During the California Gold Rush, those who supplied the miners with food, tools, and drinks made more money than the gold miners themselves. It’s almost like the App Store gold rush: Those who provide developers with distribution platforms and services make more money than the developers themselves.
For every download of an application, developers can expect about $.10 to a little more than $0.01 in revenue. Meanwhile, these applications build the network effects that make the platforms enticing for consumers, and they also require database backends, ad networks, and other technical solutions to run and stay financially viable.
How can you put your money on the winning side of the rush to the mobile application market, and avoid fool’s gold? Look to the suppliers, and not those panning in the digital river.
The obvious
According to Forbes, an Apple Inc. (NASDAQ:AAPL) developer can expect $0.10 per download, versus $0.019 cents for Google Inc (NASDAQ:GOOG)’s Play market, and $0.15 for Microsoft Corporation (NASDAQ:MSFT)’s Windows app store. And, while that makes it seem like developing for Microsoft Corporation (NASDAQ:MSFT) is the best choice, the average Windows app is only downloaded about 4,000 times versus 40,000 for an Apple Inc. (NASDAQ:AAPL) app, and 60,000 for a Google Inc (NASDAQ:GOOG) app. These are just averages, however, and a few select apps substantially outperform this, while others languish with very few downloads; similar to a few forty-niners finding gold nuggets while a majority found little to nothing.
Where to pan for application gold
There are less obvious plays for those who service mobile applications. Facebook Inc (NASDAQ:FB), once derided for its failure to capture value from its growing mobile user base, has a small ace up its sleeve in a recent acquisition. In April, Facebook Inc (NASDAQ:FB) purchased a start-up called Parse for at least $67 million in its own stock, which does not include any possible cash it might have paid. Parse simplifies application building for developers by taking care of some of the complex elements, like user management and data storage, and does it for all the major platforms, including iOS, Android, Windows and Javascript.
While Parse raised $7 million in funding before Facebook gobbled it up, the future for Parse could be massive. Like with any service that appeals to laziness, especially one that ties itself to a growing industry with big profit potential, Parse might help fill in that Zynga-sized hole in Facebook’s other revenue.
And what helps power Parse? None other than Amazon.com, Inc. (NASDAQ:AMZN)‘s Web Services. Amazon, of course, has its own Appstore for Android to help populate its customers’ Kindles. But what might be more enticing for the company is its services that run these applications. Giving developers access to vast and scalable cloud storage, as its Web Services do, allows Amazon.com, Inc. (NASDAQ:AMZN) to earn app-related revenue no matter from what store an application is eventually downloaded.
Where’s the next Klondike?
While you may not make it rich creating your own application, there are many chances to invest in companies that will make it off the backs of the millions of mobile developers.
The article Getting Yourself Into the Gold Rush of App Stores originally appeared on Fool.com and is written by Dan Newman.
Fool contributor Dan Newman owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, Facebook, and Google. The Motley Fool owns shares of Amazon.com, Apple, Facebook, Google, and Microsoft.
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