Developing iPhone apps proves lucrative

Wall Street is a major downer these days, but the runaway success of the iPhone 3G and Apple’s App Store is spurring a heady wave of enthusiasm in the venture capital community, a wave that will float the boats of many independent developers.

Consider these numbers: One million iPhone 3Gs were sold in the first three days it was available.

Even more impressive were the 60 million downloads from the App Store in 30 days. It’s no wonder that investors are ready to throw money at all things iPhone.

[ Not everyone loves the iPhone 3G, and to be fair, the launch had some very noticeable rough spots. ]

New era of startup capital

Back in March, Kleiner Perkins, one of Silicon Valley’s leading backers of new technology, launched iFund, a $100 million investment initiative to fund “market-changing ideas and products” that extend the iPhone and iPod Touch platform.

It’s much too early to know how the fund will perform, of course. But it’s clear that the early going has knocked the socks off the money mavens at KP.

“In six months, we’ve received over 2,700 plans. To put it in context, that’s about 20 times what we received in a similar period last year. Out of that group, we’ve funded five companies, totaling more than $30 million of investment,” KP partner Matt Murphy wrote in his iFund blog.

Of the five companies under the iFund umbrella, GOGII aims to create a new social interaction and marketing platform; iControl offers the opportunity to stay connected in real time to family, property, home, and business, anywhere, anytime; ng:moco is billing itself as the first iPhone-only games publisher; and Pelago will allow iPhone 3G users to discover the world through the eyes of their friends and people they trust.

To put the torrent of App Store downloads in context, Murphy says users have each been downloading an average of eight apps in the first 30 days, whereas fewer than 25 percent of users of other smartphones download any apps at all. Those that do, he said, download an average of 2.5 apps per year. That means a relatively small base of handsets is dramatically outperforming the other 250 million, Murphy said.

As I wrote last week, it was clear at the recent Demo conference that developers are rushing to make their mobile applications iPhone-compatible, while those who don’t may very well be putting themselves at a competitive disadvantage.

The bottom line on iPhone app development

Sales figures released by Taptaptap, which has developed two iPhone apps to date, give a good idea of the potential for developers.

“Total sales for the month was $75,177 and after Apple’s cut, we ended up with a grand total of $52,815,” Taptaptap announced in its blog, showing a cut of 30 percent for Apple. Any developers out there care to weigh in on how that compares to other deals?

Taptaptap co-founder John Casasanta, a longtime Mac developer, expanded on the sales figures, noting: “The sales are reported for the period of June 29th to August 2nd. But because the App Store opened July 10th, the period is actually 24 days. So over the course of those days we took in an average of around $2,200 per day.”

I have no idea what the company’s bottom line looks like, but a small shop that brings in a couple of grand a day is off to a great start.

As KP’s Murphy put it: “No more building apps and spending 12 to 18 months to get carrier business deals.”

(Disclosure: I own a small number of shares in Apple.)

I welcome your comments, tips and suggestions. Reach me at [email protected].

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Jim Love, Chief Content Officer, IT World Canada

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