Distilling market noise into market sense

VisionMobile is the leading research company in the app economy. Our Developer Economics research program tracks developer experiences across platforms, revenues, apps, tools, APIs, segments and regions, via the largest, most global developer surveys.

Will developers stop playing the app lottery?

[How long will developers be loyal to ecosystems that seemingly set them up for failure? The odds are clearly stacked against developers as most of them struggle to make a living. The sustainability of co-creator ecosystems is in serious peril, it would seem. A look at other lottery-like industries provides an explanation, and a surprising perspective.]

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Great news from Apple’s HQ, everyone! The App Store is breaking records (yet again, some point out), both in terms of popularity with users and in the total amount of money they spend. What an awesome time to be an app developer, isn’t it?

Well, not quite. Tim Cook doesn’t exactly paint the whole picture. The truth: all that app store goodness is very unequally distributed across developers.

The figures in our Q3 2014 State of the Developer Nation report are once again crystal clear: the vast majority of app developers struggle to make a living. 7 out of 10 don’t earn enough to sustain full-time development (we call them the Have Nothings and Poverty Stricken). That would be over 2 million people, roughly the population of Slovenia. Almost 90% of that record app store revenue will go to just 12% of developers.

While more app store revenues are clearly a good thing for developers, the money is peanuts compared to what Apple makes. In Mobile Megatrends 2014, we showed that Apple captures 80% of the total iOS “ecosystem GDP”, while developers capture less than 15% (including commissioned apps released without any revenue model).

The situation on Android is even worse. Whereas 50% of iOS developers live below the poverty line, the number for Android is 64%. Also for Android, hardware makers capture 80% of ecosystem GDP, while developers are scrambling over the left-overs. Other ecosystems like Windows Phone or Blackberry don’t have the scale to provide viable escape routes.

Is this sustainable?

Can this situation continue, or will these ecosystems eventually collapse as developers get fed up? How long will developers be loyal to ecosystems that seemingly set them up for failure?

The prospects are indeed grim. Marco Arment, for example, speaks about “vastly increased commoditization” as well as declining consulting revenues in a post titled “App Rot”. He quotes other Indie developers saying “There’s a chill wind blowing”, “The app gold rush is well over”, “In my tenth year as a full time indie dev, … I think that yes, it is much harder these days” or “Considering the enormous amount of effort I have put into these apps over the past year, [my sales figure is] depressing.” Expressions of distress that are far removed from Tim Cook’s optimism.

And yet, they’re still at it. The number of app developers shows no sign of declining.

The app lottery

App development is a lot like playing the lottery – as long as there is a chance to win big, people will play.

Investing significant amounts of money and effort when the odds are stacked heavily against you is not a rational choice. But it’s a very human one. We’re collectively bad at assessing likelihoods, especially in situations as complex as marketing a killer app. We get as much pleasure from fantasizing about a big win as we would get from the win itself, especially if we’re poor to start with. The fantasy gets even better because we can’t imagine any other way to get this rich, this quick. The final nudge is the sense of regret we would feel if we didn’t implement that great idea we had, while someone else hits it big on the app store with that same idea. Rational thinking versus pleasure center lit up by fantasies? It’s no contest, really.

There are plenty of other industries with the same characteristics. The same income inequality and hope-driven creation play out in music and other forms of entertainment, game development, and entrepreneurial communities (as long as there are exits, there will be wannabees). Future industries will show the same pattern, too. Internet of Things, anyone?

Ecosystems can sustain this situation as long as there is supply of developers hoping to get rich. Only 1.6% of developers have an app that earns >$500K per month, but those few big wins will make all the difference for the motivation of the Have Nothings, the Poverty Stricken and the Struggling to keep creating (source). Asking whether developer ecosystems are sustainable is like asking for how long casinos will exist given that most participants lose money. “Indefinitely” would be a safe bet.

  • Charlie

    Great article! I especially like this line “We get as much pleasure from fantasizing about a big win as we would get from the win itself, especially if we’re poor to start with.” Do you have a link to a study proving this? Thanks

  • Stijn Schuermans

    Android developer Simon Judge (https://twitter.com/SimonJudge) has written a critique on this post at http://mobilephonedevelopment.com/archives/1808 . In his reply, he argues that the analysis of ‘developer’ is probably narrow in that it only covers developers looking to make money from apps.

    Simon, you’re absolutely right! The numbers quoted in my post are for those developers who _are_ interested in making money. But there are a lot of others, whose prime concern might be reach, or perhaps just learning or having fun. As long as the platform in question is successful with users, it need not fear that those developers will leave and make the platform unsustainable. Good catch!

    • I think what is meant is that some developers contract to non-developers who think they have a great idea for an app or companies who think they need an app in addition to their website because other businesses have one. The I-need-one-too syndrome. This may sustain things a little while longer until an army of young HTML5 developers come fully online with tools improve to do cross store deployment. Its all changing, that’s for sure… Been in the app game since 2011, part-time at first. There needs to be enough competition to drive down the 30% share Apple and Google take. Hint: cider app approsch on android is interesting… If it can survive legal challenge. Could it be possible that the app stores are becoming ripe for disruption?

  • isaac

    This article is misleading. Its not a big disappointment for a developer to not make money out of his app. Nor the App Store ( iOS or Android ) will ever collapse. Do people get disappointed to not make money off a song ( or a video ) published on Youtube ? Answer is No. Well its the same for app development. Most developers have full time jobs elsewhere and they just write code for fun. If they get lucky, they make lots of money. Its the same on Youtube if you are lucky ( like Justin Bieber ) , you will score big money !

    • F

      “Do people get disappointed to not make money off a song ( or a video ) published on Youtube ?”

      Hm, if they’re looking to make a living out of it, yes they do. If they’re not, then your point is obviously moot and not related to what the article is talking about.

      Also, learn how to use spacing. Jesus.

  • John Read

    Nice Post

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