Make Money with Mobile Apps

Apps-2So you’re a developer and you want to strike out on your own and get a piece of that lucrative mobile-apps market.

Who can blame you? Research firm Gartner predicted last January that mobile application revenue would nearly triple this year to $15.1 billion from $5.2 billion in 2010.

A month later, rival analyst firm Forrester Research upped the ante, forecasting that mobile-app revenue would hit $38 billion by 2015, with tablet app sales comprising $8.1 billion of that total, up from $300 million last year.

Your next job: Mobile app developer?

It’s like printing money!

One small problem: The apps market is incredibly crowded, and getting more so as developers rush to satisfy the seemingly insatiable demand for apps by the growing global army of mobile device users.

There are more than 500,000 apps available at Apple’s App Store, while Google’s Android Market features more than 225,000. Research in Motion’s BlackBerry App World trails far behind with less than 50,000 apps. Then there are the thousands of apps available at Microsoft’s Windows Phone 7 Marketplace and Nokia’s Ovi Store.

Vast riches await (a lucky few) iPhone apps developers

Of course, every mobile apps developer wants to be the next Rovio, the Finnish computer game developer that created Angry Birds, the most popular mobile app of all time. Since its release in 2009, Angry Birds has generated nearly $100 million, and on development costs of only $140,000.

But there’s a reason there’s only one Angry Birds: No other mobile app has achieved that kind of success. The truth is, most apps make little or no money.

A far more typical mobile app developer’s story would be that of Andrew Burke, who developed a diary application for the iPad that was released last October. Through July, the total profit for Remembary, which is available for $4.99 in Apple’s App Store, was $2,058.

Still, with iOS apps averaging about $600 in revenue, Remembary is relatively successful, though given the estimated $10,000 to $20,000 in development costs (the value of the time Burke spent writing the code), the iPad app still is in the red.

The odds may be long, but the opportunities for mobile apps developers to make money grow along with the mobile apps market. Given the obvious potential and equally obvious challenges, how would a mobile apps developer turn their talent into a successful business, or at least a healthy revenue stream?

Make money with mobile apps

Here are several crucial decisions facing developers who want to make money with mobile apps building and selling.

Determine your business goal
Before you even begin developing your can’t-miss mobile app, you need to figure out exactly what you’re in this for.

Do you just want to create another revenue stream for yourself, or are you planning to be the next Zynga (maker of wildly popular games such as FarmVille and CityVille)? This will determine your strategy, inform your decisions regarding financing and — if you’re planning on growing — staffing. Knowing your business goals also will help you prepare for success over the long haul.

“The most important business decision is to define success and draw out a coherent vision for how you are going to attain and measure that along the way,” says Paul Reddick, chief executive of Handmark, a large, Kansas City-based developer of applications across numerous mobile platforms with nearly 200 employees. “Do you want critical acclaim, downloads, usage, ad revenue, paying subscribers, or are you just wanting to gain experience?”

For his part, Burke’s goals for his iPad diary app — at least from a business sense — were relatively modest. “I built Remembary because I wanted to learn iOS programming, and I wanted to have a digitally-enhanced diary on my iPad,” he wrote in his blog. “Most importantly, after years of selling my services as a developer, I wanted to have a product and learn all about production, pricing, promotions, and customer service.”

Sure, other mobile apps developers may be swinging for home runs from the first inning, but they still need a plan and a durable strategy. “Starting a mobile apps company can take a long time to establish because you need a portfolio of apps to succeed, unless you are lucky enough to have a hit right out the door,” says Justine Pratt, president of Creative Algorithms, a Chicago-area mobile software development company she co-founded with her husband, Cory. But, she added, “Smart businesspeople do not rely on luck for success.”

And once you start a business developing mobile apps, you are a businessperson in addition to a developer. You may as well be a smart one.

Choose and know your target market
There’s no point in developing an application for a market that won’t support it or doesn’t even exist, but many apps developers will come up with a brilliant idea first — and then assume they’ll find a market for it.

“You could bust your ass for months and make a very polished and impressive product, but if no one wants it you’ve wasted your time,” says “Chuck,” chief executive of FDP Games, which makes a series of drug-themed mobile games such as “Roll a Joint,” an Android app that allows the smartphone owner to “roll” a virtual joint on their touchscreen.

That’s why it makes sense for mobile apps developers who want to build a business to identify a target market — and then make products for it. Here’s why: A developer going into the mobile apps business will be building numerous applications. By focusing on one market, they can leverage their experience with each successive app. They’ll be on a learning curve.

Even the early apps failures can pay off down the road if they help developers better understand what their target market (customers) wants — and doesn’t want. This kind of “Experience Capital” is invaluable in any business.

The other huge advantage to having a core audience for your apps business is it enables you to tightly focus your online marketing efforts through social media (LinkedIn, Twitter, Facebook, Google+) and Internet forums that are geared to your audience’s interest.

Solve a problem or serve a need
Once you’ve decided on a target market, now you have to create a mobile app that provides users with some value. And that usually means either the app solves a problem (even something as simple as providing information), enhances productivity, or provides entertainment.

For example, Who Is It Pro — the current top paid app in BlackBerry App World — allows users to set 20 LED colors for their favorite contacts, thus letting them know at a glance who is trying to contact them.

And Creative Algorithm’s Trip Boss travel manager for iPhones allows professionals to track expenses, set budgets and export expense reports. Depending on the edition, Trip Boss costs from $2.99 to $9.99.

A mobile apps developer must “figure out a compelling, unique concept for their application,” says David Appleyard, author of iPhone App Entrepreneur. “Their software will ultimately be judged on how useful, original or playable it is, so this initial concept is incredibly important to carefully consider before moving ahead with development, branding and promotion.”

This is where knowledge of your target market and competitive landscape come in handy.

“Do your market research to make sure someone is not already doing what you do,” says Chuck of FDP Games. “Market research can be as simple as searching the various app stores, Google and YouTube.

“On the other hand,” he adds, “if you find someone doing your idea but they are doing it very poorly — and are obviously not a big company with a lot of money to sort it out in a hurry — go for it.”

FDP must be serving some need. Its three drug-inspired games have generated 50,000 to 100,000 downloads at $1.99 each, while each have cracked the Top 15 Android Paid Casual Games for the past two months, Chuck says.

Picking a platform (or platforms)
A mobile apps target market is more than a demographic profile or group sharing a particular interest. Every potential customer would be running your app on a specific mobile platform, or OS. Are you going to write your app specifically for Apple’s iOS? Google’s Android? Research in Motion’s BlackBerry? Windows Phone 7?

Creative Algorithms’ Justine Pratt believes entrepreneurial mobile apps developers just starting out are better off being specialists. “Small developers should pick a platform and stick with it,” she says. “Adding additional platforms incurs cost for development hardware and software requirements, plus lost time in switching modes, languages and development environments. Keeping a focus on one platform streamlines your time, which is your scarcest resource.

“Once you have exhausted your ideas for apps and have apps established on the first platform, then consider porting to other platforms.”

Handmark’s Reddick, however, offers a different perspective on mobile platforms in this blog post.

“When selecting only one platform,” he wrote, “the question is, ‘Which 80% of the market do you want to ignore?’”

Have a (realistic) revenue model
Right now there basically are three options for mobile apps developers to generate revenue: 1) Charging for their apps (paid download or paid subscription), 2) up-selling better versions and premium features, and 3) selling advertisements on their apps.

These are not mutually exclusive. Angry Birds creator Rovio Mobile, for example, charges 99 cents to download the world’s most popular mobile app onto an iPhone or iPad. The version for Android, however, is free, but includes paid advertisements. (Actually, the paid iOS version also includes ads.) “Don’t be afraid to charge for your app,” advises Remembary’s Andrew Burke. “If you’re not targeting the ‘impulse buy’ market or younger customers and if your app is somehow unique and of high quality (not just a ‘novelty’ app), you can charge much more than the usual 99 cents.”

Which Burke has done, and it has paid off. “Raising your prices is a surprisingly scary and nerve-wracking thing to do, but it can turn out well,” he says. “Remembary is now $4.99 and I’m making about twice as much per week as I was when it was $1.99.”

It’s imperative, of course, that a paid app — even one that costs just 99 cents — provides real value to a user. Otherwise it will be the target of vitriolic reviews and low ratings, which will drive away potential buyers. Just as the Internet and, specifically, social media can be powerful marketing tools for your mobile apps, they can be used to spread negative word-of-mouth about a poorly received mobile app.

Customers are more forgiving with free apps, but unless developers plan to use advertising to monetize their free app, their free version (or “freemium”) needs to be compelling enough to entice users to pay for either 1) a superior, premium version of the app, or 2) in the case of games, upgrades that allow players access to premium levels of the game or more resources (virtual currency and other perks).

The latter, known as in-app purchases, are becoming increasingly popular. According to app marketplace research firm Distimo, in-app purchases increased to 76 percent of total iPhone apps revenue in August, nearly three times the 28 percent from July 2010. Distimo also reports that 76 percent of the 25 top-grossing applications in Android Market are free apps that offer in-app purchases.

Interestingly, only 4 percent of all iPhone apps offer in-app purchases, so only a tiny sliver of apps sold though the App Store are making three-quarters of total iPhone app revenue.

Advertising revenue for mobile apps is expected to double to $3.3 billion in 2011 from the previous year, according to Gartner. Angry Birds reportedly generates $1 million a month in ad revenue from its free Android version. But that leaves plenty of ad dollars to go around.

If you’re relying on advertising revenue to monetize a free mobile app, it’s undoubtedly wise to choose either iOS or Android as your platforms because they have the most users.

Mistakes to avoid
Finally, each of our experts offered their thoughts on the most common mistakes that mobile apps developers make:

Burke: “Giving up too early. If you look at the apps that made it big, they’ve often been growing for a year or more, or they’re only the most recent of several apps that have been made by the developer. ‘Overnight success’ can take a long time.”

Pratt: “The most common mistake is to neglect marketing. A developer cannot merely build and ship a product. He/she also must have a plan to market the apps. Most apps stores are filled, and to succeed you must get noticed.”

Reddick: “The biggest mistake developers make is focusing on downloads versus usage.”

Appleyard: “Not investing enough time in considering how their application will be used by someone completely new to it.”

Chuck: “Having too big a team. You can make a whole lot of apps with just one or two people. You might not need a designer, an artist, a programmer and a business guy.”

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