$425,000 are just the average expenditures including internal and external development costs as well as marketing costs. The expenditures don’t include maintenance or follow-up development costs after launch.
Pharma companies are outsourcing most of their app development
Companies that outsource more than average of their development budget are “Pharma companies” and “mHealth app companies”. Those companies outsource 80% or more of their external development budget.
An analysis of the group of those “outsourcers” shows that:
- Companies with a higher budget are outsourcing more of their budget. The more money a company has allocated for development, the more money will be outsourced.
- Big companies are outsourcing more of their budget than small companies. Corporations with more than 5,000 employees are outsourcing above average of their development budget.
- Companies with the business model “transaction” (e.g. selling drugs, selling devices) are outsourcing more of their budget, which again hints to pharma companies.
62% of those companies are not earning any money at all with their apps (average value: 40% are not earning any money with their apps). On the other hand, companies that are not outsourcing a lot of their development are “low earners”. 33% are making between $10k and $100k (on average 24% are making between $10k and $100k).
Companies that outsource a lot on development also outsource more of their external budget on marketing. And speaking of marketing: Their preferred marketing channels differ from the average: They are relying more on social media and influencer marketing.The biggest driver of development costs for a mobile health app is the part that has to do with electronic health records.
mHealth app development is time-consuming
The complexity of health apps – mostly the complicated healthcare environment – is what drives up development time.
Most apps are developed within one year (56%), 84% within 2 years. But also, most market players are inexperienced and need more time for their app development. As we know from our previous market analyses, the majority of market players in digital health is rather new to the industry, thus rather inexperienced. Even for experienced publishers it can take 3-4 months alone to e.g. adapt an mHealth app to US-American Medicare & Medicaid standards. For players who are not familiar with this subject and its regulations, it might take much longer.
There are 325 000 healthcare apps on the market
Health documents (e.g. related to Medicare & Medicaid) are often huge (with several hundred fields to be connected, which extends development time immensely.
The time frame above (2 years) includes only the time until app launch. For most mobile health apps app development is not finished after the launch. For start-ups app development as well as development of the business model is an ongoing task, thus a long-term project.
App with more functionalities, longer decision cycles, information seeking periods, higher marketing budgets or more complex technologies like machine learning will drive up costs.
Costs will become higher in the future with new technologies
The cost of app development has risen significantly over the last few years. In one of the Research2Guidance research projects conducted in 2011, development costs of an app back then ranged from $30,000 – $40,000.
Not only development but also marketing of mobile health app has become much more expensive. Getting a health app in front of the eyeballs of potential users and being able to cut through the noise of the millions of the 325 000 healthcare apps out there is much more expensive today.
Consumer expectations are pushing apps’ complexity. Developers designing new apps should make sure that they are up-to-date with consumer expectations and best practices. There are a lot of healthcare apps out there that provide hardly any value to consumers.
Best-in-class apps are raising the bar for all other health apps. Those apps are driving up the mentioned consumer expectations, thus development time and costs. App development in healthcare has become an investment business. The more time and money is invested into a mobile health app, the more successful it will be. Producing a successful mHealth app as an “indie developer” is becoming more unlikely – especially when taking marketing costs into consideration.
Download the free report “How mHealth App Publishers Are Monetizing Their Apps”