Both TechCrunch and Mashables ran articles today about the glut of iPhone applications based on usage numbers from AdMob. AdMob has looked at 2,309 apps (with 15.1 million unique users) and has concluded what most of us already know - very few iPhone applications have any significant user base! Only 116 applications have over 100,000 users and amazingly 54% of applications have less than 1,000 users. Conclusion - unless you have a compelling reason to, you probably don't want to build yet another application for the iPhone platform - chances are (unless you actively promote and market it) you won't get millions of downloads, much less millions of dollars! The real money belongs to another group of people.

What's Good for the Goose, is Good for the Gander?
Let's do some simple math so see the type of money we are talking about. Let's say (as the articles suggest), there are more than 50,000 applications. Let assume they were build by 50K developers (not accurate since some build more than one, but again there are thousands of developers who didn't follow through and it usually takes more than one developer per app). Let's assume each of of these developers got an extra phone for development (that a $300 margin for Apple according to iSuppli) and paid $100 for the SDK (rounded up). That's $400 a developer. Multiply by 50K and that equals $20M dollars, and that's before the 30% margin Apple makes on each application sold! The real "developer revenue" number is probably 2 or 3 times that amount but we get idea!

The New Platform Gold Rush
Every once in a while, a new development platform will create a "developer gold rush". This was very much the case with Facebook (but didn't really happen for OpenSocial) and it was most definitely the case with the iPhone (but has happened in the same way for the Andriod). As a platform provider it definitely helps to be first (Facebook vs OpenSocial, Apple vs Android), to have a powerful developer-friendly platform, to be loud and takes risks (Facebook vs Yahoo!), and to do it right (Apple vs Blackberry, Facebook vs OpenSocial). Here is how some of it works:

How Platforms are Launched and Why Application Glut Happens

• Before the Beginning: A new platform usually begins with a private beta. Popular, talented or reputable software vendors and developers are courted/invited by the platform provider long before the platform is released as part of a private invite-only beta. Platform providers want to make sure their platforms are tested and stable and want to release their new platform with a huge marketing splash and lots of apps!In order to do that, they need dozens of good applications on day one! They can't have just have anyone building "crappy me-to apps" because that does not demonstrate the "true power of their new platform". Instead they hand pick a group of companies with recognizable brands or valuable services (or "friends of the company") that they want to have "featured" on their platform. Sometimes a developer like Metablocks is called in by the ISV or platform provider to actually help build these application (we have recently gone through this process for 2 new platforms in the process of being released) and sometimes we are just a "friends of the company"
• On Day One: When the new platform is launched, it usually happens with a lot of fan-fare. Facebook's F8 Launch featured dozens of applications from well-known companies like Microsoft, Amazon, Red  Bull, Washington Post, and Digg as well as more innovative offerings from upstarts like iLike, Slide, and RockYou. Now ask yourself, when was the last time you used an application from Microsoft on Facebook - you get the idea. Big launch with big names usually equals big developer response. You can't launch platform without any apps! Quiet releases don't work every well.
• On Day Two: Once the platform is launched and "publicly available", hordes of developers, ISV and hobbyists rush in as part of the gold rush. By this time, any promises of making a financial killing on the platform start to quickly diminishes. Application quickly get bloated with 10, 20, 30 or more applications that do EXACTLY the same thing! Me-to developers whose approach is to quickly replicate successful applications on other platforms make an appearance. Then anyone who has 10K or more to spend to have someone in India build them an application arrives at the same time.  Real companies, who unfortunately took their time building well-design application, are late to the party. Those who can even make it through the front doors find that there are is no free food or drinks left and they get elbowed as they try and make their way to the front of line. The brands or those with truly unique content (music labels) have the best chance of making a go at it. By spending thousands on advertising, they can get people to download theirs apps, but again they are not interested in selling $1, $2 apps but real products we already pay for everyday. So who are the real winners? Those who came early, the VIPs (Brands) and whoever is throwing the party.
• Building Momentum: If a platform is especially hard or expensive to build on, or if the market (aka consumers) just isn't there yet, or simply to accelerate the process, some platform provider organize competitions, host developer events or even help start a micro venture fund to help build platform momentum.
  • Developer Competitions: Ribbit $100K Killer App Challenge, $10M Android Challenge, Open AIM Challenge
    - note: used to jump start platforms that do not immediately sell themselves, competitions are expensive and usually do not yield the best results. Warning: if everyone is using your platform, you don't need a competition to launch it!
  • Developer Events: Facebook Developer Garage, iPhone Tech Talks, Yahoo! HackU
    - note: a very effective way to create follow-on momentum (not for jump starting). Use of free (usually alcoholic) drinks and food, and archiving events using video generally increase efficiently.
  • Development VC Funds: Facebook's fbFund, KP's iFund (iPhone), Google Ventures, AppFactory
    - note: probably the most effective "marketing tool" that serves to create the perception that everyone will soon be building on a platform. In Silicon Valley, this technique can help launch 100's of wannabe startups on a platform. Warning: these funds do not always pay out to true 'pure plays' and sometimes existing portfolio companies are 'repackaged' and quietly funded from this funds. It's also a way for small or old VC's to get much needed press (and entrepreneur interest).
• Re-igniting the Gold Rush: Providers periodically update their platform with new features to help re-ignite the gold rush. Apple's iPhone 3.0 release with its new features is being said to renew developer interest. Press helps as well. Stories about the vast fortunes being made on a platform, definitely help! Headlines from Wired that read: iPhone Developers Go From Rags to Riches or Who Wants to be a Facebook Millionaire (BusinessWeek) is what the American (developer) dream is all about! Taglines like: Developer Makes $250,000 in Two Months sound more like a late night TV commercial. Yes, for the lucky few these things do happen, but by the time you read about it, the party is probably over!
• Show Me the Money: This is all great for platform providers, since the smart ones very quickly figure out how to many money off the developer gold rush. Apple not only makes money each time an application is sold but they also charges for its iPhone SDK, making money off the thousands of application that are never made or sold - genius!Others, like Facebook, have introduce verification programs ($375 an application) and encourage developers to buy advertising to promote their applications. Both are excellent strategies for monitizing popular development platforms.

  In addition to customer acquisition via apps, charging for SDKs, "verification" programs, and advertising other mechanisms such as plaform-wide micro-payments, directory listing fees, and pay-to-play platforms will soon emerage as additional monitization options.

• Sometimes Developers Make Money Too: Joking aside, developers do have an opportunity to make real money, if they get in early and build reasonably good apps. Silicon Valley Insider claims this year, Facebook developers (combined) will make more money than Facebook, perhaps, but its all good.

Conclusion:
What's good for the goose, IS good for the gander, and promising new platforms that will attract CONSUMERS(most importantly) and good DEVELOPERS (always a chicken and egg) will make money for both (providers and developers). As for the consumer, please keeping using and buying our applications, and don't forget to click some on some of the ads, your patronage of our applications is much appreciated. Thank you and please stay tuned for more!