Should You Build an iPhone App? The Data Speaks.

Shoud You Build An iPhone App. Image

I am a heavy iPhone 3GS user with 64 installed applications, most free and some paid.  I’m repeatedly asked a simple questions by friends, media executives, and entrepreneurs – Should I build an iPhone (Android, Palm, Blackberry, etc.) application?  I will use this post to explore that concept.

There is a process to think about when answering this question.  Let’s first review the relevant data:

• Gartner recently reported total annual worldwide smartphone sales of 286.1 million (Nokia — 47%, Blackberry — 17%, and iPhone –3%)

Other specific iPhone App store data as of 8/31/2009 (thanks to 148Apps) :

• Total applications available in the iPhone App Store — 72,272
• 18 % of the total applications are Games
• In August 2009 — 7,133 apps were submitted to Apple for approval (230/day)
• Over the past 30 days it took an average of 9 days (max of 28 days) for Apple to approve (and make live) new applications in the App Store.  This is down from a max of 163 days in March 2009.
• Average App price — $2.49
• Average Game price — $1.40
• 23% of available Apps — FREE
• 45% of available Apps — $0.99
• 12% of available Apps — $1.99
• 6% of available Apps — $2.99
• 2% of available Apps — $3.99
• 3.5% of available Apps — $4.99, and then it goes on to splitting hairs.
• FREE may not be the majority based upon App availability, yet FREE is the majority from a unit download perspective.  The figure I am told is that for every paid App downloaded there are 15 FREE ones downloaded.
• The most popular categories of Apps are Games (18%,) Entertainment (14%,) Books (13%,) Travel (7%,) and Utilities (7%.)  See the full list of categories.

A few takeaways from the data:

• The iPhone/iTouch platform is in hockey stick growth mode and that is likely to continue for some time.
• The list of available iPhone Apps is also in hockey stick growth mode with price points getting lower and significant FREE options increasing.
• Similar to the issues carriers have marketing mobile applications, App publishers will need to rely more on their own (potentially expensive) marketing efforts to drive App adoption.
• iPhone App store adoption is primarily from consumers and not businesses — spur-of-the-moment, low cost decision making.
• With lots of FREE Apps and feature overlap, successful App publishers will need to deliver great products, leverage brands, and provide unique mobile value.

Suggestions:

1. Think Carefully About Your Objectives.  Is this to generate revenue, extend a brand/product, capitalize on a marketing vehicle, etc.  Make sure you are strategic here as your total cost of ownership (TCO) is not just the upfront development costs.
2. Determine Your Apps “Secret Sauce” — The Unique and Compelling Reason Folks will Use it on the Road.  This is critical – having a brand and re-purposing web content is not compelling enough as you may end up frustrating your customers with a sub-par yawn of a mobile experience.
3. Work Through a Business and Financial Plan with a Full P&L.  Do your homework, identify the target customer, determine your competitive positioning, pricing strategy, cost structure for initial development and ongoing maintenance, acquisition/retention marketing, etc. You don’t need to be a statistics genius to figure out that with pricing pressure forced downward, financially successful Apps will need lots of paying customers.  You should be able to figure out a break-even point and your ROI.
4. Don’t Rely on the “If I Build it They Will Come” — Plan for Ongoing Resources and a Time Commitment.  Once you initially launch the product you will likely need ongoing skilled financial, product, mobile development, acquisition, and retention folks to build the business.  The story of a single developer making millions on his self-developed iPhone App is not the norm.
5. Find Ways to Get Your Product Out There, Fast.  If you have a compelling and unique mobile concept and limited funds don’t let that discourage you.  Get resourceful, commit the time, and learn how to tolerate less sleep.  If you put your mind to it, there are always ways for true entrepreneurs to get ahead without having deep pockets.  For example, a company called Swebapps created MobileRoadie, a self-service, template-based iPhone application development platform that allows non-technical users to build iPhone Apps within an hour.  The cost ranges from $200-$400 and a $25-$30/mo. hosting fee.  That is much better than the typical $10-20k cost others App developers charge to build then an iPhone App.
6. Build and Launch an Exceptionally Great Product. Whether you are a big media company or a single developer with a novel idea for an iPhone App, make sure what you put out works well and is of very good quality.  Many folks (including myself) are motivated to get web-based products launched in advance of being perfect.  Reason being, product development on the web happens when it is live.  Consumers are tolerant of “beta” versions, bugs, etc. and recognize improvements come over time.  Much better to get out fast and receive feedback from live users rather than the same team of internal developers and QA experts.  This is not completely the case with iPhone Apps, especially if you are going to get featured or marketed by Apple.  Mobile users are much more sensitive to buggy Apps on their iPhones — duh, it’s their phone and they need it to work ALL the time.  Net net – make sure what you launch is fully tested and works great.  If so, you will get great reviews/exposure and, with that, comes the viral growth effect.