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INNOVATION ECONOMY

Entry is easy, but few prosper in app development

Brad Rosen (left), creator of the Drync app, with marketing director Daniel Rodriguez.

Joanne Rathe/Globe Staff

Brad Rosen (left), creator of the Drync app, with marketing director Daniel Rodriguez.

I started to feel like there might be a gold rush going on in the world of mobile apps when I went to get my car inspected last winter.

The guy pumping gas at the station, Brian Semiglia, told me that he was almost finished with an iPhone app designed to help drivers locate empty parking spaces. He’d already had some success selling a 99-cent iPhone app called Candyclock - essentially, an alarm clock with mesmerizing video backgrounds shown behind the time display.

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Semiglia admits he had hopes that mobile apps might eventually turn into his full-time job: “That was the initial appeal,’’ he says.

But in 2009, when he started selling Candyclock, there were about 50,000 apps for sale in the iTunes Store, Apple’s online marketplace. Today, there are more than 500,000. His second app, Space Defenders, hasn’t exactly been a blockbuster. “I’m kind of burnt out on apps right now,’’ he says.

The initial proposition of selling apps through Apple’s iTunes Store or the Android Market was appealing: Once you’d written the software, you could set your own price and reach a vast universe of prospective customers. Apple or Google, which created the Android Market, would serve as a cashier, handling the transaction and passing 70 percent of the app’s sticker price to the creator.

“No one will say it, but everyone develops an app because they envision launching it and making a million dollars,’’ says Jonathan Kay, founder of Apptopia, a Cambridge start-up that aims to become a broker of mobile apps. “Everyone figured that it had fewer barriers to entry than a lot of businesses, and you didn’t need to have a lot of money to get started.’’

But with so many individuals - and big companies like Fidelity Investments and TripAdvisor - creating apps, the virtual shelves of the app stores started to get crowded. Consumers started to expect that every app would have a free version to its utility before they’d shell out a buck or two for the more sophisticated version.

And with all that free stuff available, over time, developers found that fewer people were choosing to pay. Brad Rosen, a Boston mobile developer who created Drync, a personalized guide to wines, said the percentage of people who opt for the $1.99 “pro’’ version dropped from 16 percent to 10 percent over the past two years.

As a result, companies desperate to build a big user base for their apps started spending silly amounts of money advertising. It isn’t unusual for companies to spend $50 or $100 to acquire a single user, hoping that the strategy will either attract loyal new customers to a business, or land them on the most-downloaded lists.

“We were spending over $100,000 a month on advertising,’’ says David Chang, cofounder of SnapMyLife, a Cambridge start-up that ran a mobile photo-sharing service. But that didn’t work out. SnapMyLife sold its assets to another company in 2010.

All this can be frustrating to app developers who hope to earn more than $200 or $300 a month for their work. “I have a wife, a 3-year-old, and a mortgage payment,’’ says Kirby Turner of Salem, who created a contraction-timing app called Labor Mate. “It’s really hard to just make a living selling your apps, but for me, it is my ultimate goal.’’

Turner says Labor Mate produces about $12,000 in revenue a year, but he still spends about half of his time as a freelance software consultant.

Trying to make a living by creating hit apps “is fool’s gold,’’ says Semiglia, the app-developing gas station attendant. “You’re better off selling a shovel than going for the gold yourself.’’

Start-ups like Apptopia and Fiksu plan to do just that. Apptopia hopes to connect independent app developers with larger companies interested in existing apps to buttress their marketing strategies. “You might have a dating site that wants to buy an app related to movie times, and use that to drive increased sign-ups to their site,’’ says Kay.

Apptopia, which plans to launch its app brokerage next month, will take a 10 percent fee when it helps facilitate an app sale.

Boston-based Fiksu was originally founded to create hit apps, but soon decided to sell shovels and picks instead. It now operates an advertising network that helps other developers promote their apps. Founder Micah Adler says, “We could either keep building our own apps, or start marketing everyone else’s. The latter was a much bigger potential business.’’ The company has raised about $7 million in funding, and has 80 employees.

Rosen, creator of the wine app Drync, hopes to expand from selling the app into persuading his 400,000 users to purchase bottles of wine, by mail and at local retailers. He’s trying to raise $1.3 million to execute that new strategy.

For every rule, of course, there’s an exception. In Boston, that would be RunKeeper, an app that amateur and professional athletes use to keep track of workouts. The company has more than 8 million users, some of whom pay $4.99 a month to get access to more features, like the ability to broadcast their progress in a race live to the Web. RunKeeper raised $10 million in venture capital just before Thanksgiving, and this week moves into expanded office space, with plans to grow from 17 employees to 40 over the year.

But founder Jason Jacobs says he always knew that having a hit mobile app and building a company were two different things. For him, the app was simply a means to create a digitally connected community of fitness buffs, all of whom may spend much more than 99 cents purchasing products or services through his company.

Scott Kirsner can be reached at kirsner@pobox.com. Follow him on Twitter @ScottKirsner.
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