As Boom Lures App Creators, Tough Part Is Making a Living

The following is an excerpt from an article in:


The New York Times
Sunday, November 18, 2012

As Boom Lures App Creators, Tough Part Is Making a Living

By DAVID STREITFELD

ROSEDALE, Md. — Shawn and Stephanie Grimes spent much of the last two years pursuing their dream of doing research and development for Apple, the world’s most successful corporation.

But they did not actually have jobs at Apple. It was freelance work that came with nothing in the way of a regular income, health insurance or retirement plan. Instead, the Grimeses tried to prepare by willingly, even eagerly, throwing overboard just about everything they could.

They sold one of their cars, gave some possessions to relatives and sold others in a yard sale, rented out their six-bedroom house and stayed with family for a while. They even cashed in Mr. Grimes’s 401(k).

“We didn’t lose any sleep over it,” said Mr. Grimes, 32. “I’ll retire when I die.”

The couple’s chosen field is so new it did not even exist a few years ago: writing software applications for mobile devices like the iPhone or iPad. Even as unemployment remained stubbornly high and the economy struggled to emerge from the recession’s shadow, the ranks of computer software engineers, including app writers, increased nearly 8 percent in 2010 to more than a million, according to the latest available government data for that category. These software engineers now outnumber farmers and have almost caught up with lawyers.

Much as the Web set off the dot-com boom 15 years ago, apps have inspired a new class of entrepreneurs. These innovators have turned cellphones and tablets into tools for discovering, organizing and controlling the world, spawning a multibillion-dollar industry virtually overnight. The iPhone and iPad have about 700,000 apps, from Instagram to Angry Birds.

Yet with the American economy yielding few good opportunities in recent years, there is debate about how real, and lasting, the rise in app employment might be.

Despite the rumors of hordes of hip programmers starting million-dollar businesses from their kitchen tables, only a small minority of developers actually make a living by creating their own apps, according to surveys and experts. The Grimeses began their venture with high hopes, but their apps, most of them for toddlers, did not come quickly enough or sell fast enough.

And programming is not a skill that just anyone can learn. While people already employed in tech jobs have added app writing to their résumés, the profession offers few options to most unemployed, underemployed and discouraged workers.

One success story is Ethan Nicholas, who earned more than $1 million in 2009 after writing a game for the iPhone. But he says the app writing world has experienced tectonic shifts since then.

“Can someone drop everything and start writing apps? Sure,” said Mr. Nicholas, 34, who quit his job to write apps after iShoot, an artillery game, became a sensation. “Can they start writing good apps? Not often, no. I got lucky with iShoot, because back then a decent app could still be successful. But competition is fierce nowadays, and decent isn’t good enough.”

The boom in apps comes as economists are debating the changing nature of work, which technology is reshaping at an accelerating speed. The upheaval, in some ways echoing the mechanization of agriculture a century ago, began its latest turbulent phase with the migration of tech manufacturing to places like China. Now service and even white-collar jobs, like file clerks and data entry specialists or office support staff and mechanical drafters, are disappearing.

“Technology is always destroying jobs and always creating jobs, but in recent years the destruction has been happening faster than the creation,” said Erik Brynjolfsson, an economist and director of the M.I.T. Center for Digital Business.

Still, the digital transition is creating enormous wealth and opportunity. Four of the most valuable American companies — Apple, Google, Microsoft and I.B.M. — are rooted in technology. And it was Apple, more than any other company, that set off the app revolution with the iPhone and iPad. Since Apple unleashed the world’s freelance coders to build applications four years ago, it has paid them more than $6.5 billion in royalties.

Last year, federal statisticians changed the title and the exact composition of a jobs subcategory to reflect the new prominence of apps. And the tech industry has begun making claims about how apps are contributing to the broader economy.

A study commissioned by the tech advocacy group TechNet found that the “app economy” — including Apple, Facebook, Google’s Android and other app platforms — was responsible, directly and indirectly, for 466,000 jobs. The study used a methodology that searched online help-wanted ads.

Using the same methodology, Apple said this month that its app business had generated 291,250 jobs for the American economy, as varied as developers and U.P.S. drivers. That number rose 39 percent in less than a year. During that time, the number of United States developers paying the $99 annual fee to register with Apple rose 10 percent to 275,000. Some of these registered developers have other full-time jobs and write apps in their spare time.

Apple has become increasingly assertive in promoting the economic benefits of apps as its own wealth and prominence have grown and its employment and other business practices have come under scrutiny. The company issued a statement for this article saying it was “incredibly proud of the opportunities the App Store gives developers of all sizes,” but declined to answer questions.

At the company’s annual meeting this spring, the chief executive, Timothy D. Cook, noted that just a few years ago “mobile app” wasn’t even in people’s vocabulary. “Now there’s this enormous, entirely new job segment that didn’t exist before,” he said. “Apple has become a jobs platform.”

Michael Mandel, the economist who conducted the TechNet study, said it was problematic to slice the jobs data as Apple had done. “The guy who writes an Apple app one day will write an Android app the next day,” he said. “You can’t add up all the numbers from every study to get the total number of jobs.”

For many of the developers not working at traditional companies, moreover, “job” is a misnomer. Streaming Color Studios, a game developer, did a survey of game makers late last year. The 252 respondents, while not a scientifically valid sample and restricted to one segment of the app market, indicated what many people had suspected: the app world is an ecology weighted heavily toward a few winners.

A quarter of the respondents said they had made less than $200 in lifetime revenue from Apple. A quarter had made more than $30,000, and 4 percent had made over $1 million.

A few apps have made it extremely big, including Instagram, the photo-sharing app that was bought by Facebook in April for $1 billion. When app developers dream, they dream of triumphs like that.

Most developers, however, make their money when someone buys or upgrades their app from Apple’s online store, the only place consumers can buy an iPhone or iPad app.

Apple keeps 30 percent of each app sale. While its job creation report trumpets the $6.5 billion the company has paid out in royalties, it does not note that as much as half of that money goes to developers outside the United States. The pie, while growing rapidly, is smaller than it seems.

“My guess is that very few developers make a living off their own apps,” said Jeff Scott, who runs the Apple app review site 148Apps.com and closely tracks developments in the field.

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