More About the App Store Opportunity – Where the Real Money Is

We have all seen the impressive Smartphone app store statistics… hundreds of thousands of app… billions of app downloads.  Last year, Apple’s App Store exceeded 600,000 apps, 20 billion downloads and $9 billion in revenue – absolutely huge numbers.  But when considering what ecosystem to invest in, you need to look a bit deeper. 

Business2Consumer Smartphone App Stores

Doing a little math, and recognizing averages can be both interesting and misleading, the average Apple App Store app had just over 33,000 downloads, cost $.45 and created $15,000 (of which Apple kept $4,500 and the developer received $10,500).  If you do similar math for the Android Marketplace (or “Play”), you’ll see revenue numbers that are less than half of these.  To create a mini pro forma P&L, let’s assume its takes 200 hours of “someone’s” time to develop and publish an app in one of these Smartphone stores -  looks like one is “making” $25-$50/hour for one’s efforts. 

Sure this is a very gross calculation ignoring all kinds of factors such as its easy to support a second platform once you’ve built your app for the first one, cost of ongoing support, revenue the second year when development costs are less, lifespan of your app as customers and competitors engage.  But this quick calculation does get you a feel for the size and nature of the business opportunity.

We all know “some” companies are making good money with Smartphone apps – but there are an awful lot making very little.  And I don’t see this changing any time soon.  The Business2Consumer app store market is very price sensitive and very competitive.  Key is sales are both “mostly low price” and “mostly one time”.

I personally know a few engineers that quit their day job to build their Smartphone app store business – only to recognize several months later how hard it is to build a real ongoing revenue stream in the B2C app store world.  So what did they do?  Change their business to building apps for other companies – where they could predictably make $125-$250 per hour.

Business2Business App Stores B2B

In contrast to the B2C Smartphone app stores, let’s look at’s Business2Business web services based app store – AppExchange.  Again let’s look at some basic store statistics. 1700 apps and $700 million in “cumulative” sales.  Your first thought might be “only 1700 apps” – but remember this is a B2B app store – not B2C.

What is the annual revenue for the sale of partner web services in’s AppExchange? I don’t know but let’s for this simple “back of the envelope” calculation assume an easily divisible revenue number for the 1700 apps of $340 million in 2012.  Sure it might be 50% less than this… but close enough to get a feel for the business opportunity for partner web services based on the platform and I’ll admit I like to keep the math easy.

So the average revenue for a web service sold in the AppExchange is $200,000 (over 10x an average B2C app).  And maybe more importantly, this $200,000 per app is annual revenue for a web service – not like the mostly one-time sales like the B2C Smartphone app stores.  This $200,000 will come in every year as long as one keeps the customers happy – without having to find one new customer.  And every new customer potentially increases the annual revenue stream “in perpetuity”.

Of course there are some apps in’s AppExchange generating several million dollars in revenue per year – that comes in every year without having to sell a single new customer - building a sizable, sustainable, and substantial wealth generating businesses.

So What Does This Mean?

You can build a sizable, sustainable, and profitable business delivering a web services based app by working closely with a web services platform provider with a Business2Business app store. 


Start thinking about what web services your target customers would value – and engage the web service platform provider that your target customers are already working with.

At Autodesk, we are just getting started building out our web services platforms for designers, engineers and entrepreneurial software developers – Autodesk 360, BIM 360 (Glue), Green Building Studio, AutoCAD WS, Fusion 360, Sim 360 and PLM 360, with more to come.   Have a great idea for a new web service for designers and engineers?  This elephant would love to dance with you

VARs and Apps stores – Mutually Exclusive – NOT!

 (Part 3 of 3)

Obtaining Trusted Advisor Status

Another experience we have seen with the Autodesk Exchange Apps store is Autodesk Authorized Resellers browsing, vetting and recommending apps to their customers.  These are not apps that the Autodesk VAR is selling – but simple delightful apps that solve real customer problems right now at little to no cost.  A few Autodesk VARs are holding webinars to their current and prospective customers on Exchange Apps store apps that the VAR is confident will delight their customers. Experts

The time a VAR needs to invest is typically quite small to learn and then present a simple delightful app.  What is a more effective way to develop a deep trusting relationship with a customer then showing them a simple and low cost apps that saves them real “production” time – right now with no risk and no fear?

Is there real money in VARs “just” educating their customers on apps they can find in the Exchange Apps store?  You bet. 

Along with the indirect value and trust the VAR develops with their current (and prospective) customers  - that is a foundation for future low cost of sales increased product and services sales – the VAR unearths deep and broad customer needs for expanded and tailored customer specific solutions.  The VAR also has learned who the best app providers are who – important when the VAR has just a small or no software development team – who they can sub-contract services to.  In addition, the VAR is in a great position to evaluate and take on sales of “big apps” from the app suppliers they have developed a relationship with through the Apps store. Like the customer, the VARs are developing no risk no fear relationships based on real experience with the app developers work – after getting first hand confirmation from their existing customers that they “want more” from their apps.

If you are an Autodesk software partner – a member of the Autodesk Developer Network – the Exchange Apps store is increasingly a powerful tool to help you develop your own VAR channel – a subset of Autodesk’s VAR channel that deliver near 70% of Autodesk’s over $2 billion annual revenue.

As an aside…

Why have I been using the term “Exchange Apps store” instead of “App Store”?  Apple is pursuing a trademark on the term “App Store”. So to avoid a legal letter from Apple on the use of the term App Store, I avoid using is to describe the Autodesk Exchange Apps store.  Amazon is fighting back on this trademark effort by Apple – claiming “app store” is a generic term that cannot be trademarked.  Google and Microsoft are already waiting on the sidelines to see if Amazon can clear the way for their using the term “app store” to describe their - and hopefully all - on-line software stores.  In the meantime, the “rest of us” sit on the sideline awaiting a conclusion of this legal tussle between technology giants.    

VARs and Apps stores – Mutually Exclusive – NOT!

(Part 2 of 3)

Consulting and Software Development Services – High Margin Services

I know one Autodesk VAR with a free Revit app that started a new customer relationship through the Exchange Apps store that quickly led to a $78,000 custom software development contract as the customer said “love your app, can you do a bit more for me?”.  Through their experience with the VARs free app, the customer knew exactly what more they wanted – reducing the “expectations risk” all too common in delivering software development services.  The VAR had over half the software development already done as part of their free app and just needed to extend what they already had – reducing the software development risk always present when developing a new new piece of software for a customer.

ContactusIs this just an anecdotal experience?  No.  After running the Exchange Apps store for near two years, we now have numerous examples of Autodesk VARs turning free and low cost downloads from the Apps store into lucrative ongoing custom software development engagements.

Engaging a new customer with a simple delightful app also dramatically reduces the cost of sales of software development services.  For a customer, finding a software development partner they can trust is a scary high risk experience.  They can ask see demos, check customer references, use Trial versions and more – but reality is when it comes to judging ease of use, quality, reliability and support responsiveness, you really don’t know what a new supplier is going to be like until you have made a significant time commitment and financial investment.  Every customer has a horror story they can tell you about a custom software development engagement that went bad.  Except now customers can get real no risk no fear experience with a new supplier through their app on the Exchange Apps store.  They get to experience quality and reliability. They get to try out support.  They see the apps ease of learning and use – so what they can reasonably expect from the VAR with their custom app.  This dramatically reduces customer risk and fear.  And much of the “persuading, convincing and selling” is done by the customer on their own through their experience with the VARs Apps store app.

So the customer experience with the VARs simple useful delightful app dramatically reduces the cost of sale of their “serious revenue and profits” software development services – reducing hours their sales reps need to invest “selling” the customer and reducing the time from first engagement to deal close.  And that reduction in cost of sales drops straight to the bottom line – in increased profitability.

Next (and last) post on VARs and Apps stores, obtaining “Trusted Advisor” status

VARs and Apps stores – Mutually Exclusive – NOT!

(Part 1 of 3)

I am off to Autodesk’s annual sales conference this morning in Las Vegas – “One Team Conference” – where 1500 Autodesk sales people and near 1500 Autodesk Authorized Reseller’s come together to share, learn and develop their sales strategy for the year, get motivated – and most importantly develop and deepen trusting relationships.

I will be giving a presentation this year to Autodesk Resellers on how to use the Autodesk Exchange Apps stores to grow their revenue and profits.  This includes interviewing three great Autodesk Authorized Resellers on stage talking in front of 340 attendees – mostly Reseller principles – about how they can and should use the Apps store to grow their revenue and profits. AppsStore

If you are not an VAR (Value Added Reseller), I still encourage you to listen closely – as this is very much about how you can partner with VARs to both find more customers and create deep long lasting face to face relationships with customers around the world with the VAR as your proxy.  Leveraging the elephant’s sales partnerships for you and your future customer’s benefit.

Many folks reflexively view a VAR channel and an Apps store as mutually exclusive – the Apps store being about dis-intermediating middlemen - like VARs.  As happens so often in business, deductions from facts often don’t match the reality of the market.  So Autodesk VARs are very successfully using the Autodesk Exchange Apps store to grow both their top and bottom line.  Here’s how.

Marketing – Engaging New Customers

Over 30 Autodesk VARs have near 100 apps in the Autodesk Exchange Apps store.  A few of these VARs apps are seeing over 1000 downloads per month of their free apps (in 11 months the Apps store has already seen over 200,000 app downloads – with 1,000,000 downloads per year “in sight”).  Now these are mostly apps that were developed with a man week or two of effort – a small investment made when they had a software developer between projects with a little spare time.  They are in most part simple useful apps that engage and delight new customers.  From a marketing perspective, what is the cost per customer lead from these apps?  With several thousand downloads over a few month period, just pennies per lead.  What is the quality of these leads – the level of customer engagement compared to leads from other marketing tools – advertising, mass email, cold calling, Facebook, Twitter, blogs and so on?  Customer engagement is huge.  The potential new customer gets to experience what the VAR can deliver in a simple delightful useful app – showing off the VARs understanding of the customer’s needs, showing off their software development skills, and how they deliver quality work.  With none of the typical new customer risk and fear. 

Next post will be about how VARs can develop their high margin services business with the Autodesk Exchange Apps store.

Sailboat Racing and Building a Business: The Unexpected and Sleep (Part 5 of 5)

The Unexpected Happens Unexpected

In a long race, despite all the careful preparation, things will go wrong – equipment will break, crew will get sick/hurt, weather will change unexpectedly, and crew morale will start to sag.  Facing obstacles with a smile – and directness – is the way forward.  Face the obstacles, have a plan to work around or through them, get the crew involved with the solution, and keep working it with a smile and a sense of humor.  If the skipper’s emotions are “down” the whole crew feels it and conflict and disagreements are going to happen.  If the skipper is “up” and clearly in command, the crew feels that too – and works together as a team to address the unexpected.  This can get really hard in a race with a defined end when one finds oneself in a position where one cannot ever recover – such as breaking a mast or being too many miles behind to catch up.  That is the real test – keeping the crew motivated and positive when the die is cast. 

Business has no “end point” like a race so one can always look to the better future – though at times when the better future is too far off, it can feel like there is no light at the end of the tunnel.  Leadership is very much about showing and spreading hope and direction.  Leadership is rarely about working harder – and more frequently about getting the team to work smarter or when it’s tough, looking longer term (we took a third place in the 2012 PacCup… but will be back in the future pursuing that elusive first place).

Sleep is a Weapon

Crossing oceans is a long distance long term activity.  Winning races across oceans means pushing the boat hard for days on end – and making good decisions day after day for weeks. Tired worn out people (skipper or crew) cannot push the boat hard – and make poor decisions.  Poor decision’s leads to equipment damage and more lost sleep – which leads to more bad decision and more lost sleep – in an ever tighter death spiral.  Absolutely no fun.  It’s so important  to FORCE people to sleep when they are off Waking up refreshedwatch (we have three watches, two people per watch, each person is on deck working 2 hours and then gets 4 hours “off” to rest/sleep/eat).  Crew that doesn’t get their sleep makes mistakes in judgment, are in danger of crashing the boat, may hurt themselves or others mishandling lines – and are likely no fun to be around.

Work is very much the same.  People need to rest and recharge.  Tired and worn out staff make mistakes and are likely unhappy (which is infectious).  People cannot be expected to work 110% all the time.  Planning for people to work 100% all the time is a fool’s errand – as the unexpected happens and one needs planned “slack time” – both to recharge and to have some “extra” to give when the unexpected happens. 

 In sailboat racing the Kiwi’s (New Zealanders) are known for giving 110% day in and day out.  They win a lot of day races and short 2-3 day races – sprints – but rarely around the world.  The French are the perennial champs of sailing around the world (crewed and shorthanded).  They have learned the value of sleep and pacing oneself.  They understand to get around the world is a marathon and to win you need to finish.  To finish means pushing the boat and themselves only 90% much of the time so they have “something extra” when the going gets tough – like racing across the southern ocean in 40 knots of wind and 30 foot seas for weeks on end. 

Business is a marathon.  Winning at business this month, this quarter or this year is not nearly as important as winning over a long period of time – such as 3 to 5 years.  So pace yourself.  Save something extra for when you really need it.

On the lighter side…

After the race, sailing the boat home is a great way to recharge from two weeks of 24x7 racing and a week of rushed boat preparation for the voyage home.  I always choose “new” or “inexperienced” crew for the trip home.  The 17 day passage is a great time to relax and really get to know people in a deep way – like the way you know your neighborhood and school friends when you were younger – but as adults we rarely if ever have the opportunity to do. This doesn’t have a direct corollary to business – except maybe the value of occasionally taking the time to get to know your fellow team members – and partners – better (one of the reasons I like to put up team members, partners and staff in my mother-in-law apartment for a few days from time to time).  

Sailboat Racing and Building a Business: Crew (Part 4 of 5)


When the going gets tough the tough get going.  It’s easy to crew on a boat on a sunny day with small waves and little wind.  It’s hard when its 3am in the morning, the waves are big, the wind is blowing hard – and you are just on the edge of “crashing”.  One needs to develop a crew one can understand and trust when the going is hard – and this takes time on the water and time in tough conditions.  Everyone starts out with different skills – and everyone has different learning needs.  Prior to the race, several other races are needed to evaluate the crew’s strengths and weaknesses , place crew in positions that leverage their strengths, and teach people new skills that make them a more effective and flexible crewperson.  This is also very much about a crew that when they going gets tough, they are more supportive and sensitive to the strengths, weaknesses and feelings of their fellow crew members.  Everyone is different and have a crew that really knows each other deeply is an important success factor.  It’s also important to insuring people are enjoying the race.  If you don’t trust your fellow crew, you are not having fun and the rest of the crew can feel it (all these people in a small uncomfortable space for near two weeks). Last, it only takes one “insensitive I know better” crewperson to make the whole crew miserable and turn what should be fun into a not fun experience – not something you want to discover 2 days out with 11 days (locked in a small uncomfortable room) in front of you. 

Crew rowingAs in business you need to know your team strengths and weaknesses, develop your team through time working together and training, and build up a deep trust in other team members to do their job well (enabling you to focus on your job and do it well too).  Sailing very much teaches you everyone needs to focus on their job – and not someone else’s job.  On a sailboat, it only takes a few minutes to recognize crew that are spending more time focusing on someone else’s position – invariably leading to both their playing their position poorly and the person in the position they are trying to get involved in getting seriously annoyed with them.  One needs to play one’s own position first and foremost and it’s the skipper’s job to step in and provide direction if someone is not doing their job right (not one of the crews job).  That said, if you are a very emotionally skilled crewperson with deep sailing skills, you might be able to get another crewperson’s permission to give them advice.  If you see a problem with one of the crew, you talk to the skipper about it on the side.  Most times the skipper is already aware and doing something – but if not your feedback will help determine if the skipper needs to do something or your view needs re-alignment.  As on a boat, the same goes at work. See the happy crew at the finish – a sure sign of success!

Sailboat Racing and Building a Business: Weather (Part 3 of 5)


60% of winning a long race like the Pacific Cup is routing strategy based on the weather.  Preparation and crew are just 40% of the winning combination.  This means one spends a lot of time tracking weather patterns, reviewing weather forecasts and doing “routing analysis” during the month following up to the race start – and during the race.  The hard part is weather forecasts are only accurate for 3-4 days.  Though you can get 15 day forecasts, only the first 3-4 days are reliable, a few more days are “iffy” and beyond 5 days are highly unreliable and not to be counted on.  So if you are going to take 13 days to get to Hawaii but only have a reliable weather forecast for the first 3-4 days, what do you do?  You assume the weather forecast are correct all 15 days and plan accordingly.  You then get and analyze weather updates twice per day and adjust your routing strategy based on these weather updates.  What one learns over time, what doesn’t work is “guessing”, thinking you know more than the professional weather forecaster with a room full of super computers, or using some non-scientific “someone else told me” approach.  One also has to recognize even using the best fact/science based approach; one gets it wrong at times.  The weather defies long term prediction.  The “best” navigators identify changes in the weather forecast “early” and make the needed changes in boat direction at this early time – while others wait for clearer and more certain changes in the weather forecast – putting them behind.  This said, a lot depends on the number of competitors on the race course.  Weathermap If there are just a few competitors, one can wait a bit longer to make a decision as the chance one of them is already “in the right place for the new weather pattern” is slight.  If there are lots of competitors all over the ocean, one of them will be in the perfect place going the right direction purely by accident – so you need to see this early so you can stay within reach of the competitor who was lucky. 

This very much applies to our business.  Some folks are smart and some are lucky.   Being “ahead” doesn’t tell you if one has been lucky or smart.  Over time, after several key strategic decisions, one starts to see who was lucky and who was smart.  Who makes good early decisions time after time – and who gets lucky a few times and then falls back after a few bad decisions.  So have a science/fact based strategy and be quick to change it as the environment around you changes.  Don’t get discouraged if you are a bit behind as there will be opportunities in the future for you to make a good decision and the competition to make a bad decision.  Though you want to be quick to change strategy if the environment changes – if the environment doesn’t change and you have solid fact based strategy, be patient and stick with it.  In the PacCup, it can take several days for one’s routing strategy to play out and those who win almost always look behind early in the race – as they pursue a strategy based on what the weather will be like in a few days’ time.  When the competition is “close” be patient following one’s strategy – waiting for the competitor to make the first or more mistakes.  Business is very much the same.  One needs to spot changes in the market/environment early and change strategy to match this changed market – before competitors do – while at the same time following one’s long term strategy and not changing direction based on non-environmental changes (like what a competitor did or said last quarter).

Sailboat Racing and Building a Business: Post Mortems (Part 2 of 5)

Post Mortems Postmortem

Every race – of which there are 10-12 per year - is an opportunity to learn more about the boat, the crew, the equipment, the layout, sail trim, etc.  After 6 years and 70-80 races one learns a lot about the boat and crew (only last year, after 5 years, after losing several races to identical boats, did I learn how to set-up the boat’s mast rake properly).  One also learns the most when racing with the most closely matched boats – and it’s harder to learn when racing against boats that are less competitive or very different in form.  Winning means dissecting one’s losses to understand what went wrong.  If you don’t know why you lost – you are going to make the same mistake and lose again. 

This applies to work too – whether one’s team within the larger corporation or as an entrepreneur building a new business.  When one has a loss or failure at work, one has to go through the painful and frequently introspective process of figuring out “why”.  Often one doesn’t know exactly why one “lost” but has “suspicions” that need to be reviewed over time during other races to narrow down the source of failure.  Ignoring, denying or not inspecting failures means improvements will be slow or not at all.  “Those who don’t study history are doomed to repeat it.”  With my race crew or at work, it takes time – face time – to build the personal trust needed for people to be open and honest – to be able to criticize their own performance in front of the team – and take criticism from other team members – without being defensive.  I have taken to using Autodesk’s “Mature Directness” tenant with my race crew too!  

Sailboat Racing and Building a Business: Intro and Prep (Part 1 of 5)

Some of you know I am an avid sailor – and more specifically love long distance sailboat racing in the ocean.  Having been racing sailboats for 40 years, I have learned a number of lessons and rules of thumb that I see many successful entrepreneurs also using.  At risk of this coming off as hubris, I’ll be sharing these lessons with you over the next few posts – using lessons from successful sailboat racing as applied to successful business. 


The Pacific Cup is held every two years – even numbered years.  From 45-70 sail boats in several divisions (7-10 boats per division) race the 2070 nautical miles (1 nautical mile = 1.12 statute miles) from San Francisco to Kaneohe Bay (Oahu, Hawaii).  I have done this race 12 times on a wide variety of boats from 24 to 73 feet in length and with crew sizes that varied from two people (“double handed”) to fourteen people.  It is typically a 10-13 day passage that starts with a few days of “big wind and waves” and then a week plus of “running” downwind with the spinnaker up.  Envision several people locked in a small room with a great view for almost two weeks - with the stereo blasting 24 hours per day – and a bucket of water thrown across the room every few hours. And the room is moving like in a strong earthquake.   After close to two weeks of this, one gets a week on land spent mostly preparing the boat for the return trip, and then one gets back on the boat for the 16-19 day mostly upwind “beat” home. Sailboat


You don’t win races if you are not prepared – more prepared then your competition – preparation as a source of competitive advantage.  For the race to Hawaii, I am almost continuously preparing – since first acquiring Green Buffalo.  I bought the boat knowing I wanted to be competitive (starting with a solid competitive foundation) and then restored and continually upgrade and fine tune to make it ever faster.  In this year’s PacCup, I spent the last few months sailing with the crew, analyzing weather patterns, and fine tuning equipment – while most of the competition was scrambling to get the “basics” ready for the race. 

As with sailboat racing, you need to be thoroughly prepared - the “basics” must be a given - so you can focus on how to improve.  Once in a while someone unprepared gets lucky and wins a race – but over time the best prepared win consistently.

Dancing with Elephants: Antifragile

My most recent during travels last month was “Antifragile” by Nassim Taleb.  I am a real fan of Taleb’s writing having first read his second book “The Black Swan” and then going back and reading his first book “Fooled by Randomness”. Black swan

Taleb is by Wall Street standards a “Quant” but feels more like a philosopher.  His basic premise – based on probability theory and statistical facts – is that life is ruled by infrequent unpredictable large disruptive events (“Black Swans”).  Whether in the financial world – stock market crashes, financial crisis, real estate bubbles and so on that happen unpredictably but the fact they will happen again in the future is quite predictable.  Randomness also plays an outsize role in personal life from how you ended up in your first drop, to how you met your spouse, and how you came to live where you live today.  In Antifragile, Taleb goes beyond showing how people manage the small things but are caught by surprise and randomness when it comes to life’s most important choices – that there are some things that react positively to unpredictability.  The prime example is life and evolution.  Dramatic changes in an environment drive evolution of species – and rapid change making species stronger.  Lack of environmental change results in fragile organisms that more easily go extinct.  Antifragile systems are also characterized by having many small failures that enable the system to adjust without going through unpredictable but certain to happen massive disruptive events.  For example, large markets with many buyers and suppliers can see several buyers and sellers fail with little impact on the system as a whole – and in these many small failures strengthen the surviving market players.  We hear this almost daily in discussions about what to do about large banks that are deemed “too big to fail”.  A few large banks with a large percentage of the banking industry are fragile whereas hundreds or thousands of small banks are not.  

Business platforms and ecosystems – to some degree - is also an example of an Antifragile system.

It’s about Shared Risk and Diversity

Platform providers develop and nurture a community of innovators by providing innovators technology that reduces the cost and risk of innovation.  Innovators get to market faster and at a lower total investment by leveraging the platform provider.  The faster time to market and lower costs also gives the innovator greater flexibility to change the direction of their business and/or pursue new ideas.  The lower cost of starting and building a business based on someone else’s platform technology also makes it more feasible for an innovator to bootstrap their business and avoid the risks in giving away ownership/equity/control of their business.  Innovators are reducing financial and technical risk by being able to more quickly and cheaply get their app to customers by leveraging the platform provider.

The platform provider gets innovation driven by diversity based on their platform. As if you were playing roulette, instead of having to place a few product and technology bets, the platform provider uses an ecosystem to cover the whole table with bets of varying sizes.  The platform provider will have to share the value of success (customer’s money) with their partners – but that is part and parcel of the platform and ecosystem strategy.