Can You Get Rich Creating Apps?
With the proliferation of smartphones and mobile devices, apps have emerged as an integral part of the tech economy. Over five million apps are available for download via Apple (AAPL) iTunes app store, the Google Play Store, or Amazon (AMZN) in dozens of categories.
Some apps help people manage their finances, and some provide up-to-the-minute news of the world. Others act as a GPS, allow users to shop at their favorite stores from their phones, take pictures, send messages around the world, find somebody to date within a five-block radius, or find the best nearby bar or restaurant. Whatever you can imagine, there is probably an app for that.
Apps of all kinds have become ubiquitous, and the majority of mobile device owners use multiple apps daily. Some apps have become hugely popular, leading to success and wealth for the developers, bringing in millions or even billions of dollars. These success stories, however, are the exception, not the rule.
- Most app developers work hard to create the next big thing while barely scraping by.
- Consumers spent over $120 billion on apps in 2019, though a huge majority of that revenue went to large tech companies.
- While some do strike it rich, an average hard-working app maker with five apps can expect just around $20,000 a year before taxes.
The unfortunate truth is that most app developers will work hard to create the next big thing while barely scraping by in a world of ever-increasing competition and consumers with short attention spans.
Understanding Getting Rich Creating Apps
Some free apps generate revenue via in-app purchases or advertising, while others are purchased. The good news for both kinds of apps is that people use them a whole lot. ComScore's Global State of Mobile 2019 found that more than seven out of every eight minutes spent on mobile devices is app-related.
The bad news is that ComScore also found the majority of mobile device users download no new apps each month. There is, however, a small set of around 7% of smartphone users who download apps like crazy, accounting for nearly half of all monthly downloads.
Apps can be a huge source of profits. Consumers spent over $120 billion on apps in 2019. These days, there are tens of thousands of developers working independently, with start-ups, or with established companies to come up with the next big app.
The competition to develop a successful app is fierce, and there's no guarantee that even a great idea executed well will catch on and bring financial success. Even though some apps have made millionaires out of their creators, most app developers do not strike it rich, and the chances of making it big are depressingly small.
There have been a few instances of small apps generating big success and making their creators exceedingly rich. Some apps have been snatched up by larger companies for huge sums of money, for example when Facebook bought Instagram, Onavo, and WhatsApp.
Square, the point of sale app, has a market cap of $32.9 billion as of mid-2020. Snapchat has a market cap of $26.15 billion. Uber and Lyft have caps of $54.6 billion and over $9.35 billion, respectively. Airbnb was worth over $38 billion at the end of 2019.
While those valuations and sales numbers may seem encouraging, don't be fooled: the average app developer is unlikely to strike it rich. According to Forbes, the average app developer produces between three and five apps, each app bringing in an average revenue of $1,125 on Google's platform and $4,000 on Apple's.
A hard-working app maker with five apps can expect just around $20,000 a year before taxes. And that doesn't account for the money, time, and effort invested in creating those apps.
With those small revenue potentials, it is hard to build a team of developers and create advertising and marketing campaigns to increase recognition and drive downloads. There is also a huge amount of competition. For every category of app, there are numerous options to choose from, and making yours the one to gain traction can be hit or miss.
On top of all that, even with a hugely successful app, there is no guarantee that it will be able to produce a profit. It is increasingly difficult to monetize activities that many people have come to expect to be free—such as messaging, social networking, photo sharing, and cloud storage.
Many other apps have seen their valuations drop as users' short attention spans and increasing access to new offerings make them passé in ever shorter periods of time. A study by Techcrunch showed that anywhere from 80% to 90% of all downloaded apps are used just once and then eventually deleted.