If there’s one trend that’s become evident in the software and services landscape in recent years, it’s the use of subscriptions. Independent developers and large service companies alike have decided to ditch direct pricing in favor of the most elusive thing in the industry — recurring revenue. And while those who dislike the subscription pricing models that have become the norm may tell you that this is how developers can make money, new research shows that this is not necessarily the case at all.
Developers have long argued that moving to a subscription model is the only way they can keep their businesses alive in a world where people don’t expect to have to pay for updates to new versions with better features. But research now shows that while some at the top of the heap are indeed making money, the fact is that subscription pricing doesn’t work for everyone.
In fact, the numbers show that the median monthly revenue generated by apps after the first 12 months of sales is just under $50. Furthermore, the top 4% of apps generate 200 times more revenue than the bottom quartile after the first year — something you might want to think about the next time you’re complaining that an indie developer must be making millions off your $1.99/month subscription.
A money making nightmare
This is the worrying news brought to light by a research paper by RevenueCat that was picked up and reported by TechCrunch. RevenueCat’s client base is considered the largest collection of app developers outside of Google and Apple, and the company helps these clients build their businesses on select platforms. This means that all these figures are based on those platforms and are not iPhone or App Store specific. But it gives us a good indication of where the app development business is right now, and it’s sometimes grim reading.
For those who achieve success, it starts with reaching $1,000 in monthly revenue, which the RevenueCat report says takes the average developer 65 days to reach. After that, it takes 120 days to reach $5,000, and new milestones come more quickly after that — a trend that suggests that those apps that prove successful pass it on, potentially thanks to viral marketing and similar exponential growth drivers.
However, the numbers also show that only about 17% of apps will reach even $1,000 in monthly revenue. Further down the scale, only 3.5% of apps will reach $10,000 in monthly revenue, the figure some may need to turn their freelance project into a full-time business, TechCrunch notes.
In terms of success stories, health and fitness apps seem to be the most capable of making money, performing at least twice as well as all other categories tracked combined. However, developers may want to stay away from travel and productivity apps as they are more difficult to find success in terms of revenue.
A few words about prices. RevenueCat figures show that the most common monthly subscription price is $9.99 per month. Weekly subscriptions typically cost $4.99, while annual subscriptions typically cost at least $30. However, lifetime subscriptions are not recommended, and Reid DeRamus, founder of Caddie, says that “lifetime plans tend to severely under-monetize the most passionate, loyal subscribers, many of whom would be happy to pay for a membership as long as you’re in business.”