The average cost of development for a mobile health app from conception to launch is approximately $425,000, with nearly half of this expense outsourced to third-party app development agencies or freelancers, according to new research data recently released from a Research2Guidance survey of 2,400 mobile health stakeholders conducted over the summer.
“The [$425,000] is just the average cost — for apps that are better, or probably will get used more, development costs are most probably much higher than that,” Markus Pohl, cofounder and research director of the mHealth App Developer Economics Program, told MobiHealthNews. “And these are just the costs until the app is launched. Usually if you have a business that you’ve built around an app, you have follow-up costs, so if your business grows or your business model changes you have to make changes on the app as well.”
Furthermore, with previous expenditure data and technology-driven healthcare trends in mind, Pohl said that he suspects the average cost of mobile health app development to increase in the coming years.
"[App publishers] can expect app costs to rise even more, because we know that the apps that we use at the moment are driven by consumers, and consumers [will congregate toward] the best practices apps and not the lower end of apps out there,” he said. “And think about AI and machine learning, [which are] getting more and more complicated. To develop an app that is based on AI and machine learning has much, much higher development costs than the average app of, say, three years ago. With these added functionalities, app development cost will increase.”
Breaking down the expenses, the report shows that 47 percent of app development budgets are comprised of external expenses such as third-party development agencies, freelancers, and marketing. A mobile health app publisher’s reliance on outsourcing is generally skewed with the size of their total development budget; 36 percent of publishers spent less than $25,000 externally, while 12 percent had an external budget exceeding $500,000.
The distribution of this development expenditure is also somewhat skewed, according to the report. Thirty-six percent of mobile health app publishers spent less than $25,000 on their apps up until launch, while 12 percent reported budgets exceeding $500,000.
It’s the latter of these groups that is finding the most monetary success. According to the report, 56 percent of mobile health app publishers are making less than $10,000 annually with their entire portfolio (a six percent decrease over the previous year) while 11 percent of publishers are bringing in more than $1 million annually (up four percent over the previous year). Comparing the lowest and the highest earners reveals that the most successful developers are most often from North America, have a higher technical development level, have greater reach, and more than twice the external development budget than their lesser-performing competition.
“Mobile health development has become an investment business. Starting as an indie developer, making an app in your garage, putting it out there and expecting it to become successful has become very, very unlikely. We know from the research that we’ve done that those apps that will be successful [will] have big investments behind [them],” Pohl said. “That means there’s huge potential out there; if you’re a development agency or a marketing agency, mobile healthcare has big, big potential there for you. A lot of agencies know that, and have jumped into the market of healthcare.”
Other leading drivers of cost highlighted by the report included integration with EHRs and extended development cycles, especially among market players who are inexperienced and may need additional preparation time before release.
Survey responses included additional insights into the mobile health app market. For instance, the most common business models employed by respondents involved licensing (35 percent), service sales (26 percent), app development for third parties (25 percent) and sponsorship (24 percent). Among revenue millionaires, however, business models focused on device sales were the most prevalent despite low download rates compared to other approaches.
On the subject of downloads, the report also found that less than four percent of publishers are achieving more than 1 million downloads annually across their health app portfolio, while 55 percent of respondents reported fewer than 5,000 annual, portfolio-wide downloads. In terms of health app marketing strategies, partnerships with health associations are becoming increasingly common among publishers (48 percent), with social media (37 percent) and email-driven campaigns (29 percent) also proving common.
Sometimes in heatlhcare you want to target very specific user groups,” Pohl explained. “It makes sense to reach out to exactly this specific target group [by] partnering up with health associations that have the outreach into those specific target groups. And if you strike a good deal, it will not cost you a lot.”
These and other findings from Research2Guidance follow a previous analysis of the same survey, released in November. This report offered data suggesting that, again, health app developers with smaller budgets are being outpaced by those with more substantial backing.