Why You Won’t Make Money Building Apps

 

With over 1 million apps available in both the iTunes and Google Play stores and an average of 50,000 downloads per app, building mobile apps looks like a very lucrative money making option. However, when you dig deeper into these figures and see that over 90% of these apps are free to install and just 1% of these apps are financially successful, it becomes a much less appealing proposition. This article will take a detailed look at the world of mobile apps and discuss the main reasons why you won’t make money building apps.

making money with apps1. Over 90% Of Apps Are Free

One of the main reasons mobile apps are so difficult to make money with is that over 90% of apps are free and by the start of 2015, this figure is expected to rise to 94%. Consumers are drawn to free apps and tend to favor them over paid apps with Carter Thomas (an app developer and marketer) stating that he gets around 10 times more downloads when the app is free. This makes it almost impossible to generate any significant revenue from apps at the point of sale.

2. Number Of Apps

While the number of apps available suggests that this is a booming market, it also makes your app very difficult for consumers to find. Even if they’re willing to pay for your app, consumers will have to browse through thousands of similar apps to find yours and then choose you over the competition. The likelihood is that your app will get lost in the vastness of the app stores and rarely get seen by potential customers.

3. Marketing Costs

Many of the app providers you are directly competing against will have large budgets dedicated to advertising and marketing their app. Therefore, to stand a chance of being successful, you will have to invest a significant amount of finance into advertising and marketing your app. The latest statistics suggest that a marketing budget of at least $30,000 is required to have a successful paid mobile app.  As the number of apps available across the app stores continues to grow and huge multi-nationals such as Disney and Electronic Arts becoming increasingly active in the app industry, this figure is likely to rise consistently which makes attempting to dominate the competition in this industry is a very costly strategy and one that is unlikely to pay off.

4. Speed Of Innovation

Due to the size of the app market, innovation is essential if you want your app to be a winner. However, even if you come up with a completely new idea that is different to anything which is already available in the app store, the chances are that lots of people have already come up with that very same idea and are getting ready to release their app. In scenarios like this, the first app to reach the market is likely to succeed and any latecomers will get left behind.

David Pritzker (a former lawyer who left his job to become a mobile app entrepreneur) and his app Mouthee (an app that provides users with movie, music and restaurant recommendations from their friends) are a perfect example of this. When the idea was initially conceived, it was completely unique and nothing like it was available in the app stores. However, by the time the app was launched, lots of competing apps with very similar features had reached the market and Mouthee suffered as a result with Pritzker admitting that his team may have spent too much time developing the app which is now struggling to build an audience.

5. App Retail Price

The average paid app retails for $0.99 and app stores take an average of 30% of this income. This leaves developers with a meager average of $0.69 revenue per paid app sale. When you factor in the high level of competition and consider that most successful paid apps require a marketing budget of at least $30,000, this is a huge risk to take for such a small return. To cover the average marketing budget alone, you would need to sell 43,479 copies of your paid app and when you add other costs to this, you’re likely to need over 100,000 sales for your app to be financially viable. While this figure is possible, when you consider that the average amount of downloads per app for all apps (paid and free) is 50,000, you’ll have to do something extra special with your paid app to generate the sales volumes that are required.