How Much Do Apps Cost?
Insight Into How Agencies Price The Development of a Mobile App
If only I had a nickel every time I got this question. Estimating the costs associated with a project are never easy, because rarely do we have all the answers going into a new product.
“What’s it gonna cost?”
The answer never changes: “It depends”. For example, there’s a significant difference between engaging a freelancer or individual, outsourcing your project, or using a small agency like Red Shepard. Similarly, if your app requires a back-end server to be built or integrated with, or APIs created, versus needing an app that is completely standalone; the price differences can be enormous.
Many startups today are either exclusively or heavily app-focused. And seeing as the majority of our clients are small and often startup businesses (hence “Experiences that begin with mobile…”), let’s reference many of the leading VC firms and how they go about estimating their company’s baseline costs of development.
What The VC’s Say
Angel investor Jason Calacanis recently had a great post outlining the amount of money startups should raise in their first round of funding. He advises early stage startups to raise seed rounds, enough to cover the first 18 months, at a suggested $750,000. That’s not necessarily how much an app will cost (although some apps do, especially over their support lifetime), but more of a blanket of funds to cover everything from operations to engineering.
The $750,000 includes $120,000 of operational budget for legal, accounting, and other fees. He then breaks down the remaining $630,000 with $35,000 per month for a team of four, which could be considered standard team size for building a version one app, with a timeline to build such an app as usually between 4–6 months. If we take that monthly spend and multiply it out for the timeline, we have our first answer: a version one app should cost anywhere between $140,000 to $210,000.
“The rich and interactive experiences we have come to expect on mobile apps have created new standards and expectations for all digital media including the web.”
- Raj Aggarwal, CEO of Localytics
To back up Jason’s plea, Manu Kumar — renowned chief of K9 Ventures — outlined what he believes is the new “pre-seed” round last April. He suggests roughly $500,000 should be “used for building team and initial products and prototypes.” Using a similar breakdown for operational dollars, the monthly product budget would be just over $23,300. Even in this example, a version one app at 4–6 months time would come out between $90,000 to $140,000.
What About The ‘Big Fish’?
Many people assume that the app development lifecycle is relatively straightforward. They see polished products like Twitter, Instagram, and Snapchat and then begin to model their applications after the success of these ‘big fish’. But what they don’t see are the costs associated with the development and go-to-market strategies of these massive apps. Would you be surprised to hear that Instagram blew through $500,000 in venture funding to build a new backend and interface? I wouldn’t be. These companies raise millions in seed funding and even more in Series A funding rounds, and often times they haven’t even planned for an Android version at that point…
For example, the Barack Obama app took 22 days to develop from first code to first release. The app took three developers and a staff of 10 people total. If you figure 500 to 1000 engineering hours, and industry average contractor rates between $100–150/hr, the app likely cost between $50,000 — $150,000. And that was in 2008. Take a look at that app, and scale your idea accordingly.
In more recent years the advancements in backend services like Firebase make adding in a backend and server components less time intensive. Yet, still, any server-related development time drives up cost considerably. Apps that are built with a complex user interface, or that require significant server-side development can cost anywhere from $150,000 to $1,000,000.
However, it’s important to consider the rates that agencies use when planning their projects. At Red Shepard, we are a smaller firm. See our other post on comparing agencies to see how these costs can be reduced drastically with smaller teams.
The Short Answer
Ultimately, it comes down to what the specific features of the app will be. To get a quality app with any professional firm, you’ll usually need to start around $25,000 or so. But if you have a budget less than $10,000 you will assuredly not be able to work with any reputable firms.
Each app has different costs, different stories, visions for growth, and paths to profitability.
So don’t let the numbers scare you. At the end of the day you must remember that building a worthwhile business is difficult. My first business was rough. I wanted to escape and be my own boss, but at the time I knew nothing about the app (or software) industry. I cut corners with my college student budget, and sacrificed quality for speed-to-market and low costs. My business suffered in the process, and in the end my product was weak; I never captured market share, and never gained enough traction to properly mature. It wasn’t until later, in teaching myself to code out of pure frustration that I would learn how to properly build a valuable software product.
Quality systems take time and extraneous effort to build, and thats exactly why you should embrace the challenge: the reward for such hard work is worth it. Focus on building your dream, your business, and your vision. We’ll take care of the software, and guide you along the way.
(Bonus) Comparing Costs & Types
A simple comparison of the different types of apps on the market, and what you can expect in terms of cost. Most apps will fall into one of these ‘types’, and this section aims to provide you with an idea for where you should begin crafting your budget.
Disclaimer: Much the the analysis of the market data below is sourced from a great article written by Savvy Apps, please check it out!
“Standalone” apps are apps that don’t require server components or often don’t require network access to perform their function. These apps are not common, due to the high demand for information and interactivity in the Web 2.0 era, but they are often helpful for small businesses, one-off products, or utility applications.
- Type: Standalone
- Cost: Less than $25,000
- Examples: Calculator, Clock, Camera, Settings
Data Only Apps
The next kind of app involves apps that need network connectivity but solely consume data. They don’t need any sort of login or authentication. For example, these apps often pull from 3rd party data sets or API to present things like weather data, stocks, events, or product prices.
Keep in mind that the data-consumption apps may require a light server-side implementation as well.
- Type: Data-Consumption Only Apps
- Cost: $20,000 — $50,000
- Examples: Calendar, Weather, Stocks
Login Authenticated Apps
Apps begin to get more complex — and costly — once user authentication is involved. Reason being: the expectations for user accounts and security become enormous. It is usually expected that users will be interacting with data, liking, favoriting, or saving content for later. Moreover, many apps are expected to sync data across devices, integrate push notifications, invite friends, and more.
- Type: User Authentication
- Cost: $50,000 — $200,000
- Examples: ESPN, Password Managers, Google Drive
These apps are built of the notion of heavy user/data interaction. Their wide-spanning features, integrations, and data schemas becomes exponentially complex, and their development process becomes extensive.
Facebook, Instagram, Snapchat, Twitter, WhatsApp, Pinterest, and YouTube all fall into this category. Keep in mind that some of these apps have been worked on for many, many years. That being said, a V1 social app will likely not offer all of the same features as the intense feature sets you see in the largest apps of today. For instance, Snapchat did not start with videos, filters, ads, or their stories function. A social app would, however, include user authentication, friending, liking, favoriting, messaging, search and other comparable functions.
- Type: Social Networking
- Cost: $100,000 — $500,000
- Examples: Facebook, Snapchat, Tinder
Ecommerce often incorporate many of the same features of the above app types, like logins, social integration, and more. However, they go further by offering product listings and have a method for processing payments.
Some Ecommerce products can leverage existing product catalogues from 3rd party APIs. However, many will require a custom built solution (which can become extremely expensive), or power themselves off of existing platforms like Shopify, Magento, WooCommerce, or others. These provide you with interfaces for adding new products, updating prices, providing shopping carts for your users, and other critical features.
Additionally, processing payments requires a PCI compliant vendor. For your ecommerce platform you will need to be able to perform checkouts and payment transactions, issue refunds, and perhaps even split payments, take out local taxes, or account for shipping costs. All of these processes require thought and development, even when using a 3rd party payment solution provider like Stripe or Braintree.
The variability in costs for the ecommerce app type can range immensely. Product catalogues and platform depth can become complex rather quickly, and handling logistical issues and building a business around the platform is a whole other story.
- Type: Ecommerce, Transactional
- Cost: $200,000 — $1,000,000
- Examples: Amazon, Stitch Fix, Gilt
On-demand applications fulfill user needs for grocery delivery, meal services, or hailing a ride. We all know the major players here: Instacart, GrubHub, Lyft and Uber, to name a few. These apps incorporate many of the same features of the above app types as well, like logins, social integration, invites and more. They also process payments with a transactional component, and have an additional aspect that people often miss — two separate apps: one for the ordering party, and another for the delivering party.
Think about how Lyft and Uber must provide apps for both the drivers and the passengers. Each have slightly different feature sets, both require on-demand data, and some even include user ‘wallets’ for storing money, applying coupons, and more. These essentially require two very different user experiences to succeed.
Therefore, on-demand applications are time intensive. And if you are building for both iOS and Android, you now must build four separate apps, each with a different experience, as platforms differ in design methodologies. The time adds up rather quickly.
- Type: On-demand
- Cost: $100,000 — $1,500,000
- Examples: Uber, Instacart, Postmates
Two-Sided Marketplace Apps
Think of marketplace apps as those that help you make money, or achieve a task or goal. These tend to share many of the same features of on-demand apps, like wallets, payments, and invites. But marketplaces often take on a more free-form position in the app world. Think of Airbnb; unlike Uber, it’s not just about calling any ride, or in this case, just finding any place to stay. It’s about allowing the user to choose a specific experience with a rental of their wants and needs, at location they desire, where the price can vary greatly. Users will craft their experiences, and each user will have different goals when using the app. Not just to get from A to B.
These apps thrive off of supply and demand. They allow parties to build out miniature business operations like renting apartments and homes, or becoming a TaskRabbit. In the case of ‘Wag!’, it’s walking dogs, and for Care.com it’s family care. The platform unites two sides of the economic equation, and profits from the transaction. The issue for growth with these apps is that they require a network effect. In other words, scale is needed for the business and the product to work and retain users. If Airbnb, for example, had millions of listed rentals and no one to rent them, the app would flop, and the business would flounder out of existence.
Because two-sided market apps lack the specificity of on-demand apps, usually more features need to be built. And even more significantly, it’s much harder for a startup business to build each side of the market. Uber is focused on driving, whereas Angie’s List has hundreds of different kinds of service providers. If it wasn’t clear from the examples, both on-demand and two-sided marketplaces also have a geographic component. This means that they often start in one area, and grown from a local market into the national space.
- Type: Two-sided Marketplace
- Cost: $200,000 — $1,750,000
- Examples: Airbnb, TaskRabbit, Wag!, Care.com
IoT And Hardware Integrated Apps
Nowadays apps are becoming increasingly more interactive, and for some that means taking the experience further than just the device in hand. This is where IoT (Internet of Things) and hardware connected apps entered the market. These apps communicate with real-world objects, and could be any number of things from your toothbrush, a doorbell, advanced medical devices, lights and more.
IoT apps require low-level interactions with firmware that controls the hardware devices they pair with. This means close collaboration with whomever is building and programing the hardware devices, and usually reliance on some sort of strong, dependable, network like wifi or low-power bluetooth.
- Type: Internet of Things, hardware-focused
- Cost: $200,000 — $1,500,000
- Examples: Eero, Nest, Amazon Alexa