As in years past, WIP supported Vision Mobile and BlueVia’s research into the economics of the mobile developer space, resulting in the Developer Economics 2012 report. The research encompasses probably the most comprehensive survey of mobile developers, and as such, generates a lot of interesting data in many key areas. As we did last year, our team has undertaken an in-depth analysis of the report to highlight key points in the data and the conclusions, and to offer our own interpretations of them.
Key findings, per the report’s authors
Vision Mobile highlighted the following key findings from the report:
1. Consolidation among platforms and devices
Survival of the fittest among platforms, with developers consolidating on Android and iOS, while abandoning BlackBerry, BREW and Bada.
The mainstreaming of tablets for developers, with more than half of those surveyed targeting the devices, up from a third last year.
Mobile web moving from hype to reality – even if this shift doesn’t result in more usage, thanks to its many challenges.
Facebook as the new web and becoming a “platform of platforms”
Windows Phone as “the new cool”, attracting developer interest that far outweighs actual sales.
User reach has become the key point for developers to choose which platforms to work on.
2. Developer revenues and costs
A third of apps earn less than $500 per month, with the average per-app revenue reported to be between $1,200 and $3,900.
BlackBerry has the highest average per app revenue, at $3,900 per month.
iOS apps are the most expensive to develop, at an average of $27,000 per app.
Graphic design now accounts for 25% of development budgets, with maintenance and marketing taking 10% each.
3. Distribution and marketing
Operators are seen as a primary distribution channel by just 3% of developers.
Discovery remains a major pain point for developers, while user engagement and targeting are big challenges.
Developers struggle to find the right revenue model for their apps.
Tracking bugs and errors is the biggest post-launch headache for developers.
4. Global app demand
Demand from BRIC countries for localized apps will stimulate demand for “the next 10 million apps”.
There is currently a lack of support for the most widely spoken languages in the world among apps.
North America and Europe remain the biggest target markets for developers worldwide.
Many of these match the understanding and experience of the WIP team, but there are a few that seem to contradict (such as the popularity of Windows Phone, despite its small user reach), while there are some deeper conclusions and insights that can be drawn from the data. Our interpretations and key insights appear below.
It is no surprise to see developers consolidate their platform choices, as cross-platform development remains a sink for time and resources. Furthermore, it’s little surprise to see the platforms that remain standing are Android and iOS. But the report says that developers use an average of 2.7 platforms; how do they choose that third platform? And for the predominantly Android and iOS-based developers, how do they choose other platforms? What can we extrapolate from this for developer decision-making as a whole?
Let’s begin by getting an idea of the platforms developers are using, and which they are abandoning. Just over three-fourths of developers surveyed are using Android, with iOS following at about two-thirds. The mobile web is next, at 53%, followed by Windows Phone at 37%. Java ME, BlackBerry and Symbian follow.
In terms of abandonment, there are few surprises either. 60% of developers using BREW plan to abandon it this year, as do 52% of Symbian developers, half of webOS and Bada developers. Perhaps the only “surprise” there is that 41% of BlackBerry developers plan to leave the platform, but given RIM’s slowing sales and the delays in getting the BB10 platform to market, it’s not wholly unexpected.
Vision Mobile contends user reach is the key driver of these figures, based on the results of its survey questions around developers’ platform selection criteria (see below). But that does not explain the relatively high placement of Windows Phone in the mindshare data, where it ranks above BlackBerry and Symbian, which still dwarf its installed user base. BlackBerry and Symbian also feature prominently in the platform abandonment chart; such high figures here would see developers abandoning those platforms at rates that are likely rising more quickly than user abandonment.
There are a few explanations here. First, not all users are created equal. As we will see later, developers’ geographic focus remains largely on Western Europe and the United States, while platforms such as Symbian, and to some extent, BlackBerry, see the bulk of their users in other regions. In addition to falling outside many developers’ thinking, users in these regions can also be more difficult to monetize.
But the bigger issue is that developers’ perception of user base size and growth plays a bigger part in their decision than the reality of the user base. Geography, as mentioned above, plays a role here, but so does press, PR and buzz – the constant stream of bad news from BlackBerry, and the way the Symbian transition has been handled by Nokia, sucked the life out of those platforms, in terms of developer perception.
As we move further down the list of developers’ platform selection criteria, we see further issues of perception clouding out reality. Low-cost development is the second-highest factor, but it could be argued that the cost of iOS development – mainly investing in Mac hardware – hasn’t been an obstacle to its uptake. A familiar development environment is cited as the next most important criteria, but again, the proprietary iOS environment hasn’t gotten in the way of success.
Next is revenue potential, which also doesn’t jibe with per-platform revenue figures (which we’ll examine more below). BlackBerry leads this metric, even surpassing iOS; Android is about a third lower, with Windows Phone trailing far behind.
The selection criteria can also be compared to the measured developer sentiment for each platform, shown on the left. Again, these don’t particularly match up, but the sentiment chart does give us some more insight into the characteristics of the popular platforms. Again, perception plays a role here: as with any survey, the criteria developers say they consider may be different from those they do actually consider.
We spent some time in our analysis of last year’s Developer Economics report discussing the success of various platforms at managing developer expectations, based on developers’ judgment of revenue levels they received, and on that metric, they ranked like this:
This maps very closely to the top five platforms in terms of mindshare in this year’s report (data on developer expectations was not included in the 2012 edition), further illustrating the importance of expectation management and perception in developer decision making. We propose a developer platform decision model that’s based around this, with three pillars:
Perceived ease of development: How difficult does it appear to be to get started? What startup costs are involved? Is it easy to code and prototype? Is there adequate support, both from the provider and in the community?
Perceived reach: How big does the user base appear to be? How big do the brands behind it appear? What is their perceived trajectory? Are they prominent in the major developer markets?
Perceived return: Relative to the above, what do developers expect to get back from investing in the platform, whether it’s tangible or intangible? It could be revenues, street cred and visibility in the community, the chance to learn new transferable skills or create reusable code, and so on.
This model is really a weighted one, where strength in one area can make up for weakness in another (for example, the monetization difficulties of Android are compensated for by ease of development and high user reach. But a fundamental point is that the pillars are based on perception and expectation management. Even when, for instance, a platform has a high user base, if this doesn’t match to developer perception, it is not much of an asset.
Windows Mobile provides a good model to follow here, where it’s relied on marketing to create a highly positive perception among developers, a perception that really outstrips the reality of its situation. Similarly, the negative perception of BlackBerry among developers undercuts its actual strength.
Revenues and Costs Vary Widely
When looking at the revenues generated and development costs broken down by platform, there’s a wide variance in the figures; in addition, the different revenue models chosen by developers vary significantly from platform to platform.
We mentioned above that BlackBerry leads in terms of average revenue per platform (see below); it’s followed pretty closely by iOS, then there is a significant drop-off to Android, with Windows Phone bringing up the rear. What makes BlackBerry come out on top are the number of apps on the platform earning over $10,000 per month – some 10%.
What further helps BlackBerry is its low cost of development, the lowest of the four major platforms listed above, giving it the quickest average time to break even, followed by iOS, Android then Windows Phone. BlackBerry also has the fastest average development time, with almost half of the apps on it developed in less than one month. (There are a few possible reasons why BlackBerry development costs come in so low, beyond free tools and no specific hardware that’s needed: at this point, the only developers left could be the experts, who can work more quickly, or the apps that are being built aren’t as complex as those on other platforms and require less time.)
The separate cost and revenue figures by platform are worth considering. While they are averages, they are fairly low. Another data point Vision Mobile collects is the number of developers who are interested in making money, but are currently earning less than $500 per month on each platform, and the figures are pretty staggering, from about 75% for Windows Phone to 40% on iOS. While the opportunity to make a lot of money exists – Vision Mobile reports some per-app revenues of over $100,000 per month – the vast majority of developers aren’t making much, and those who do have scale behind them, either in terms of huge user bases or a large number of apps.
These figures help explain the first question asked by many developers of any new tool, API or resource: “how much does it cost?” The takeaway for resource providers should be that a mass-market developer product or service would need to carry a very low cost, while those dependent on higher costs should be targeted solely at the relatively small number of developers and companies that are really making significant money. This sounds like an obvious point, but it goes against much of the “all developers are created equal” marketing that exists today.
But overall, the issue of low average revenues leads well into the next section: data on developers’ ongoing problems.
Developer Problems: The Song Remains the Same
What’s the biggest problem developers say they face? Not making enough money. It should be little surprise, then, that developers cite a number of marketing issues as major problems for their apps post-launch. User engagement is most widely cited problem, with 39% of developers naming it, followed closely behind by user targeting. These, along with a number of other issues, are somewhat laid at the feet of app stores, which the report blames for hiding user data, offering little guidance on pricing, few promotional possibilities and a number of other faults.
This blame is slightly debatable. App stores’ primary role is distribution, not marketing or promotion. But it does highlight that developers are still searching for easier, better and more effective solutions to help them with marketing their applications. Last year’s Developer Economics report indicated that developers were willing to pay for marketing support for their apps, based on a growing understanding that creating awareness of their apps was crucial. That need remains, but developers are discovering that keeping users engaged is also a major challenge.
While this year’s report doesn’t contain data on whether (or how much) developers are willing to pay for help in this area, it does indicate developers’ general lack of satisfaction with how app stores support them here. The notable exception here is operator portals, which received an above-average rating for their promotional options, the only type of app store to do so (they also rated highly for their reach into regional markets).
This is likely to encourage those seeking to build up operator portals and app stores, but these outlets continue to be less and less relevant for developers, with just 3% using them. Trying to get a significant uptick in this model will remain an uphill battle. But what it should indicate is the ability for the operator to help on many of these issues, regardless of the store through which the app is finally delivered. Furthermore, the shift away from paid downloads to revenue models that use in-app purchases supports this, since the operator doesn’t need to deliver a download to see any revenues (assuming they can get in on the in-app purchase payments). So instead of trying to boost app stores that developers don’t use, it would behoove operators to align their promotional and marketing tools with usage of their network APIs instead. The threat here is clear: without solving any developer pain points, the relevance of operators to mobile developers is diminishing very quickly.
For other developer resource providers, the takeaway is simple: helping developers solve their marketing, user targeting and user engagement issues will grow your mindshare and usage.
Segmentation – An Incomplete Model
The 2012 report also includes a job-based segmentation model designed by Vision Mobile. It focuses on the motivation of a developer for their applications. While we welcome any discussion of developer segmentation, since it’s an underrepresented topic, there are (of course) some points of contention with this model. It’s a good starting point for discussion, but as with any model, it’s one that needs to be tailored to an individual company or product.
The model has eight defined segments:
The Hobbyists – developers motivated by fun and recognition, not profit
The Explorers – developers looking for side income and experience
The Hunters – developers looking to make money from apps
Guns for Hire – developers looking to win client projects
Product Extenders – developers looking to extend an existing B2C product to mobile or build a new revenue stream
Digital media publishers – developers looking to reach as many mobile users as possible
Gold seekers – developers looking to use apps to support a high-profile startup launch
Corporate IT – developers looking to extend the corporate intranet to mobile apps
First, the presented model muddles individual developers and developer companies, which is an important distinction to make in developer marketing and outreach. Marketing and selling to companies in many of the above segments will be drastically different than marketing and selling to individuals working at those companies. For instance, a tool such as a bug-tracking and reporting system isn’t likely to have immediate relevance to “Product extenders”, which the report names as “CMOs, marketing directors or IT teams within B2C companies.” However, it could have significant relevance to the individual developers working at those companies and responsible for delivering high-quality apps. Conversely, audience measurement tools may have more relevance to CMOs and marketing directors than to coders in this segment. Understanding the company/individual distinction is key to effective developer tool, resource and platform marketing.
Second, the major problem with a solely motivation-based model is that it presents an easy and unrealistic marketing solution: simply answer each segment’s motivation. For example, give hobbyists free tools, cool experiences and a platform or community to let them build notoriety. For corporate IT, integrate with key players and show cost savings. For gold seekers, give them something that adds cool features, but make it free. And so on.
But this doesn’t really give any insight into how to reach developers, since it ignores vertical or industry-based segments or behavioral segments; it doesn’t explain the types of marketing that will be most effective on individuals since it ignores psychological segments, and on and on.
There is no shortage of segmentation models to follow – and there’s no single all-encompassing model that’s right for every need. We will explore this area in greater depth in future reports, but in general, we favor a model that assesses developers (and segments) on a number of different scales, rather than trying to drop them into pre-defined buckets. See an example of this below.
Basing your evaluation on a few key areas will help you build a better understanding of your product and the types of developers your marketing should focus on:
Level of engagement – i.e. hobbyist vs. IT developer vs. app moneymaker
Vertical focus – none vs. specific industry (such as publishing, retail, games, etc.)
End user – essentially B2B vs. B2C
Technical focus – web vs. native, Android vs. iOS, frontend vs. backend
Decision-making ability – decision-maker vs. influencer vs. powerless
Other Key Points
The report contained several other pieces of data worth noting:
The mainstreaming of tablets: more than half of the developers surveyed said they now target tablets for development (up from 35% last year), boosted by their rapid take-up as well as the higher prices their apps command.
The number of apps is still on the rise, but at vastly different rates per platform: in Q1 of this year, 9,000 Android apps were added per week, compared to 4,600 on iOS. BlackBerry and Windows Phone trailed far behind with 1,800 and 1,400, respectively.
HTML5 continues to lag, or as the report puts it, “move from hype to reality.” Browser fragmentation remains a big problem, as does the lagging performance of mobile web apps and the availability of device APIs. It’s hard to see how this will change significantly in the short term as platform providers and device OEMs continue to add new device APIs, meaning HTML5 is trying to hit a moving target in terms of feature parity with native apps.
The most widely used revenue models aren’t the most lucrative: developers report that device pre-loads generate the biggest per-app revenues, but of course this remains a pipe dream for all but 4% of developers. Subscriptions generate the next highest amount of revenues, but are used by just 12% of developers (because it’s very hard to make this model work). In-app purchases earn about 25% more per app than paid downloads, but are used by only half as many developers. Meanwhile, advertising is used by a third of developers, but trails all the other revenue models in earnings.
Facebook is putting all the pieces together: it now has tools for developers to promote and distribute their apps, bill for in-app purchases, and of course build in social features across iOS, Android and the mobile web. It’s also got a base of 900 million users. It’s slowly, and somewhat quietly, becoming a major force to be reckoned with in the space – by offering developers tools to deal with their biggest problems.