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How Much Does an App Cost?

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Table of Contents
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Who To Hire?

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How To Hire?

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Cost Structure of Launching an App


Cost of App Development
What Kind of Functionality?
Cost of Features
Web Apps

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Which OS To Start With?


Cost of Design

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Startup Costs

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16

Case Studies

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Who And Where To Hire?


Marketing

Game Plan

Putting It All Together


References

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20

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21

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Cost Structure of Launching an App


Total Costs

App Development

Design

Startup Costs

Front End

UX/UI

Marketing

Back End

Visual Design

Support

Testing

Copywriting

Office etc.

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1.

Code
The cost of hiring someone bad is so much greater than missing out on
someone good. Joe Kraus, Google Ventures

Cost of App Development


Apps are booming. With almost 2 Billion smartphone users in 2014, app startups are among the fastest growing companies. There have been top headlines filled with multi-billion dollar
acquisitions or acquisition offers for the likes of Instagram ($1 bn), Snapchat ($6 bn offer) and WhatsApp ($20 bn). In 2013 mobile apps generated $27 bn in revenues. And this is just the
mobile side of it. Web apps have been booming for a while. For example SaaS applications are estimated to generate over $20 bn in revenues p.a.
Naturally, many of the top brands are under pressure to get into the mobile space fast and some of the most ambitious serial and aspiring entrepreneurs are hoping to take advantage of
this major technological shift, defining a new era much like pcs defined the era of Apple, Microsoft, Oracle and internet defined the era of Google, Facebook and Amazon.
What are the economics of getting your foot in? This white paper aims to provide some insights to get you started.

What Kind of App?


Building an app is like building a car, you cant say how much it costs unless you have specs. The car can be a $1000 Tata, 70k Audi or a 100k Truck. Its the same with apps:

Native Apps

A native mobile app is a Smartphone


application that is coded in the same
programming language as the platform for
which the app is designed, such as
Objective C for iOS and Java for Android
operating systems.
Native apps provide fast performance and a
high degree of reliability. They also have
access to a phones various devices, such as
its camera and address book. In addition,
users can even use some apps without an
Internet connection.
However, this type of app is more expensive
to develop because it is tied to one type of
operating system, forcing the company that
creates the app to make duplicate versions
that work on other platforms. Most video
games are native mobile apps.

Web Apps

Web apps are basically websites that, in


many ways, look and feel like native
applications.
Unlike regular websites which have to
communicate with a server every time a
user does an action or regular apps that are
installed on your device, a web app runs in
your browser and requires no installation.
Probably the best example of a web app is
Gmail.
A mobile web app uses technologies such
as JavaScript or HTML5 and is designed to
run within a mobile devices web browser.
Such apps can be designed to run
reasonably well via almost any smart
mobile web browser and are delivered fully
on the fly - via internet, requiring no
installation.

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Cross-Platform /Hybrid

Cross platform or hybrid apps are like


native apps, they run on the device but are
written with web technologies (HTML5, CSS
and JavaScript). This enables access to
device capabilities that are not accessible
in mobile web applications, such as the
accelerometer, camera and local storage.
The main benefit of hybrid apps is that,
instead of developing separate native apps,
the code components can be reused across
mobile operating systems (iOS, Android,
Windows) reducing significantly the
development costs.
However the app design can be
problematic since different platforms have
different UI and UX conventions. For
example designing an app for the iPhone is
different to designing one for Android.

Responsive/Mobile Website

This is not really a category, but deserves a


mention as they provide a cost efficient way
to test your market and validate ideas, or
build an MVP and make it more accessible
on mobile.
Using responsive CSS frameworks such as
Bootstrap you can build a web app or
website that renders reasonably on
different clients. Users will use the same
app / website but the design will resize for
the screen size (iPhone, iPad) theyre using.
You may want to develop a native app or
mobile web app later on but responsive
design allows you to get an app out the
door rapidly.

3.

What Kind of Functionality?


In general mobile apps can be broken into four major groups, depending on the amount of work involved in developing them.

Simple Apps

A simple app with only 3 or 4 screens,


serves one basic function and doesn't store
any data about your user or about the
previous uses of the app.
Examples include Timer, Task-list, Recipe
Book etc.

Database/API Apps

If your app requires information to be


stored on the user's device or on a remote
server then the infrastructure will be a bit
more complex.
If you want to allow users to save lists,
register and sign in, sync their data
between multiple devices or you have a
huge amount of content to utilize, your app
falls in this category.
Development gets more complex based on
whether you want your data to be housed
native (built into the app) or
dynamic (built into online web services).

$20,000 - $40,000
2-4 Weeks

Multi-Featured/Enterprise Apps

An app that is your startup/business. Users


can access their information using your app
on any device or web-browser. The app
may offer several key features and
completely bespoke user interface design,
tailored to users needs.
The timeframe and price can range based
on the scope of the project - the app can be
anything like Evernote, Basecamp or
Facebook.

$70,000 - $100,000

$120,000+

2-3 Months

3-6 Months

Games

The range in complexity of game apps is


huge, starting with something as simple as
a PONG type functionality all the way up to
a 3D physics engine that does high speed
air racing.
In addition to building a functional app, to
succeed, games require high quality user
experience, storyboards and mechanics
that hook the user.
Price and time ranges vary accordingly.

$150,000 - $250,000+
Varies

Developing an app can be a daunting process. There are lots of decisions to be made and each one can have a dramatic impact on the overall cost of the finished app and its chances of
success. Simple apps can take as little as one week to complete. Large, and complex enterprise projects can take several months to a year. Its up to you to determine whether speed-tomarket is a priority. If so, your costs will be affected as you will be better off with more people working on your project, in which case, youre looking for an experienced dev shop.
What can help is having a clear idea of functionality beforehand so you can move forward fast - this usually requires some market research and customer discovery.
The above are ranges you would normally get from hired professionals or dev shops. Other aspects, discussed in the following section can determine your price more precisely.

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4.

Cost of Features (Estimated Range)


These figures are estimates and feature
selection is just an example. The final cost
will depend on who you work with and
other things.
The figures reflect what a pro or a dev shop
would charge providing standard rates in
most of the Western world. You can
outsource some work at a cheaper cost, but
only if you can control the quality.

One of the benefits of having an email login


is that unlike social logins, it allows you to
establish a communication with users via an
email newsletter which in general converts
better than social media.

Learn more about this in the next chapters.

Game Center

If you're developing a game and would like


to register it with Apple's Game Center. This
lets users play and share games with
friends, track progress, use leaderboards
etc.

Email Login

Social Login

Login with Facebook, Twitter or Google.


This also gives access to social profiles and
the networks of your users' friends.

Social Integration

Allow users to post on their social media


directly from the app. Instagram leveraged
this feature to build a viral growth,
piggybacking off Facebook and Twitter.

$2000 - $2500

$3000 - $4000

$1000 - $3000

Rating System

User Profiles

In-App Purchases

Does your app require a rating system. This


can help to validate your content and make
the experience moreinteractive Eg. star
ratings, thumbs up vs. thumbs down,
comments, reviews etc.

If youre building a social app or would like


to incorporate community aspects you
might want to allow users to create their
own user profiles.

Charge users for additional features,


downloads and services from within the
app using In-App Purchases.

$6000 - $8000

$6500 - $8500

$5000 - $8000

$3000 - $7000

Geo-Location

Sync Data Across Devices

Native iPad Support

Custom Icon Design

Locate or collect data about the users


g e o g ra p h i c l o c at i o n t o m a ke t h e i r
experience more relevant to them and be
able to track their live whereabouts.

$7000 - $9000

Allow users to sync data on all their devices


(iPhone, iPad, Mac) This means they can
conveniently access different data on other
platforms if you have already developed an
interface for these too.

$7000 - $9000

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It's tempting to think that iPads are just big


iPhones. While this can be true at a code
level it can be a mistake on a UI level.
Bigger screens require different layouts and
UI needs to be changed to suit this.

+30%

A beautiful design makes your app stand


out. Depending on the designer this can
range anywhere up to $1500 if you decide
to go with a pro.

$1000 - $2000
5.

Web Apps
Web apps are not real applications; they are really websites that, in many ways, look and feel like native applications. But they are not implemented as such. They are run by a browser.
Users first access them as they would access any web page: they navigate to a special URL and then have the option of installing them on their home screen by creating a bookmark to
that page. In many ways, web apps can be a good choice over native if you are trying to cut costs.
For example, in 2011 Financial Times withdrew their native app from Apples App Store to circumvent subscription fees and maintain closer connection with their subscribers. Instead of the
native app, they came out with an iPhone web app (app.ft.com). Their web app is, in a lot of ways, hard to distinguish from a native app. For instance, there are no visible browser buttons or
bars, even though it runs in Safari (when accessed from an iPhone). Users can swipe horizontally to move on to new sections of the app. And, due to browser caching, its even possible to
read the newspaper offline.

Web App vs. Native

App Features

While Web technology is catching up


quickly, it still lags behind Native Apps,
when it comes to mobile. HTML5 now gives
you access to the Accelerometer, GPS and
even the Compass, but basics like Camera
access are missing from Safari on iOS.
Features we take for granted like custom
keyboards are also not available.
Here is a list of what is supported on
various browsers.

Cost

This is the big one. Costs are affected by


two factors: How many platforms and form
factors you decide to support: iOS,
Android, Blackberry, Windows, Tizen,
Tablets, Phablets AND the programming
talent and work required to support those.
Developers familiar with web technologies
are more abundant, easier and cheaper to
hire than experienced Native developers.

Visibility

App discovery is a huge problem right now.


If visibility in the search engines is an
increasingly important part of your strategy
to grow your business, then a web app is
critical in helping grow traffic to your
website. A mobile app lives in a closed
environment and cannot be indexed by the
search engines, which requires driving
traffic to this app through alternate
methods.

When it comes to deciding whether to build a native app or a web app, the most appropriate choice really depends on your end goals.
If you are developing an interactive game, an app is probably going to be your best option. But if your goal is to offer a mobile-friendly
solution to the widest possible audience then a web app is probably the way to go. In some cases you may decide you need both a mobile
website and a mobile app, but its pretty safe to say that it rarely makes sense to build an app without already having a mobile web app in
place.

User Experience

Native Apps deliver faster & smoother apps.


The native mobile app will provide a mobile
centric experience for your existing and
most loyal customers, while your responsive
website can help provide an optimized
experience to new and old visitors
browsing your website or discovering it for
the very first time.

Average Cost of Web App

In general web apps are cheaper. Most


companies offer to build them up to 40%
cheaper than mobile apps, including most
features.

$100,000 - $200,000

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6.

Who To Hire?
Hourly rates for software developers can vary quite a bit. From $300/day for a freelance developer, up to $1000/day for a well-established development company with a large portfolio.
However, price is not always a reliable indicator of quality. Paying someone inexperienced but cheaper may prove to be expensive in the end, the work may take longer and potentially
lower quality may damage your ability to make money. Hiring a more expensive development shop with a complete team may appear a more secure choice, however there many
companies who will simply over-charge you or wont care too much if youre a small start-up client.

Offshore Teams

If you are tight on budget you can hire an


offshore team in countries such as India,
Russia or South America. The average wage
there is cheaper and freelancer platforms
make it easy to find the relevant people.
The price will be cheap, however the eye
for design will be very different than
something coming out of New York or San
Francisco and the code can range anywhere
from OK to horrific.
Good developers are not a commodity and
the demand is high. If you go down this
route make sure you have someone on the
team that can assess the work of your
offshore firm. They can be best utilized in
combination with an in-house team who can
manage the quality well, otherwise you're
taking a high risk hiring someone who will
just take advantage of you.
You also run the risk of problems such as
getting a bug 3 months later (all software
gets bugs) and your developers may be too
busy with new clients.
This is a good option to roll out an MVP,
raise funds and then rewrite from scratch.

Freelancer

In general this is a very broad category, you


can hire a freelancer, a student or get a
friend on board to help you out.
For students, expect them to work much
slower than a shop, and remember its best
to search for teams that have a designer
and a developer - both skills are very
different: design is creative and
development analytical.
Local freelancers will cost you more. For
example, if you hire a front-end developer
and a back-end developer both working 40
hours a week, and a designer working 20
hours a week, all at $50-100 per hour, the
total 1 week of work will end up between
$5000 - $10,000. On average, expect 10+
weeks.
A tech-savvy friend may do this kind of
work for cheap or even for free. However, it
might be incredibly difficult to find
someone willing to ignore the tens of
thousands of dollars they could be making
for a single app working for someone else.
Note: if you are unfamiliar with the process
of programming, you may have a difficult
time properly assessing the quality of a
developer.

Technical Co-Founder

If you have a friend who is a developer and


you both decide to found a startup,
congrats! You just created an ideal team. If
you dont, be prepared to go the extra mile.
Firstly, developers get these offers all the
time and there is much disrespect in places
like Silicon Valley, NY or London towards so
called idea guys (Hey, I have a billion
dollar idea for Facebook killer, if you do all
the work I can give you 10%)
Ideas in the modern startup world literally
mean sh*t. Youtube started as a dating site,
Paypal as a security company and Flickr as a
gaming company - its the execution that
matters. Expecting someone to believe that
merely your fantasy will make them a billion
d o l l a r s c a n b e p e rc e i v e d a s a b i t
disrespectful, especially if all youve done to
date is nothing except think up the idea.
However, you have a good chance if you
prove you can execute (or you have an
extensive history in execution). So build
mockups, talk to investors, interview
customers etc. This and equal equity stake
will get you potential co-founders.

Dev Shop

A developer shop will provide you with a


team - thats not just a couple of developers
but a much bigger team that makes
everything operate.
In addition to developers, a team will
almost always include one or more
designers and a product manager. The
stereotype is that designers and product
managers are easier to find, but when it
comes to high-quality talent, finding good
people on the creative side can be just as
difficult.
A dev shop has the advantage of having a
set process in place and they tend to have a
lot of experience. Search for one with a
great portfolio composed of more than just
simple apps. Also if youre a startup, make
sure they have worked with startups before,
as hiring someone who only works for big
old (and easy to rip off) companies can turn
expensive.
Expect to pay $100-$200k, with $50k being
the low end, all the way up to $300-$500k
for top industry names. The mid-range of
$100-150k is a reasonable number for
something great.

!
$10,000 - $40,000

$50,000 - $100,000

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Equity

$150,000 - $250,000+
7.

How To Hire?
!

Developer

Use Your Personal Network


If you've never worked with someone, it can be difficult to examine how reliable, competent
and professional they are. While you may not know the developer yourself, you can always
ask for referrals and find out about quality people from your friends.
Consult Programmer Friends
If you have programmer friends (or you've found someone in your network who can help)
ask them to provide a qualified opinion and help you hire the right person. That is, let them
review the candidates portfolio, background and quality of code. If you can, bring them into
the interview and let them ask questions.
Look at Their Portfolio
Any decent programmer should have at least a basic portfolio of past work. Look at their
Github account, see if they are active on StackOverflow and whether they are a good
problem solver and communicator. Review their blogs and ask for referrals from past clients.
Do They Like Programming?
You may come across a CS grad, who got into this industry because of his/her parents and
isnt really into it (with an it pays the bills attitude). Someone who loves programming will
have a number of their own hobby projects to show. They might be participating in open
source projects and have their own blogs. Look for creators, not just the ones who did the
courses and got the grades.
Find Someone You Can Get Along With
A decent programmer you get along with, is much better than a brilliant programmer you
cant stand. The decent programmer can always learn through experience and research,
whereas the brilliant programmer probably cant change his personality enough to suit
working with you.
Ask For Sample Code
It may not entirely show the skill but it will definitely filter out the worst candidates and in
some cases you may get an idea of how they approach problem solving. A simple Fizz Buzz
test should be a decent starting point. According to Jeff Atwood, founder of developer
community StackOverflow, this should take a couple of minutes to solve. He says you would
be surprised that the majority of CS graduates cant do it. He also states he experienced
many self-proclaimed senior programmers who would take more than 10-15 minutes to
write a solution.

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Developer Shop

The Company
Is it a real company or a bunch individuals and freelancers working together? Another good
starting point, is to find out whether they have either won awards or received press in techrelated news sites or blogs.
The Team
You are looking for a complete team with an impressive background. Aside from
developers, expect product managers, UX designers, creative direction, quality testing etc.
Assess Their Portfolio
How many smartphone apps have they developed that are actually shipping in the app
stores? How many of their apps have reached the #1 spot, received industry award
recognition, or reached over 1M downloads? Do they have experience with complex apps
or have they mostly worked only simple projects. Do they have experience with startups?
Check Client References
Look for developers who will readily extend client contact information so that you can get
real feedback on their company.
Be Clear About the Scope of Your Project
In general you should start with a clearly defined minimum feature set and have done some
sort of non-tech validation (mockups, market research, customer interviews.) Have a clear
vision of what you need to build, so you can resist the temptation to increase the scope.
UX/UI Design
A good dev shop must also have great UX design skills. When looking at their portfolio,
keep an eye out for beautiful looking apps with excellent user interfaces. 60% of your
application is about how a user interacts with it.
Testing and Quality Assurance
Do they do test-driven development? Who does QA (quality assurance)? Have they included
QA in the estimate? Do their app developers test on actual devices? Which devices? How
many? Which OS versions and languages?
The Final Deliverable
What is the deliverable? Is source code included? Who owns it?
Get a Fixed Price
Every dev shop will resist you on this, saying the product scope will change. But, its the only
way to make sure you dont end up using your whole budget.

8.

Which OS To Start With?


!

iOS

Today, the vast majority of startups develop for iOS first, the
key reason is revenue: out of $27 bn in app revenues across
all platforms, Apple accounts for $18 bn. Most startups work
under a tight budget - the development, design, and
marketing required in a roll out is expensive.
In the USA and the EU, its not unusual for an iPhone
developer to charge well over $100/hour to do contract iOS
development, but realistically the hourly range is anywhere
from $50/hour to $250/hour, with experience and name
recognition usually setting the price.
With thousands of apps submitted to iTunes weekly, most
startups need to validate fast. And if there is an investor on
board, the pressure can multiply. So revenue counts.
iOS is most popular in the western world, where Apple
commands the majority of the affluent market share.

Android

Android is growing fast. Today over 80% of the market share


belongs to Android. Unlike Apple who maintain a singular
approach, Android is licensed to most hardware
manufacturers. This allows a huge market reach, but causes
the headache of fragmentation - as the app should suit
many different screen sizes and Android versions.
The cost of development is comparable to iOS. Most
developers range between $50/hour to $250/hour,
depending on skill and location.
While iOS leads in terms of revenues, the average Android
revenue is growing relatively fast. Aside from market size
and positive revenue growth, publishing an app on Google
Play is easy. Google Play also provides a robust search
capability, making it easier for users to discover your app.
If your app is for masses or your target markets are Asia,
South America or Eastern Europe, Android might be a good
first choice.

Windows, BlackBerry etc.

Windows and BlackBerry command the least of the


marketshare, both in size and revenues. However some
positive developments have taken place recently.
Contrary to popular belief, the Windows Phone ecosystem
is very much alive and growing. Powerful cloud integrations
with some other Microsoft products, such as Office,
OneDrive, XBox and Windows are fueling the growth.
BlackBerry on the other hand provides access to some of
the wealthiest user demographics. Many businessmen,
financiers and investment bankers still use BlackBerry.
Both platforms are trying hard to attract developers, it's
quite possible you may get some sort of financial help if you
go with one of them first. For example BlackBerry offers
$10,000 in guaranteed app income for certified BlackBerry
10 apps and Microsoft is literally paying developers to build
Windows apps.

Pros

Pros

Pros

Higher Revenue & Retention Rate: Over 5x the revenue per


download than Android. iOS users are also more loyal
delivering higher lifetime value of the customer (LTV)

Huge Market: If youre building the next WhatsApp


Android is perfect to start on. Having a user-base of over 1
billion is reason enough on its own.

Small Market: Smaller market means less competition.


Windows also offers high revenue per download.

Cons

Cons

Cons

Lack of Customization and Strict Policies: Apple holds a


high degree of control over the marketplace, this can be
quite frustrating to some developers.

Fragmentation: Android phones come in all shapes, sizes


and OS versions. This can be a bit of a nightmare.

Well, Small Market: It can be an advantage, but depending


on your need for a user-base it most likely wont.

Device Quality: A multitude of devices are constantly


coming out, and most manufacturers dont have a high
reputation when it comes to reliably releasing good
products.

Uncertain Future: Its difficult to predict if RIM/Microsoft will


succeed in the app marketplace battle. Currently they are
both losing.

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Financial Support: Both BlackBerry and Windows offer


financial support to attract developers.

9.

Design
You've baked a really lovely cake, but then you've used dog sh*t for frosting.
Steve Jobs

Cost of Design
For years the importance of great design in software development was underestimated and misunderstood. However, this started to change and with the astonishing success of Apple,
good design started to gain the prominence it deserves. After all, design is how users interact with apps, and what makes them buy and stay. With millions of apps, user experience is often
a core ingredient of the difference between highly successful and mediocre apps.
Steve Jobs sums it up perfectly: Most people make the mistake of thinking design is what it looks like. People think its this veneer that the designers are handed this box and told, Make it
look good! Thats not what we think design is. Its not just what it looks like and feels like. Design is how it works.

What Kind of Design?

Visual Design

One hallmark of good design is having a


strong visual appearance.
As Dieter Rams outlines in his legendary
principles of good design: 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

Does this website give me value? Is it easy


to use? Is it pleasant to use? These are the
questions that run through the minds of
visitors as they interact with products, and
they form the basis of their decisions on
whether to become regular users. User
experience design is all about striving to
make them answer Yes to all of those
questions.

Visual design skills include page layout,


form design, color selection etc.

UX Designers study the behaviour of users


and use the data to build engaging and
habit forming experiences.

$5000+

$5000 - $20,000

Icon, Logo Design

Icon design is a craft that requires an


incredible amount of skills. It s no
coincidence that the best and most popular
a p p s f re q u e n t l y h a v e s t r i k i n g a n d
memorable icons. It might seem like just a
colorful tile, but a good icon is a critical
piece of an app's design that has a huge
effect on how people think about and
interact with what's inside. Moreover it
helps your app stand out on the AppStore.

$1000 - $2500

Copywriting

The best user experiences have copy that


excites and compels, making the user feel
comfortable and secure about the design.
Copywriting skills include identifying the
style of voice and tone that matches the
organization's brand, creating persuasive
copy that motivates users to explore the
d e s i g n , a n d c l ea r l y s t at i n g b e n e fi t
statements, to help the user understand the
value of using the new capabilities and
functions.

$500 - $1500

These are rates for an initial prototype provided you hire a pro. The rates can vary from $50/hour on the lower end and up to $250/hour for a senior UX designer.
Most dev shops will have their own designers and the work will be included in the price. If youre building a team from scratch, the pricing may differ depending on the scope of work.
The UX design is an ongoing affair. You should never stop learning about your users' behaviour and always keep improving it. It takes numerous iterations to get close to perfection.
Your visual brand and icon design is work that only needs to be redone once every 1-2 years.

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11.

Who And Where To Hire?


If you have no background in design, hiring a designer can be a daunting and frustrating process. You can review portfolios, interview candidates, and persuade a designer that your team
is worth joining. But before all that, theres a fundamental question you need to answer: What kind of designer are you looking for?

What is More Important, UX or Visual Design?


Luckily, its common to find UX designers who are good at both visual design (how it looks) and UX design (how it works). Both skill sets are required to build great products, and both are
core to how customers understand and perceive the product. In general you should:

Focus on visual design if your product:

Focus on UX design if your product:

Must be more delightful than competitors (e.g., games)

Has many features but needs to feel simple

Needs to appear credible, well built, and high quality (e.g., finance)

Supports complex tasks and flows and is used every day

Creates a space people aspire to be a part of (e.g., communities)

Is mobile-based (and can lean on a mobile platforms visual style)

Core UX Designer Competencies (No one will master all, but look for relevance)
Core Skills

Research, Information Architecture (content structure principles), Interaction Design, Interface Design, Product Design

Business Skills

Project Management, Time Management, Basic Copywriting

Technical Skills

Understanding of Programming Principles, GUI Development Principles, Tools and Techniques, Knowledge of New Tech

Usability Skills

Knowledge of Usability Testing Principles, Basic Cognitive Psychology Knowledge

Communication Skills

Persuasive Writing, Visual Communication, Public Speaking and Presenting

Personal and Interpersonal

Interviewing, Mediation, Team Work, Passion, Empathy, Analytical Thinking

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12.

Startup Costs
Writing code? Thats the easy part. Getting your application in the handsof users, now
thats the hard stuff. Jeff Atwood (StackOverflow)

Marketing
As you can see, costs for building an app can climb up. But coding the app is only one part of the execution - without traction, the app is just a statistic. According to latest stats, the cost to
acquire a loyal user, or one that opens an app three times, grew from$1.30 in 2012 to $1.62 in 2013, with the latest numbers from the end of last year at around $1.80. That is for users
who only open an app at least 3 times. Add an average retention rate of only 4% over 12 months for most apps, and you may end up with costs anywhere from $20 - $40 per user.
Spending on marketing too soon is also a number 1 reason why startups fail, according to a Startup Genome report. It is therefore important you set aside a budget to test various tactics in
order to find which is the most profitable, instead of setting the bar high and overspending too soon.

Why Marketing Matters?

59%

59% of apps dont even make enough money to break even on their
development costs

12%

12% of Top Earners earn $50,000+ in revenue from the App Store

$0
$30k

52% of app developers/startups have set aside $0 for marketing,


despite 91% believing marketing is important

Top Earners have a marketing budget of at least $30,000 on average

5%

52% of app developers/startups dedicate less than 5% of their time to


marketing

14%

Top Earners dedicate as much as 14% of their total time to marketing

How To Market Your App?

Start Before Development


While marketing is important, even a huge budget can prove to be inefficient. The best
startups are almost $0 marketing machines. Groupon, Instagram, WhatsApp, AirBnB all have
a growth mechanism built in their product. For example Instagrams growth can be
attributed to cross-posting, Groupons to social buying, a Craigs list cross posting hack of
early AirBnB etc. Think about how you can make your product social by design, but most
importantly, put extra time into designing a great user experience.
Start Small
For example, if you're going to use Google Adwords, you should plan on segmenting a
budget of $1,000 into a few smaller tests. Once you figure out what works (this could take
months) you can then put together a more structured budget as you understand potential
results.
A good idea might be to start with a reasonable monthly budget of $250 - $1000 and slowly
expand to a $1000 - $10,000 range.
Test, Refine, Repeat
Dont expect to have all the data and costs ready when you start. Nobody knows. Instead run
small tests, learn from them and modify your hypotheses for the next round of tests. You will
get closer to an ideal strategy with every iteration.
Do It Yourself
Dont hire a marketing agency, at least not too soon, and certainly avoid PR firms like a
plague. As a founder you need to interact with the market and learn from customers
yourself.
Work on Retention
With most startups failing in this field (95% of apps get deleted after only user once), you
should work on maximizing your on-boarding and retention strategy to drive your marketing
costs. Theres a whole science behind building habit forming user experiences and pleasing
users to the point that they will never want to leave.

May, 2012

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14.

Startup Costs
Launching

Servers & Backend Support

Customer Service

Office

A fee of $99 is required to launch an


app in the App Store and $25 for
Google Play.

If your app relies on a web server to


store your users' data then you should
expect to pay around $200/month for
server support and maintenance.

The best online sites also have the best


customer service. In fact, customer
service may help you grow faster than a
sleek design or adword marketing.

You can start from home or a bedroom,


alternatively you may already have an
office you can use. You may have to
accommodate a growing team too.

This cost can severely increase if you


are storing large amounts of files such
as photos and especially videos.

In early days, founders should serve the


customers to learn about issues and
how users use the app etc.
Later you will need some sort of
ticketing system like Zendesk and an
employee (can be remote work).

The problem with working from home


is that the environment has tendencies
to make us less focused. Great options
are co-working spaces, where you can
be around startups and just hire a desk
at a fair cost.

$500 - $1000

$25 / $99

$500 - $1000+ / month

$500+

Accounting + Incorporation

Development

Miscellaneous

If you are a business then you should


be taxed. An incorporation of a limited
liability company can be done online
for less than $500.

Yes, this doesnt stop. There are bugs to


fix, improvements to make and so on.

You might need: equipment, HTML


newsletter design, business cards,
tickets to attend meetups and
conferences, travel budgets to pitch
investors and see clients etc.

You can hire a remote accountant at a


similar cost, who will review your
papers a couple of times a year. Or you
can simply use free accounting
software like wave.

$500-$1000

You may find a co-founder or keep


working with with whoever you started
your work with. Expect this to cost
anywhere between $5000 to $10,000 if
your app is also a core of your
business/startup.

$50,000 - $100,000

You can always bootstrap and you


shouldnt overspend here - a beautiful
business card does not make or break
a business.

$5000 - $10,000

15.

Putting It All Together


The three great essentials to achieve anything worthwhile are, first, hard work; second,
stick-to-itiveness; third, common sense. Thomas Edison

Case Studies
!

Twitter

Henrik Werdelin, who helped build companies like


Tradable, Barkbox, FancyHands, Basno and Path, says
recreating Twitter isnt necessarily difficult, but the layered
features will take time to get right. It can take 10 hours in a
$160 Ruby on Rails course plus free Heroku.
Still, a product is nothing without scalability. You cant just
build a product today, you need to build a venture. And that
involves processes, structures, feedback loops, analytics and
a community. Therefore, if you want to bring an MVP to
market, Werdelin approximates that youll need $50,000 to
$250,000, depending on the skill sets of the developers and
designers you hire.

Instagram

Instagram is slightly more complicated to build than Twitter


because you need a wider range of skills to handle imagefiltering for iOS and heavy backend image loads. However,
you could still build an Instagram-like product
inexpensively, in the $100,000 to $300,000 range over a
three-to-six-month period, says Werdelin.

WhatsApp

"Real-time communication support can be more difficult


than other apps that provide e-commerce or news,
according to Ryan Matzner, the Director of Strategy at
Fueled, a mobile development company based in New York
and London.
To put out an MVP of WhatsApp with basic functionality
something that verifies phone numbers, perhaps with a
Twilio integration and includes a payment management
system would cost about $120,000. Follow that up with
a n o t h e r $ 1 2 0 , 0 0 0 ro u n d f o r d e s i g n , a d d i t i o n a l
development and branding. And then another $25,000 to
fix the remaining bugs and add stability.

$50,000 to $250,000

$100,000 to $300,000

$256,000

ber

Shopify

iOS

According to Artem Fishman a VP of Engineering at Huge, a


full-service digital agency on its early rounds, a minimum
viable product for Uber cost about $1 to $1.5 million to
develop.

According to Sam Mathews, the founder of product studio


Neverbland, to build a replica of the e-commerce platform
Shopify, it would cost between $250,000 and $300,000 with
highly-skilled designers, developers and product people.

According to DJ Saul of iStrategy Labs, a DC-based digital


agency, hed want a 20-person team working more than one
year to deploy Angry Birds and at an average salary of
$110,000 for a total budget of $2.2 million plus overhead.

It becomes increasingly difficult when youre trying to scale


your business from an engineering perspective while
focusing on market penetration.

These costs dont take into account the many relevant


systems within Shopifys business such as maintaining its
API, the infrastructure and server space needed to support
its 50,000+ shops and designing and developing all of the
beautiful templates that help make Shopify so successful.

First, you have to take into account the time to develop a


brand identity including the logo, color palette and
typography, says Saul. Theres the ever-important UX, both
for the app itself and especially for the game. You need
experienced game designers and engineers who can
develop cross platform. Then factor in building for Android
and you have a multiplying effect on costs!

$1,000,000+

$250,000 to $300,000

$2,200,000

TNW: How much does it cost to build the worlds hottest startups?

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17.

Game Plan
Truthfully, you couldnt rebuild Twitter, Instagram or Facebook today for a billion dollars. But you could potentially spend a few million on an exact replica that no one will ever use. As an
aspiring entrepreneur you want to build something remarkable, captivating and new; something with better features, different features or fewer features. Thats what the next Jack Dorsey,
David Karp, Kevin Systrom and Mark Zuckerberg would do.
Its also important to note that neither of the above founders have started with millions of users, they have built an MVP, proved it with a few hundred and slowly scaled, fueling the further
development requirements by rounds of financing. If youre a startup, it is therefore sensible to break the process into 3 phases:

Private Alpha

Your initial test with 100 people

$50,000 - $100,000

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Public Beta

Full Release

Finding a Product/Market Fit

Scale

$100,000 - $150,000

$150,000 - $250,000

18.

Putting It All Together


If youre beginning a serious startup, you will likely want to raise money too. To estimate funds required you need to prepare a cash-flow forecast, to show what your expectations are and
provide a benchmark for both yourself and your investors. In general your development expenses will be high early on and slowly decrease over time, while marketing, support etc. will
start on the lower end and slowly grow higher. The revenue estimate depends on what the size of your market is. Here is an expenses example for a bootstrapped app:

Month

10

11

12

Total

Development

$40,000

$40,000

$40,000

$40,000

$10,000

$10,000

$10,000

$10,000

$15,000

$15,000

$15,000

$15,000

$260,000

Design

$5,000

$5,000

$5,000

$5,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$1,000

$28,000

Marketing

$1,000

$1,000

$2,000

$2,000

$3,000

$3,000

$4,000

$4,000

$5,000

$5,000

$6,000

$6,000

$42,000

Office + Misc.

$500

$500

$500

$500

$1,000

$1,000

$1,000

$1,000

$1,500

$1,500

$1,500

$1,500

$12,000

Support

$0

$0

$250

$250

$500

$500

$500

$500

$1,000

$1,000

$1,000

$1,000

$6,500

TOTAL

$46,500

$46,500

$47,750

$47,750

$15,500

$15,500

$16,500

$16,500

$23.500

$23.500

$24,500

$24.500

$348,500

EXPENSES

Your 12 month running costs

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19.

For more information about this whitepaper contact Appster

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20.

References
Cost of App Development

Which OS?

Socialhunt: Types of Mobile Apps

n4bb.com: 5 Reasons To Develop For BlackBerry

PluralSight: Why You Should Develop Windows Phone Apps

Cost of App Development p.2

VentureBeat: Why Developers Should Build On iOS Before Heading To Android

Mediabistro: How Much Does It Cost To Make An iPhone App

IdeaToAppster: How Much Does It Cost To Make An App


BlueCloudSolutions: How Much Does It Cost To Develop An App

Cost of Features
Otreva: App Cost Calculator

TechCocktail: iOS vs. Android: App Development and Consumer Experience Comparison

Cost of Design
SmashingMag: What Is User Experience Design? Overview, Tools And Resources
UIE: Assessing Your Team's UX Skills

PickCrew: How Much To Make An App

How to Hire Designers?

IdeaToAppster: How Much Does It Cost To Make An App

FastCoDesign: From Google Ventures: How To Hire The Best Designer For Your Team

KatanaCode: How Much to Develop An iPhone App

UX Matters: Essential and Desirable Skills for a UX Designer

Web Apps

Marketing

Nielsen Norman Group: Mobile: Native Apps, Web Apps, and Hybrid Apps

TechCrunch: App Marketing Cost Hit Record High

iTexico: Web App vs. Native App, should you go native?

App Promo: The Necessity ofMobile AppMarketing

!
!

Who to Hire?

Fundable: How Much Should I Budget For Startup Marketing?

Fueled: How Much Does It Cost To Develop An App

Startup Costs

Quora: How Much Does It Cost To Make An App

FastCompany: True Costs of Launching an App

How to Hire?

Case Studies

CodingHorror: How To Hire Programmers

TNW: How much does it cost to build the worlds hottest startups?

Forbes: How To Hire Programmer, If You Don't Know How To Code


oDesk: Hire App Developer
CodingHorror: Why Can't Programmers Program
Entrepreneur: 7 Steps to Hiring the Perfect Mobile App Developer
Arctouch: Developers For Hire
Forbes: Building Your Vision: What to Consider Before Hiring a Dev Shop

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21.

Appster is the fastest growing web & mobile app development company in Australia serving clients internationally from Australia to North
America and Europe. Our focus is on business ROI first, whilst delivering outstanding functionality and design. This is why weve had dozens of
top 100 apps, developed multi-million dollar startups and worked with everyone from BRW Young rich members, to Billion dollar company
founders. We develop apps using the SCRUM framework, leading to an AGILE and LEAN development experience. We specialise in working
with disruptive game changer ideas and large enterprises looking to innovate their business models with mobile-first technology.

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