Developer App store pain may be Marketplace gain

The Apple App store launched with much fanfare about developers striking it rich with very little effort – the so called App store millionaires.

Newsweek has now exposed how precarious the situation in the Apple app store has actually become, essential for naive developers who have not done their home work before following the lemming-like App store gold rush, which has attracted more than 125,000 programmers.

Newsweek conducted almost interviews with App store developers, where, far from describing the  App Store is a world of easy opportunity, or a fast track to quitting the rat race, they spoke of  an anxiety-wracked marketplace full of bewildering rules, long odds, and little sense of control over one’s success or failure. "It’s kind of a crapshoot," says one developer.

Not only have most sellers failed to turn a profit, even developers with high-ranking games and applications have made far less than commonly thought. Many come nowhere near recouping their investment at all.

Most apps take at least six months of full-time work and cost between $20,000 and $150,000 to develop.

However over the past 18 months the average price of apps has crashed: now three out of four cost 99 cents or less, according to the tracking firm 148apps.biz.

This is not the route to riches.

"We’re far from calling ourselves ‘app store millionaires.’ " said another developer. He notes that despite his company making $200 000 in revenue, after accounting for costs he earns around $10 per hour. "We made enough to live, but not nearly as much as if we kept our jobs at a regular game company,"

"Speaking as a small developer who’s been releasing Mac software for over a decade, the App Store is broken," Gedeon Maheux, cofounder of the software company Iconfactory, wrote on his blog last month under the headline LOSING RELIGION.

Gizmodo took up the App store problem, noting the concentrated hyper-competitive market caused huge pressure to engage in a race for the bottom, with prices constantly falling.

Developers noted Apple was complicit in this, by ranking applications in terms of number of downloads on its portal:

The ranking by volume (as opposed to revenue) on the App Store seems to drive the prices of apps down. Aside from being featured by Apple, exposure of an app is dependent on its ranking in the top lists, so developers lower prices to obtain a higher ranking.

This is echoed and amplified by the makers of Twitterific, an app that, in a bid to stay competitive, saw its price fall from $10 to $4, despite active development and a growing featureset:

While these changes represent perks for users, it also means that sustaining profitability for a given piece of software in the App Store is nearly impossible unless you have a break-away hit.

Ultimately developers can continue chasing diminishing returns or look elsewhere. Said the Twitterific team:

Myself and others like me will have no choice but to focus our development efforts elsewhere.

For those developers there is one clear alternative, where the host of the store does not actively promote a race to the bottom: Marketplace for Windows Mobile.  We hope to see their applications there.