Can you build a Big Business on Apple’s App Store?

A good friend refers to the Apple App Store as the California Lottery. So I thought I’d do some rough numbers on how feasible it is to build a big software business creating apps for iPad and iPhone and selling them in Apple’s App Store.

The Apple App Store will still own three quarters of mobile app revenue by the end of 2011. It’s the place to be if you want to develop paid mobile applications.

According to Apple, they had paid out developers $2.5 billion since the creation of the app store until July this year. I’m including this as a sanity check on my numbers below.

According to this article, the combined revenue of all app stores will be $3.8B in 2011, with Apple owning 75% market share. That’s $2.85B total revenue for the app store in 2011 with 30% going to developers so total payout to devs will be approximately $1.995B for 2011 (which roughly gels with the total all time payout number above).

The app store just passed 500,000 approved apps in May 2011. (Edit: fixed a typo. Apps, not developers)

In May of this year:

  • $3.64 was the average price for paid apps.
  • There were 244,720 paid apps.
  • There were 85,569 unique developers.
If those paid apps split Apple’s projected 2011 revenue to developers of $1.995B between them, they each earn $8152.17 per year. There will be more paid apps by the end of 2011 than there were in May, so the same calculation for 2010 revenue to developers gives us: $2.1 total sector revenue X 75% apple’s market share X 70% developer share gives us $1.1025B / 244,720 paid apps = $4505 per app in 2010.
I’ve calculated both 2010 and 2011 revenue per app because the only data I have on total paid apps is from May.
So total revenue per app now is roughly between $4K and $8K per year based on my back of the envelope calculations.
While app store revenue is increasing, so is the number of developers in the app store, exponentially:
Lets say you create a startup producing Apple App Store apps. You manage to completely dominate the app store in 2011 and capture 1% of the total 2011 app store revenue of around $2 billion that Apple will pay out to developers.  That’s $20 million in annual revenue. Remember, you’ve just owned 85,560 other unique developers and a quarter million other paid apps, which is not impossible.
To put this in perspective, here is the 2010 annual revenue from a collection of well known software companies, leaving out the eye watering revenue from companies like Oracle, Microsoft, Apple, Google and the like.

Food for thought.

PlatformFu for Hackers and Startups

Being over 35 has it’s advantages. Us old(ish) timers have lived through Microsoft using their platform to beat the hell out of Novell, Netscape, Real Player and others. Watched Eric Schmidt’s ascension from platform victim to platform player. And learned that platforms are honey traps that give good honey but you might get caught.

Twitter Investor Fred Wilson wrote a much talked about post earlier this week that sparked a discussion about whether Twitter would implement critical apps themselves. Seesmic founder Loic issued a stark warning to Twitter developers today. Apple continues to bar Adobe’s Flash platform from Apple’s iPhone platform and Adobe evangelist Lee Brimelow pulls no punches in his “Apple slaps developers in the face” post today.

Ten years ago a developer was faced with a much scarier platform landscape. You either build on Microsoft’s monopoly operating system and risk them implementing your app themselves, or stop being a desktop developer. Web Applications were really Web Sites, web platforms didn’t exist and mobile platforms were completely proprietary.

These days playing with platforms is a little easier because you have a range of platforms and integration methods to choose from. You can build a Facebook app that runs inside Facebook or integrate via FB Connect. You can choose to build on Twitter instead. And if you like you can integrate both to hedge your bets and add social features of your own on a completely external website. If you’re building a mobile app you have Droid and the iPhone to choose from and if both suck, well both platforms have a web browser so a lightweight web interface is an option too. Even in the desktop OS arena if Microsoft rubs you the wrong way there’s always the smaller but more spendy Apple market to go after.

When formulating your platform strategy it’s important to put yourself in the providers shoes and think about the following:

  1. Are they wildly profitable or is it possible they might go out of business or radically redefine their business?
  2. Have they figured out their business model yet or might your app become their model?
  3. Is their API locked down and unlikely to change or is it evolving as they figure out what business they’re in and how much of their revenue they want to give away via their API?
  4. Are they waging a strategic war with anyone that may affect your business and your app?
  5. Does any part of your own business compete with any part of their business? How about in future?

Being first to market on a new platform has it’s advantages. My former colleagues at UrbanSpoon got their iPhone app in an Apple ad because they were early adopters of the platform. Smart move – and smarter given that they weren’t betting the farm on the platform. But early adopters of the Facebook platform saw revenues and traffic change as Facebook evolved the platform early on.

So when building your app, first carefully assess the state of the platform and then decide how and at what level you want to engage it.

Spooky fun with ssh on OS X

Want to freak out your wife/husband/kids?

On a mac that you have access to:

Go to ‘System Preferences’. Under ‘Internet & Networking’ there is a ‘Sharing’ icon. Run that. In the list that appears, check the ‘Remote Login’ option.

Then ssh into your mac remotely by downloading putty if you’re on a pc or launch a terminal on another mac and run “ssh username@ip.address” without quotes to ssh to the mac while someone is working on it.

Once you’re logged in:

Crank up the volume by running:
sudo osascript -e "set volume 10"

Then run:

sudo osascript -e 'say "I am watching you." using "Zarvox"

Or if that doesn’t work, try:

sudo osascript -e 'say "I am watching you." using "Cellos"'

Make sure you have an automatic emergency defibrillator handy.

Remove GoBoingo to fix MacBook WiFi pauses, stutters, hiccups, latency, delays

I recently upgraded our router to the Linksys WRT320N router. I set the router to only transmit on 5GHz and the performance has been awesome because all our neighbors are still on 2.4 GHz, our 2.4 GHz cordless phones don’t interfere with our WiFi anymore and because 5GHz is better at getting around corners and going through walls.

Awesome… except on my personal MacBook.

Earlier today  I was on a 3.5 hour skype call (!!!) and every few minutes I’d get a 1 second delay before the other side’s conversation continued. They told me the same would happen with my voice. I also use SSH on my MacBook which requires a real-time response from the server. Every minute or so I’d notice a 1 to 3 second pause in my internet connection. The WiFi didn’t drop, it just paused as if it was busy doing something, and then continued as normal.

If you’re browsing or streaming something that pause probably won’t affect you because browsing usually has a second or two delay while DNS lookups occur etc, and streaming isn’t affected because it usually has a few seconds of content buffered. But with Skype and SSH it’s a real pain in the ass.

After tweaking the hell out of my router’s settings including Beacon Interval, RTS Threshold etc. and trying to disable things like Interference Robustness on my MacBook I finally found the culprit.

A little piece of software called GoBoingo was causing the problem. I launched Activity Monitor (under Applications / Utilities ) and stopped the GoBoingo process and voila! No more hiccups every 1 minute.

I’ve seen a few reports of other background MacBook apps that monitor your WiFi that cause this exact problem. So if you’re getting stutter, hiccups, pauses, latency or delays every minute or so, kill these apps and check if that’s fixed your connection quality.

Smashed iPhone

Update: According to my live traffic feed, busted iphones are hip. My bro posted this to reddit.

Update2: @chrisrodde Just reminded me that this will be my third iPhone – I drowned the last one on a fishing trip with him.

Update3: Just visited AT&T. The conversation went like this:

AT&T guy: Um yeah, so lets see if we can do anything for you here today.

Me: Great! So maybe I can get a discount on a 16G iPhone? [Thinking I can pay less than the $199 replacement cost]

AT&T guy: Um no I don’t think so. You’ve only had the phone for 7 months.

AT&T guy: So that’ll be $299 for the new phone.

Me: Um. WHAT? The phone only costs $199 to buy! On Apple’s site they’re advertising it for $199.

AT&T guy: Well you can go to Apple and try.

Me: What does that mean?

AT&T: Well Apple might sell you an iPhone that’s $199 but if they know it’s a replacement with no upgrade then they’ll probably charge you $299.

Realizing that this guy was just part of the corporate meat grinder and really didn’t know WTF he was talking about I called Apple and they’re going to sell me a replacement handset for $199. Looks like AT&T need to realize that they’re just providing the pipe and don’t have a monopoly on handsets on their network anymore.

Original smashed iPhone post:

In one last selfless act of recursion my smashed iphone has taken a picture of itself taking a picture of itself taking a picture of itself…  for your enjoyment:

I’m off to the Apple store to buy a new one this morning. So:

  • Get a cover for your iphone because if you drop it so it pancakes screen down on the ground, it’ll smash
  • The screen is real glass and smashes like real glass
  • It also cuts and splinters into your finger like real glass. I’ve pulled two splinters from my index finger already checking my email.

Why those Microsoft ads make Steve so happy

This is an internal video of Steve Jobs at NeXT in 1991. Skip to about 4:30 in the video:

Those MS ads you’ve been seeing recently that keep mentioning Apple are exactly what Steve Jobs wanted with NeXT – that every customer of the market leader also considered his product. And Microsoft just made that happen for Apple.

Congratulations Steve! Now that your competition has leveled the marketing playing field for you, all you need to do is keep building a better product.

Thanks to VentureHacks for this tweet that pointed me to this video.

Apple Basic emulator in Javascript

I started programming on an Apple IIe at around age 11 and if you too enjoy reminiscing, check out Joshua Bell’s Apple Basic emulator implemented in Javascript.

Since my move (back) to using Apple I think my code has improved – if nothing else then from a feeling of happy nostalgia.

…And I couldn’t help myself. I wrote a similar program as a kid – except back then we had a green monochrome screen.

20 W = 279 : H = 159
25 C = 1
30 FOR I = 0 TO 1 STEP 0.005
40 HCOLOR= C / 10
45 C = C + 1
46 IF C > 160 THEN C = 1
50 HPLOT W / 2,H TO W * I,0