Last summer, it became clear that most paid Apple (AAPL) iPhone apps will lose money. Now a new report from app market research firm Distimo suggests that developers writing for Google (GOOG) Android make even less.
This new report paints a grim picture for the vast majority of app developers who hope to make money from the platform. As the graph below shows, only a tiny portion of paid apps have significant sales (click to enlarge):
Of all free apps, 41.6 percent get downloaded between 1,000 and 50,000 times. However, only 4.5 percent of paid apps hit the same download figures. According to Distimo numbers from last year, the average paid Android app cost $3.27. Round up to $3.30, and you see that 4.5 percent of paid apps will gross, after Google's 30 percent cut, between $2,310 and $115,500 during their lifetime. (The low end is probably a little higher because new apps that hadn't enough time to sell in higher volume would disproportionately drag it down.)
The median price would be $58,805. That's considerably more than the $8,300 per iPhone app that I estimated last year. But there's one big difference: the bigger number for Android is for the top apps.
About 95.4 percent of Android apps sell fewer than 1,000 copies. That means the top money almost any app will make is $2,310, and 79.3 percent of the paid apps don't even make $330 for the developer. Furthermore, top apps change over more quickly for Android than for iPhones, according to Distimo.
This is probably why app developers for Android lean more heavily toward free models, presumably with advertising, than for iPhone. For some time, it's been clear that Android is the king of free apps. Rovio, as an example, uses advertising to monetize the Android versions of its Angry Birds titles:
But, again, is that any better for the vast majority of developers? Here are the download stats for free Android apps (click graph to enlarge):
When 73.8 percent of free apps get downloaded fewer than 50,000 times, you have to ask about the average advertising revenue per user. On an ad views basis, where sales were by the thousand, the total views amount would be 50 times however many views the average single user provided. Even at 100, that would be 5,000 times maybe a few dollars, so still in the tens of thousands for revenue.
The reality is that only a few will see apps make enough money to provide a reasonable return on their investment of time. That should concern everyone in mobile, given how much faith most put into apps as the reason platforms thrive.
If that's true, then the entire industry rests on the labor of people who essentially donate their services creating enough bulk content to catch popular attention. What happens if the un-moneyed masses decide to walk away and do something profitable with their time? Will platform owners have to start a subsidy model to make sure they continue to hold the interest of third party developers?
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