App Developer Diary Part 4: The Hidden Cost of iPhone Apps

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Going behind-the-scenes of a real iPhone app’s development, the latest installment takes a candid look at the economics of the App Store.

In my previous entry for the App Developer Diary, I was lost behind a mountain of paper-work. Since then, the rapidly growing mountain of tasks hasn’t changed too much — I’m still working on the game design document and concept artwork, but an array of new tasks have also joined the list.

The game I’m developing with Pear Computers is being created in our spare time. As such, we’re not keeping any records as to how long we’re spending on a given task. We’re working evenings and weekends, any random available hour, to push the project forward.

Although some smaller developers may work in this manner, this isn’t the way it would work at a big studio. A larger studio needs to know how much money they’re investing in an app’s development, ensuring that they’re staying on-budget and able to accurately calculate how much profit will be generated.

As we’re not keeping any official record, without running through e-mails and diary entries, we’re unable to accurately quantify the cost of development. So instead of generating a hasty approximation for the benefit of this diary’s readers, I spoke to Mills, founder of mobile content studio UsTwo, to tell me about the hidden costs of developing for iPhone.

Stepping Back

Founded in 2004, UsTwo specialize in mobile content development, their current largest client is Apple-competitor Sony Ericsson. Having grown to an impressive 43 staff, made up of designers, animators and coders, the London-based team are also opening studios in San Diego and Mälmo, Sweden.

When the App Store opened last Summer, Mills decided to experiment with developing for iPhone. “We do so much work for clients but, more importantly, we wanted to create our own apps. We’re a design-led company, the iPhone is a really exciting device and so we decided that UsTwo is the perfect space to do create apps.”

Released in February this year, UsTwo’s first project was Steppin, a tap ‘n’ drag game that tests the player’s digit dexterity. Looking back, Mills describes the project bluntly as, “how not to develop a game.” He explained that Steppin’s development cost an estimated $50,000, with it only generating around $1600 in profit.

The extraordinary development costs were really due to UsTwo’s drive to experiment and test different gameplay concepts. Mills explains, “We kept experimenting, trying to get it perfect. Rather than prototyping in Flash first, we went straight to iPhone and kept changing it as we went. Nowadays we’d never develop like that.”

Mouthing Off About Costs

With the studio’s next app, MouthOff, Mills felt that UsTwo had learned from their previous mistakes. “Before we began development, we looked at the apps that were doing well, like the fart apps, and decided to make something quickly with minimal effort and cost. It’s only made around £11,000, but it probably broke even. Development cost a tiny amount, however we spent time promoting it and have rolled out updates too.”

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Despite MouthOff breaking even, Mills believes the real value for UsTwo is in the contacts the studio has made and the exposure they gained in promoting the app. MouthOff was even used in a video for Tanya Morgan. In a surprisingly candid move, Mills shared the sales figures and stats for MouthOff with me. Sales for MouthOff are revealed as averaging out at around 50 per day, the vast majority of which come from the U.S. and Great Britain.

Although he knows it could have been even more popular, Mills is happy with the general response to MouthOff, “In some ways it was a massive success and in other ways it wasn’t nearly as successful as it could have been. We made lots of contacts though and we’ve been approached by new clients too.”

Looking forward though, it’s clear that UsTwo has its eye on the App Store’s future. “The next wave in the App Store has to be coming soon,” Mills explains. He believes that, as there’s an over-saturation of duplicated app concepts, it won’t be long until people run out of novelty ideas. Hinting at the future, it’s clear that Mills sees UsTwo as a part of the next wave, “We’re in talks with a fair number of clients, discussing some interesting and genuinely useful apps.”

Only a few weeks in to developing an app for iPhone, it’s clear to me that this could be a potentially costly undertaking. Mills, with his straight-talking and utterly candid approach to development costs, gave me a serious reality-check. As a team, we need to take on UsTwo’s approach — building gorgeous, fun apps while keeping one eye on the books.

Next time: I wrestle with Apple’s Developer Center and try to test out the first playable prototype of our game concept.

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