Android App Developers Endure Lower Sales in Search of Growth

Pinger Inc., a developer of mobile applications, can get twice as much in sales from programs for Apple devices than for phones powered by Android software. That’s not stopping it from creating its first Android app.

“Even if the revenue generation might be less, we think it’s still going to be significant,” said Joe Sipher, chief product and marketing officer at San Jose, California-based Pinger, which makes text-messaging and other programs. “Our users are saying, ‘Gosh, I switched to an Android phone, can you put your Textfree app on Android?’”

Pinger and other programmers don’t want to miss out on the $40 billion that Booz & Co. estimates will come from sales of apps by 2014, much of it from Google Inc.’s Android platform. Android unseated Research In Motion Ltd.’s software as the top mobile operating system in the U.S. last quarter. That’s making developers more willing to put up with its drawbacks, including higher app-creation costs and an online marketplace some users consider harder to navigate than Apple’s App Store.

PopCap Games Inc., maker of the “Bejeweled” and “Plants vs. Zombies” games, doesn’t yet have any titles in the Android Market. By mid-2011, the Seattle-based company expects to release games simultaneously for iPhone and Android handsets.

Photographer: Jin Lee/Bloomberg

Android phones like Motorola Inc.’s Droid X, seen here, are gaining devotees. Close

Android phones like Motorola Inc.’s Droid X, seen here, are gaining devotees.

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Photographer: Jin Lee/Bloomberg

Android phones like Motorola Inc.’s Droid X, seen here, are gaining devotees.

‘High Hopes’

“Even though we are not making any money on Android right now, we have pretty high hopes for it,” said Andrew Stein, PopCap’s director of mobile business development. “There’s really no reason why users shouldn’t consume and buy content to the same extent on an Android phone as they are on an iPhone.”

Android phones like Motorola Inc.’s Droid X and HTC Corp.’s Droid Incredible are gaining devotees. Stein said he expects revenue generated from Android games to approach that of its iPhone versions by the end of 2011.

A wide variety of apps -- as well as the availability of the most popular ones for games, location, texting and content -- is critical to luring phone buyers. Apple has more than 250,000 apps available, compared with about 70,000 for Android.

Like Apple, Google takes a 30 percent cut of revenue from apps sold in its marketplace.

“We want to reduce friction and remove the barriers that make it difficult for developers to make great apps available to users -- across as many devices, geographies and carriers as possible,” said Randall Sarafa, a Google spokesman.

Google rose $10.32, or 2.3 percent, to $460.34 yesterday on the Nasdaq Stock Market. The stock has lost 26 percent this year.

Android Remedies

Google may be taking steps to remedy some of the issues that make Android app creation less lucrative to developers.

Apple iTunes users can do one-click shopping because iTunes saves their information. While Android buyers can do the same if they sign up for Google Checkout, that service doesn’t have as many users. Android Market also lacks features for in-app purchases, which some developers of Apple apps use to sell new game levels or virtual products, said Tim Chang, a venture capitalist at Norwest Venture Partners, whose investments includes iPhone-game maker Ngmoco.

Google is in talks with EBay Inc.’s PayPal to add its payment service, three people familiar with the matter said last month. That may ease the process for buyers. Google may also offer tools that let developers sell subscriptions and virtual goods from within apps, Andy Rubin, Google’s vice president of engineering, said in June.

For now, producing programs for Android isn’t as lucrative. Loopt Inc., the maker of an app for locating your friends on a map, and Zecter Inc., which offers the ZumoDrive file storage service, said they derive less in sales from Android apps than iPhone versions. Neither of the Mountain View, California-based companies would specify the difference.

Paid Versus Free

“There’s no question Android has a lot more phones out than six months ago, but that’s very different from saying Android is a more appealing platform for developers,” said Sam Altman, chief executive officer at Loopt.

ZumoDrive makes money by getting people to download the free program and then upgrade to a paid version. Thirty percent more iPhone customers do that, said CEO David Zhao.

Besides attracting fewer paid app downloads, fewer people click on ads in Android programs, according to data from Smaato Inc., a Redwood City, California-based mobile-ad firm. In July, the iPhone had a “click-through” rate of 140 in the U.S., compared with 103 for Android, Smaato said, citing data that measures which operating system had users that clicked on advertisements more often.

Plus, the market share Gartner Inc. measures for Android -- 34 percent in the U.S. last quarter -- doesn’t mean there are that many customers for apps, said Pinger’s Sipher. Some Android phones don’t have the ability to access Google’s app store and the proliferation of different models means some programs won’t work on some phones.

Product Variables

App creators have to contend with various versions of Android and differences in screen resolution and keyboard. That makes it more expensive to test programs and can force developers to design for the lowest common denominator, said Bill Predmore, president of POP, which builds mobile applications and ads for clients including Google, Microsoft Corp. and Target Corp.

Still, the accelerating rate of Android phone sales is luring some developers that keep long-term prospects in mind. While Zumobi, which makes MSNBC’s mobile app, gets less than 3 percent of its traffic from Android, the developer is investing almost as much in Android apps as it does for the iPhone, said co-founder John SanGiovanni. Zumobi’s free, ad-funded programs get about the same revenue, and in some cases, even a bit more, from Android, he said.

‘Senseless’

Google, itself, could help narrow the revenue gap for developers, according to Trip Hawkins, the founder of Electronic Arts Inc. who now runs mobile-gaming company Digital Chocolate. He calls Google’s policy of letting consumers use paid apps for as long as 24 hours and return them for a full refund “senseless and lazy.”

“As a game platform right now, Android strikes out,” Hawkins said. “As long as they keep selling devices, Android could be a good game business by 2012, but it would blossom now if Google would get out of their own way.”

To contact the reporters on this story: Dina Bass in Seattle at dbass2@bloomberg.net;

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