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Recap: February Dinner with Christina Moulton

Bit of a smaller crowd this time around – we totally forgot about reading week – but it worked out well. The evening was a hoot and we had more of an opportunity to get to know everyone, sharing hiring and job hunting, events and anecdotes, and generally geek out. We were back at the Centre in the Square‘s Members’ Lounge, which is always a crowd-pleaser, with Little Mushroom Catering providing the noshing.

Christina took the floor to give us a look into the world of mobile app development: the work, the strategy, and the economics with “Why Are All the Apps Free?” It was seriously eye-opening, and there’s way more gambling than I ever expected.

Christina started off telling us a bit about her background and how she fell into iOS development. We always love origin stories, since we find so many unique paths and creative pivots. She started off on a Commodore 64 and an Amiga as a kid, though she did clarify that she wasn’t one of those kids doing the programs from the back of magazines and such.

A few years go by, and she went to UW in Systems Design Engineering, one of the biggest draws being able to do regular co-ops terms right from the get-go. (Yay, not being in a classroom!) She discovered and developed a love of maps and math, which have proven to have rather wide-ranging uses in her career. Christina ended up using her skills and learnin’ to bridge the gap between those specialties, assisting several groups to do better mapping, clean up their data, etc. It should be noted that Christina never really sought out programming, however.

But then graduation came, and all the jobs were in development. And it turns out that it’s easier to train people who understand mapping to do computer science than vice versa. Christina did assorted contracting and moonlighting, including agency work and with UW, and really just kind of fell into iOS development while working with an indie dev. When she realized she was doing way more project management and whatnot than she liked, she decided to go out on her own. At least if she had to do the crappy stuff in addition to the interesting programming, it would be her crappy stuff.

And lo, Teak Mobile was born. These days Christina says she spends about half her time programming. There’s also a significant amount of user experience design, and she noted that a major reason for that was the iOS platform and its requirements and restrictions. She does a bit of UI design as well, i.e. cracking open Photoshop.

Christina noted that she does get to live in a mobile app bubble, where, like in any industry, certain stories, trends, or scandals are vastly amplified. So while you or I might hear a story or two that “Paid apps are dead!” that might be ALL the folks in her sphere are talking about for a while… until that goes away and is deemed a stupid idea six months later. In reality, though, what Christina spends her days doing is helping people in the real world figure out what they need, mobile app-wise.

Ultimately, though, the deep, dark secret of mobile app developers is that they don’t really know what they’re doing, apparently. 🙂 There are so many changes in hardware and development technologies, so much inconsistent research and data about what drives consumers, and so many trends in apps and games. Developers generally just follow the trends, everyone jumping on this or that bandwagon (Angry Birds, Plants vs. Zombies, Flappy Bird, etc…) and hoping it pays off and they don’t get left behind. As we will see, strategizing how many dev resources to dedicate to a project, when and for how long, is a huge crapshoot.

And ultimately, it’s really all just about Apple selling more hardware, since that’s where the money is. The more apps you cram on your phone, the more you’re likely to use it, and the more you’re going to want to upgrade for a better experience with the newer apps. And the cheaper apps are, the more you’re likely to cram. (There were over 1 million apps in the App Store as of last October.)

How apps get developed ranges from some teenage kid hacking together a quickie game and tossing it in the App Store, to big companies with mega bucks doing all kinds of psych research, including attaching electrodes to people to study brain activity whilst they’re playing games. Presumably we’ll be playing games and directing our phones with our brainwaves any day now… Wearable tech separate from your body is so 2013…

So, on to the business of apps.

App development costs span a wide range, from about $10,000 to $100,000+, and they take anywhere from 2 to 6 months to build and ship. A lot depends on what all gets crammed in there. If the app integrates a database, social, in app purchasing, better design, etc., it takes longer and gets pricier. You can expect to pay about $100/h for development in North America.

A dead simple, minimalist app will run about $1-5K. A middle of the road app that works well on one platform will cost about $20-25K. A decent app that works well on all the major platforms will cost about $50-75K, though if you’ve previously built a middle of the road app for one platform, you won’t be able to re-use much of the code. And a best in show app with all the bells, whistles, and integration can cost $400K and up.

Now, there are actually several kinds of free, or, perhaps more accurately, “free” apps. Christina kindly broke them down for us.

Ad supported: content or supplement

E.g. Flappy Bird

These apps can make a shocking amount of money. (Rumour is that before it was pulled, Flappy Bird, which isn’t actually good, just addictive, was making $50K/day.) And keep in mind that typically for these kinds of apps to make money, you have to click on the ads. This seems fairly amazing given that most of us claim to not even see the ads. Cha-ching!

This type of app is actually Android’s biggest revenue stream (and makes more money than the same but paid versions on iOS). Apple doesn’t like to share their data, though, so they don’t necessarily make a good ad platform partner. This leaves developers to work with other add suppliers/platforms, some of whom are more reputable than others.

Christina did remind us that for all those permissions you have to agree with when you download an app, most of them and the data they glean are for the benefit of ad development and targeting. Remember, if you get something for free, YOU are the product being sold.

App is an ad

e.g. Chipotle Scarecrow

These apps are typically part of companies’ marketing campaigns. The example here is from US restaurant chain Chipotle, and is meant to “edutain” people about their ethical and sustainable food practices. It’s pure branding with cute characters. And they’ve also tacked on diabolically useful functionality like being able to order burritos from your phone, repeat a previous order, and skip the restaurant line to pick them up, or something.

Cost estimates for this campaign and app are nearly stratospheric, like SuperBowl-level spending. But digital is where it’s at these days.

Upsell to service or sales leads

E.g. Colin Wright, realtor

In this case the app is tied directly to someone’s business. Colin Wright is a GTA real estate agent, and this app helps house hunters (and, most importantly, potential customers of his) to search listings, calculate mortgage payments, and more. And, of course, contacting Colin directly is just a touch of a button away.

In app purchase

E.g. Plants vs. Zombies 2

Downloads of apps like this are probably free, though there is often a paid option as well. (So you can pay up front, or later…) Apps like this are where those news stories have come from where little kids rack up gazillions of dollars in charges on their parents’ iTunes accounts. Though apparently tweaks have been made to help prevent that now.

This strategy is pure psychology. The reason you pay is to get more, faster. Whether it’s not wanting to wait 12 hours for more lives in Candy Crush, or you need that edge to defeat those zombies at higher levels. You want it, you want it now, so you’re willing to splash out for it. And make no mistake, a buck or two here and there adds up to big money, fast.

There’s a lot of research and experimentation being done in this area to learn our motivations and brains’ reward centre responses. So, yeah, prepare for your favourite cartoon-y game to get even more addictive.

Freemium

E.g. Dropbox

These apps are fairly similar to in app purchase ones, though tend to skew more towards things that are useful as opposed to just fun (like cloud storage vs. games). The product/service starts off free, and then you pay if you need more – more storage space, more features, etc.

These apps are more likely to have a professional focus, either individually or for a team (Dropbox is a good example), and the payment options are more likely to be subscription-based, and possibly tiered. Because of the professional focus, paying can see like much less of a big deal.

Add-on for physical goods or desktop/web software

E.g. Griffin Helo TC

In this case it’s likely that you’ve procured a product of some kind… and now need the app to get the full experience. Please enjoy your remote-controlled helicopter toy… which did not come with a remote control. Good thing you own a smartphone!

This model is common with children’s products, Webkinz cornered the market on this some time ago, selling plush toys that had an enriched add-on web experience. The iPad offers a rich environment for this model as well.

Really free

E.g. Cardiio heart rate monitor

Yes, sometimes apps are free, for reals. They’re not selling your data or tricking you into buying extras. Now, there’s always a reason for them. A few reasons for building free apps that Christina mentioned:

  • hobby (for the developer – something to tinker with, livelihood doesn’t depend on them)
  • portfolio (for the developer – same as for a designer or web developer being able to show projects they’ve worked on)
  • acquisition dreams (app will hit it big, get lots of attention, Facebook will buy them for a gazillion dollars – you’re better off buying lottery tickets…)
  • testing for later monetization (eventually we will charge for this, but we’re still building, testing, and tweaking so it’s free in exchange for us learning from how you use it)
  • social good (just meant to help people, further the work of various organizations).

So, if you’re not Rovio (and even they churn out something like a dozen apps per year), can an indie developer make a living at mobile apps? Yes, but it’s tricky, and many don’t. Fundamentally, you can’t put all your eggs in one basket hoping to have the next big hit on your hands. You need to throw lots and lots of apps out there and hope something sticks.

Developing apps is very expensive in terms of time, money, and other resources. So the higher quality the app is, the more pricey to make (before you ever recoup a cent). As a result, app stores are full of free-to-cheap, fairly simple and crappy games. But hey, if something strikes gold, you can iterate – and charge for it.

The tricky part of building great apps is similar to the challenge of splitting your time, as an indie, building apps and hustling for new business. There’s never enough time for both, and when you’re doing one, you’re not doing the other. You might be busy as hell now, but in a month, when that project ends… there’ll be nothing in the pipeline because you haven’t had time to drum up new business. Same thing happens if you’re focusing on the current app only, with nothing else behind or in front of you if it tanks.

Christina then gave us a breakdown of the economics of several apps she’s made and released. You can check out the specifics in the slides (starting at the real estate flyer maker slide).

Of the three listed, the one with the most downloads had 3462, the lowest had 22. The most lucrative made $85, the lowest $37. (The 3462 download was actually a BlackBerry app, and Christina said she was paid more by BlackBerry to put it in BlackBerry World than she made from actual downloads.) And note that you are sharing your revenues for your apps with whichever platform owns the store they’re in.

Some numbers by platform from Christina’s slide, courtesy of Forbes, as of 2013:

Mobile app platform averages - downloads and revenue
Mobile app platform averages – downloads and revenue

Given those economic realities, how else do indie developers make money? Contracts, making apps for companies or universities, side projects in research. And no, despite what might be assumed, developers don’t necessarily get all kinds of perks, like free phones. Some of the big shops might, but not indies.

And with that we came to the end of Christina’s presentation, which was followed by some continuing Q&A. One question addressed where the trends and market might be going next. Christina thought that market maturity was coming. Companies and developers would figure stuff out, do less guessing. It would become more accepted that audiences are different on many levels, and so developers would become more niche and target better.

Tools intended for professional uses would become more professional grade, especially since people would be willing to pay for them. There’d be more specialization in the iPhone and iPad markets, since development for each is actually quite different. Even beyond screen size and whatnot, psychologically people treat each platform differently. Phones are more private, what we’re doing on them more “mine”, whereas we treat iPads publicly – hey, check this out! – collaborative games, etc.

Christina also figured that wearables would continue to evolve and expand. There’s a lot of that integration potential between physical items and software to work with them. And, conveniently, the pet market has a lot less regulation and red tape, so look for wearable tech for your dog to be a mature market perhaps before wearable tech for you.

And that was our February Dinner! Huge thanks to Christina for a highly enlightening and fairly hilarious talk. 🙂 And also to our fine hosts at Centre in the Square and our caterer, Little Mushroom.

We’ll be announcing our March Dinner very shortly, so stay tuned. And remember we now have a Facebook page as well, so head on over there for announcements, interesting links, and to share your projects, job hunts, and whatever else we can help each other with!

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