So, you want to make money in the app business on Windows Phone?
Carefully analyze these numbers first.
And make up your own mind.
As a Windows Phone developer with 2 Million downloads and developing on the platform since its inception on October of 2010, pastaGapp is seriously considering suspending its operations on Windows Phone.
The market is just not there.
Too small, even when you reach an excellent position in the Top Apps (we reached #35 for several weeks across all apps).
So there’s something bigger at play here.
Maybe the future of Microsoft as a smartphone player?
TLDR; What’s in this long post
If you’re considering developing seriously for Windows Phone, you first have to estimate if the game is worth playing before hand.
You need estimates of downloads and revenues before investing in your architecture, marketing, graphic artists and developers time.
Those numbers are hard to come by.
But we have a present for you.
Along with some insider information from pastaGapp, a developer with 2 Million downloads that, according to Microsoft, had in 2011 “one of the highest WP7 ad impression totals in May”.
We will demonstrate, with proof, that very little money is to be made on Windows Phone.
Here is the table of contents:
1/ “top apps for windows phone” includes TRIAL apps
2/ The 30% tax
3/ Oh, we forgot the expenses
4/ Oh, you have a team?
5/ Increase the price of the app?
6/ Oh, the numbers were conservative
7/ Ads to the rescue?
8/ Intellectual property problems
9/ Piracy you say?
10/ Microsoft changing the rules on the fly
11/ Of quality apps
12/ The Devil’s advocate: the case for crappy apps
Here are our hard numbers:
you need 500 downloads per day to reach #35 in the “top apps for windows phone”.
Here is the Zune screenshot taken April 13th 2012, showing our app, Sexy Videos TRIAL, at #35 in the Marketplace
#35 out of more than 80,000 apps. Not too bad huh?
And the corresponding download numbers for that day:
2777 downloads for 6 days, so an average of 463 downloads per day. Let’s round that to 500 downloads/day to be conservative.
Now you might think “woohoo the bar is not that high, if the app is priced at $0.99 I will make $500/day, or around $182,500/year”.
You can interpret it that way, but digging in, here is our interpretation of that figure.
The “top apps for windows phone” list is tricky: it does not include only PAID version, it also includes TRIAL versions.
This means users can download your app for free, try it for a few days (or with reduced functionality) and decide to buy it (or not).
Windows Phone has a 10% conversion rate from TRIAL to PAID according to Paul Laberge, Windows Phone App representative for Canada.
10% is considered extremely good in the industry and hard to achieve, so we’ll consider it the upper bound.
So now we’re down to 50 PAID downloads per day, or $50 per day, or $18,250 per year.
Congratulations! You’re just $2,000 above the minimum wage of $8/hour in California. ($8/hour with commonly 2000 hours worked in a year puts the minimum wage at $16,000)
Of course Microsoft charges a 30% tax on all your sales.
The exact same number Apple, Facebook, Amazon, … charge to their developers (hum, price fixing anyone?)
So the $50/day become $35 per day. Or $12,775 for the full year.
Oh boy, we’re $4,000 below the minimum wage now.
And that’s by being #35 on the top apps on Windows Phone, Angry Birds holding first place.
Yes, ONLY 34 SPOTS BEHIND ANGRY BIRDS!
For $10,000/year? Who knew.
So you didn’t make your $12,775 sitting on your hands, did you?
You had to pay for Microsoft’s registration ($99 per year) and that’s the least of your expenses.
You probably had to buy a Windows Phone itself to develop your app. That’s anywhere between $100 to $300, although these days (but only recently) you can get a free Windows Phone with a 2-year commitment with your cell phone provider.
How about your marketing and advertising cost? You server costs?
You may even had to pay for consulting costs in development, graphic design, translation of your apps, etc, …
We’ll not even begin to speculate or try to approximate those costs, but they will certainly lower your $12,775.
So now we’re down to $12,775 per year.
Good, hard earned money.
Oh but wait. You may actually not even be a solo developer!
You actually didn’t go it alone to reach #35 in the Windows Phone Marketplace?
Your team size will vary.
A 3-person team is easy to come by with, for instance, one developer, one graphic designer and one jack of all trades.
But let’s continue with choosing a conservative number of 2 people on the team.
Congratulations, now each person gets home with a whooping $6,400 per year.
Next step up: work at McDonald’s, they actually pay the minimum wage.
Let’s double the price of the app to $1.99. Now you’re bringing home the $12,775 per year for a 2-person team.
But you will have less conversions, meaning you’re not going to sell 50 apps per day, but even less.
$12,775 per year is not enough even for a single developer. Not to mention a company.
Yes, remember we rounded up to 500 downloads per day.
And we chose an outstanding 10% conversion rate to get to 50 PAID downloads per day.
Our conversion rate is not even 10%.
Taking all that into account, 50 PAID downloads per day for reaching top #35 was already overly exaggerated.
So the $12,775 per year are exaggerated.
Now let’s get super crazy and multiply our already conservative numbers by a random number 4: we now make $51,100 per year for a one-person team.
Yeah! We’re at the salary of an Intern in the Silicon Valley!
YEEEEEEEHA. That’s a wild ride.
Oh wait, we forgot the team again…
That’s your last hope.
You might get more lucky by offering an ad-supported version of your app.
Recently Microsoft showcased a developer making “$245K a Year and $1750 in One Day”.
The $245K are claimed to come from 436,349 impressions at an average eCPM of $1.69.
$1.69 eCPM is extremely good (and not easy to achieve).
A more realistic number is $0.50 eCPM or below.
Advertising campaigns and eCPM vary greatly and revenues change tremendously from one day to another, mostly depending on the position of Saturn in the constellation of the Rhinoceros.
Moreover, if you continue reading GeekWorks’ article, you’ll find these sentences:
While 2012 has brought even more impressions, our eCPM has taken what can only be called… one hell of a dive.
From the first of the year until the writing of this article, Clockwork Computing has reported a total of more than 185 million impressions at approximately 1.5 to 2 million per day. That is more impressions than all of last year. More than a little sobering, however, is the rather abysmal average eCPM of 0.16
They speak for themselves and confirm you can’t count on a steady eCPM.
More saddening is that Microsoft uses GeekWorks’ story to showcase how to make money on Windows Phone, leaving out important parts in the article mentioning only a $0.16 eCPM in 2012.
That’s borderline dishonest.
Also search Microsoft’s PubCenter forums for “low eCPM” and you’ll see a few posts asking the same questions like “why is my eCPM so low?”, or “why my eCPM vary so much?”.
If that’s the best showcase story Microsoft could find, don’t get surprised nobody makes money on Windows Phone.
Even the PubCenter “success” stories erode when you dig a bit…
What caused that eCPM drop?
Was Microsoft forging success stories then leave them in the dust?
When you develop for Windows Phone, be aware that your source code is distributed in plain text.
Your app is not encrypted, it’s just zipped.
A “compiled” app comes in a file with a .XAP extension.
Rename it to .zip, extract it and lo! You have access to the binary code.
Binary code you say? So it’s not source code?
C# is an interpreted language.
Free tools like ILSpy allow you to “decompile” the .XAP and show you all the source code.
All the .XAP files can be downloaded directly from Microsoft!
From any app.
From any developer.
For the sake of illustrating that point, here is Angry Bird’s source code on the Windows Phone.
If you have valuable IP, that’s a no go for a company.
Oh, we haven’t even addressed the subject yet.
From the last section we pointed out how easy it is to get an app source code through a simple HTML link, even from big app makers like Angry Birds’ Rovio.
When you have the source code, it becomes trivial to pirate your software.
And software piracy is huge on Windows Phone.
So huge we should probably publish another post…
It’s always a threat on any platform, whether it’s Facebook, Apple’s App Store, etc… getting your apps pulled out.
A nightmare for developers.
They can pull any app on a moments’ notice.
For any reason.
Same as the lengthy terms of services, privacy policies and even your contract with your employer, Microsoft includes chilling clauses that we easily let go, because we always think those are extreme cases, and they will rarely use them, at least not on you.
Until they do.
Microsoft recently showed they can pull the plug overnight on any app, even on apps approved over and over again (they check all the policies at every update) for more than a year.
Both approved more than a year ago, in their current form:
same icons, with the same type of content (nothing more than what you can find at your local beach, and we’re not even talking about a nudist beach).
These apps already had a high level of scrutiny, and it took many corrections to understand and comply with their Content Policy, through a lot of submission-rejection-correction-resubmission cycles.
Now set aside the fact these apps are “Bikini” apps to talk “quality” of apps, and leave the Adult content controversy to this other post: Dear Microsoft, Please stop playing Calvin Ball for which our proposed solution is obvious: just create a protected “Adult” category (according to this this poll by @TheMetroShow the majority wants access to adult content, but to be fair and polite to the minority, we’re all for creating a specific category to hide the “Bikini” apps away from their sore eyes).
The bottom line is: we were compliant with the policies all along, and the apps were double checked many time by Microsoft for more than a year.
Yet they changed the rules over night, and took down the apps.
Actually let’s correct that: THE RULES DIDN’T EVEN CHANGE.
Not a single word changed.
The wording is exactly the same.
It’s their interpretation that changed to a “more stringent interpretation”.
So all this year we wasted on learning what their content policy meant by trial and error?
You can never be sure of what their interpretation is, or will be.
Now it’s obvious Adult apps are always the first to go (just look at Apple’s example).
But did Microsoft actually crack down on “Bikini” apps only?
Microsoft actually cracks down on something more generic and subjective than apps with “adult” content: apps that are not “quality apps”.
Now re-read Microsoft’s blog post on “Keeping the quality bar high” for apps in the following light:
They actually didn’t even start to enforce that apps are actually “quality apps”.
Windows Phone developers know that Microsoft actually doesn’t do anything to “Keeping the quality bar high”, even though they kept hammering it since the beginning of the platform.
They cannot be blamed for that, how do you enforce “quality” apps?
What is a “quality app”?
This is very subjective.
Leaving it to their interpretation that can change overnight.
So you think you’re safe because your app is not a “Bikini” app?
It all depends on Microsoft’s definition of “quality”.
Are Fart apps “quality” apps?
For the majority, No.
Should they be removed?
We don’t think so.
Are Blue Screen of Death apps “quality” apps?
For the majority, No.
Should they be removed?
We don’t think so.
… the list goes on an on, easy to find
Now for the duplicates:
Do we need so many Fart apps?
Should any of them removed?
We don’t think so.
Now for the buggy apps:
Should apps that have more than X crashes per day be removed?
We don’t think so.
Crashes in the apps would actually be a very good and objective parameter to take into account for gauging the real quality of an app.
Oh but wait, did you notice your FREE apps with embedded Microsoft Advertising crash much more often?
(yes, in percentage, not because the FREE app has obviously more downloads than the PAID one)
And that most of the crashes are related to the PubCenter Advertising SDK?
We could write another long blog post about how Microsoft’s Ad SDK was poorly implemented…
So crashes cannot be part of an app’s quality, not unless Microsoft wants to shoot itself in the foot.
And last, shouldn’t customer feedback be a gauge of app quality?
As usual, Adult content is always the first thing that goes out the door when a platform decides to “cleanup” their Marketplace.
But that’s just the premise of what’s really coming next: the real big crack down on “quality” apps.
Next are the duplicate apps.
Next are the “useless” apps.
Next are the apps with “similar” names.
Next is your app.
Don’t take our word for it, just look at Apple’s App Store history.
We agree those are just speculations from our part, and doesn’t necessarily mean Microsoft will crack down on them.
But certainly Microsoft’s mood swings is something you need to add in the “threat” section of your S-1 filling when you go IPO.
To be fair to Microsoft, that’s also the case on any underlying platform you develop on, so this point is not new.
The news here is that there is no longer any doubt Microsoft will hesitate or not to play the “CalvinBall” card:
Microsoft WILL throw you under the bus on a moment’s notice.
So with the threat of a “quality apps” enforcement on every developer’s head, let’s talk “non quality” apps.
Let’s call them “crappy apps”.
With the same broad meaning and subjective interpretation as “quality apps” conveys.
Not all apps can be at Angy Birds’ level.
Unless you’re VC-backed or a Big-name entertainment company, you will not be able to develop an Angry Birds’ quality app without trial and error (before you call us on that statement, there must be some exceptions out there, congratulations to them!)
The big developers of today started small.
This is an incremental process.
You start with the crappy apps, then do more and more sophisticated apps.
As Microsoft is trying to attract developers from other platforms (Android, Apple, RIM, …), they have to realize this:
- new developers will not be prescient overnight
- new developers will need to learn the tools (C#, XAML, the incredibly powerful tool that is Visual Studio and they offer for free, …)
- new developers will need to make crappy apps to test the water and learn
Let the developers make crappy apps!
Let them learn your tools.
Let them learn your platform.
Let them learn and make better and better apps
Let the market decide what apps will be successful or not.
Let the users chose.
“Put People First”, according to Windows Phone’s slogan written all over the Marketplace.
Do you really want to launch your next big idea app right away without fixing the bugs first?
Well, after all, Nokia released the Lumia 900 with a serious bug that could have been detected by real life testing, so maybe that’s acceptable after all.
One day one of these small developers will come up with a big success, having learned the tools of the trade on your platform by making crap apps at first.
Guess what, having crappy apps in your store is not so bad:
- if they are crappy they will fall to the bottom anyway, no one will use them, let the free market decide
- they still add +1 on your quest to catch up on Apple’s half a million apps, good (on paper at least) for your shareholders
Microsoft, you cannot play catch up on Apple’s 500,000 apps by weeding out crappy apps.
You need crappy apps to get to that number.
Or you could keep the numbers low and decide to enforce what you’ve been claiming since the beginning of the platform: that your apps are all quality apps.
Meaning developers should seriously start fearing for their own apps.
But how do you think the “we have only 80,000 apps but they are all quality apps, compared to Apple’s 500,000 crappy apps” argument will go in the board meeting?
Microsoft, you can use your strong iron first to enforce “quality apps”, but Windows Phone will remain a no man’s land for developers unless you continue ramping up paying developers directly for your subjective “quality apps”.
Not profitable now, and maybe too risky in the long term.
Let’s stop fooling ourselves: The Windows Phone Marketplace is too small to make money.
Add the following threats:
- Intellectual Property running free
- Piracy rampant
- the ever threatening overnight change of rules (or simply their “interpretation”)
and Windows Phone is a no go.
We demonstrated that both PAID, TRIAL and even FREE apps are not making much money on Windows Phone, at least starting from position #35.
So clearly don’t even think about making money on Windows Phone apps.
Even ad-supported apps turn out to be a cloud of smoke according to Microsoft’s own showcase study! (see 7/ Ads to the rescue? above for the shocking truth)
That’s why Microsoft has been paying developers “anywhere from $60,000 to $600,000″ to develop on their platform.
Microsoft, do we have your attention now?
Can we too get in on the paid developers program?
After developing on your platform since its launch in October of 2010, that’s the hard conclusion we came to: Windows Phone is too small to make money unless Microsoft writes you a big check upfront.
And that comes after many highly anticipated moments that could have saved the platform:
- the Mango software release adding iPhone competitor must haves (copy-paste, multitasking)
- the expansion to so many countries
- Nokia phones released worldwide
- Low-cost entry level phones offered for FREE by carriers
We still believe in Windows Phone (we’re stubborn huh? you desperately need companies like us though), and that it will be a great platform to make apps on when it reaches critical mass some time next year.
Or the year after.
But at least not today.
There are important things you need to fix on the platform to make it a success.
We’ve been trying to work closely with you to build a healthy and long term relationship, but you keep ignoring us and pretending we don’t exist.
Probably too busy to pay attention.
Or even worse, slapping us on the wrist overnight for things you’ve been okay with for years.
We believe it’s only a communication problem that can easily be repaired.
Maybe that’s an area of improvement you should work on: get closer to your developers.
Can we finally work together on some awesome apps you would help us finance, and not resort to spitting out Bikini Apps to make a dime on your platform?
You have our number.