iphone economics

June 22, 2010

Full Analysis of iPhone Economics - it is bad news. And then it gets worse

The median point is under 1,000. Lets call it 999. That number times $1.95 per paid app gives the 'most typical app' the total revenues in its lifetime - the full two years of App Store existence - of $1,948 dollars. This is before Apple takes its cut of 30%, so we are left with $1,363 over two years or $682 per year. This is so 'successful' that half of all of the developers of the 164,250 apps -will actually earn LESS THAN THIS. Before you start to cry, remember, there is that Angry Bird game that had 4 million paid downloads and the Bewelled 2 game with 3 million paid downloads. Thats your math there, they are totally skewing the averages, and you are stuck in the 'long tail' indeed. Half of all developers will earn less than $682 per year. Do you still think this is a good business idea?

Now we can calculate more valuable data points. The total paid apps earned $1.43 Billion over 2 years. When we divide that by the average price paid of $1.95, we get total paid app downloads of 733 million. In other words, of the total 5 Billion iPhone paid and free app downloads, 733 million - 14.7% - were paid, and obviously the rest, 85.3% of all downloaded iPhone apps were free. That is 4.27 Billion free apps. incidentially a sanity check, in Sept 2009, Yankee Group surveyed actual iPhone App users and found 18% of their apps they had were paid, 82% were free. So the math result of 15% paid apps is quite consistent with other sources.

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Making Money In Mobile - Issues and Strategy

http://wapreview.com/blog/?p=7805

Most of the success stories seem to be with iPhone apps. With a block buster iPhone game like "Angry Birds", which has sold over four million copies, you can do quite well even with the ubiquitous $0.99 App store pricing. As can a high quality app, especially one that fills an enterprise need, like iTeleport, a $25 iPhone/iPad app for remotely controlling Windows and Apple PCs that generates over a million dollars in annual revenues.

But those results are atypical. Tomi Ahonen crunched the numbers and calculated the the average iPhone paid app or game returns a mere $682 per year to its developer. It's worse on Android where paid apps are only available in 13 countries. Android apps tend to be offered as a free ad-supported version with a paid upgrade that removes the ads and includes an additional feature or two. Mobile web publishers generally rely on mobile advertising as well.

To make any decent amount of money with mobile advertising you need volume, a whole lot of volume. Cost per click (CPC), the average payout to the publisher when a user clicks on a mobile ad, is about 4 cents in the US. Click Through Rate (CTR) for mobile ads varies widely but most reports, including these from Mobiclix and Chitika,put it at well under 1%. Assuming that you are lucky enough to get a 1% CTR you need about a quarter of a million daily ad impressions or 7.5 million ad impressions per month to make $100 a day! And that's assuming a 100% fill rate

So at the average fill rate, you would need 37 million monthly impressions to earn $100 day. As mobile sites and apps typically only carry one or two adds per page so that equates to at least 18 million monthly page views.

Eighteen million page views is a lot. To put it in perspective, last year People Magazine reported that its mobile site averaged 19 million monthly page views, the New York Times 60 million.

Why is it so hard to make money with mobile advertising? The biggest problem is inventory. There simply aren't enough ads to go around.