The Real Cost of Building an App
A mini-guide to understanding the cost structure of app development
Yes, mobile is taking the world over. Yes, the app economy is booming, and entrepreneurship has never been more popular than it is today.
According to the latest study by comScore, mobile now represents 65% of digital media time, while the desktop has become a “secondary touch point.”
The total revenues in the App Store reached $28 billion last year, while developers earned over $20 billion on app sales.
What Kind of App?
Developing an app is like buying a car — it’s impossible to say how much it costs unless you know the details. The car you’re looking for can be a $10k Hyundai, $80k Tesla, or a $100k Truck.
First, there are different kinds of technologies. Then, there are features. Let’s have a look at the technology:
- ‘Native mobile app’ means the app was written in the same programming language as the platform for which the app is designed. For example, for iOS it’s Swift and for Android it’s Java. These apps are typically faster and more reliable. They have access to a phone’s features, such as its camera and address book. They’re usually more expensive than other apps.
- Cross-platform apps: Cross-platform are like native apps, but they’re built using a combination of the web and native technologies that are distributed via a native app store. They run on both platforms, but don’t have access to phone features and can be quite problematic to design, as both platforms have different conventions.
- Progressive web-apps: This is the latest technology by Google. It’s a web app that you can access through the browser but has most of the features and the feel of a native app. They’re extremely easy to install; you just visit the website and add it to the home screen. That fixes the leaky funnel of native apps which lose about 20% of new users in the process. They’re not supported on iOS, though.
What Kind of Functionality?
As noted earlier, features determine the final cost. In general, mobile apps can be broken into four major groups, depending on the amount of work involved in developing them.
- Simple apps: This would be an app with three or four screens that serve one basic function and don’t store any data. An example would be a calculator or a timer.
- Database / API apps: If your app needs to store some data on the user’s device or a remote server, then you’ll need something more complex. If it requires users to register and sign in, sync data between multiple devices, or you have a lot of content to utilize, your app falls into this category.
- Multi-Featured/Enterprise Apps: If you’re looking to offer several key features and a completely bespoke user interface design tailored to users’ needs, this is your category. The timeframe and price can range based on the scope of the project.
- Games: As it is with other apps, games vary in complexity and functionality and the price changes accordingly. In addition to app development, games require a high-quality user experience, storyboards, and mechanics that hook the user, which adds to the total cost.
You can expect to pay up to $80,000 for a simple app. Basic database apps range from $100,000 — $150,000, while more advanced multi-feature apps will cost you $150,000 — $250,000. Games are hard to estimate as, based on quality, they can cost anywhere from $100,000 to $250,000+.
Delivery times vary too. From a couple of weeks to a month for a simple app, three plus months for a database app, and three to nine months for more complex multi-feature apps.
Then there are additional features that come into play. On top of the basic functionality, you may require some other features like email login or geolocation tracking. Here are some examples and their pricing:
- Email Login: A very simple feature most apps have. The reason for it is that collecting emails is incredibly useful for your marketing efforts.
- Social Login: Login with, for example, Facebook, Twitter, or Google. Again, very important from the marketing point of view, as social logins provide you with important user data.
- Social Integration: A feature that allows apps to post on a user’s social media. It can be leveraged to boost your app’s growth through “word-of-mouth” and “viral” marketing.
- Rating System: Thumbs up/down or rating of content and so on. This would be useful for something like a Restaurant review app or recipe app where there’s a lot of user generated content.
- User Profiles: If you want to allow users to create their own user profiles. For example, for a social app or a ride-sharing app.
- In-App Purchases: To charge users for additional features, downloads, and services from within the app using “In-App Purchases.”
- Geo-Location: Locate users or collect data about their geographic location. This can help you make their experience more relevant to them and collect valuable data.
- Sync Data Across Devices: In case you’re building something like a task management app that your customers will use on both desktop and mobile.
Simple features like social login and integration can add between $3000 — $15000 in costs. The more advanced user profiles or geo-location can add about $7500 or more to the basic cost.
Who Will Build it?
Who will build your app affects the cost about as much as the functionality it’s going to have. But while in app design, a cheap and simple minimum viable product works great; in choosing your developer, you have to be careful.
Cheaper isn’t necessarily better; in fact, it can be a big mistake. We’ll get to that later.
If you’re looking to build an app, you have several options available. They include offshore teams, freelancers, technical co-founder, and an established development shop.
They all have some positives and negatives. For example, when it comes to offshore teams, they’re probably your cheapest option. This means you’ll hire a team in India or Russia and work remotely.
The price is low, but the risk however is in the quality of the final product. You’re not seeing the people you’ll work with and usually these shops have little to show for their portfolio, as the apps that are actually successful and make millions of dollars are rarely built that way.
What you’ll get, however, is a team. What you don’t get, compared to a developer shop, is a full-fledged team; a team with a product manager, designer, developers, and so on.
You can hire a freelancer from one of the freelance websites too. It’s a similar thing to an offshore firm. Good developers are expensive. You can hire a student or a friend, but the work will be probably much slower and the lack of experience will show.
Technical co-founders are a great option if you’re an established business person with a track record. That’s because to attract top-talent and have them bet their career on you is not easy.
These guys are approached a lot, especially by “idea guys” who offer something along the lines of “I don’t really know what I’m talking about but I just got an idea for the next Facebook. All I need you to do is all of the work in return for five percent of the gazillion dollars it’s going to make.”
Co-founders are paid in equity and can be an incredible asset.
Developer shops are the most expensive option here; they’re also, alongside with technical co-founder, the surest way to build a great product.
Some developer shops are innovative and have top grossing apps under their belt. They provide you with a full fledged team and experience in building and shipping successful products.
Some are useless however and you’ll just pay for terrible work. You must choose wisely.
Look at their reputation, reviews, and awards and most importantly, track record. Talk to their past clients and meet the team. See how invested they feel in your success. Don’t go with the first developer you meet; it’s an important decision to make.
Product Comes First
One thing you must realize here is that it’s not about how much you spend but how great of a product are you going to build.
Instagram sold for one billion dollars in two years. They spent about $250,000 to build a prototype. Whether the cost was $50,000 or $500,000 makes no difference when compared to the exit value.
What’s important is that they’ve built a successful product. You can save $50,000, but what’s the use if it means building an inferior product that will just net you a loss?
In other words, yes money matters, but product comes first.
Cost of Design
“Most people make the mistake of thinking design is what it looks like. People think it’s this veneer — that the designers are handed this box and told, ‘Make it look good!’ That’s not what we think design is. It’s not just what it looks like and feels like. Design is how it works.” Steve Jobs
It doesn’t matter how great your technology is, if your design sucks, no one will use your app. There’s a lot of misconception around the role of design though.
To make it clear, design is as important as your technology. It’s what users see and interact with. It’s what sells your app and the idea behind it. Ultimately, it’s what makes them sign up and use the app over the long term.
Design plays a key role in solving the user’s problem. If you’re looking to build a profitable app, you will have to nail this aspect of product development as much as the technical one.
App Design: Breaking it Down
When it comes to app design, there are several aspects to it. Those include:
- Visual design: It’s what gives your app its look and feel. The importance of visual design can be best summed up by a quote from the icon of product design, Dieter Rams: “The aesthetic quality of a product is integral to its usefulness because products we use every day affect our person and our well-being. But only well-executed objects can be beautiful.”
- UX design: UX design is about how it works. It’s the discipline in design that studies user behavior and uses data to design user experiences that deliver specific results. The result can be anything from engagement or successful onboarding to making a product become an everyday part of a user’s life.
- Icon, logo and branding: Branding can be a powerful asset. In fact, according to Peter Thiel, brand alone can give you a monopoly in the market. Take Apple for example. Whether you agree or not, you will need to invest at least into solid icon and logo design. Icon is what gets you noticed in the App Store and has a big impact on the user’s decision to download your app.
- Copywriting: The best user experiences have copy that excites and compels. It takes a lot of effort to identify the style of voice and tone that matches your app’s brand. To get it right, you’ll need a persuasive copy that motivates users to explore the app. It should clearly state the benefits and help users understand the value of using the different features it has.
The icon, logo, and copy can cost you anywhere between $500 to $2000 each. For UX and visual design, expect to pay much more. A pro UX design firm can charge you up to $20,000 a project.
Most developer shops will provide you with their own design team. From icon and visual design to UX design, you’ll get it all done.
If you’ll looking to get it done in-house, the rates to hire a designer can vary a lot. Expect to pay at least $50 per hour on the lower end and up to $250 per hour for a senior UX designer.
Also bear in mind that the UX design is an ongoing affair. You should never stop learning, testing, and improving. Icon design, on the other hand, is something that needs to be redone every couple of years.
Let me ruin it for you. “Build it and they will come,” is bullsh*t. This tech industry mantra got popularized during the failed dot-com boom and for some reason, it’s still hanging around. It’s a lie.
You will have to invest in sales and marketing. Why? Because your app, no matter how well executed, can still be a loser. In fact, 59% of apps don’t even make enough money to break even on their development costs.
Around 12% of all app developers earn over $50,000 in annual App Store revenues. The latest data shows that over 94% of all revenues go to one percent of monetized apps.
Data shows that the main difference is that the money losers dedicate zero dollars of total development costs to marketing and spend less than five percent of their time on sales and marketing activities.
In the App Store, to get noticed, you need to hit the charts and to hit the charts, you need to get a lot of users in a short period of time. Without paid marketing, it’s almost impossible.
But don’t expect to just throw money on ads. You will end up losing most of it. App marketing is a science of figuring out the best business model that delivers ROI.
To get there, you want to test multiple channels and compare the data. The best advice I can give you is start early. When you hit the App Store, make sure to have at least hundreds of users waiting in line for the release.
Growing your user-base will cost you both money and time. A lot of it. The cost to figure out the right business model can vary a lot, but you should set at least $35,000 aside for your sales and marketing efforts.
Obviously, there’s more to it. Aside from sales and marketing, you’ll need to pay App Store and Google Play fees, servers and backend support, customer support, accounting and legal costs, office or co-working space, and further development costs.
Putting it all together
So, how much should you budget? Again, it all varies. But to put it in perspective, a recent survey of 12 leading app developers by Clutch revealed a wide range of $30,000 to $700,000 to develop a mobile app.
Based on the average number of hours required to build an app, the website calculated $171,450 to be the median cost per app.
According to a 2016 survey of 300 senior mobile practitioners around the world by Enterprise Mobility Exchange, the most common budget size for the next 12–18 months was $250,000–$500,000. But that’s for corporate budgets.
To put more perspective into this, to build an MVP of something as simple as Instagram or WhatsApp can cost you anywhere between $100,000 to $250,000. MVP for an app like Uber would require an investment of at least $1,000,000.
Based on the data above, you’ll need to make your own analysis.
Originally published on http://www.appsterhq.com/