Making money with mobile apps

If you want to build a business developing mobile apps, identify a target market first, and then make products for it.

So you're a developer and you want to strike out on your own and get a piece of that lucrative mobile-apps market.

cash640.jpgSource: borma818/Flickr

Who can blame you? Research firm Gartner predicted last January that mobile application revenue would nearly triple this year to $15.1 billion from $5.2 billion in 2010.

A month later, rival analyst firm Forrester Research upped the ante, forecasting that mobile-app revenue would hit $38 billion by 2015, with tablet app sales comprising $8.1 billion of that total, up from $300 million last year.

Your next job: Mobile app developer?

It's like printing money!

One small problem: The apps market is incredibly crowded, and getting more so as developers rush to satisfy the seemingly insatiable demand for apps by the growing global army of mobile device users.

There are more than 500,000 apps available at Apple's App Store, while Google's Android Market features more than 225,000. Research in Motion's BlackBerry App World trails far behind with less than 50,000 apps. Then there are the thousands of apps available at Microsoft's Windows Phone 7 Marketplace and Nokia's Ovi Store.

Vast riches await (a lucky few) iPhone apps developers

Of course, every mobile apps developer wants to be the next Rovio, the Finnish computer game developer that created Angry Birds, the most popular mobile app of all time. Since its release in 2009, Angry Birds has generated nearly $100 million, and on development costs of only $140,000.

But there's a reason there's only one Angry Birds: No other mobile app has achieved that kind of success. The truth is, most apps make little or no money.

A far more typical mobile app developer's story would be that of Andrew Burke, who developed a diary application for the iPad that was released last October. Through July, the total profit for Remembary, which is available for $4.99 in Apple's App Store, was $2,058.

Still, with iOS apps averaging about $600 in revenue, Remembary is relatively successful, though given the estimated $10,000 to $20,000 in development costs (the value of the time Burke spent writing the code), the iPad app still is in the red.

The odds may be long, but the opportunities for mobile apps developers to make money grow along with the mobile apps market. Given the obvious potential and equally obvious challenges, how would a mobile apps developer turn their talent into a successful business, or at least a healthy revenue stream?

Here are several crucial decisions facing developers who want to make money building and selling mobile apps.

Determine your business goal

Before you even begin developing your can't-miss mobile app, you need to figure out exactly what you're in this for.

Do you just want to create another revenue stream for yourself, or are you planning to be the next Zynga (maker of wildly popular games such as FarmVille and CityVille)? This will determine your strategy, inform your decisions regarding financing and -- if you're planning on growing — staffing. Knowing your business goals also will help you prepare for success over the long haul.

"The most important business decision is to define success and draw out a coherent vision for how you are going to attain and measure that along the way," says Paul Reddick, chief executive of Handmark, a large, Kansas City-based developer of applications across numerous mobile platforms with nearly 200 employees. "Do you want critical acclaim, downloads, usage, ad revenue, paying subscribers, or are you just wanting to gain experience?"

For his part, Burke's goals for his iPad diary app — at least from a business sense — were relatively modest. "I built Remembary because I wanted to learn iOS programming, and I wanted to have a digitally-enhanced diary on my iPad," he wrote in his blog. "Most importantly, after years of selling my services as a developer, I wanted to have a product and learn all about production, pricing, promotions, and customer service."

Sure, other mobile apps developers may be swinging for home runs from the first inning, but they still need a plan and a durable strategy. "Starting a mobile apps company can take a long time to establish because you need a portfolio of apps to succeed, unless you are lucky enough to have a hit right out the door," says Justine Pratt, president of Creative Algorithms, a Chicago-area mobile software development company she co-founded with her husband, Cory. But, she added, "Smart businesspeople do not rely on luck for success."

And once you start a business developing mobile apps, you are a businessperson in addition to a developer. You may as well be a smart one.

Choose and know your target market

There's no point in developing an application for a market that won't support it or doesn't even exist, but many apps developers will come up with a brilliant idea first -- and then assume they'll find a market for it.

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