Making revenues on apps is like catching an angry bird; have you chosen the right app store?
It was a small sentence that caught my attention in the news. The average hourly rate for a freelance mobile app developer in 2011 has dropped by almost half (!), down to 49 euros from 100 euros a year ago (source: FreelanceMatch.nl). According to a commentary, one of the reasons behind this this decline is the explosive growth of supply of mobile app developers, many of whom had to lower their rates to stay competitive.
Demand and supply
In the past two years the output of mobile app developers has been nothing less than phenomenal. The Apple iTunes app store currently carries 392,871 apps, and Google Android Market is closing in with 190,067 apps in store. These counts are taken from our latest report Netsize Application Store Billing, available as a free download from www.netsize.com.
The appetite for apps is not likely to level off soon. Smartphone sales are accelerating globally and all smartphone users are app-hungry. In fact, the abundance of apps – entertaining or professional, useful or useless – might also be the driver behind the massive increase in smartphone demand. This is certainly the view of device manufacturers. All handset vendors already have or will soon launch their own app store as part of a compelling offer in a smartphone market that is heating up.
Where is your app?
But where does that leave the struggling developer? An hourly rate of 49 euros doesn’t deliver that nice sports car. Clearly, the only way to earn that kind of money is to choose creative business model that delivers.
As in all retail, distribution is a key factor. There certainly is not shortage of app storefronts to choose from. The Wireless Industry Partnership (WIP) already counts 120 active application stores of all sorts and sizes in their latest survey. This certainly doesn’t make it easier for developers to pick the one(s) right for them.
How about reach? In the Netsize report, iTunes ranks number 6 in our ranking by number of apps in store. Android Market takes the number 11 spot. Both definitely attract a lot of visits, and other research has shown that a presence on iTunes is a must if developers want to increase exposure and revenues for their apps.
All other application stores listed in the top 15 are independent, meaning they are not limited to any one platform, operating system, device brand or mobile network operator in particular. These stores aim to be a one-stop portal for users to find and download apps. The number of apps on offer via these stores can reach a mind boggling 700,000. A closer examination reveals two categories of app store: application directories and independent app stores. It is an important distinction that matters a lot if you want to make money and get users to come back for more.
The last mile
App directories such as Appitalism, Chomp, Appolicious and AppStoreHQ aggregate content from app stores such as iTunes and Android Market to promote and re-merchandise it. Thus, app directories don’t host the apps. Their key focus and strength is to make it easy for users to search and discover apps. What’s more, there is little difference between the directories. They are effectively lookalikes, competing on the sheer number of apps referenced in their storefronts.
Put another way, these directories are not app stores in the proper sense. Users may choose the app they want here, but it’s not where they actually buy it. Instead, the user’s browser is directed to the hosting store. Directories lack the view of that all-important “last mile”.
Making money from apps has become a numbers game. Developers therefore need tools that provide them insight into their apps´ commercial performance and opportunities for cross-sell and up-sell based on detailed information about their customer base. This is where independent app stores such as GetJar come in. In addition to hosting the actual app, these stores also provide mobile analytics and other tools that can help developers to better merchandise and monetize their applications.
Discovery is good, billing is better
Developers can’t sell what users can’t find. So, naturally, being found is an important aspect of running an app business.
Knowing where and how to spend your marketing funds effectively is at least as important, if not more. But the end goal is to build revenues and a sustainable business. For developers being able to charge users and take advantage of the window of opportunity that opens at the moment of the impulse buy is critical.
This is why application stores are implementing mobile operator billing, providing end-users with an easy to use and trustworthy method of payment that can be used for “on mobile” and online transactions alike. Users can even make a purchase from inside the app, a payment mechanism known as in-app billing. This approach allows developers to charge for additional features and functionality (such as a move to another level in a mobile game), allowing developers to monetize their app and build stickiness.
Developers and app publishers make their money in this last mile and should make use of the analytics tools and payment approaches available on the market. Even as the initial costs to create an app go down (and with it their hourly rate), they can make up for the losses by choosing the right route to market. Picking the right app store is key to make a profitable business out of apps. You might be able to afford that fancy sports car after all.
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Posted by netsize 
