Apps are big business and have been for several years now. From idea to implementation and then to releasing an app to the millions of smartphone and tablet users around the world is more akin to starting a business than just a hobbiest creating an app for fun. Everyone seems to have a good idea for an app, but they don’t know the true cost of bringing a successful app to market. I couldn’t tell you how many people that come to our company on a weekly basis thinking they can have an app built for $1500.00.
The old adage of “you get what you pay for” applies just as well to apps as it does anything else. Hiring a dirt cheap freelance developer will certainly not yield the same high-quality results that an experienced development firm can produce with the knowledge and resources to put together a fully functioning app that includes, if needed, a backend server.
Putting the correct amount of resources into an app startup venture from the very beginning will save a lot of trouble in the long run, especially when it comes to updates and bug fixes. Nothing will kill an app’s success, or potential for success, faster than a buggy user experience or an app that doesn’t live up to user expectations.
The true cost of app development
That leaves the big question: what does an app cost to develop? It’s a very common question nowadays, even compared to a few short years ago. There are a lot of variables that need to be worked out to answer that question. How much an app costs to develop depends on features, complexity and platform – and that’s just for the app itself. If a backend server is needed to support the app, then the cost will increase accordingly. Even the most simple apps will cost around $25,000. Likewise, more complex apps can easily cost $100,000 or more to develop and might even go over the $1,000,000 mark.
For a new startup, raising enough money not just to cover the cost of app development (and anything else needed like a backend server or API integration) but also to cover the basic costs of running a business, including: accounting, marketing/advertising, salaries and other expenses. All of these factors can add up to a cost that’s much, much higher than a tech entrepreneur might expect. In fact, startups often need funding from venture capitalists (VC) to ensure they can even release the app to the market without going broke.
Venture capitalists give their startup estimates
Because VCs are on the front lines of funding some of the hottest apps on the market today, they’re in the best position to explain and breakdown the costs of launching an app.
One venture capitalist, Jason Calacanis, gave a general breakdown of the costs. He suggests that the startup raise at least $750,000 in first round funding. About $120,000 of that amount will go to basic administrative fees of running a business like accounting, legal and other expenses. Building a foundation early on in the game will ensure there are minimal problems in the future. Further, Calacanis suggests about $35,000 for a team of four each month. The average time it takes to build the first version of an app is between 4-6 months, though this can vary drastically the more sophisticated the app is. Taking into account the timeline and cost per month for the team, the app development itself will cost between $140,000 to $210,000.
Other venture capitalists estimate app development costs to be in the same ballpark. One VC suggests it will cost about $500,000 for both the team and the first prototype or version of the app. This brings the monthly cost to about $23,333, which means if we use the same 4-6 month development timeline, the cost will be about $90,000 to $140,000. It should be noted that these numbers reflect “pre-seed” funding. This means the startup initially raises roughly $500,000 before they even think about raising their first “official” round of operating funds.
The estimated and known costs of well-known apps
Another way to gain a perspective on how much an app costs to develop is to look at well-known apps that have “made it big.” These are apps that have been well engrained into our tech culture to the point where there are many people who want to copy their success with clone apps. The problem with this, however, is that these people often fail to consider just how much those apps cost to develop and how complex they are.
For example, Instagram, the wildly popular photo sharing app, cost about $500,000 to build a robust front and backend to give the app the necessary power to handle user photos. It should also be noted that this only includes the cost to develop the iOS app. It doesn’t include the additional money it took to develop the Android version. The reason for this is that Android apps are much tougher to build, and therefore are more expensive. The traditional route for most app developers is to develop and launch the iOS app first, then move onto the Android version at a later date.
Another popular app, Uber, raised the funding stakes even higher by raising around $1,500,000 that included both seed and angel funding. Like Instagram, Uber also required a sophisticated backend server to support not only the user interface, but also the behind-the-scenes programming. The truth is, most apps need support from a server to be able to offer a seamless and feature-rich experience that is required for any app to become successful and make the company any money.
Difference Between App Developers
The largest app development companies will generally cost the most. There are stories of these larger companies not considering any startup that doesn’t have a budget of at least $500,000. Sometimes the estimated price can skyrocket to $1,000,000 or more, depending on how complex the app will be.
On the other hand, the smaller development agencies can build a fairly robust app can cost up to about $450,000. The smaller “boutique” shops will cost even less, with $100,000 being the typical price ceiling. These small shops are typically 2-3 person operations with fairly low overhead, allowing them to charge less for the same work.
Of course, just developing the first version of the app and getting it up and running is only the first step. The app must also be updated to fix any bugs, improve the user experience and add features that will attract new users. Even the expense of updating an app can take many people by surprise. Further, there are also costs for running and maintaining the backend servers.
Apps Without A Backend Server Or API Integration
Not every app is going to need a full backend server or even API integration. Some apps are meant to be standalone. As a general rule of thumb, yes, standalone apps do cost less. However, the more bells and whistles one wants the app to have will keep adding onto the cost. It’s not unheard of for a standalone app to cost a solid six figures. But generally a standalone app will cost about half that of an app that needs server and/or API integration.
However, standalone apps are becoming increasingly rare as smartphone and tablet technology continues to improve and becomes even more sophisticated. Also, with the sheer number of apps on the market, users are demand feature-rich apps with a smoother user interface.
All The Other Expenses
This was mentioned briefly before but is worth expanding on because it’s very important. The cost of just developing an app is a fraction of how much money a startup needs to continue running. This includes being able to pay yourself, pay for support services like legal and accounting, and the cost of marketing and advertising. There’s a lot of competition in the world of apps and it’s becoming an increasingly crowded field as each year goes by. Not every app will be a game-changer like Uber or Instagram. Those are definitely the exception, not the rule.