A couple months ago, Niels Vanspauwen told you about how he and a couple other part-time developers (and full-time dads) launched a full-fledged app studio called Kidimedia with a little help from your trust CoronaSDKNow, Niels is back to share some of his insight and secrets to shaking the most change out of your apps.


What do the App Store, Google Play, and the Amazon Market have in common? They’re all attracting hordes of developers who are looking to make it big with the next Angry Birds or Cut the Rope!

However, many developers end up being disappointed with the results they’re getting. So, in this blog post, we’ll have a closer look at some data that has been published on Apple’s App Store economy and offer some advice on how to succeed on the app stores.

Let’s combine some data from around the web, all published in recent months: Apple’s Q2 earnings call, data from 148 Apps, a recent AdMob survey, some analysis done by GigaOM and some statistical models that are fitting for economies like the app store:

  • From Apple’s Q2 earnings call, we know that Apple has paid out over $2 billion to developers, coming from over 10 billion downloads of more than 350,000 apps.
  • AdMob’s survey tells us that smartphone and tablet users are doing a lot of gaming on these devices.
  • GigaOM put these numbers together and assumed an exponential distribution of downloads: cheaper apps are downloaded way more often that more expensive apps.

GigaOM’s post then went on to compute the average revenue per app for each price point, assuming revenue was spread evenly across all apps.

In reality, of course, the distribution of revenue is far from uniform.

In a market where there is a large number of products (apps) to choose from, a large population of customers and negligible stocking and distribution costs, the demand across products follows a power law distribution or Pareto distribution. This is often referred to as “the long tail”. Well, all the app stores are exactly such market places. The Pareto principle is also known as the 80-20 rule: 80% of the wealth is held by 20% of the population. App stores are even more brutal than that and the distribution of wealth is better approximated by the 90/10 rule: 90% of the revenue is collected by 10% of the apps.

Applying the 90/10 rule at each price point, yields the following results for the gaming segment in the Apple App Store. I’ve rounded the numbers, to not give the false impression that they’re very accurate. I’m also only showing the number up to the $4.99 price point, because there really isn’t enough data about the higher tiers.

90-10-Chart

So what is this telling us. Let’s break it down for the $0.99 price point:

  • Combined, these games are downloaded about 225 million times over one year
  • Combined, this translates into a revenue of around $223 million
  • Applying the 90/10 rule, the top 10% of games (about 2,300) are raking in 90% of the yearly revenue in their segment (about $200M). On average, that means that a top 10% game, at the $0.99 price point, is making $90,000 per year.*

Note that there will still be an awful lot of difference between being the number 1 and the number 2,000 in this top 10% slice. Monster hits like Angry Birds are bringing in way more than $90K per year. But the point I’m trying to make comes from looking at the next 10% slices. Look how fast the numbers are dropping! Clearly, it doesn’t make sense to talk about an “average” app. The difference between being number 10 or number 10,000 is tremendous!

Another interesting observation comes from comparing the different price points: a top 10% game priced at $0.99 is bringing in roughly four times less than a top 10% game priced at $1.99! The race to the bottom that has quickly unfolded in the App Store just doesn’t make sense. Unless you can find some other source of income of that larger installed base (like ads or in-app-purchases), it’s better to sell your games at a fair price.

Of course, scoring a top 10% app isn’t exactly easy and involves a certain amount of luck. Does that mean you should just give up? Hell no!

Here’s some advice on how to win in the app stores…

Tip #1: Keep your investment low,
but don’t sacrifice quality

Given there’s a fair chance that your game is not the next Angry Birds, be very careful about how much you’re spending on developing your app. This is where CoronaSDK really shines: instead of wasting time with difficult ObjectiveC API’s, you can move quickly, focus on building killer game play and top notch graphics. Building high quality games at a low cost will enable you to be profitable with games that aren’t home runs.

Tip #2: Ride the long tail of the app store

Have a look at this graph depicting the long tail. The green region on the left represents the apps above the mean and the yellow region on the right represents the apps below the mean. The area of these regions is identical and corresponds to the revenue made by that region. The yellow region is what is called “the long tail”.

Long-Tail

Because there are no distribution and inventory costs for developers, you can make the same amount of money by having many apps in the yellow region as you could make by having one hit. So the key message here is: build many games, rather than putting huge amounts of effort into one app that you’re convinced will be the next monster hit. Even if you succeed in building a superb game, you’ll still require a good amount of luck to get noticed and make it to the top.

Tip #3: Don’t bet on the rankings

Some people argue that the long tail doesn’t apply to the App Store, because it is so difficult to get any kind of attention if your app is not visible in the rankings. And that actually, the yellow region is non-existent because of that. I believe that’s only partially true.

There are two ways to get noticed if your app is not ranking: search results and niche app store apps.

To stand out in search results, choose your keywords wisely. Don’t use generic keywords like “fun” or “puzzle”. Instead, use short phrases like “celebrity quiz”. This has two advantages: first, you have a much better chance of appearing high in the search results, because your rank is taken into account when sorting the search results! Second, you’ll get a much higher conversion rate, because it’s more likely that your app matches with what the user was looking for.

A second way to get noticed outside of the official app store rankings is by getting listed in niche app-store-like apps. A good example is the MomsWithApps app,  which is a catalog of great children’s and family-friendly apps. You can search by skill, age, and so on. When we released our educational iPad app for 3-7 year olds (Kidimedia), sales quickly fell flat after we dropped out of the ‘What’s new’ lists. After being listing in the MomsWithApps app, we’re selling copies every single day. Not huge amounts, but that’s exactly what riding the long tail is about.

Tip #4: Use your free version as a marketing vehicle

It’s no surprise that you’ll find many, many more people downloading a free version of your app, even if you’re only charging $0.99. In fact, only about 12% of downloads are paid apps. This gives you an audience — an excellent audience in fact. These people have read the description of your app, seen the screenshot and thought “Hey, this could be cool!”

Make sure you make the most of this opportunity: give them a decent sampling of what your app has to offer, but not too much. It’s likely their friends have similar interests, so consider giving them something extra (e.g. an extra level to play) if they “Like” you on Facebook or tweet about your app.

Again, Corona SDK comes to rescue with its dead simple Facebook API. Once iOS 5 comes along, tweeting from your app will be easier than ever.

* Disclaimer: take the numbers presented here with a grain of salt. There are no accurate numbers available, we can’t prove the statistical methods applied undeniably hold for the app store, the effect of in-app-purchases have not been taken into account and so on. That doesn’t mean we can’t try to learn from it though.

  1. Great to read! Really puts things into perspective, and it helps to keep being reminded not too sink too much time into any one project.

  2. It’s likely their friends have similar interests, so consider giving them something extra (e.g. an extra level to play) if they “Like” you on Facebook or tweet about your app.

    How would you go about doing this?

  3. @Gerald: you can use Corona’s facebook API to open up your fan page in a webpopup and instruct the user to hit the “Like” button and close the webpopup again. As soon as it closes, you use Corona’s facebook API to request the “user_likes”. Then check if your page appears in that list. If it does, unlock the bonus.

  4. Bottom line is that it is about marketing and volumes. As you say, it is better to have several products than one. I compare AppStore with a gold rush. First arrivals were few and got rich with little effort. But now it’s more like a lottery. Bet everything on one app is a risky business. Past years I only know one app which went great without any marketing – Tiny Wings.

  5. This was very good and realistic article.

    It makes me feel better about having 45 projects I am working on. I keep coming up with ideas all the time. I sit down and prototype the very very basics of it and the gameplay I want, until I run into issues – which happens on EVERY project, which is why I don’t have an app released on the app store. However, when I DO get things sorted out, I have a large library of apps that I can release. I think this is the better way to go. I spent 2 weeks on one app, then when I got stuck I just kept working on that one app. What I learned later on was when I get stuck on something, I ask the question on a forum and take a break and go build another prototype.

    I think this will allow me to ride the “long tail”…..whenever my “never programmed nothin’ before june 2011″ butt gets into gear and actually releases an app to the app store!

    ng

  6. I think the author missed one key point – income from advertisement.

    The developers’ income mainly come from two ways, paid app and advertisement. The paid app is very limited unless your app got huge hit. The best income will be advertisement income from the 99% of your combined download (free and paid). Utilize the 99% of the combined download to constantly make money for you when they play/use the app. The paid app is one-time deal, once they paid $0.99, then you have no rolling income in the future from this app.

  7. This is a great article and has given me a renewed push to keep going and to keep doing what I do best; illustrate and write children’s books! Sooner or later, my customers will find me.

    The other thing I’m going to try is to make a seasonal book. My first book’s content was too genearlized. I think by doing seasonal content, at least my book might come back subsequent years for more sales. I can hope it will, at least!

  8. From one Nicholas to another Nicholas. You can Do iT! THere is a lot of great help here on the forums and people want you to succeed. Keep trying. Pretty soon, we’ll see a flood of apps from you, and I’m sure they will be great!

  9. I did all of this (except releasing multiple apps) and more, but still getting trouble noticed in the Android Market. Maybe multiple apps are the key, cause I’ve tried lots of stuff like

    Unlocking new levels for Likes and tweets
    Advertising the app with AdWords for mobile (compatible devices only)
    Facebook page updates
    Twitter account updates
    OpenFeint integration
    Forum posts
    YouTube video
    Amazon App Store
    Ansca Showcase
    Dedicated game’s website

    And I still down have even 1000 downloads! It’s like my app is invisible or complete crap. I don’t know, you tell me (see http://pyroshelf.com).

    So far mobile game dev is the biggest waste of time I had in life! I always put effort and passion in everything I do and it becomes successful. This simple formula has always worked, but not this time. Or maybe it’s not the time yet?

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title="" rel=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>