Apple and Google's mobile platforms are making billions of dollars for developers. For instance, Apple paid developers nearly $1.5 billion through its App Store in the first two quarters of 2012, according to mobile analyst Flurry. About 32% of the combined money flowing into Android’s Google Play store and the App Store went to developers of the top 100 ranked apps. That might seem like a large percentage, but in 2010 it was 55%. In fact, middle-class developers - those who publish the bulk of the 600,000 apps available in the Google's and Apple's app stores - are making a comeback.
In January, we predicted that the market for applications through Android and iOS would be about $6 billion. To date, Apple has generated about $2.14 billion in revenue from its App Store (with 70% going to developers). That puts the company's app sales on target for around $4.5 to $5 billion for 2012 - likely higher, considering that the holiday season tends to be a download-heavy time. Adding Android app sales, our January estimate looks conservative. Flurry estimates the total app ecosystem to be worth about $8.7 billion in 2012, taking in-app advertising revenue into account.
The distribution of that wealth has never been wider, according to Flurry. The top 25 ranked apps in the App Store and Google play garnered 15% of total revenue, while apps ranked 26 through 100 took 17%. In 2010 those percentages were 28% and 27%, respectively.
Flurry's tally reveals two trends simultaneously. Overall, apps are bringing in more money as more people buy smartphones and tablets. Second, a larger proportion of developers are benefiting financially. This is the natural evolution of any market as the long tail of choices develops over time.
But the trend is not quite as egalitarian as it may seem.
The iOS App Store holds 600,000 apps. That is a lot of apps, and the inventory grows by tens of thousands every month. According to data from adeven, an analytics platform based in London and Berlin, the App Store added 26,646 new apps in June 2012. The App Store gained 250,668 apps in all of 2011. The sheer mass of apps added on a daily basis makes it very difficult for developers to compete with the eye toward the lucrative top spots in the App Store rankings.
Then there is the problem of visibility. Some 400,000 apps in the App Store have no visibility at all, according to adeven, meaning that they rarely show up in search or rankings. That means 66% of applications for iOS are in a no-man’s land of the application ecosystem and likely generate no substantial revenue. In short, the developer middle class that earns the 68% of revenue left by the top 100 ranked apps is effectively capped after the first 200,000 apps or so.
That does not mean that apps cannot move up in the charts. According to adeven, volatility (an app's ability to move up and down the rankings) was 10.4 spots. If developers perform their due diligence (through media, marketing, engagement and smart decisions based on analytics), there is potential to move up in the rankings.
In 2011, many people in the mobile app development ecosystem worried that there would be little opportunity for the middle class of developers to carve out decent livings. While business will remain difficult for small and independent developers, there is plenty of room to create wealth within the mobile ecosystem. The top spots in the App Store and Google Play rankings are not set in stone, and the market remains fluid, waiting for the right application to disrupt the top of the lists.