When applications earn and how they die
The gold rush never ended, and certainly not in 19th century. Since those days, it is just not about mining anymore, it is a state of mind. Good ideas, great opportunities, and even greater expectations to get rich. Nowadays, we are seeing an app rush, with thousands being uploaded to the markets every day, and millions more waiting to be published.
But even though many individuals have made fortunes on apps, sometimes almost “overnight,” can you really expect that ? While developers and entrepreneurs keep their finger crossed, we decided to investigate our database to give you a precise overview of what the distribution of income looks like over time.
App life cycle
To do so, we examined almost 400k apps, and the results turned out to be quite interesting. First of all, mobile applications, as with every product (but it seems no one wants to talk about it), have their own life cycle. The life cycle of a product is a sequence of stages and changes in marketing situation, usually measured by sales.
Before we move on to the numbers, it is important to notice that all figures relate to the Android market, and that we talk about certain kinds of apps (mostly informative and problem-solving) excluding, for example, games, very advanced logic, etc.
And one more thing, the numbers we will present show a percentage of total income, not mixed with revenue. So in order to note high profits, consider your costs. Usually, you can choose between hiring a company to code your app from the beginning or code it by yourself (which takes time), or you can use a DIY app builder, where costs are relatively lower.
When to expect first money
The average life cycle lasts for 175 days, which is nearly six months, but out of that, only 124 are really active. Active means the time when the app is monetising. We count this time from the beginning (regardless of sales) until the first month when the app is making less than 4% of its overall income. Why don’t we use standard business expressions? Let’s take a closer look.
The first stage of the product cycle is called development. It is the time when the product goes onto the market and tries to get attention. At that time, costs are usually high and sales are low, but there is almost no competition. The second stage is growth, when sales are rising, and the company starts to make a profit. However, we have noticed that in the mobile market there is no clear distinction between those two, they almost always merge. In general, the first month accounted for 16.79% of total income, which meant quite rapid growth, especially compared to other markets. Although these numbers sound very tempting, there is more than meets the eye, so we will come back to this in a minute.
How long does the winning streak last?
Next stage is maturity, the time when market share and sales are the biggest, giving a high return on investment. Our research shows that this stage lasts for around 70 to 90 days. Each month gives, on average, the following results 31.81%, 25.86% and 18.67% of total income. It means that after the first four months, apps generate 93.13% of what they are going to earn entirely.
Knowing this, it is not hard to predict what the stage of decline looks like. It is a huge and rapid fall, on average up to 4% of revenue. Decline in popularity is even 3% higher than growth at the very beginning. The research also shows that the more rapid the growth in the beginning, the shorter the life cycle is, and the more dramatic the potential decline.
Although the app market is very dynamic, we haven’t noticed a single app that would rise after such a decline without a solid update. This results due to the rapidly growing competition and frequently appearing updates larger companies, e.g., producer of popular messenger decides to expand to make their product for all tablets.
First of all, be aware that although markets and technology changes, business rules only vary. They just adapt to specific situations. It is important to keep in mind that e-commerce people tend to reinvent the wheel, making the same mistakes along the way.
Second, think about this while forecasting revenue. It is one of the hardest parts of any business plan and a big issue when negotiating with venture capitals. It is unlikely that your app will follow this exact cycle, as it is just statistics, but it gives a big picture view of how the market works. And this leads us to the final thought.
All of us, who see their future in the making of applications, are prepared or at least expect rapid growth, but keep in mind that sometimes it works like a bubble. Therefore, take some time to work on a “worst case scenario.” Make it and then let it rust in the locker under the desk, like in Jay Z’s song, “Hoping for the best but expecting the worst.”