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The VisionMobile team
About VisionMobile
VisionMobileTM is the leading research company in the app economy
and mobile business models. Our research and workshops help
clients compete and win in their rapidly changing industries.
The firms semi-annual industry research series, Developer
Economics, provides benchmarking of developer attitudes, trends
and monetization by region.
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Copyright VisionMobile 2015
v.1.0
Alex Veritsis
Data Analyst
Andreas Constantinou
Founder & Principal Analyst
Research methodology
Our App Profits and Costs report is part of Developer Economics 6th edition, one of the
largest ever research on app developers and trends in app development. This report is
based on a large-scale online developer survey, which was designed, produced and
carried out by VisionMobile over a period of five weeks between October and late
November 2013.
The online survey received over 7,000 responses, making this the largest mobile
developer survey at the time of publication. Respondents to the online survey came from
over 127 countries, including major app development hotspots such as the US, China,
India, Israel, UK and Russia and stretching all the way to Kenya, Brazil and Jordan. The
geographic reach of this survey is truly reflective of the global scale of the mobile app
economy.
The survey reached an unprecedented number of respondents, globally balanced across
Europe (36.5%), Asia (32.1%) and North America (19.7%). The online survey also
attracted a significant developer sample from Africa (6.6%) and South America (3.4%).
To eliminate the effect of regional sampling biases, we weighted the regional
distribution by a factor that was determined by the regional distribution identified in
our App Economy Forecasts (2013 - 2016) report published in July 2013, as shown in
the graph below.
The survey gathered responses from developers across 15 platforms including Android,
Bada, BlackBerry 5/6/7, BlackBerry 10, Chrome, Facebook, Firefox OS, iOS, Java ME,
HTML5, OSX (desktop), Windows (desktop), Windows Phone, Windows 8 and Tizen.
As our research focuses on mobile developers, we have excluded from the analysis all
respondents that are not developing for mobile platforms.
To minimise the sampling bias for platform distribution across our outreach channels,
we weighted the responses to derive a representative platform distribution. We
compared the distribution across a number of different developer outreach channels
and identified statistically significant channels that exhibited the lowest variability from
the platform medians across our whole sample base. From these channels we excluded
the channels of our research partners to eliminate sampling bias due to respondents
recruited via these channels. We derived a representative platform distribution based on
independent, statistically significant channels to derive a weighted platform
distribution.
By combining the regional and platform weighting we were able to minimise sampling
biases due to these factors. All results in the report are weighted by main platform and
region.
The App Profits and Costs research is based on the responses of developers who
indicated they are interested in app revenues. Profit calculations were based on the
responses of those who had provided number responses for both average revenues and
monthly costs per app per month.
Our research shows that development takes up the majority of an app businesss time:
57% of developers dedicate at least half of their efforts in development. At the same time
it is just 4% of developers who state their efforts go almost exclusively into development,
while 4 out of 5 put at least some effort into marketing. This means that the app
economy is moving into a higher level of maturity than the just build it and they will
come mentality of its early days.
The weight that different activities, from development to customer support, have in an
app business helps pin the point where the app economy currently stands on its journey
between the artisan and the mature business phases. It has obviously come a long way,
but it has still got a long way to go. Marketing and customer support are still to be
recognized as essential dimensions of an app business.
Design has by now been recognised as a major part of app building: Almost 40% of
developers put some moderate effort (25% - 49% of their time) into it, while another
23% actually dedicate more than half of their time to design.
Marketing is yet to grow in importance in the eyes of app makers. It is a very interesting
finding that 21% of those who do care about revenues and profits dont spend any time
on marketing, while another 50% (i.e. half the app businesses) allocate less than 25% of
their efforts to marketing. Partially it is just a matter of new businesses not having yet
appreciated what marketing can do for them. But it is also the hardcore programmers
who think that all it takes for a successful app is good performance and a cool UI. As the
app economy evolves, such a notion is bound to become obsolete.
Customer support is the last stage in an apps lifetime: Once an app begins having a
stable flow of demand, it is time for the app business to start supporting its customers.
For the time being it tends to be as overlooked as marketing is, although there is also a
non-negligible percentage of app businesses (13%) that put significant efforts into
customer support. These are most likely businesses that rely on building a loyal clientele
rather than selling cheap apps to the masses.
Our findings also suggest that too much focus on development hurts revenues: Those
who spend more than 75% of their time in development are more impeded than all other
developers in making significant revenues (more than $5,000 per app per month). This
implies that developers who focus on development spend time in this phase at the
expense of marketing and customer support, two factors which, if assumed, would
improve revenues. In effect, this means that allocating more than 50% of an app
businesss manpower in development is not just a lost investment that doesnt pay off: It
actually harms the business, as it both increases development costs and reduces likely
revenues.
Focus on design doesnt bring about much better results than focusing on development.
The flat non-existent correlation of design efforts and $5,000+ revenues suggests that
design is merely a hygiene factor, not a differentiator between high and low revenues.
Customer support correlates to healthy revenues almost as much as marketing does.
Here the correlation works in reverse: As stated earlier, a business needs to be
moderately successful to have some customers to support - in other words first come the
revenues then the customer support, not the other way around. Even so, companies that
take care of their customers seem to be doing quite well.
The magic ingredient behind measurable revenues in terms of how developers spend
their time and efforts is therefore marketing.
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Our research of 7,000+ app developers shows that all platforms have essentially the
same share (around 40%) of developers and companies that either break even or make
slight profits. Therefore, the experimentation and under-the-radar stages of an app
business are not the characteristic of any platform in particular. Where platforms differ
is at the low and high tails - those developers making spectacular profits and painful
losses.
As expected, iOS has the largest share of profitable developers (41%) and the smallest
share of loss-making developers (21%). HTML5 developers are a close second to iOS.
iOS only-moderate precedence implies that iOS developers may be enjoying higher
revenues but they also incur higher expenses than others.
HTML5 comes second in profitability with 38% of the platforms developers being
comfortably profitable, while just 25% of developers are losing money. This verifies our
earlier Developer Economics findings on the substantial revenues behind HTML5 apps,
which stem from the nature of HTML5 mobile apps - many of those being enterprise
and media apps. Android has come a long way in terms of developer profitability,
coming in a close third after HTML5, with the same chances of incurring a loss (25%)
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and slightly lower chances of comfortable profits (35%). Androids lower number of
profitable developers (35%) is unambiguously due to the lower revenue opportunities
the platform has to offer.
For the three challenger platforms, BlackBerry 10, Windows Phone and Windows 8,
things look gloomier: The app businesses that make a loss are comparatively more in
number and the businesses that make a healthy profit are significantly fewer.
In fact, as far as platform profitability is concerned, apps are a two-speed
economy: There are the high-speed platforms, namely iOS,HTML5 and Android which
present less than 30% chances of failure and more than 35% chances of success - in
other words success is more likely than failure. Then come the low-speed ones,
BlackBerry 10, Windows Phone and Windows 8, that have more than 30% chances of
failure and up to 30% chances of success - i.e. failure is more or equally likely to success.
The numbers for Windows Phone, the challenger ecosystem, portray a grim picture
indeed: 40% of the developers who select it as their primary platform report losses,
while only 21% enjoy comfortable profits. This is in mostly due to the many Explorers
and Hobbyists that value fun and knowledge gained more than profits - although the
Hobbyists included in the findings of this report are those who are not indifferent to
revenues.
Windows 8 developers perform somewhat better. Compared to Windows Phone,
Windows 8 developers represent more mature businesses that also produce desktop
apps. There are more Enterprise IT, Product Extenders and Guns For Hire developers
among the Windows 8 developer ranks. Hence the better profitability as compared to
Windows Phone.
The grim picture of Windows Phone versus the near-rosy one of iOS, as painted above,
are based on the share of developers and app businesses that are above or below the
profit line. Just how profitable or loss-making are developers of each platform though?
Where are the painful $2,000+ per app per month losses and where are the spectacular
$50,000 per app / month profits?
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Losses for Windows Phone are in fact not that serious - they are mostly between $100
and $500. In total 77% of Windows Phone developers make between -$500 and +$500,
which verifies that its often chosen by Explorers: developers who are exploring
monetization prospects in the app economy make cautious low-risk bets that can only
lead to limited profits or losses.
For BlackBerry 10, developer losses are similar to Windows Phone but profits above
$500 are more likely (24% vs. 6% for Windows Phone). In BlackBerrys case it is not
about Explorers: Having lukewarm device sales so far, BlackBerry cannot justify
extensive investments, thus the limited losses of its developers. On the other hand, the
rather limited competition that BlackBerry 10 developers have to face means they have a
better chance at getting discovered and selling their apps - hence the better returns.
iOS presents of course a very different case: The middle of its distribution is thinner.
The most interesting finding about iOS profitability is the extent of losses made: iOS
may have the lowest percentage of loss-making developers, but their losses are mostly
deep red. Almost half (45%) of those developers making a loss (19% of iOS developers
in total) bleed more than $2,000 per app per month.
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As iOS is in most cases a priority platform, the heavy losses of some iOS developers
make perfect sense: Those who are serious about investing into an app business are
more likely to invest on iOS, given its large user base and revenue potential. And
investments can go wrong. Of course, iOS also has to offer the widest green area, 35%
of its developers enjoying profits above $500 - investments can bear fruit as well.
HTML5 developers stand somewhere in the middle between iOS and Android
developers. HTML5 app losses are slightly worse than in the case of Android, although
not as bad as the iOS ones (fewer HTML5 developers lose more than $2,000 compared
to iOS). At the other end of the distribution, HTML5 presents better opportunities than
Android (32% of HTML5 vs. 27% of Android developers make more than $500), but not
as good as iOS does. Higher profits than Android are justified by far more HTML5
mobile developers building enterprise apps (37%) and business tools (31%) as compared
to Android (21% build enterprise apps and 25% build business tools). It is also usually
the enterprise and media businesses for whom HTML5 is a sweet spot that now target
mobile using HTML5, Enterprise IT developers in many cases.
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Our research shows that game developers have a 1-in-3 chance of reaching comfortable
profits. A game makes between $201 and $350 per month in median revenues while its
median development cost is between $101 and $250 per month. The diversity and
inherent volatility of the games category imply that revenues and costs are in reality very
widely spread around these observed medians. Games of different revenue models or
subcategories offer very different prospects for profitability. The many factors on which
game revenues depend on - discoverability within the largest app category, for one makes games a risky bet in terms of profitability.
Enterprise apps (e.g. sales force automation) are the most likely to be profitable, as 47%
of developers who build enterprise apps report comfortable profits. Both median
revenues and median development expenditure for enterprise apps are way above all
other app categories. High expenditures make sense, given the revenues, and they seem
to be paying off with a healthy profit margin for most.
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Business and productivity tools (e.g.Analytics Pro) and entertainment apps offer the
next best options, as 44% of those building business tools and 42% of those building
entertainment apps make solid profits. For entertainment apps, median revenues per
app are cleanly above costs, the only app category other than enterprise apps where such
a pattern is observed. Entertainment apps seem therefore to be a reasonably safe bet for
making a profit.
Utilities, on the other hand, are not something with a promise of profitability: Only a
third of those building utilities (i.e. 13% less than those building enterprise apps) enjoy
healthy profits. For half the developers who build utilities, revenues do not exceed
development costs. For developers who are interested in making profits, utilities could
therefore only be justified for experimenting, developing skills and gaining knowledge.
For education apps both revenues and development costs are slightly higher than those
of utilities, but still comparable. The education apps market is expanding fast, targeting
a wide audience from toddlers to college students. Opportunities for revenues are
therefore increasing, but so are development and content production costs: As the
demand for high-quality education apps is growing the effort and money that businesses
have to put in each app are also increasing considerably - and it remains to be seen if
small teams can keep up. Currently, 1 in 3 developers building education apps make
comfortable profits.
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Our research shows that developers who target tablets as their primary device are as
likely to make a profit as smartphone developers are - both on iOS and Android. The
answer lies in expenditures: Tablet developers spend on average 30% more per app and
month than smartphone developers do. As a result, and despite the higher conversion
rates, the bottom line in profits is the same - in fact its slightly worse: 78% of the
developers who prioritise tablets vs. 72% of those who prioritise smartphones make
either a loss or up to $500 in profits per app per month. Higher profits of developers
building tablet apps proves therefore to be a myth - at least for the time being.
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is not necessarily a causation, it does recount a compelling story about how tools and
profitability are related: 70% of those who dont use tools - and do care about revenues make less than $100 in revenues per app & month. On the contrary, only 13% of those
developers who do use tools dont make any revenues at all and 41% in total make less
than $100.
Double-clicking on the data shows that some tool categories are associated with higher
profits. Push notifications and crash analytics are at the top of both the revenues and
profitability rankings, as 57% of those who use them make more than $500 in revenues
per app per month.
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At the bottom of the profits ranking we find ad networks, game development tools and
cross-platform tools. Ad networks are the least correlated with revenues and profits, as
39% of those using them report monthly per-app revenues of up to $100 and only 35%
are profitable.
As most game developers use specialised development tools, and given the rather low
median revenues of games we saw earlier, it comes as no surprise that those who use
game development tools score badly both in revenues and profitability. It is rather the
app category rather than the tools that is correlated to revenues and profits.
Cross-platform tools are correlated to low profits too: 40% of those using them make
$100 at most per app per month. We believe that this research finding reveals how
native apps are tied with higher revenues and better profitability. Apps developed using
lowest-common-denominator apps are still struggling to compete in the consumer apps
space.
User analytics might be the most popular tool category, but developers using such tools
are not showing strong profit performance. The median revenue of developers using
user analytics just manages to touch $500. Clearly, employing user analytics tools is
certainly popular, but is not what differentiates developers between those profitable and
those not.
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In our State of the Developer Nation report we showed that e-commerce is by far the
revenue model bringing the most returns, at $2,750 on average per app per month. A
good example of apps using e-commerce revenue model is the eBay app or apps that use
Amazon mobile affiliate APIs. In this analysis we further confirm that those developers
who leverage e-commerce revenue models have much higher chances of being profitable
than others: More than half (52%) of such developers report comfortable profits. This
result holds true across all company sizes: Small, medium and big companies alike are
significantly more likely to be profitable if they do e-commerce sales as compared to
other companies of similar size. This also leads us to conclude that the e-commerce as a
revenue model e-commerce is easy to approach by both startups and incumbents
building apps alike.
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Affiliate / CPI programs is the next most profitable revenue model, which works well for
all company sizes, and especially for small companies. Commissioned work, on the other
hand, has similar profitability (44% enjoy comfortable profits) but works better for
medium-sized and big companies. It is obviously the larger agencies and software
companies that undertake sizeable, multi-platform projects with the fatter profit
margins.
Our research also showcases the differences between the old and new revenue models.
Pay-per-download and in-app advertising come in stark contrast with the e-commerce
and affiliate revenue models. Traditional revenue models simply dont work anymore the profitability of those using them is at best average. Developers obviously need a
major review in their understanding of business models and a careful look at the
untapped potential and low risk of e-Commerce and affiliate revenue models.
Despite the increasing share of ad dollars going into in-app advertising, we would not
recommend the revenue model for any company size: Those who use in-app advertising
(and particularly companies of 21+ employees) are making considerably less profits
than other companies of the same size. Similarly, pay-per-download is at the bottom of
the profitability ranking (30% of developers using it are profitable) and is the worstperforming model for small companies.
Selling services to developers seems to work well only for big companies (of 501+
employees). Medium-sized companies that have tried it are making profits significantly
lower than other companies of similar size, while for small companies services to
developers are correlated to average profitability.
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