A medium size non profit that I am on the board for has a received a proposal by a company to develop an iPhone/iPad/Android app. The app will provide additional information about the place they are visiting, and should be be pretty cool. Think of it as Tablet/iPhone replacement for those audio tours you take at a museum. The problem is the cost $500,000 for phase 1 and another $500,000 for Phase 2 and Phase 3, which is a lot for a non profit. The company thinks we can recover our cost by app store sales and they think we can get 1-2 million sales at $3-$5. I am very skeptical of these sales figures, so I am trying to get some data on apps sales. My Google power seem to be failing. I can find some data for games, but nothing for other type of apps. I would classify this as a edutainment application.
I’d appreciate any pointers to sales data on app store sales. I am basically trying to figure what percentage of apps out there hit a million+ in sales, and also what type of price resistance is for apps above $2.
I have also heard that development cost of most apps is pretty small often under $100K and seldom over $300K is this accurate. Are there example of expensive apps (including games) that became big sellers?
Finally I have heard that despite much lower market share, iOS sales are actually higher than Android app sales. Anybody have some comparisons?
I’d expect anyone pitching this idea to me to provide me with the data to show what they say is true. That is, this app development company should be able to show you the sales figures you’re looking for. The only reason they wouldn’t is if they were making these figures up.
Are you currently filling this use case via other means, or is it net new opportunity? ie, do you have existing data yourselves on potential demographics and market opportunity?
If not they need to help demonstrate that market opportunity. Saying you’ll get 2 million sales just because you are on the app store is bullshit. Who is the target audience and how are they going to be informed of your app?
Now say you were running that audio tour line of business and had some of that data. You might know you serviced 2 million customers in 2013 at $5 per customer for rental of the equipment and service delivery. Now if you are going to fulfill that via a downloadable app instead of headset/device infrastructure, are you potentially just shifting sand? Is there a cost benefit to not owning, maintaining and operating that headset infrastructure? Are you still going to need the people and process in place to inform potential customers about the app and how to get it? Does that represent cost benefit? Will you be able reach a larger audience for which the content is relevant? And is that app price resistance likely to be an issue? A customer might not blink at $5 for a headset hire, but $5 for an app, that’s highway robbery!
Make the app free. Open it up to crowd sourcing of audio tours for all sorts of locations. Allow free tour downloads, but take a cut of all paid tours. Leave the pricing up to the creators. In-house, hire high profile experts/celebrities for high profile spots, and charge for each one via in-app purchasing. I’d loooove to have something like this available. Walking tours of Brooklyn, Paris, Florence, etc. Various museums… All kinds of potential, and I’d never bother to pay a museum for one of their earphone recordings, but this seems like a great idea. Just needs advertising. Lots of it.
Your skepticism is quite appropriate. The latest app revenue survey reports that 1/3-1/2 of developers make less than $100 per month from all their apps combined. So those $500k would take 5,000 months to recoup. Not counting the next $500k, or the necessary ongoing update costs for bug fixes, new iOS versions, changes to your exhibition (or whatever you do), etc.
I’d appreciate any pointers to sales data on app store sales. I am basically trying to figure what percentage of apps out there hit a million+ in sales, and also what type of price resistance is for apps above $2.
The top spots on all app stores are permantenly occupied by apps that are free to download. You will not reach a million downloads with anything that costs an upfront charge, period. To reach a million paid conversions you’ll need 100 million downloads, using the typical 1% rule-of-thumb, and then $3-5 is a stiff price in a 99 cent world.
In games, due to the proliferation of free-to-play, last year the average cost to acquire new users already exceeded the average revenue. (source)
I have also heard that development cost of most apps is pretty small often under $100K and seldom over $300K is this accurate. Are there example of expensive apps (including games) that became big sellers?
Yes, $500k-1M is completely absurd for a niche edutainment app where all the actual content comes from you. These guys are trying to take you for a ride.
Finally I have heard that despite much lower market share, iOS sales are actually higher than Android app sales. Anybody have some comparisons?
Yes, iOS users tend to pay more. Android gets more downloads but fewer paying users. That’s been the case in every analysis I’ve seen, you should find plenty of articles on the web.
Those are excellent questions and I have to be careful here due to confidentiality issues. We rent several hundred thousand audio headsets a year, a figure which has increased in recent year due to better marketing. I am pretty confident that almost all of the million+ visitor will be exposed to ad for the app at the location, and many will have seen the ad app in a variety of venues. At $3 for the app we’d make slightly more unit than we would with the audio headset, which we would probably continue to offer no matter what for the senior citizen crowd. At $5 we’d make more than twice as much per visitor. The visitor experience is significantly enhanced especially if you are using a tablet. Enhancing the visitor experience is more important the making money, but as our CEO says no money, no mission. Even after you leave the location you have a small book/short film worth of content, much of it never seen before. Because of this we could get sales even for people who never visit the location, although I have my doubts if that would be a lot of money, even with freemium model.
The issue you raise $5 for headset no problem, $5 for an app highway robbery, is one which I am struggling. Although we could presumably charge $5+ for the rental of an iPad with the app. It sounds like there is considerable push back above $1 for applications,so maybe me should call an interactive film or something and sell it on iTunes.
There is considerable opportunity for other museum and historical places to use this application. But that isn’t something my non profit would do, but the company making the proposal could do. One of the big problems is the company is engineering consulting firm and has zero experience developing applications, so they are use to charging big bucks to firms building skyscrapers, not the low cost world of apps. On the other hand their engineer experience is very relevant to their proposal.
I like it, you are obviously considering all the business angles.
There is considerable opportunity for other museum and historical places to use this application. But that isn’t something my non profit would do, but the company making the proposal could do. One of the big problems is the company is engineering consulting firm and has zero experience developing applications, so they are use to charging big bucks to firms building skyscrapers, not the low cost world of apps. On the other hand their engineer experience is very relevant to their proposal.
I don’t work in app development, but that screams risk to me. Can they deliver? That’s a lot to pay if they have no prior experience or track record of delivering. They may also have no appetite for revenue sharing as they have no go to market avenue for something that is not core business.
That said, the high cost could well be because they are outsourcing the app development portion of the proposal to an experienced agency, hence there is additional margin stacked on.
I’d be thinking to rip the app development piece out of their proposal and look to engage an app development partner you can both work together with so there is a bit more transparency and confidence in a delivery outcome.
I have had been talking with coworkers about making a similar map.
Having the phone has a viewer and browser of content, than maybe is synced with location data tags, like QR codes. It could be cool/fun to write.
It would be more fun (no idea if cheaper) to find a company that has already created something like this, and hire them to release the app again but with new content. This way you guys will be able to get a better idea of the result, and delivery time. Everyone has different prices, some people price is way lower than 500k. You may also get what you pay for.
Yeah, that kind of app has been developed repeatedly for a variety of different scenarios; it’s not a new idea, and IIRC, there are even a few trying to be “general purpose,” though, obviously, the plethora of concurrently developed imitators suggests no standard has been agreed upon, but I’ve seen AR stuff like that in city mapping, classroom use, and museum use, at least.
I almost wonder if the engineering firm is looking to get your non-profit to help them pay someone to develop their own flavor of this that they hope to sell more broadly in the end. It’d probably be easy to spot in the final contract, but I think what I’m driving toward here is that little of their proposal seems like it’s on the up and up. They’re either massively overcharging you to reinvent the wheel and create a product they have no way of proving the efficacy or value of, or they’re just using you to bankroll something for their own benefit.
