The popular email app Sparrow was recently acquired by Google for a tidy sum, and pretty much immediately mothballed. This has resulted in a firestorm of criticism leveled at both Google and the Sparrow developers. "Why can't independent developers stay independent?" is a common refrain. "Why must they always sell out like this?"
Two independent app developers have done some in-depth analysis of the App Store economy. App Cubby's David Barnard, developer of Launch Center Pro, approaches the issue by analyzing his company's own experience on the App Store and inferring Sparrow's probable income from his own app. Tony Wright analyzes the top-grossing apps in the App Store to determine which types of apps gain the most revenue.
Though their analyses approach the App Store economy from different angles (and both are well worth reading), they both reach the same inescapable conclusion: for the majority of developers, selling paid apps in the App Store is simply not sustainable. Free-to-play games with in-app purchases are where the real money is being made -- or, alternatively, making a successful app like Tweetie or Sparrow and then selling it to Twitter or Google.
Both posts pour cold water on the idea that an independent developer can become an overnight millionaire off a successful App Store debut. Our own Mike Schramm experienced this personally when developing and launching his own iOS game, Antithesis. After eight months of working on the game, getting widespread favorable reviews at launch and a brief feature at the top of the App Store's Arcade page, Antithesis ultimately earned less than $1000 in revenues.
Mike made Antithesis for fun, but many independent developers are staking their livelihoods on success in the App Store. Game developers in particular dream of making the next Angry Birds or Infinity Blade, titles that earned their respective developers giant stacks of money.
The reality is much harsher. Barnard estimates that Sparrow's iOS app made $400,000 in its first four months. That may sound like a lot of money to people making $40,000 a year or less, but most of that $400,000 came in the first couple of months. Sparrow's team had five people on it and, according to Barnard, that team of five could expect total revenues to eventually average out to around $30,000 per month. They had also taken a funding round, meaning that there were now investors who would expect an eventual return on their money.
It's no wonder then that Sparrow sold the company and the app to Google for $25 million. In one lump sum, the team earned an amount of money that would have taken nearly 70 years on the App Store at App Cubby's estimated monthly revenue.
Barnard reaches a rather stark conclusion after analyzing Sparrow's rise, leveling off, and buyout:
The age of selling software to users at a fixed, one-time price is coming to an end. It's just not sustainable at the absurdly low prices users have come to expect. Sure, independent developers may scrap it out one app at a time, and some may even do quite well and be the exception to the rule, but I don't think Sparrow would have sold-out if the team - and their investors - believed they could build a substantially profitable company on their own. The gold rush is well and truly over.
Sparrow is almost certainly not the last time we'll see a critically lauded, popular app "sell out" to a bigger company like Google. Facing numbers like those in App Cubby and Tony Wright's analysis, who could blame them?