Developing Perspective

#225: Users per Day.


00:00:00   Hello and welcome to Developing Perspective.

00:00:02   Developing Perspective is a podcast discussing news of note in iOS development, Apple, and

00:00:06   the like.

00:00:07   I'm your host, David Smith.

00:00:08   I'm an independent iOS developer based in Herne, Virginia.

00:00:11   This is show number 225, and today is Wednesday, August 12th.

00:00:15   Developing Perspective is never longer than 15 minutes, so let's get started.

00:00:19   Okay, so today's topic, I'm not sure if it's going to work, but I'll give it a go.

00:00:25   It's something that I've been musing about recently for just largely out of curiosity

00:00:29   and also kind of in preparation for the talk I'm going to be giving at release notes this

00:00:35   fall.

00:00:36   I've been doing a lot of digging around in my sort of historical books and where I've

00:00:41   made my money, how the revenue I've made over time has shifted for different types, you

00:00:47   know, for me in app purchase and paid sales and advertising and just trying to get a sense

00:00:51   of honestly how the history of the App Store has been for me.

00:00:55   And as I've been taking you around there,

00:00:57   I realized it's not that much I've ever really talked about on the show,

00:01:00   but it's kind of how I think about making a living from products,

00:01:05   how you kind of have to think about it.

00:01:08   Because it's a different kind of a job and a different kind of an income

00:01:12   than, say, if you're doing consulting,

00:01:14   or obviously if you have a traditional kind of a salaried job.

00:01:18   It's a very different way of having to conceptualize your income,

00:01:21   because it is in some ways consistent, and in some ways becomes kind of a salary, but

00:01:28   it's not like it's a set amount. Every single day, every hour, you are hoping that there

00:01:35   are people out in the world who are coming to, say, the app store. I'm going to see if

00:01:39   I just constrain this discussion to, say, you're making iOS apps and selling them in

00:01:44   the app store, which is what I primarily do. You're hoping that there are people out in

00:01:49   the world, of the hundreds of millions of people who have iPhones, who are picking up

00:01:54   their phone, opening the App Store app, browsing in that App Store app to find your application

00:02:00   out of the 1.5 million apps in the App Store.

00:02:05   They find your app, they download it, either by paying you money for it or by downloading

00:02:10   it for free, and then opening it.

00:02:12   And maybe if it was a free app, you're going to show them some advertising or you're going

00:02:16   to offer them in-app purchase.

00:02:19   And you're hoping that at the end of that, the sum each day or each hour or each year

00:02:24   is the amount of money that you need to sustain your business.

00:02:28   And obviously, a successful business is functionally just, do you make more money than you spend?

00:02:34   And when you're independent, it's probably more, do you make more money than you need

00:02:38   to live on to break even?

00:02:39   Because obviously, if the business breaks even or makes a small amount of money each

00:02:43   year it's not really productive because obviously you need more than that to live on. And when

00:02:49   you're independent or at least a very small team, those two become very strongly entwined.

00:02:55   And so what I've always done, and the way that I look at my finances as a business,

00:03:01   is I work backwards into how much I need the apps to make each day. And then on a weekly

00:03:12   I go in and I run up a whole bunch of reports to look at how I did the previous week

00:03:17   I have a sense of where I am in terms of that goal

00:03:20   I find it easiest to think in terms of per day because I don't know if it just the way my mind works

00:03:25   But the numbers are nice and concrete and typically small enough that I can kind of conceptualize about them

00:03:30   and

00:03:32   It's also just kind of a less of a daunting thing

00:03:35   And if I try and be tracking it

00:03:37   on a quarterly basis or a monthly basis.

00:03:42   I don't feel like that granularity is helpful.

00:03:45   And so each Monday I go down and I pull in all my reports

00:03:48   from IAD, from iTunes Connect, from the other kind of

00:03:50   advertising and places that I get money from.

00:03:54   I pull them all into this big custom script, it pushes them

00:03:56   together and then I end up with this nice pretty chart

00:04:00   that shows by product and by product income type,

00:04:03   where my income is going.

00:04:03   And I can kind of see overall if I'm on track,

00:04:06   if things are slowing down, if things are speeding up,

00:04:09   and get a sense of where I am.

00:04:11   For me, I found that to be very helpful.

00:04:14   But the funny thing about this way of thinking about it

00:04:16   is focusing in on the daily numbers

00:04:19   is also kind of hard to lose track of what that

00:04:21   means at scale and overall.

00:04:24   And so what I wanted to do kind of as a thought exercise here

00:04:27   and moving away from my own experiences,

00:04:29   but just kind of in the abstract looking at it

00:04:32   from the perspective of if you are somebody who was going to start, you wanted to start

00:04:37   a business, you wanted to make products and sell them in the App Store, and you wanted

00:04:40   that to be your income, what that would look like practically.

00:04:45   And so kind of as a thought exercise, I was going to say, like, say, for example, you

00:04:48   wanted to take home from your business about $85,000 a year.

00:04:53   And I'm just making that number up.

00:04:54   Like that is, I think, a reasonable number in terms of if you are qualified enough to

00:04:59   make apps and sell them in the App Store at a high enough quality level that you would

00:05:03   be able to successfully do that independently, you could probably get a pretty good job at

00:05:07   a 9-to-5 place.

00:05:09   And you could probably, at the very least, take home that, at least in the United States.

00:05:13   That's just high-level guess.

00:05:14   Like I said, it doesn't really matter.

00:05:15   I just needed an A number to punch into it.

00:05:18   And of course, you have to keep in mind, if you are working—and the reason I ended up

00:05:22   at 85,000, too—if you're working for yourself, there's also a bunch of overheads and costs

00:05:26   that you won't have from a salary.

00:05:28   So if you want to take home that as though it were your salary, you probably need to

00:05:32   make substantially more, at least something like maybe 15% more than you would actually

00:05:41   need.

00:05:42   So if you want to take home 85, then you'd have to make, on an annual basis, about $100,000

00:05:47   a year from your products.

00:05:49   And so that's why I kind of worked backwards from there.

00:05:52   $100,000 is a nice round number.

00:05:54   Whether it's constructive for you, obviously, it doesn't really matter, or it matters to

00:05:57   but for the purpose of the exercise doesn't matter.

00:05:59   You can just scale the number up and down if your cost of living is much higher or much lower.

00:06:02   But say you needed your business to bring in $100,000 a year,

00:06:06   what would that look like practically on a day-to-day basis in the app store to make your living?

00:06:12   And obviously a lot of people make--there's a lot of products that end up just making most of their money

00:06:17   in a very short period. Like they'll have a big launch spike and then they'll make almost nothing.

00:06:22   And that is certainly a model.

00:06:25   It's one that I try very hard to avoid

00:06:27   in the way that I sell my products,

00:06:29   because that just is, A, it's terrifying,

00:06:31   and B, it's not really sustainable.

00:06:33   You can't make a living off that.

00:06:34   It's a great way to make side income

00:06:37   and hobby income from applications,

00:06:38   but it's not really a business.

00:06:39   Like if you make,

00:06:40   if your first week's sales is 100 times your next day's,

00:06:46   your next week's sales, and it continues down from there,

00:06:50   that's not really a business.

00:06:51   It's a really cool thing to see, and sometimes can be kind of fun, but it's not really a

00:06:54   business.

00:06:55   And so I want to look at it as on a sustained basis, day in and day out, what would you

00:06:59   have to do?

00:07:00   And so say you had an application and you sold it for 99 cents in the app store.

00:07:04   Whether or not that's a good idea, I'm not really going to get into, but say that's what

00:07:07   you did.

00:07:08   How many sales would you need a day?

00:07:10   So after Apple's cut of 70%, or after Apple's cut of 30%, your 70% of that, your 70 cents

00:07:16   that you get per sale, you would need about 395 sales.

00:07:19   995 sales and I'm getting that by just taking a hundred thousand divided by three hundred and seventy five three hundred and sixty five

00:07:25   So you need to make about two hundred and seventy four dollars a day

00:07:28   So you need three hundred and ninety five people to open up the app open up the App Store every day

00:07:33   find your app downloaded pay you ninety nine cents and

00:07:36   Getting four hundred people a day to do that isn't crazy. It's not like a totally insane number of people

00:07:43   It's units four hundred people and on a you know on an annual basis

00:07:47   that isn't too wild of a number of people to have to support.

00:07:52   Let me actually-- I forgot to do that math.

00:07:54   It is.

00:07:55   You have about 145,000 people a year

00:07:59   who will be downloading your application,

00:08:01   which you could probably reasonably

00:08:02   support as a one-person team.

00:08:05   That's probably unlikely, though, in the current App Store

00:08:07   to be able to get that number of people.

00:08:09   Like, 395 paid sales a day is actually a pretty high number,

00:08:14   in my experience.

00:08:15   It's very hard to get that these days.

00:08:17   And if you did that, you'd be in a pretty high,

00:08:21   you'd be a very high sort of quintile in the app store,

00:08:24   whatever the fancy word for that is.

00:08:27   So more likely than not, what you're gonna do

00:08:29   is free with in-app purchase of some kind.

00:08:31   And so say you have a 99 cent in-app purchase

00:08:34   in an application, and you wanna make,

00:08:37   and you have say you have a 10% conversion rate.

00:08:40   Like I'm just throwing out numbers here.

00:08:42   This is hopefully interesting.

00:08:43   That's why I said I wasn't sure if it would work.

00:08:45   But at that point, you would need about 4,000 people

00:08:49   to be downloading your app each day to hit your goal.

00:08:54   So if you had 4,000 people downloading your app each day,

00:08:57   10% of which bought your $0.99 in-app purchase,

00:09:00   then you'd probably be able to hit your revenue goal.

00:09:03   4,000 people downloading a free app a day

00:09:06   is also quite a big number.

00:09:08   It works out to about 1 and 1/2 million people a year

00:09:11   who are finding your app and downloading it,

00:09:14   which is doable, it's not inconceivable.

00:09:16   It's numbers symbolism.

00:09:18   It's about the ballpark of what I've

00:09:21   seen a lot of free apps do.

00:09:22   I mean, the nicest thing about a free app is that you--

00:09:25   it's free.

00:09:26   So it's easier to push people to download it.

00:09:28   10% conversion is probably optimistic,

00:09:31   but somewhat realistic.

00:09:35   But that's kind of what you end up with.

00:09:36   And it's kind of crazy, though, when you think about that,

00:09:39   that you'd need 1.4-ish million people to download something

00:09:43   order to make your living. It starts to get kind of scary. And this is, for me anyway,

00:09:50   the scary part of what I do. That every single day, that is what I need my business to do.

00:09:56   I can't miss a day or I have to make it up an average, I suppose. But it's kind of a

00:10:04   crazy thing to think that that's the pace that you have to be able to sustain just to

00:10:08   sort of barely make it where you want to go.

00:10:12   As a side note, instead of doing in-app purchase,

00:10:15   if you just do ad ads, I took a look at my current ad rate.

00:10:19   And I think I get an effective CPM, which

00:10:23   is the value I get per 1,000 views of about $0.90

00:10:27   is what I've been seeing recently.

00:10:29   If you want to get that same amount of money from that,

00:10:31   you need something like 300,000 ad impressions a day,

00:10:36   which, based on my experience, means

00:10:38   you would need something on the ballpark of about four and a half million downloads a

00:10:41   year or 12,000 a day.

00:10:45   And these numbers start to get very scary very quickly.

00:10:49   And my point here is not to scare anybody away and say that it's not completely possible

00:10:56   to make a living in the app store.

00:10:58   This is what I do and have been doing for a very long time.

00:11:00   But it becomes that you have to...

00:11:04   This is in some ways a justification for why I have so many apps.

00:11:07   It's kind of a running joke that I have so many applications.

00:11:09   And part of it is that my apps in aggregate have to hit these numbers, not one app individually

00:11:15   hitting it.

00:11:16   And because if that was the case, if I had to hit, say, 1.4 million downloads a year

00:11:23   just to hit a basic revenue goal, it'd be pretty intimidating and pretty tough.

00:11:29   It's nice to be much easier to be able to do that split out over a lot of applications,

00:11:33   a lot of applications that are doing reasonably well, adding up to that number, rather than

00:11:37   trying to get there in one big bang.

00:11:42   So that's kind of the way I think about it, though.

00:11:44   And I think it's an important exercise if you're somebody who would like to make their

00:11:47   money from the App Store, or at least the substantial amount, is to do -- I think it's

00:11:51   very wise to sit down and do this reverse calculation.

00:11:55   What is your goal?

00:11:56   What is the amount of money that you're trying to make from the App Store?

00:11:59   At like -- at full scale, like what would you want that to be?

00:12:02   And then to be able to work that one, work that backwards

00:12:05   into what you would need per day,

00:12:06   and work out how many users you would reasonably

00:12:09   expect to have to get per day in order to do that.

00:12:13   It's helpful both in terms of setting expectations

00:12:15   reasonably, like understanding how realistic it is for you

00:12:17   to make your living in the App Store based on the application

00:12:19   you have.

00:12:20   If it's a very niche app whose market

00:12:23   is going to be really constrained,

00:12:25   and you start to look at, do I really

00:12:26   think I can get 4 million people to download this app,

00:12:29   one and a half million people to download this app.

00:12:33   You may have to be very, very thoughtful about if you could e-debt, or even if it's just

00:12:38   straight up paid and you had to get, say, 100,000 people, 140,000 people to download

00:12:42   your app, pay for your app.

00:12:43   Like, is that realistic?

00:12:44   I find it easier to work, though.

00:12:47   You have to work your way back and really have a handle on these numbers, because if

00:12:51   you're just kind of hoping it will work out, it's very unlikely that it will.

00:12:57   When I started out doing the App Store stuff, I started off also consulting.

00:13:03   And I've said many times on the show, what I did is in some ways I conceptualized my

00:13:06   apps as a client of mine, and I was able to justify spending time on my apps based on

00:13:11   the income that I got from them, and so they eventually became my biggest client, and eventually

00:13:15   I dropped doing other clients.

00:13:16   But I had a goal in mind for what my daily income from the apps had to be before I could

00:13:22   sort of quit my consulting work.

00:13:24   And that was very helpful for me to think about.

00:13:25   And it was, you know, as a daily goal.

00:13:27   And you can kind of easily see it on a day-to-day basis.

00:13:29   How close am I?

00:13:30   Am I above?

00:13:31   Am I below?

00:13:34   And it's been really helpful for me to think about.

00:13:36   It's also a useful exercise, probably, just

00:13:38   in terms of understanding the infrastructure you will need,

00:13:41   in terms of the help desk infrastructure you'll need,

00:13:43   the number of support requests you can expect.

00:13:46   You know, it's a very different number

00:13:47   if you have four million users a year,

00:13:50   or if you have a couple hundred thousand users a year.

00:13:53   Similarly, if you have any kind of web infrastructure

00:13:56   that you need to support within your app,

00:13:58   you have a good sense of if your numbers go crazy

00:14:01   and you have massive growth in your application,

00:14:03   tons of downloads, things are going awesome,

00:14:05   and you have to scale your web infrastructure,

00:14:07   then obviously that's a great problem to have.

00:14:09   But you also have to make sure you can understand,

00:14:10   if things are just going as expected as a basic level,

00:14:14   what will my expenses be?

00:14:15   Because obviously that will end up in a circular fashion of,

00:14:19   if you need more and more--

00:14:20   if the cost of supporting even a basic level of users

00:14:23   will exceed what sort of income you're going to be getting,

00:14:26   or make it such that it just won't be financially viable,

00:14:29   you may have a problem.

00:14:30   All right, hopefully that was helpful.

00:14:31   I'm not sure if it was a bit rambly,

00:14:32   but anyway, it's a thought I've been having

00:14:34   that I thought it'd be worth sharing.

00:14:36   And as always, if you have questions,

00:14:37   comments, concerns, or complaints,

00:14:38   you can find me on Twitter, @m

00:14:39   or @md.s there, otherwise you can email me,

00:14:41   david@developingperspective.com.

00:14:43   Have a great week, happy coding,

00:14:44   and I'll talk to you later, bye.