The Mobile App Economy is in full swing, but does it mark a new chapter in our history? Or can we learn from history to make sure everyone in this new ecosystem —particularly the independent app developer —benefits and prospers? Mike Anderson draws startling comparisons between the current app frenzy and the California Gold Rush of 1848 to provide developers some solid business advice.
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A lot of people like to say that there’s a ‘gold rush’ mood in the Apps industry at the moment. Hell, I’ve probably said it myself. It’s something of a cliché, and like most clichés, you use it unthinkingly. But I’ve been thinking about it, and I’ve come to realize that the description is far more apt than most people in the apps space realize. Indeed, exploring the comparisons tells us a lot about where our industry is headed.
Here’s why the metaphor works so well. Firstly, there’s money to be made. Lots of money. Analysts at Canalys estimate that revenue from app stores will top $36 billion in 2015. Similarly, analysts at In-Stat recently put out a market alert that mobile app download revenues would likely surpass $29 billion in 2015.
So much for the gold. What about the rush? Well, there are a lot of app developers, but no definite numbers. (I’ve seen guesses that range from 40,000 to 100,000 worldwide.) One thing for sure: the number of developers getting in on the action is increasing at a rapid rate. And, of course, developers aren’t the only ones getting in on the gold rush. Advertisers, agencies, app stores, technology vendors and brands are also panning in the mobile valley. Despite there being a finite amount of gold —with most ‘prospectors’ only getting to see a few kernels— there is no end to the flood of independent developers setting their sights on the day they ‘strike it rich.’ Or, in other words, the day they replicate the success of Angry Birds, make their millions and retire.
Reality bytes
In the California Gold Rush, which started in 1848, billions of dollars worth of gold was recovered (in today’s money), but only a handful of individual miners (the bedroom/garage coders of the app development world) made a substantial profit.
A slew of recent studies/developer polls show that individual developers aren’t making much for their time during the current app gold rush either. The Vision Mobile Developer Economics 2011 paper found that roughly a third of respondents made less than $1,000 per app (meaning they made a loss) and, more crushingly, that “there are five times more developers who are dissatisfied with their mobile application revenues than there are satisfied developers.” If you’re not convinced by the polls, then you might also want to check out this analysis (via GigaOM). It statistically demonstrates that ‘publishers’ are making only $8,500 a year on average for their App Store efforts. It seems like an untenable situation for the individual miner – and in most cases it is, but the dream of striking that Angry Birds seam keeps ‘em digging.
Let’s look for a moment at what’s holding the individual App developer back during this Gold Rush period. The most obvious factor is their singularity, or oneness. Individual developers only harness their own earning power; successful business people understand that real success results from harnessing the talents (earning power) of many individuals.
Individual developers also tend to be extremely time-poor, which comes with a number of disadvantages. First, they don’t have the capacity to take on the kind of app projects —often on behalf of big brands— which garner the best rewards. Such projects require fast cross-platform development (building an app for both iOS and Android mobile platforms). Most individual developers cannot resource these, even if they’re able to stay up to speed with multiple programming languages.
Another issue for the bedroom/garage guys arises during the post-build phase. Put simply, most developers lack the necessary marketing skills or contacts to make sure their apps are discovered. Instead, they publish their apps to the app stores, cross their fingers and hope their hard work finds a large enough audience.
So what can developers do to level the playing field? The answer is simple: band together and work together, just as many of the prospectors who flocked to California for the Gold Rush learned to do.
A new model for app development
When I set up the Chelsea Apps Factory in March last year, I knew the developer business model was broken and that I would have to innovate to improve on it. Once I had found my developer match—my expertise comes from 20 years of managing and marketing newspapers, and not from software development—I could pursue this ambition. My partner, Melville Carrie—a fellow Scot with 15 years of development experience, including an extremely fruitful stint commercializing Cortexica’s visual recognition tech for consumer mobile apps—and I started by visiting a number of friendly app development houses. During this time we quickly realized that our ideas and approach was unique. There was nothing like what we wanted to do out there. We would be the first. Naturally, that was terrifying and exciting in equal measure.
We set down to the task of bringing together a community of developers, marketers and investors under one roof, with the contribution of each helping to generate an app-centric creative atmosphere for all. Developers were welcome to be a part of this virtuous circle and could take space in the factory (for as little or as long as they wanted) to work on their own projects or on ours. There would be an emphasis on consultancy as a service in its own right (rather than as a form of lead generation).
Finally, this consultancy would offer advice that included perspectives from the whole community. Ideas would be paired with developers, and developers with fully formed apps paired with marketers. Eventually the community would develop a character synonymous with quality and innovation and the apps would develop their own kind of momentum. We described what we wanted to do by comparing it to the Industrial Revolution – we would take apps development out of the garage and into the factory.
Next phase
Have we been able to realize our vision? The answer is: most of it. We opened our doors in a renovated schoolhouse by the Old Gas Works in Chelsea. Since then we have rented out space to individual developers and small teams and given them contract work when we’ve had to upscale projects quickly and accurately for our clients. Our track record speaks volumes. We have helped developers make their great ideas a reality; we have assisted developers with marketing to generate publicity for their apps; and we have brought developers together with investors (and, in a small way, we have become technology investors in our own right). At this point we are confident that a stage-2 app development model has potential.
Returning to our Gold Rush metaphor, we see important parallels that hold true when it comes to the future of app development. I would be remiss if I didn’t mention that the merchants —the ones who sold the equipment (Levi Strauss denim work clothes, shovels, provisions) made far more money than miners. What does that tell us? Simple: we can’t call the losers but we can be sure the companies that control what we need to do our job (platforms, tools, licenses) and distribution we need to reach customers (handsets, app stores, search services) —that is, Google, Apple and Amazon—will be among the winners.
About Mike:
Mike Anderson, CEO of Chelsea Apps Factory, made his name in the newspaper publishing industry, where he rose to become managing editor of the Evening Standard, and went on to helm the Metro (he was on the launch team), the News of the World, and The Sun (where he was instrumental in the launch of the paper’s online bingo game). It was in the latter position that he became seriously interested in the potential of mobile technology. Chelsea Apps Factory, his first, personally funded, venture outside of the corporate environment, opened its doors in March 2010 and already has a number of blue chip clients, including Vodafone, Telegraph, RBS and CNBC. His work in the space has been profiled in New Media Age and Business XL. His ambition is to bring about an industrial revolution in apps by recruiting senior executives from commerce and blending them with world class technologists. The Factory is in a schoolhouse by the Old Gas Works in Chelsea; it is a point of pride for Mike that his doors are always open to businesses and brands who simply want to come down and talk about apps over a cup of tea.