In a recent article on Fool.com, there was an interesting assessment of iPhone Apps business model. From Apple’s recent announcement of handing over 1Billion to Apps Developers, approximately 225,000 apps developers may get cumulative $1.4B making about 6.3K per app. With the average development cost anywhere between 15K to 35K+additional maintenance+infrastructure, the break-even point would be from 3-10years for an average app.
However, IMO the article does not cover few aspects:
1. Many of the Apps are developed with lower costs and may be by a part-time development. Such app’d developers did not have any opportunity earlier to earn any money from their creativity.
2. There will be a big push towards mobile ads and that needs to be counted.
3. Few apps may have transaction model and may get commission from partners.
4. (2) and (3) is about a long tail for revenue generation.
4. The Article expects a linear scale but it reality if iPhone usage explodes exponentially then there is a huge potential.
5. The law of average does not validate the model. The Apps are either successful or they attract very low traction. In such case, the successful apps break-even quickly and others never. hence this average break-even formula does not make sense.