Financial Realities of eProducts

This past year we have been experimenting with selling electronically distributed products, namely our iOS applications ‘State Lines‘ and ‘Coverage?‘, and our ‘Answers to Common Excuses‘ eBook.

We thought it would be interesting to share the hard numbers behind these roll-outs, because there isn’t a lot of real-world publicly available data showing the realities of how much (or little) independent developers and eBook publishers make.

We took on these projects as experiments in both learning new technologies and learning how to best distribute them.

In the case of our iPhone/iPad apps, we built product ideas that solved real world problems we had as full time travelers. We wrote apps that we wanted for ourselves, and that we could have fun developing. Fortunately (as you will see), we aren’t dependent on ‘making a living’ doing this – our core custom software development clients and projects happily remain our primary sources of income.

We share this information with you not to complain, but because so many folks ask us if creating and selling eProducts can be a profitable and sustainable business model. And we encounter a lot of folks who assume anyone who creates an iPhone app is destined to be an instant millionaire. As if…

So here we go:

State Lines for iPhone

State Lines is the first iPhone app we developed – it is a handy guide to the state laws and regulations that change as you cross state lines, helping travelers keep up with seat belt laws, towing regulations, smoking bans, sales taxes, driving laws and much much more.  We created this app because this was stuff we were always looking up, and we wanted to have it easily accessible in one convenient spot.

We began learning the specifics of iPhone development and working on State Lines in February of 2010, and officially launched it in early May 2010.

Our time invested into the initial launch of this app included:

Research on laws/regulations: ~70 hrs

Development time: ~100 hrs

Graphics & Initial Marketing: ~20 hrs

While we actually spent much more time than this developing State Lines, we’re estimating low because there was a lot of learning and experimentation time involved.

We have have also released three updates to expand State Lines and keep the app current, as well as a version of State Lines focused on alcohol laws, and the time spent on those versions and updates is not accounted for in these estimates either.

Now, the sales figures:

# of copies sold in 2010: 1161

Money earned: $2,152.80

State Lines did reasonably well in the first month or two – having an average of about 15 downloads a day.  But towards the end of the year, it slowed to a steady trickle of 2-3 copies a day. Overall, we averaged selling only 5 copies a day in 2010. From talking with other independent developers, this seems fairly typical.

If we consider just our initial pre-launch invested creation time, we’ve been compensated at about $11.33/hr.  While this makes for a nice residual income, we won’t be quitting our day jobs anytime soon (not that we are aiming to).

We are however still working on evolving State Lines, and soon we’ll re-launch it as a universal iPhone/iPad version, as well as releasing the underlying data in an eBook format for those not on an iOS device.

As for pricing – you can purchase ‘State Lines‘ for $2.99, though we intend to up the price to $4.99 once the iPad version is released.

Coverage? for iPhone/iPad

‘Coverage?‘ is a universal iPhone/iPad app that provides an at-a-glance “universal” coverage map by interactively overlaying maps from the four major nationwide cellular providers. It isn’t meant to give neighborhood level detail, but rather it is a tool for us traveling bandwidth junkies to interactively see where we’re most likely to catch our next hit of usable bandwidth.

We wrote this app not to embarrass AT&T or to make Verizon look good, but because as full time travelers, we needed it. To learn more about the story behind ‘Coverage?’, watch the demo video here.

Creating ‘Coverage?’ involved a whole raft of new technical challenges (excuse us as we geek a bit), in particular mastering the new in iOS 4.0 API’s for overlaying image layers on top of an underlying map. Being able to display so many graphical overlays interactively on top of Google Maps is pretty challenging stuff.  We needed to learn more about digital cartography, map projections, tiling, and image compression than we ever imagined.

We also quickly learned that there’s a reason that a resource like ‘Coverage?’ doesn’t currently exist anywhere else – coverage map data is not easy to acquire. Each cell phone provider reports it through a very awkward interface, rendered in very different mapping formats and projections.  It isn’t as simple as downloading maps and overlaying them – we had to first create our own interpretative maps based on each provider’s reports, standardize them to the same format, and separate out each coverage type to its own layer so that they could be compared on top of each other.

Our time invested in this project thus far:

Development time: ~200 hrs

Map creation: ~150 hrs

Graphics & Initial Marketing: ~20 hrs

We’re of course not including all of the research and learning time necessary to even take on creating ‘Coverage?’.   Plus, in addition to investing our time, we outsourced some of the graphical map-making grunt work for a cost of $300.  And that overhead cost will be repeated with each map update.

Since we just launched ‘Coverage?’ on December 22 – it’s far too soon to know what the longer term potential is of the project. But after the terrific launch-day numbers, the initial sales aren’t nearly as exciting as we hoped.

For the tail end of 2010, here are our results:

# of copies sold in 2010: 875

Money earned: $620.00

Our initial launch was quite exciting, and after a prominent featured review on TUAW we were blown away to sell 480 copies of ‘Coverage?’ on the first day. We immediately shot up as high as #2 in the iPad Navigation charts, and #3 on the overall iOS Navigation charts.

And then (we did know this was coming) Apple shut closed the interface to track sales for a week-long holiday shutdown, leaving us in limbo waiting for our next update on how well we were doing.

Based upon the day one sales, we thought we might have enough momentum to become an App Store success story, and we even had fantasies of ‘Coverage?’ earning us enough to buy a sailboat!

However, once Apple’s tracking interface came back online after the holidays, we were greatly disappointed to see the download numbers had quickly slumped off to about around 10 copies a day, and we were already nearly invisible in the App Store charts.

In hindsight, our biggest launch mistake was going with a 99-cent introductory price. While this made ‘Coverage?’ a no-brainer purchase, it also meant that we had a few too many ‘no brainer’ App Store reviews submitted by people who bought the app having not read the app description and who expected it to do things that it was explicitly not designed to do.

We’ve since raised the price of ‘Coverage?’ to $1.99, and we’ve found that a higher price makes for happier customers. Why? Because when spending more, people are much more likely to read reviews and the description to make sure the app is in line with their needs and expectations before purchasing. Since switching to $1.99, our sales have only slightly dropped, the reviews have improved, and our revenue has remained constant.

It is still way too early to draw too many conclusions from the launch of ‘Coverage?’. We still have a lot of media outreach to do to make sure that the app gets the notice it deserves, and we are working to make that happen.  We are also playing around with some other business models – such as maybe offering a free version with limited features that can be upgraded via in-app-purchase.

But based upon our initial sales, we have a long ways to go to get to a break even point, especially since we are faced with recurring hard cash expenditures to keep the maps updated.

Answers to Common Excuses eBook

When we were accepted to present at SXSW 2011 on Technomadism this coming March, we decided it was a good opportunity to experiment with offering a way for our readers to opt into financially supporting our non-commercial efforts in educating people about the potential and practicalities of this sort of lifestyle. Our ‘Answers to the Common Excuses’ blog series seemed like great content make into an eBook for fundraising.

We decided to release the eBook on a ‘Pay as you Wish‘ basis with a $20 suggested contribution, so that folks could decide what it was worth to them, and how much they’d like to support us.

Our time into this project thus far:

eBook Creation and Editing: ~40 hrs

Marketing graphics and materials: ~15 hrs

Obviously, we’re not including the time invested in writing the original blog posts that this eBook was based upon, just the time invested in re-writing, expanding and updating the content – and putting it into an eBook format.

Thus far, the eBook has these numbers:

# of copies downloaded in 2010: 156

# of folks who opted to contribute something: 38

Money raised (minus PayPal fees): $421.43

Average contribution per copy sold: $11.09

Average contribution per copy downloaded: $2.70

We’re quite thrilled with the generosity of folks choosing to contribute for their download of our eBook, and contributions have ranged from $1 – $40 (wow!). And we have hopes that some of the folks who opted to take our offer to preview the book for free will eventually come back and contribute.

Considering we weren’t launching the eBook to make a profit but simply offset our SXSW travel expense, we’re pretty darn happy that we’ve covered one plane ticket to SXSW so far.   And we still have a couple months to go.

Some Analysis & Opinions

We’ve learned a few things with our eProduct experiments in 2010:

• We are glad that we spent our time developing things that we’re passionate about, proud of, and that we can use ourselves. If we had approached these projects as ‘work’, the return on our investment would have been exceedingly disappointing.
• If you build it, customers wont magically come. Creating content or an app is not enough – you must have a way to reach your audience.  For any hope of success, you have to work constantly at keeping your visibility up! Particularly in the iOS App Store, it is really easy to get lost in amongst the other hundreds of thousands of apps.
• We’ve had several requests to port ‘State Lines’ and ‘Coverage?’ to other platforms, such as Android, Blackberry or WebOS.  Based upon our results in the iOS App Store and research into the viability of these other marketplaces, we just can’t see any way that investing in these ports would be at all worth our time, or even any fun. We would need to buy phones, subscribe to data plans (and get locked into contracts), learn new languages and tools, and then do a bunch of drudge work – all to enter into a market where other developers report seeing only a fraction of the sales as they do on iOS. It seems that the majority of successful Android apps are advertising supported, a model that we are not fond of and which does not mesh well with occasional use reference apps like we have created. We remain open to partnering with other developers who want to take on the porting costs and split the profits, but we’re just not interested in investing time or money into it ourselves. Maybe once Amazon’s upcoming Android App Store launches, the market conditions will change…
• For niche focused useful apps like ours, selling at 99-cents just isn’t worth it.  It is frustrating to be selling into a market where people value your work less than a can of soda, or a pack of chewing gum. In theory we can make it up in volume, but the volume for anything other than a mass-appealing hit just isn’t there. Selling cheaply devalues the work that went into creating the app, and invites critics not aligned with your app to submit unfounded negative reviews. For 2011 we are going to avoid under-pricing our apps, and are vowing to support other developers by buying their apps when the are OFF sale.
• If you are going to be in the App Store, it helps to have a thick skin. Consumers that spend a buck on your product seem to be the harshest critics, and they have very high expectations for their 99 cents.  The App Store review system is completely one-sided towards the consumer’s voice; they can leave unfounded negativity anonymously and without any responsibility for what they say. And Apple gives developer’s absolutely no way to proactively provide customer service or even a refund to these people. In our opinion, the customer service side of the App Store if fundamentally broken.

Anyway – that’s been our experience with ‘State Lines‘ and ‘Coverage?‘, and our ‘Answers to Common Excuses‘ eBook.  We thoroughly appreciate all of you who have supported us with purchases, positive reviews and spreading the word. Thank you!