Not Everything in the App Store that Glitters is Real Gold

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newsweek article app store goldA wise man once said: "The successful always has a number of projects planned, to which he looks forward. Anyone of them could change the course of his life overnight.”

That pretty much sums up a recent article in Newsweek that reports on the fast-rising success of a handful of iPhone developers. Dan Lyons in There's Gold in them iPhone" the Dec. 13 issue of Newsweek quotes Brian Greenstone, of Pangea Software:

Some kid in his bedroom can make a million bucks just by writing a little application for the Apple phone.

Greenstone has created several hit games for the iPhone, including Cro-Mag Rally and Enigmo.

Lyons uses Ge Wang, whom we interviewed last month as a leading example of the App Store's possibilities for developers. Wang — who was one of three sources Lyons used in his piece — is the creator of the record-smashing Ocarina. That app will rack up close to $1 million this year, Lyons reports.

Wang and Smith are riding the latest phenomenon to sweep across the tech industry. Thousands of people are writing applications for the iPhone and selling them through Apple's App Store.

While it's true some app developers have struck gold, few other app developers have done nearly as well, as we reported in October, citing a report from Business Week.

The App Store contains some 10,000 apps and there have been more than 300 million downloads since July when Apple founded the online marketplace. Although market research companies vary in their estimates, the consensus is that the majority of apps downloaded are free or sell for $0.99 (too little for many developers to profit). One analysts calculates that of top 50 downloaded apps, the first paid app is 48th.

A look at the Dec. 15 "What's hot" list posted in the App Store shows that of the 34 apps on the list, 21 are free or $0.99.

The Newsweek article comes at a time when some successful iPhone developers are starting to voice their concerns about the difficulty of making a living crafting apps for the iPhone, as we reported the other day.

They say with the hit-driven mentality behind the App Store that unless an app quickly gets pushed into the top 50--either by being featured on iTunes or by word of mouth--it's doomed to only break even or lose money. The consequence is that developers will stick to building low-risk $0.99 apps rather than apps that are more ambitious and useful. At best, Apple needs to refine the App Store's business model or risk stifling growth and innovation, they say.

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