Fixing inequality in the app stores

At YTTRO, we believe that all apps are created equal. Upon their debut in the app stores, all apps should be given equal consideration and opportunity for the spotlight, regardless of their developers’ pre-existing prominence. From there, apps that demonstrate excellence in creativity and quality should ascend to the top charts, assuming their hard-earned places in the upper echelons of mobile gaming.

Unfortunately, the app industry rarely adheres to this principle. Here’s what actually happens.

The present structure of the app stores creates an uneven playing field from the very outset by favoring marketing budgets over app quality. As a result, virtually the moment they are released, mobile games from indie developers immediately fade into the murky, unknown depths below the top charts, while mobile games from well-established firms receive unprecedented exposure alongside their large-scale marketing efforts. The consequence of this disparity in marketing opportunity is a disparity in profits. Compounded together in a never-ending spiral, these two make for some very interesting statistics. Let’s take a look.

First, it’s important to acknowledge the rapidly increasing size of the app industry that the top charts cannot accommodate. Games account for the bulk of Google Play’s earnings, and mobile has claimed the title of largest game segment in terms of revenue. The global mobile app marketplace will reach $25 billion this year, and by 2017, developers will have made over $77 billion from 268 billion downloads. Yet despite the industry’s overall positive outlook, a miniscule portion of the industry, comprising developer titans, will take in the lion’s share of this revenue. The remaining majority of independent developers will find the road to success to be more daunting than ever before, due to a steady influx of mobile games to compete against.

supercell king revenue

Today, over 3.17 million apps vie for the attention of increasingly selective consumers. Amid this intense competition, the eventual top chart contenders are winnowed down to a mere top 200, or 0.012% of all apps. Of these 200, many belong to titans who cement their positions in the charts with the help of their sheer size and marketing power. So ironically, the very lists that most users refer exclusively to for new content are often static and unchanging. Additionally, many games in the top charts are simply replicas of other successful games – part of a new “science” in which developers mimic Clash of Clans or Candy Crush in a desperate attempt to piggyback off of those games’ successes. So users who consult the top charts get an inaccurate picture of all the options available in the app stores and overlook a large portion of indie games. Consequently, many indie developers face substantial hurdles in garnering app exposure.

This crowding out phenomenon can be neatly summarized in one ratio, 80:20. While 20% of developers dominate an astounding 80% of the App Store, the remaining 80% of developers are relegated to the obscure realm below the top charts and left with the remaining 20% of revenue to fight over. As a result, a quarter of developers make nothing at all, and another quarter generate less than $100 a month per app. In total, over half of developers earn below the poverty line of $500 per month. Moreover, the top 3% of developers cash in over $100,000 a month, or more than 20,000% of what the bottom 57% collectively earn. And if we pit one top grossing app firm against one indie developer, the firm’s app can earn an astounding 40,000x what the indie developer earns.

revenue distribution

To combat the super-saturated app marketplace, indie developers must rely on intense marketing efforts – but with revenue trickling in at a sluggish pace, marketing opportunities are becoming more costly and out of reach.

To put the necessity of marketing into perspective, the average development cost for an independent mobile app rounds out at slightly less than $6500 while marketing costs can reach as high as $30,000. Though $30,000 sounds like a substantial amount to invest in marketing just one app, it’s nothing for game titans who can easily outperform an indie developer with a marketing budget over 15,000x larger. What’s more, someone who does put $30,000 forward in marketing might still remain in the 68% majority of developers that make less than $5000 from their most successful app. That translates to an ROI of 18% and a net loss of 82% in expenditures. So success isn’t guaranteed by a long shot.

The exorbitant marketing costs stem from the issue that we’ve previously brought up: the oversaturated app market. With millions of apps pushing and shoving for the spotlight, it’s only natural that the CPI has steadily increased by 7% each year. Coupled with the usual spike in CPI during the holiday season and an increased focus on acquiring a loyal user base, the rising CPI has caused the Cost Per Loyal User index to recently hit an all-time high, 61% higher than the year before. This means that, on top of everything else, indie developers must wait a couple months after release before they can break even with their initial marketing costs – but keeping users engaged for that long requires additional marketing that developers might not have funding for.

cplu

And given that 80% of revenue is already reserved for the lucky 20%, the other 80% of developers have little funding that they can dedicate to marketing, let alone running a business. If we exclude the top earners from the 20% minority, then only 8% of independent developers have generated sufficient revenue to run a stand-alone business. And through 2018, less than 0.01% of apps will ever be labeled a financial success by their developers.

Overall, what we have is a ruthless chicken-and-egg cycle of extreme disparities in revenue compounded with inadequate funding for marketing. But before indie developers decide to give up their pursuits and join Glu or Gameloft, there is light at the end of the tunnel.

That light is the emergence of alternatives to the traditional, rankings-driven lists. Recently, the App Store unveiled curated lists of apps that are handpicked by the editors. It’s a step in the right direction, but it doesn’t completely close the gap in opportunities for the spotlight.

app store screen

Enter YTTRO. As another alternative to the experience of scrolling through monotonous lists, YTTRO is already ahead of the curated content trend. By displaying mobile games available in a visually appealing, intuitive interface, YTTRO places the power of discovering any game in the hands of the end user. No longer do the App Store’s lists have to filter out potentially promising games before users can explore for themselves; now, users have complete access to every single game in existence.

zoom out

zoom in

For developers, this means that they now have a venue to get their work noticed and downloaded, regardless of their marketing budget or previous successes. By eliminating these external factors that have no influence over the merits of the game itself, YTTRO is shifting the focus to creativity and quality – the truly important elements essential for a game’s success. At YTTRO, our mission is to distance the mobile app industry from 80:20 and bring it closer to the principle that all apps really are created equal.

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