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As boom lures app creators, tough part is making a living

As boom lures app creators, tough part is making a living

By David Streitfeld, The New York Times | Updated: 19 November 2012 12:37 IST

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 thatthe "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.

The Struggling Entrepreneur
Like many computer experts, Shawn Grimes started experimenting with apps almost as soon as Apple opened its doors for the iPhone. He wrote an Internet security program as well as a tool for studio photographers to manage portrait sessions. Those amateur apps pulled in more than $5,000 from Apple.

Late last year, Mr. Grimes was laid off as a computer security specialist by Legg Mason, the Baltimore financial firm. The dismissal shook his confidence. "I worked really hard," he said. "I did my best. But ultimately my career was not in my hands."

The layoff, a result of Legg Mason's decision to eliminate the jobs of 300 tech support workers, had been in the works for more than a year, which gave Mr. Grimes and his wife, Stephanie, plenty of time to contemplate their future. They have strong family roots in the Baltimore area but would have moved for a position with a Silicon Valley giant.

Google, which receives two million applications a year, interviewed Mr. Grimes, but he did not make it past the preliminary stages.

With direct employment out of reach, he decided to work independently by writing apps. He had no illusion that he was likely to become rich. Mostly, he hoped to find satisfying work that paid enough to provide a middle-class living and some shelter from a shifting economy.

But with hundreds of new apps introduced every day in Apple's store, the field is overcrowded - something the Grimeses learned quickly and painfully.

Ms. Grimes, 32, quit her job teaching kindergartners to join the couple's new venture, Campfire Apps. They downsized to a two-bedroom apartment. "We either succeed and it's awesome, or we fail and it was awesome while it lasted," she said.

They worked steadily on apps that revolved around children. Henry's Smart Headlamp was a learning game for preschoolers, a hunt for hidden objects that the Grimeses hoped iPhone-wielding parents would think was worth $2 for a moment of distraction. A free version called Henry's Spooky Headlamp got 5,409 downloads during Halloween 2011.

The couple aimed for one new app a month, but progress was slow and sales were slower. In March, with the apps bringing in only about $20 a day, they cashed in Mr. Grimes's 401(k), which yielded $30,000 after taxes and penalties. They had already spent the severance from his job at Legg Mason.

One thing they never scrimped on was technology, especially Apple technology. At one point they owned a 24-inch iMac, a Mac Mini, a 24-inch cinema display screen, two 13-inch MacBook Airs, a 15-inch MacBook Pro, two iPad 2s, two Apple TVs, two iPhone 4s and an iPhone 3GS. "We justify buying new models by saying we need them to test out the apps," Mr. Grimes said.

Soon, though, it got to the point where Mr. Grimes needed to take on freelance work, which brought in crucial income but took time away from Campfire Apps. By the beginning of summer, troubled by several persistent health care issues, he surrendered to the need for a full-time job.

Mr. Grimes now works as an app developer for ELC Technologies, an Oregon company that allowed him to stay in Baltimore. Ms. Grimes is still working on Campfire Apps.

While Mr. Grimes was angry at Legg Mason for laying him off, Apple delivered little - but it also made no promises. "People used to expect companies to take care of them," he said. "Now you're in charge of your own destiny, for better or worse."

The Grimeses' quest cost them more than $200,000 in lost income and savings. So far this year, their eight apps have earned $4,964. When the newest iPhone came out at the end of September, the couple immediately bought two.

Success Beyond Dreams
Ethan Nicholas was a Sun Microsystems programmer, a games enthusiast and a father of two very young boys, and he needed some extra cash. So in late 2008 he wrote an artillery game that could be played on the iPhone, which was still relatively new. There were about 11 million in circulation - certainly a large number, but nothing like the 270 million that have now been sold.

Mr. Nicholas wrote iShoot in six weeks, in his spare time. It sold 17,000 copies at $2.99 each on a single day, Jan. 11, 2009. That was a Sunday. On Monday, he quit his job. By March, he had earned more than $1 million. "Sheer dumb luck and being in the right place at the right time," he said.

Mr. Nicholas and a friend, Brent Miller, were inspired to form a company. "We were going to make another million or two," said Mr. Miller, 38. But when none of their new games sold like iShoot, the pair moved in an entirely new direction. They founded echoBase, a start-up with 14 employees that is developing apps to allow doctors and nurses to view and update medical records across different computer systems. They brought in Mr. Miller's father, Rod, a former I.B.M. sales manager, as chief executive.

EchoBase has raised about $4 million. Most of that has come from dozens of small investors, but Mr. Nicholas and the Millers have contributed about $1 million. "All of my savings and retirement account are gone," Brent Miller said. His father took out a second mortgage. Revenue is now coming in, with 3,200 doctors signed up, but the company is a long way from making a profit. Rod Miller forecast that it would become self-sustaining in 2013.

Mr. Nicholas has cautioned his new colleagues about easy money. "The time for that has passed," he said.

EchoBase markets its service to medical records software providers and hospitals, whose doctors download the app free. Apple makes no money here, but it gets a long-term benefit: start-ups that succeed will embed the iPad and the iPhone more thoroughly into society.

The company is, in a sense, another arm of Apple's research and development program. "The applications are what sells the hardware," Rod Miller said. "Without us, and thousands of others like us, Apple has limited appeal."

On one level, it was a strange move for Apple to open its devices to people like Mr. Grimes, Mr. Nicholas and the Millers. Imagine a violinist's horror at letting a toddler play with his Stradivarius and you would have some idea of Apple's reluctance to let anyone outside of its walls fool with any of its technology. This is a company that sealed batteries into its devices so people could not replace them.

Apple's brilliant but mercurial chief executive, Steven P. Jobs, agreed to unlock the gates of the fledgling iPhone only after much internal argument, and he made sure that Apple would retain strict oversight of every app. In retrospect, it might have been the smartest decision ever made by a company that prides itself on creating the future.

The App Store opened in July 2008 with 500 apps. In an interview, Mr. Jobs laid bare the company's goal: "Sell more iPhones."

And so, thanks in large part to the multitude of apps, it came to pass. More iPhones - nearly seven million - were sold in the next three months than in the entire previous year, and that was just the beginning of the ascent.

"Apps changed the iPhone from a simple phone into a mobile computer," said Mr. Scott of148Apps.com.

Apple's financial documents show just how crucial app inventors are. If the developers stop developing, the company warned again last month, "customers may choose not to buy the company's products."

So far, there has not been much risk of revolt. Developers have expressed flickers of grumpiness at Apple's 30 percent cut of each app sale. A shadowy group calling itself theApp Developer Union briefly posted a petition online this summer asking for "something more equitable." Apple declined to comment about the union, which disappeared from the Web as mysteriously as it had arrived.

Mr. Nicholas has the same philosophy about Apple now as he did when he wrote iShoot. "I'd rather get 70 percent of a large pie than all of a small pie," he said.

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