Tuesday 3 March 2009

So You Want to be a Developer of a Smartphone Application?

Few current topics offer as many interesting angles as the cell phone business. Historically (to the extent one can talk about the "history" of this nascent industry), the business focused on the system operator, handset manufacturer and purveyor of the computer operating system. More recently, the rise of the Smartphone, the increasing importance of application programs, and the challenge of the Android operating system have all pushed IP to a more central role in the industry.

Following on my previous post of February 28th on the possible patent aspect of the iPhone and its competitors, my attention was drawn to an article that appeared in The Marker, the business daily published together with the Israel newspaper Haaretz. The article, entitled (in English translation) "How to Make Money from iPhone Applications", contains a large number of interesting nuggets about the emerging industry of iPhone application programs, where copyright reigns supreme. Let me mention several of the points made in the article.

While Smartphone applications are developed by companies with dedicated staff, successful applications have been developed by an individual or two, often working in his/their spare time for several months. One such example is iFog, which was developed by two individuals over a two-month period. Reportedly ranked no. 20 on the list of most downloaded applications on AppStore and iPhone, the iFog has been downloaded over 150,000 times, at a price of $1 per download.

Find the Fog in iFog

Seen from another angle, each of the top ten downloads can earn $3,000 a day for its developer, while the number 1 download is reported to earn $15,000 a day. Of course, there can be only a single no. 1, and over 15,000 applications are reportedly competing for downloads by the iPhone users. Neverthless, perhaps (perhaps not) with a tinge of exaggeration, one of the iFog developers observed that one can earn sums similar to producers or artists in the music business. That said, even the most successful developer will admit that the half-life of application is not overly long, and the odds of coming up with a second (or third) hit would not seem to be overly high.

There appear to be several business models for the developer of the application to monetize his product. Marketing the application through the operator or integrator is reported to split revenues 70-30 in favor of the operator/integrator. On the contrary, distribution via iTunes or the AppStore splits revenues 70-30 in favor the developer. There also appear to be applications that are distributed for free, with monetization realized either by the provision of add-on services or from advertising.

The application must further take into consideration the characteristics of the typical user of the particular system. Thus, the Blackberry user is overwhelmingly a business type, while the iPhone has not (at least yet) been embraced by the business community. Further, the developer is advised to make his product compatible for different platforms, for use with both proprietary and open source operating systems. Moreover, the AppStore will likely encounter additional competitors. The article noted that Samsung, Nokia, RIM, PocketGear and Palm are all contemplating application stores, which provides further channels for sale and distribution for potential developers.

So what do I tell my son when he comes into my study tomorrow, asking advice on how to get into the Smartphone applications business? Young man, it is a tough, competitive business, but it is also an attractive way to channel your creative digital juices in a way that is both financially and aesthetically attractive. And who knows--maybe you will find that pot of gold at the end of the copyright rainbow that has eluded so many an author in the oh-so-yesterday publishing business.

I found my copyright pot of gold

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