M-Theory: Flukes, freemium and Flappy Bird: the economics of mobile app development with Christina Moulton Melanie Baker February 21, 2014 Columns, Communitech, Featured, Guest columns, M-Theory I recall hearing recently that before being taken down, Flappy Bird was making $50,000/week – in ad revenue. As I write this, Facebook is planning to buy WhatsApp for $19 billion. However, I’m still going to tell you that developing mobile apps is not the path to fame and fortune. Sorry. Our February Girl Geek Dinner took place at Centre in the Square in the ever-popular and funky Members’ Lounge. We welcomed Christina Moulton, proprietress of Teak Mobile, an indie iOS development shop. Full recap is here. The two key messages that struck me from Christina’s presentation spoke to the fact that the mobile apps industry is still really immature. Christina mentioned multiple times that developers don’t really know what they’re doing. (Which is kind of scary, given the kind of money you’ll shell out to have an app built.) The second theme was how hard it is to balance time and resource allocation, both for indie developers and larger organizations. Both of these tie closely to the theme referenced in the original lede: This is not an easy industry in which to make a living. Honestly, you’d probably do better in Vegas. The main strategy at work in the mobile apps industry (not just iOS) is to throw as much as possible at the wall to see what sticks. Because no one knows what will be a hit. Until something is a hit, and then everyone rushes to copy it until it stops being the cool thing. As a business strategy, this is kind of insane. It gets worse. Developing apps is really, really expensive. Like between the cost of a car and a house expensive (you can check out some numbers in the recap). No one can really afford to put all of their development eggs in one basket with the intention of making something completely amazing. Because if it flops, you have no revenue and nothing else in the pipeline. So the “solution” is lots and lots of free or cheap and often crappy games and apps with limited functionality. If something’s a hit – awesome – now you’ve got some money coming in and you can iterate and add to the game … and charge for those things. (The recap also has a comprehensive explanation of all the different types of “free” and add-on payment options in apps. Even big names like Rovio tend to put out lots of other games – in addition to all the Angry Birds spinoffs and such – because no one can afford to rely on one franchise or rest on their laurels. It’s the same tug-of-war indie developers have between doing app development and business development. You need both, but while you’re focusing on one you can’t do the other. Neglect one and soon the other will suffer. Now, some big firms, or, more likely, huge consumer products conglomerates, are getting into some pretty freaky psych research to assist in their development efforts. Just having people play test games isn’t enough. Now we need to hook them up with electrodes and such to analyze what their brains are doing as they play. What is motivating them? What is frustrating them? What is lighting up their reward centres like Christmas trees? (And what can we charge them extra for or get them to agree to at that point?) Of course, those who have the real money, and thus the luxury of time and more informed decision-making, aren’t using it to develop apps that help people. They’re building more games, time-wasters, and even apps that are nothing more than ad campaigns. Hello, Chipotle Scarecrow … (The spending on that campaign was at Super Bowl levels.) There is no shareholder value in helping people. Now, obviously, little indie shops don’t have access to these kinds of resources, so they’re the ones who tend to play guessing games with their roadmaps, hoping to score that fluke hit. To pay the bills, a lot of these developers also take contracts, build apps for companies, work on research projects and other side efforts. Part of the problem with using guessing as a business strategy is that, like many others, the mobile apps industry is a big bubble and echo chamber. While the average person might read one article about paid apps being dead, those in the industry get to hear little else, perhaps for months. It makes it hard not to be swayed. And then six months later everyone will get tired of that and that idea will be considered dumb. Time to move on. Except… what do we do with all these crappy free apps we built? Interestingly, one of the trends Christina is expecting to grow is that the industry will start to figure out what it’s doing. Folks will get tired of guessing and going broke, so they will start to pay attention, do research and analyze what has worked and what hasn’t. (And those who can will presumably keep hooking volunteers up to scan their brains.) More developers will likely abandon free-for-all markets like gaming for more targeted and niche markets where there is actually money and where people actually expect to pay for things. Professional tools are a great example. People will pay, and well, for great apps that solve their pains and enable them to get their jobs done. Developers will learn more and focus better on enhancing and exploiting the differences among the mobile platforms. While all technically iOS, the iPhone and iPad experiences are very different. As Christina explained, our phones are private. What we see and do on them is mine. But iPads are the opposite. They’re about sharing and collaboration and “Hey, check this out!” All in all, the message came across pretty clearly that if you want to develop apps, you’d better have a diversified plan, or just do it as a hobby. For consumers, if we want better apps, we need to be willing to pay for quality to encourage more of it. And always, always remember that if you’re getting something for “free”, the product being sold is you. M-Theory is a guest column by Melanie Baker, who has a Mennonite background, a career in tech, and enjoys the unlikely ways these things complement each other. She enjoys writing, working with geeks, building communities, baking and creating fanciful beasts out of socks.