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 CoronaSDK. Now, 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.
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”.
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.