazing! My last comment was deleted... why? It certainly was not abusive. Was it because there was implied (not even direct) criticism of Apple?

    This is a puzzle to me. I expected better from FastCompany.

  • Anne Ominous

    Apologies. For some reason my first comment was not showing up here. But now it is. Please disregard the above comment.

  • Anne Ominous

    A large number of failures is virtually guaranteed simply because of Apple's insistence on taking an outrageous 30% cut of all revenue.

    That's an enoumous percentage, by normal business standards. Most businesses are lucky to make profits of 20% of revenue, given the usual business expenses. When your distributor takes 30%, it makes achieving that 20% darned near impossible unless you are one of the lucky few.

    I think the app store would be MORE successful, and people would see even more apps, if Apple would cut their percentage down to a more realistic 10% or so. That's still pretty generous, especially considering what a lame application the App Store itself is. It's really terrible.

  • wadexyz

    i disagree.   apple created this amazing marketplace, they deserve to be rewarded.   i hardly think the commission rate is the reason mobile shops are struggling.   it's basically feast or famine, as the article mentions.

  • Ron

    The make it sound like these App Store failures have been somehow wronged.  Please.  The failures failed because they are mediocre.  Angry birds sustains because it is exceptional.  This is pretty simple economics.

    Sure some mediocre apps blip on the top charts due to savvy marketing.  But the blip is not sustained when it is found that the content does not match the marketing.  It works this way in the book industry as well.

  • Andy Korth

    The point is that it's purely a gamble. Even if those who have great successes like Chris Stevens (Hi Chris!), Simon Oliver of Rolando knew how to repeat their success, they would. When you're gambling at a slot machine, no suggestion of what the winners do differently or have in common is helpful.