Archive for 12th July 2010

iPhone App-Trepreneur: Part 3 — Cost Control

“50 cents income, 51 cents expenses: Poor man. 50 cents income, 49 cents expenses: Rich man.” — Mark Twain [1]

Previously, we saw that the average paid iPhone app generates a little under $6,000 and that you have a 50-50 chance of making something considerably less than that. Of course, it’s one of the privileges of entrepreneurship to dream of shattering the averages, of writing a blockbuster, of ending up in Costa Rica eating dolphin sushi and hanging with lady singers [2]. And, if you’re young enough, that might be enough for you. But if you’re a little older, and a little less confident that the universe will reward you just because you’re totally awesome, you have to figure that it might take you a couple of times up to the plate before you hit one over the wall. [3]

So, what can you build for a few thousand dollars?

If you’re a professional programmer, you know that the answer to that is : “Not a heck of a lot.”

How many hours equals an investment of “a few thousand dollars”? That depends on your circumstances, of course, but it’s a timescale measured in weeks, not months.

To me, this is one of those constraints that spur creativity. It should remove from your mind all temptation to explore some new domain that you don’t know much about. Instead, you should think about… Well, to be honest… A Web site.

Now, you might say to yourself “A Web site? But small creative folk don’t make money on the Web! It’s a fine outlet for expression and perhaps it’s an important part of marketing, but in terms of paying for my next 6-pack of Fire Rock Pale Ale… That dog don’t hunt!”

Forget the device itself. The reason the iPhone is appealing to entrepreneurs can be summed up in two phrases :

  • Micropayments
  • Walled Garden

Micropayments

Back when we were young and foolish [Redundant — Ed.] writers embraced the Web because we saw a bright future in micropayments. We’d write our articles, people would pay a dime to read them and, all-in-all, we’d make more money than we did writing for magazines. For instance, back in the early 90s, when I was a magazine editor, we used to pay around $800 for a computer programming article. Our circulation varied over the years, but we can use 80,000 and not be too far off. So as a writer, you made about a penny per reader.

For whatever insanely stupid reason, the banking industry didn’t create micropayment services. (To be fair, destroying the world’s economy while creating no actual value can take up your whole workweek. And weekends in the Hamptons don’t just happen by themselves.) Instead, this Northeastern undergrad named Shawn Fanning wrote this program called Napster.

Digital music went from being a novelty to being a pain in the ass for every technical manager in the world. “We need another T1 line! All our bandwidth is gone!” you’d tell the accountant, only to learn that someone in BizDev had ripped the complete Abba discography.

In 2001, Apple released iTunes and, soon after, the original iPod. The world that we know today, where if you hear a catchy tune, you’re an impulsive click away from spending $0.99 and getting a legal copy may not have been invented by Apple, but they made it a reality.

Seven years later, when Apple released the 2nd Generation iPhone, they made software programs as easy to buy (and generally as cheap) as MP3 singles.

The AppStore, and its Apple-mediated micropayments, created a new sales channel to a vast potential audience.

Walled Garden

If you’re a musician, your experience may well belie this story of a new gold rush. Recording contracts and publishers may have been scoundrels and thieves, but at least there was some money to be made selling your music. The common wisdom nowadays is that recordings are far less important than live gigs.

There’s something to be said for giving away your apps as marketing tools. Just as every retail company nowadays pretty much has to have a Website, every retail company will eventually have to move to having a presence on mobile devices. (Of course, the easiest way to do that is to make your Website friendly to mobile devices, but that’s another story).

There’s also an emerging story about ad-supported apps. Apple’s recent launch of iAds is very interesting, although no numbers are yet available on results.

But the main way that apps differ from the Web is that apps are difficult (not impossible) to pirate and the habit of piracy has not established itself the way it has with music and movies.

If you put up a Website that contains, say, a helpful collection of instructions on knot tying and invite people to contribute, you won’t make any money. If you did start making money (because your photos showed nekkid ladies tying them, or whatever), your content would be pirated and put on other Websites.

If, on the other hand, you put your helpful knot-tying instructions in an iPhone app, you could charge $4.99 for them ([4]). Although it would be possible for a resourceful programmer to steal your content and put it on the Web, they would not be able to resell your content on the App Store (technically, they might be able to get away with it until someone noticed the identical content, at which point Apple would intervene.)

Whether the “walled garden” that Apple maintains around the App Store and retail sales is a net good (at least some assurance of functionality and safety) or a net bad (too much control, too little transparency) is a matter of debate. But the fact is that Apple’s distribution channel is established, widespread, and active.

So, although you can’t create complex software for few thousand dollars, if you’re a creative person, you probably can create something potentially interesting for readers / viewers / listeners.

Think “Web site” not “Software Program.”

A good example of what can be done economically is my “Kailua Kona Tour Guide: In My Opinion” app. This

Next: Tools for creating iPhone Applications

FOOTNOTES

[1] Or words to that effect. And maybe it wasn’t Mark Twain who said it.

[2] Jean Ralphio — Parks & Recreation

[3] Unless, of course, you’re Daniel Nava

[4] Animated Guide to Knot Tying


  1. Prologue
  2. Part 1: Desperately Seeking Ka-Ching
  3. Part 2: Opportunity Always Ring-Tones Twice
  4. Part 3: Cost Control
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