1/ Tell us a bit about what you do; what platforms have you developed for and which is your main platform now?
Creative Algorithms mostly does productivity apps. We have some in travel (Trip Boss), business (Date Wheel), and cooking (Serving Sizer). We developed for PalmOS in the past (first app released in 1999), dabbled in a web app (http://datewheel.net) and are now focused on iOS apps, both iPhone and iPad.
2/ How has the market changed in terms of developing for mobile devices? Has it changed for the better?
The distribution gained by the synergy of the AppStore changed the market a lot. Poor distribution methods and greedy commissions made it tough to make it in the mobile software market in the past. The falling prices, due to various influences, including lack of trials, have not been welcome, but they too have grown the market. The fact that everyone now knows what a smartphone is and how to buy software for it, has made the market much better.
3/ Which method is best for revenue in your opinion- paid apps or free apps with adverts?
Free apps work best for games, as well as 99c apps. But serious apps priced at 99c or free are not very serious, IMHO. We have not released any free apps with adverts yet, but I think the key to ad revenue is usage. Games get used a lot. Non-game apps will have varying usage. A twitter app probably does better with adverts than an app to track your flights. So, I think the best revenue model depends on the type of app you are developing. Revenue could be good (or very bad) for either model.
4/ Does the recent assimilation of popular apps by Apple into iOS 5 concern you?
No. It's right there, plain as day, in the agreement, that you should have no assumption that Apple won't take your app idea and use it. Filling in obvious gaps in functionality is risky, since it's more likely that Apple will get around to updating to add those types of things. I used to feel that way with the Palm apps that would fix volume, for example. One day Palm would probably get the volume right and your app would be obsolete. However, if you feel you can gain enough income in the short term, it's not a bad idea. Plus, sometimes when Apple provides a basic feature, such as Notes, and a developer can expand on it, it's good for everyone. Apple creates an awareness for this type of app, and people start to look for something better and find your app.
5/ Do you agree with the comment that having a hit app now is as likely as getting in the top 10 of the music charts?
No. Yes, there is a 'lottery' of sorts, but there is also a way to position yourself to have better odds. Write a good app. Make it look good. Include all the latest features that Apple is trying to promote and people want. Things like that. Plus, if your business plan is based on only hits, you should move on.
6/ Is it possible to make a living out of app development or do you need to be a big software house to do so?
To follow up with my last comment, yes, you can make a living as an indie developer. Yes, hits would be nice, and make it easier, but you just need to develop a number of apps, that are cross-promoting themselves, and eventually you'll hit the right number to support yourself. I recently fleshed this opinion out in a blog post, "Slow and Steady Wins the Race: the Optimistic Numbers Post": http://bit.ly/hLP41w
7/ What is the likelihood of you still developing mobile apps or games in 12 months time?
We are more indie app developers because of the lifestyle, not the millions in revenue (which would be nice, of course). We're a husband and wife team and we enjoy working on our business together, and having the flexibility to do things more with our kids. We started later in life, so we had established ourselves, so our options are probably different than others. So, yes, we will stick with our mobile apps, even if it means doing mobile app contract work on the side. But, then again, that's still developing mobile apps. :)