More Evidence Suggests That iPhone App Store Doesn't Really Sell That Much...

from the ain't-looking-so-good dept

Among people who really, really want to believe that there's a huge market out there for selling content directly, the iPhone App Store has recently become "Exhibit A." The thinking is that all you have to do is slap together that perfect Steve Jobsian user interface that just makes it so easy to buy, and people will start forking over their money. It was part of David Carr's argument when we debated newspaper micropayments. Except... there really isn't that much evidence to support even the claim that the iPhone App Store really sells that much. We were a bit skeptical of the early reports that people claimed offered "proof" that people would buy all sorts of apps. Then, earlier this year, we suggested that it was an early warning sign that so many apps on iPhones were never used at all or were used once and abandoned. Basically, that meant that people would test stuff out when they first got the phone, but sales would likely dwindle after that. More evidence was provided by an analyst firm that figured out how little money Apple was making from app sales (which is fine -- Apple is in it just to sell hardware, but it suggested that app sales weren't quite as amazing as people were claiming).

Newsweek is presenting some more evidence -- albeit anecdotal -- that the iPhone App Store isn't making very many people very much money at all. There are, certainly, a few folks at the top who are doing okay, but for most people there just aren't that many sales -- or the cost of getting those sales greatly outweighs the revenue that came in from them.

This isn't to say that the iPhone App Store is a failure. In fact, I'd argue it's been a huge success in making the iPhone significantly more valuable. But as evidence that there's a huge market out there of people willing to pay for content if it's just packaged up nicely? There's just not enough there to be convincing.


Reader Comments (rss)

(Flattened / Threaded)

  •  
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    Mark Murphy, Oct 8th, 2009 @ 5:44pm

    It's a Catalog

    My area of expertise is Android, not iPhone, but the argument that I've been saying over and over again for the Android Market holds true for the iPhone App Store:

    It's just a catalog.

    It is a catalog with wide distribution and tiny listings. It is also a very big catalog -- tens of thousands of products dwarfs the Sears, Roebuck Christmas Book at its biggest.

    Few got rich by just having a listing in a catalog. Being in a catalog helps, but it is not the be-all and end-all for marketing. You still gotta hustle, you still gotta sell, and you still gotta find ways to stand out from the crowd.

    It is possible to make money selling only through a catalog. Out of 40 business models I outlined recently for Android, I'd put app sales to consumers at #40 or thereabouts in terms of the ones I'm looking to employ.

    The sooner developers get out of the mindset that these mobile markets are money machines and start treating them as just a channel, the better.

     

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      Michael Long, Oct 8th, 2009 @ 11:17pm

      Re: It's a Catalog

      Ditto. It's a business, not a gold mine, and the days of making a app with a blank screen, calling it a "flashlight", and pocketing the proceeds are over.

      Besides, you might as well have published an article about how the vast majority of published music, books, and movies fail to make the grade, much less make anyone rich.

      Put this one in the "blindingly obvious" category.

       

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    Killer, Oct 8th, 2009 @ 6:49pm

    I agree totally. I bought a couple of apps at the start but only used them a few times. I guess I was sucked in like every one. Some paid for apps have since been deleted. Now I use my iPhone every day to check emails and surf the net. App novelty is over. Long live the free app business cause if it's not free then I ain't paying for something I won't use further down the line. Music purchases thought me that at least.

    Keep up the good reporting.

     

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    Xian, Oct 8th, 2009 @ 7:40pm

    It's a business

    Wait! You mean, making money and big profits is actually hard work?!

    Wow. I'm shocked.

    Business, any business, is extremely challenging, fraught with tough competitors and sometimes cut throat pricing that makes it difficult to stand out in a crowd and have your enterprise thrive.

    AppStore is a distribution channel. Software is software. For every Microsoft or Adobe there are millions of companies and pieces of software that you've never heard, and never will.

    Imagine after Ford revolutionized auto production and distribution. I guarantee there were hundreds of people out there that thought, "Just slap four wheels and a steering column together and you'll be rich!"

    I wish. Business is a bitch. R&D is expensive. And margins are often razor thin.

    Welcome to the world.

     

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    Anonymous Coward, Oct 8th, 2009 @ 7:46pm

    Not surprised

    Not completely related to the essense of the story, but this offers another insight into why "accessing content for free" isn't necessarily equal to lost sales. People like to try things before purchasing to see if they really meet their needs. I think a lot of what falls under the 'evil filesharing' umbrella is actually just people trying stuff out because the cost is negligible. The things they like, they buy, or become fans etc.

    I don't have an iPhone, so don't know what App store items cost, or whether there is a "try this" feature, but if it's cheap enough, I can see how people will try something to see if it's actually suitable. If not, they don't buy (or don't continue to subscribe), if they do, they become customers and supporters.

     

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    Felix Pleșoianu, Oct 8th, 2009 @ 9:17pm

    Typo

    Typo: "people would by all sorts of apps" - should be "buy".

     

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    Sahlgren (profile), Oct 8th, 2009 @ 9:19pm

    Somewhere In Between

    C'mon. This isn't news. The headline draws you in "Doesn't really sell that much"??? BS. It sells lots. Are people making a living off of it? Hell no. Well, not the majority anyway.
    It's an open market and a level playing field, that is all. I don't think Apple has ever portrayed it as anything else. If your geek pals did, well, chalk it up to "excitement of the month."
    Actually, the app store is pretty remarkable. It IS a rare opportunity for the amateur to make their presence known on a world stage without a lot of monetary risk.
    Create a good idea. Work hard. Do your research. Make a good product and you WILL make money.
    Revel in it while it lasts cuz it probably won't.
    I've slogged thru literally hundreds of dollars worth of apps roughly $2 at a time just to find a few gems. I have 9 pages on my iPhone, half of which are games which I play infrequently but my wife and kids love `em. True, I haven't purchased as much as I used to because I finally found the apps that suit my needs. But I had a lot of fun doing it.
    What's more it's given ME ideas for applications that don't yet exist.

     

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    Anon, Oct 8th, 2009 @ 11:49pm

    I find it interesting how the entire premise of this article is about numbers but not a single one is included. Bravo. Next.

     

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    Brooks (profile), Oct 9th, 2009 @ 12:08am

    You mean...

    ...it's a logarithmic distribution, with most apps seeing few sales and a few apps seeing most sales? And the vast majority of people who see it as an easy, slam dunk, get-rich-quick business fail?

    That almost sounds like, I don't know, books, movies, music, games, restaurants, retail stores, clothing manufacturers, and, oh, pretty much every other business?

    The only thing newsworthy about this finding is that anyone found it newsworthy.

     

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    Nicholas Overstreet (profile), Oct 9th, 2009 @ 6:29am

    I fall in to this category

    I have bought exactly 1 app from the app store. That 1 app was a game which I bought the first day I brought the phone home.
    Even that 1 app I regret paying the $10 for, and I seriously doubt I will ever buy another one.
    Novelty apps for a novelty device. Not worth the money IMO.

     

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      Nicholas Overstreet (profile), Oct 9th, 2009 @ 6:30am

      Re: I fall in to this category

      Ugh, I really don't like TechDirt's login system.
      I thought I was logged in, but apparently wasn't.
      You guys should make it more obvious if you're not signed in... or when you sign in and check keep me signed in, actually have it keep you signed in.

       

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    Parker Mason (profile), Oct 9th, 2009 @ 6:29am

    Sell not apps, but...?

    I might not be reading the article closely enough, but it seems like people aren't making a lot of money based on people BUYING apps.

    What about free apps, like the Pizza Hut one that enables you to order pizzas through your iPhone? Surely things like this must be making money for people (and I realize this is a slightly different issue than making money directly by sale of the app).

     

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    Been There Done That, Oct 9th, 2009 @ 6:50am

    This is long and I'm happy to continue off line with anyone.

    I've worked with companies who put apps into the iTunes Store. First, Apple is of little to no help in this process, as someone stated, its a huge catalog and one that is now geared to reward large companies with large budgets. It has poor usability and with the recent re-launch and removal of the directory structure, easy browsing and exploring for apps is all but gone. Every company I worked with had grand expectations of selling thousands (if not hundreds of thousands) of apps. The reality is far from the truth. And these are good apps. And we hustled hard, really hard (and we are no strangers to digital marketing, a combined 30 years between the two of us). After the initial launch, review sites, press releases, social media, etc. etc. that performed beyond expectations (based on traditional product/service digital campaigns we have run) the apps didn't sell well. To add insult to injury, the analytics/stats inside of the iTunes store are criminal. The ability to measure tactics against performance (other than sales) is impossible. We are not able to see how many people are searching for keywords, who is actually landing on our app page, and see what the ratio of impression to buy is. Apple should be ashamed of themselves, especially considering the size of their cut.

    The next issue has to do with end user expectations which are totally out of whack and unrealistic. First of all, a recent study states that the average user purchases 11 apps. That means the rest of the apps they own are free apps. We also heard complaints about our pricing models (under $2) from end users, that our app should have been free. I don't think so. People prefer free apps to even quality low cost apps. Advertising models won't support development of apps for those companies with lower selling product. Its putting smaller developers in a bind, these apps cost thousands to tens of thousands to develop. Unless you are a big brand with multiple channels for an integrated app marketing message (i.e. big dollars behind a push like Pizza Hut for instance), a brand looking to run an affinity app (apps are the new affinity credit card IMO and are generally worthless such as the new Mercedes app), or have the one in a million killer app, your app is going to go largely ignored.

    Let's touch on the app review sites. Many really try to do a good job and seek out smaller developers to help push. However with over 85,000 apps in the store, the ability to handle such a massive onslaught of app review requests is next to impossible. Even the larger sites with editorial staffs are only reviewing a handful of apps a week. Most review sites I've communicated with have told me that they are weeks, if not months behind on getting to reviews and the sheer number of requests they get has limited them to only being able to handle a few a day or even week.

    It is a very imperfect, and getting worse system for app developers/marketers. It works for a few big fish at the top, Apple makes their money and really doesn't have to care much, and it leaves a lot of great apps ignored by a public with unrealistic expectations that we set early in the life of the iTunes Store.

     

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    digitalmarketingdude (profile), Oct 9th, 2009 @ 8:24am

    My contact info from above post (Been There Done That)

    digitalmarketingdude@gmail.com is my contact info, I didn't have account set up for this site. Thanks!

     

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    Derek Kerton (profile), Oct 9th, 2009 @ 10:57am

    Additional Observation

    I'll add to Mike's post that the distribution of downloads is heavily skewed towards a few dozen leading apps.

    This is no huge surprise, either, and a few commenters have pointed it out already.

    But what this fact challenges is Apple's (and Android, Palm, etc.) continuous efforts to boast about "85,000 apps" or whatever the number is today. While the number is impressive, it matters relatively little if 80% of the downloads are from the top 100 apps.

    That is, is Apple's store really better than RIM's or Palms if apple has over 80k apps, but RIM only has 6k? Not really, since almost nobody uses the 75k apps that are only on the iPhone.

     

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    roger (profile), Oct 11th, 2009 @ 4:56am

    some real figures

    Here are some real figures for the smallest of app developers.

    My son is 16 and has been learning to code for a year or more. He is competent in Java so we decided to try out developing an iphone app. I bought him a used macbook on ebay for $500, the sdk license for $99 and a book on iphone programming $30.

    He spent a couple of hours a day over the summer learning objective c and gradually put together the app. I can draw well and have done a lot of graphics work on the computer so my input was to do the design side of the app.

    The app is called

    "how to catch flies"

    We had numerous ideas but chose one with a simple format which he was able to code. It required a series of consecutive pages with text and diagrams, an embedded video, and a counter to record the number of flies caught (along with a reminder to wash your hands).

    We had a mini disaster just as we finished, the hard disk died suddenly losing everything. It was a minor hassle to replace and he was able to recode the whole thing from scratch in less than a day.

    Eventually we submitted it to Apple, it was passed by them first time round. The app was priced at 99 cents and the release date was set to 4th October but there was some problem with details outstanding on the contract which took a further 2 days to sort out. Critically, the release date remained, this meant that by the time it was fully released into the app store in the evening of 6th October it was on page 5 of the new releases.

    So the bit you have all been waiting for are the sales figures.

    6th october 2 sales
    7th October 2 sales
    8th October 0 sales
    9th October 0 sales

    It is NOT a great idea for an app but still it is of some use to anyone who has ever been irritated by a fly and can't bring themselves to kill it which must be more than 4 people out of the entire iphone ownership. Even if we had been on the front page on 4th October, a ten fold increase would not have made much of a difference.


    So that is the reality for the smallest of developers for an average app. There is a growing black hole at the bottom of the app store for apps that disappear off the radar and are never found because of the sheer number of apps being produced.

    It has not put us off though. My son is already starting on his next app, which is a game and I will put together some more apps using the same source code. It is unlikely to make a fortune but a dozen apps selling a few a day is a reasonable income for someone his age.

     

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    roger (profile), Oct 11th, 2009 @ 4:57am

    some real figures

    Here are some real figures for the smallest of app developers.

    My son is 16 and has been learning to code for a year or more. He is competent in Java so we decided to try out developing an iphone app. I bought him a used macbook on ebay for $500, the sdk license for $99 and a book on iphone programming $30.

    He spent a couple of hours a day over the summer learning objective c and gradually put together the app. I can draw well and have done a lot of graphics work on the computer so my input was to do the design side of the app.

    The app is called

    "how to catch flies"

    We had numerous ideas but chose one with a simple format which he was able to code. It required a series of consecutive pages with text and diagrams, an embedded video, and a counter to record the number of flies caught (along with a reminder to wash your hands).

    We had a mini disaster just as we finished, the hard disk died suddenly losing everything. It was a minor hassle to replace and he was able to recode the whole thing from scratch in less than a day.

    Eventually we submitted it to Apple, it was passed by them first time round. The app was priced at 99 cents and the release date was set to 4th October but there was some problem with details outstanding on the contract which took a further 2 days to sort out. Critically, the release date remained, this meant that by the time it was fully released into the app store in the evening of 6th October it was on page 5 of the new releases.

    So the bit you have all been waiting for are the sales figures.

    6th october 2 sales
    7th October 2 sales
    8th October 0 sales
    9th October 0 sales

    It is NOT a great idea for an app but still it is of some use to anyone who has ever been irritated by a fly and can't bring themselves to kill it which must be more than 4 people out of the entire iphone ownership. Even if we had been on the front page on 4th October, a ten fold increase would not have made much of a difference.


    So that is the reality for the smallest of developers for an average app. There is a growing black hole at the bottom of the app store for apps that disappear off the radar and are never found because of the sheer number of apps being produced.

    It has not put us off though. My son is already starting on his next app, which is a game and I will put together some more apps using the same source code. It is unlikely to make a fortune but a dozen apps selling a few a day is a reasonable income for someone his age.

     

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    digitalmarketingdude (profile), Oct 12th, 2009 @ 7:48am

    Response to Roger

    It's great to hear about a young guy jumping into app development, you should be really proud of him (I'm sure you are!).

    Those numbers, wow they are really disappointing. The apps I've worked with, we spend hundreds of man hours marketing them. Send me a message to digitalmarketingdude@gmail.com, I'll run a few things for your son (for free) and maybe can help him sell a few more units (and give you gusy some marketing tips). Still, once the "new" designation has passed, selling is tough.

    We did sell some apps (since its not my app I'll leave numbers out) and had consistent sales for a couple of weeks, but those fell off after the initial blitz happened. We have numerous Twitter accounts that we've built up over time with a good, actionable audience and received thousands of clicks via our trackable bit.ly URL (that opened up the iTunes store). We also ran multiple videos that we distributed through multiple video sites. We had multiple thousands of views on those. The most traction we got was out of press releases. We spend $18 on one service and were picked up by hundreds of Mac/Apple/iPhone sites and were able to track that our release (only through the site's trackback service) had thousands of views. If your son is on Facebook, he should promote his apps through there also.

     

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    Iain, Oct 28th, 2009 @ 5:37pm

    I disagree with most of the people here, I started off just downloading free apps, but I have come to realise that it is worth the money buying them. I have bought at least 100 apps ranging in price from 59pence (GBP) to £5.99. So round about 99 cents to 10 bucks. Im not rich or anything, but alot of them are really useful. I took philosophy as an extra class in University and downloaded a Plato's complete works app, I love NFL and downloaded Madden, and many many more. Really its the same as buying a game for a gaming console or buying a book, except its usually much cheaper (and in the case of games I admit they tend to be smaller but still really good, so its worth it because of the reduced price).
    As someone said earlier, the days of a blank screen = flashlight are over, you need to make quality apps for people to buy them. No one wants to buy ancient games from the pacman era (pacman excluded), people want new cutting edge things. If your app sucks, no one will buy it.

     

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      Iain, Oct 28th, 2009 @ 5:44pm

      Re:

      Forgot to say, obviously there are thousands of people out there that maybe dont have their own credit card/too young/just too cheap, so they LOVE to complain about the price of apps. And I must say they are more vocal about it than people that actually pay for things. Out of all the apps I have bought I have only felt the need to complain once, not because of the price (the average I paid was probably around 3 bucks for an app) but just because it didnt work. My advice was taken on board and they fixed the problems and made me feel satisfied with the program. All the other apps I bought I have never left a comment nor rated.
      Really though, I cant believe people demand 99 cent apps to be free, its 99 cents. Most people probably spend more than that on a snack every day. And a snack can only be used once, yet you dont demand them for free do you? Stop being so stingy.

       

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        Iain, Oct 28th, 2009 @ 5:48pm

        Re: Re:

        Ah I press send too fast, anyways
        Overall, as someone who buys apps, I can say, that I only spend money on something that catches my eye and seems a worthwhile investment. So like I said before, if your app looks rubbish or is practically useless, then of course you wont make any money from it. And obviously there are very specific apps that are only used by a limited number of people, for example, Oxford university published a Medical Student's handbook, obviously for a very limited amount of people (1. British, 2. Medical students, 3. Iphone/Ipod Touch Users), so these also wont make much money.
        Make something great, and people will take notice.

        Done :D

         

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    roger (profile), Nov 27th, 2009 @ 6:11am

    how to catch flies

    Here is an update for anyone who is interested

    week 1 4 sales
    week 2 2 sales
    week 3 0 sales
    week 4 1 sale
    week 5 0 sales
    week 6 0 sales
    week 7 3 sales

    we thought that once the first few sales disappeared then the app would be lost forever but surprisingly people still seem to find it occasionally and after one positive review there were three sales in a week! The numbers aren't great but the quality of future apps will certainly improve as will our understanding of a target market. If we can build up a small portfolio of apps it should end up as reasonable pocket money for my son.

    The net app is ready to submit, we have taken a different approach including choosing content which is aimed at different target market so it will be interesting to see how thing work out next time.

    We are also making a youtube video to see if that has any impact and are looking at having it translated into other languages. This would mean that we end up at least on the first page once in each country which we missed out on before. At the current sales rates we could end up losing money on the app but I am sure the knowledge gained will be valuable.

     

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    jd (profile), Jun 18th, 2010 @ 11:02am

    new iphone game developer

    Like Rogers son, I too just entered the iphone game market

    (http://itunes.com/app/rollthebonesdicegame).

    I'm using various ways to get the word out (myspace, facebook, review sites, forums etc.)....1st week sales are ok, but i'm hoping for better, it just seems like it is easy too get lost in the sea of apps that are out there. If anyone has any successful ways to promote that has worked for them, I'd love to hear from them.

     

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    iPhone Apps, Jun 23rd, 2010 @ 3:00pm

    Sales are high, but profits are low. As of now, the standard acceptable price for an app is five bucks or less. Still, most are far cheaper and many are completely free. Its just like any other software industry. A few companies get most of the money, and the rest fight over the crumbs.

     

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    iphone repair services, Sep 11th, 2011 @ 6:43pm

    iphone repair

    By 2015 all the website will be on your phone as an app.

     

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