How much does it cost to build a web app?April 2007
I didn't get a chance to go to SXSW, so have been happy to see slides that have come from some of the presentations. One of the more interesting ones was Barenaked App: The figures behind web apps. It's an essential read for anyone who's interested in building a web-based application for a new business and wants some reference for the costs involved.
According to the presentation, here's how much it cost to build some successful web applications (design, development, hosting, legal, accounting, etc.):
- DropSend: $48,012
- FreshBooks: $20,000
- Maya's Mom: $70,000
- Mobissimo: $60,000
- Wesabe: $200,000
And here's how much they cost to maintain each month (including employee salaries for some):
- Dropsend: $3,625
- FreshBooks: $46,000
- Maya's Mom: $30,000
- Mobissimo: $150,000
- Wesabe: $3,000+
While these numbers are certainly not representative of every type of web application, the presentation shone light on the types of things to think about when planning a web business. Here's what I took away from the slides:
1. It costs a significant amount of money
There's a popular myth that you can hire a developer to build something for $50, post the URL to Digg, then watch the $1B buyout offers flood your inbox. OK, maybe nobody believes that exactly, but I think people largely ignore the fact that web businesses operate under the same maxim that brick-and-mortar businesses do: it takes money to make money.
Generally speaking, anything that costs an insignificant amount of money will probably face a large number of competitors and knock-offs. Even if you somehow managed to protect your business from that, any major application with less than 100 hours of work behind it probably isn't going to be designed with a great user interface, won't scale with increased traffic, and will be riddled with bugs.
2. It doesn't cost that much money
On the other hand, those numbers are within reach of most would-be entrepreneurs through funding from angel investors, small business loans, or a line of credit. Most successful web applications don't require venture capital to get started, if ever at all. Web applications are a lot less capital intensive than most businesses — retailers would probably be overjoyed if they could open new stores with startup costs that low.
3. It still costs money after it's launched
The second part to the $50 myth is that once your application is up and running you can just sit back and count the profit, without spending any time and money to maintain. Ongoing costs will vary widely depending on the business, but it's fairly safe to say that some amount needs to be budgeted at least for customer support and ongoing hosting if not for development of new features.
Out of curiosity, did these numbers seem reasonable to you? What else struck you about the costs?