[How long will developers be loyal to ecosystems that seemingly set them up for failure? The odds are clearly stacked against developers as most of them struggle to make a living. The sustainability of co-creator ecosystems is in serious peril, it would seem. A look at other lottery-like industries provides an explanation, and a surprising perspective.]
Great news from Apple’s HQ, everyone! The App Store is breaking records (yet again, some point out), both in terms of popularity with users and in the total amount of money they spend. What an awesome time to be an app developer, isn’t it?
Thanks to our amazing developer community! Apple says July was record-setting month for app store revenue http://t.co/BI8wFTTG5V — Tim Cook (@tim_cook) August 5, 2014
Well, not quite. Tim Cook doesn’t exactly paint the whole picture. The truth: all that app store goodness is very unequally distributed across developers.
The figures in our Q3 2014 State of the Developer Nation report are once again crystal clear: [tweetable]the vast majority of app developers struggle to make a living. 7 out of 10 don’t earn enough to sustain full-time development[/tweetable] (we call them the Have Nothings and Poverty Stricken). That would be over 2 million people, roughly the population of Slovenia. Almost 90% of that record app store revenue will go to just 12% of developers.
While more app store revenues are clearly a good thing for developers, the money is peanuts compared to what Apple makes. In Mobile Megatrends 2014, we showed that [tweetable]Apple captures 80% of the total iOS “ecosystem GDP”, while developers capture less than 15%[/tweetable] (including commissioned apps released without any revenue model).
The situation on Android is even worse. [tweetable]Whereas 50% of iOS developers live below the poverty line, the number for Android is 64%[/tweetable]. Also for Android, hardware makers capture 80% of ecosystem GDP, while developers are scrambling over the left-overs. Other ecosystems like Windows Phone or Blackberry don’t have the scale to provide viable escape routes.
Is this sustainable?
Can this situation continue, or will these ecosystems eventually collapse as developers get fed up? [tweetable]How long will developers be loyal to ecosystems that seemingly set them up for failure?[/tweetable]
The prospects are indeed grim. Marco Arment, for example, speaks about “vastly increased commoditization” as well as declining consulting revenues in a post titled “App Rot”. He quotes other Indie developers saying “There’s a chill wind blowing”, “The app gold rush is well over”, “In my tenth year as a full time indie dev, … I think that yes, it is much harder these days” or “Considering the enormous amount of effort I have put into these apps over the past year, [my sales figure is] depressing.” Expressions of distress that are far removed from Tim Cook’s optimism.
And yet, they’re still at it. The number of app developers shows no sign of declining.
The app lottery
[tweetable]App development is a lot like playing the lottery – as long as there is a chance to win big, people will play.[/tweetable]
Investing significant amounts of money and effort when the odds are stacked heavily against you is not a rational choice. But it’s a very human one. We’re collectively bad at assessing likelihoods, especially in situations as complex as marketing a killer app. We get as much pleasure from fantasizing about a big win as we would get from the win itself, especially if we’re poor to start with. The fantasy gets even better because we can’t imagine any other way to get this rich, this quick. The final nudge is the sense of regret we would feel if we didn’t implement that great idea we had, while someone else hits it big on the app store with that same idea. [tweetable]Rational thinking versus pleasure center lit up by fantasies? It’s no contest, really.[/tweetable]
There are plenty of other industries with the same characteristics. The same income inequality and hope-driven creation play out in music and other forms of entertainment, game development, and entrepreneurial communities (as long as there are exits, there will be wannabees). Future industries will show the same pattern, too. Internet of Things, anyone?
Ecosystems can sustain this situation as long as there is supply of developers hoping to get rich. Only 1.6% of developers have an app that earns >$500K per month, but those few big wins will make all the difference for the motivation of the Have Nothings, the Poverty Stricken and the Struggling to keep creating (source). Asking whether developer ecosystems are sustainable is like asking for how long casinos will exist given that most participants lose money. “Indefinitely” would be a safe bet.