If you want to make money from apps, forget about the app store

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Global developer revenue from apps, 2013.
Global developer revenue from apps, 2013.
Image: VisionMobile

Considering the number of free apps that clutter the world’s many app stores and the pittance paid by mobile advertising networks to app developers, it was only natural that app makers would find other ways to make money from creating mobile software. A recent report by VisionMobile, a London-based research firm that looks specifically at developers, puts into numbers just how much developers earn in other ways—which is to say, a lot. Taken together, app stores sales and advertising together count for less than a quarter of all revenues for developers.

Only 11% of apps are paid for, a number that will decline to 7% by 2016 as more and more people in the developing world start using smartphones. Including things like in-app purchases, app-store subscriptions and normal fees to download an app, app store revenues across platforms brought in $8 billion globally. Advertising contributed another $3.8 billion. That is 15% and 7% of the $53 billion that the report calculates as the total value of apps to the global economy in 2012.

The rest of it comes from sources such as e-commerce licensing and commissioned app-making. The largest of these is app-making on contract. Just as building software for businesses made the fortunes of several older tech firms such as Oracle and SalesForce, making custom apps and maintaining them is far more lucrative for developers than appealing to frugal consumers. At $30.2 billion, commissioned apps account for 56% of revenues earned by developers worldwide, more than double what they made from app stores and ads.

Other sources of income for app makers are less profitable. Revenues from directly selling things through mobile apps accounted for a mere 2% of the total last year. Together with things like non-app store subscriptions and royalties, a fifth of revenues last year came from miscellaneous sources.

The full report (pdf) looks at trends in apps from 2012 to 2016 based on a survey of over 6,000 developers in 115 countries, which VisionMobile senior analyst Andreas Pappas says is the most exhaustive study of its kind. It forecasts that paid apps will decline in the coming years relative to unpaid apps, but that revenues from stores will grow the fastest, from $11.9 billion by the end of this year to nearly $40 billion in 2016. Still, the market will continue to be dominated by apps made on contract, revenues from which will more than double to $62.5 billion in the next three years. And yet, developers working on consumer apps (there are just under one million of them) outnumber those who concentrate on commissioned apps by about 400,000.