Is The Gold Rush Over?

David Barnard of App Cubby recently wrote about Sparrow’s problem:

The age of selling software to users at a fixed, one-time price is coming to an end. It’s just not sustainable at the absurdly low prices users have come to expect. Sure, independent developers may scrap it out one app at a time, and some may even do quite well and be the exception to the rule. The gold rush is well and truly over.

David has a horse (or 6) in this race. Is the gold rush of iOS development over? The question that needs exploration is how a developer can build a sustainable product.

The problem with building one-time sales software is that a small percentage of apps will get an initial launch boom, but then the sales will most likely trail off over time. A very small percentage of that already small group will ever reach a status like Instapaper where they park themselves on the top charts for years on end to continue driving sales.

Developers have the option then of spending some of their profits on marketing their app (Disclosure: I own and run The Syndicate, a blog sponsorship network that often promotes apps). This model is capable of paying off in bursts, but the question still remains of how developers can continue to earn a sustainable revenue, especially when Apple shows no interest in allowing for app upgrades.

If I was building an app today, and looking to turn it into long-term sustainable income, I’d look for the recurring revenue model, using in-app purchases. Find an idea that lets you scale from Freemium to hook users and then convert them to paying over time. The issue is that often this limits the quality of the app for free users.

The other option is to build an app that earns a decent income, but use it as a platform for people to get to know you. Marco Arment, founder of Instapaper was smart to do this – he’s diversified his income stream by blogging and podcasting. Provide a unique perspective to people. Become a speaker, podcaster, writer, coach, or whatever else your strengths would lend themselves to.

It’s easier than ever to build an app, but the world doesn’t need 20 other list apps and weather apps. It’ll be tough to build a sustainable business on dime a dozen apps.

The “gold rush” still exists in terms of the size of the iOS audience and ease of sale, but the strategy for making money needs to start to evolve – we’re 4 years into the app store, and the old way of doing things isn’t going to lead to sustainable businesses as often.

July 24, 2012