>That's a hard pill to swallow, but we should let it sink in. We pour all our creativity, time, and passion into creating basically worthless products.
What a weird conclusion. For me, the take-home is rather "why don't I stop doing this and try to figure out something that is actually worth something to someone?"
Isn't that exactly the same conclusion as the article?
"But we should be aware of the fact that we're in the business of creating products which offer very little value to people. It's our choice if that's what we want to pursue."
What is the worth of something precious or valuable, if all around it that same precious and valuable thing (or a very close substitute) is available for no charge at unlimited quantity?
I wonder if Apple was aware the App Store would lead to basically infinite supply of (in many cases) beautiful and high quality apps for little to no cost.
With 200 million+ users, many of whom have a greater than average tendency to pay $$$ for apps than your average smartphone user, an outstanding Apple developer has some chance of making money on the App Store - (That old saw about capturing 1% of a very large market) - but I really pity the third and fourth tier platforms - they are going to struggle.
> most people would opt for a free cup of coffee over a paid one, if quality was similar.
Quality does not enter the equation. Most people will opt for a free cup of coffee over a paid one if the paid cup is the best coffee in the world and the free one is barely a step over ground-up dried shit.
> The economic reality is that most apps offer next to no value to people.
I'm not an app developer and I disagree that most apps provide next to no value (some apps, like everything else sure, but many of them do provide more value than their price).
For example there are many games priced $0.99 or $1.99 that people might play for hours and hours. Shouldn't that cost more?
The reason that the prices are low is not because people are not prepared to pay for them. It's because Google and Apple want it that way and also because developers are slashing prices to the extreme to compete.
Imagine if App store and Play store didn't exist and you'd have to individually find developers and buy/download their apps. That would certainly result in higher prices.
The bottom line is app developers have no one to blame but themselves for creating this perception about their apps and allowing this expectation of $0.99 apps to grow.
People also have no freaking clue how hard it is to make apps. For example most people think mobile apps are a lot easier to make than software/web apps, perhaps because mobile devices are 'small' so they tend to think of mobile apps as 'tiny' little widgets that someone pushes 20 buttons and it magically gets created.
If a large enough group of people start raising awareness and refusing to release their work for peanuts we'll see a shift in the market price towards more realistic numbers.
I have my doubts that prices are going anywhere but down. You can stubbornly keep your app's price high if you want but a couple of dozen others will gladly step in your place.
I think the author is wrong here; apps do offer real value but they are still close to being worthless economically. What developers should start realizing is they shouldn't spend so much effort on todo lists, podcast clients, rss readers, or any other trivial app category that many people do as side projects for free for fun.
As a result we might get more genuinely innovative apps as developers look more closely at what niches are being underserved.
Exactly. If you can't build something unique then don't complain if there are 100 other developers (some of whom may come from developing countries) who are happy to do for it less.
There is a new era of apps being ushered in as a result of Bluetooth LE. Take advantage of it.
As Arment notes, there's no way you can build something unique unless 1. you've got dedicated hardware (in which case you'll sell the hardware and give away the application) or 2. it's a small niche market through which you can stay under the radar of price dumpers
But there are nearly infinite numbers of "small niche markets", many of which are willing to pay a lot of money because in their case the app provides enormous value.
There are a lot of small niche markets, but I am not convinced that they'll generate much revenue because--hey, it's still just an app, why does it cost so much?
If the only way to do anything in mobile is to constantly be outrunning the onrushing boulder of the shitty free knockoffs, it probably makes more sense to just go do something else. (This is where I'm at now; there are no good applications for a number of things I really want, but there's also no way to recoup the time investment of making one just so you can get one-star reviews for "$5 is too expensive".)
Prices are not low because of Apple or Google, they are low for exactly the reasons in the article plus one, they are so many apps its just as likely you will find an acceptable one that is free that does what another wants money for.
I have purchased a few apps, namely ones I was familiar with on my desktop and wanted a portable version of. Yet for nearly every paid "other" app I could find one or more free ones.
the idea of finding a "large enough group" to correct pricing is laughable, go for it, the ease of development is that ideas undoing. Yeah, it does not guarantee good apps, but that old adage about a million monkeys and Shakespeare applies here too
I imagine Apple and Google are largely indifferent. Low price points make their platform more attractive. Higher price points, make them more money.
It's just competition. The barrier to entry is incredibly low (lower than it's ever been on desktop, because billing and distribution is done for you), and now it's a race to the bottom.
I think that applies to Google/Samsung/Amazon, who want to capture as much of the market as they can get.
Not sure it applies to Apple. They've made their position on the low/mid-range clear. If anything, having an App Store full of shovelware makes it harder to distinguish iOS from Android, which is what they've bet the company on being able to do.
>If anything, having an App Store full of shovelware makes it harder to distinguish iOS from Android
But app stores full of crap provides easily reguritable marketing nuggets that make your platform seem more robust and put potential competitors in a bad light. "ZOMG we have 1,000,000 apps!" Try posting about Windows Phone or Blackberry and prepare to be ridiculed for talking about platforms with "only" a few hundred thousand apps.
I fail to see where they have had any influence. Apple at least has historically priced a number of their applications pretty high (not all of them though, basically "core feature" applications such as ibooks or podcasts were free, but iwork applications are $10 each, and garageband and imovie are $5)
> also because developers are slashing prices to the extreme to compete.
Mostly that one, from very early on there's been an insane tendency to price-dump and race to the bottom.
> That would certainly result in higher prices.
It would also result in extremely low sales, as known by anyone who developed for S60 or Blackberry back in the bad old days.
> If a large enough group of people start raising awareness and refusing to release their work for peanuts we'll see a shift in the market price towards more realistic numbers.
That's completely unrealistic. It would require a buy-in from every single developer.
but iwork applications are $10 each, and garageband and imovie are $5
These are enormously complex, rich applications that supplant historic applications costing hundreds of dollars. If Garageband is $5, it makes it that much more difficult for anyone not making a significant application with a team of developers to demonstrate value for a couple of dollars.
> Apple at least has historically priced a number of their applications pretty high
This is incorrect. Apple has historically priced their software very low, and their hardware very high. Their office suite is very inexpensive compared to MS Office, for instance. Their OS is also very inexpensive compare to Windows.
On the mobile side, their $5 and $10 price points make it hard for others to justify charging that much for less complex software (a point corresation has also made).
Now of course they are giving away their mobile software, which I think helps both themselves and 3rd party developers, so I think it's one of the few steps they've taken to help 3rd party developers charge more. (Last time around it was the creation of a "premium" category.)
I think your comment is an example of exactly the sentiment this blog is trying to address: Complaining into a void. Users should value what you want them to value. Apple & Google should fix it.
The reality is that Apple & Google have their interests driving them, user have theirs & App developers have their own. Anyone who finds themselves frustrated and complaining into a void needs to channel the stoics and devote their emotional energy to stuff that can be changed, preferably by them.
That said, I don't quite agree with his approach. The price of a cup of coffee is not a good benchmark unless you happen to be selling tea or biscuits or something else in the coffee shop. The Cup of Coffee is a little anomaly involving self esteem, addictive substances, morning routines and other bits and pieces of dark magic. Every environment has its own price dynamics and very few are similar at all to coffee shops'. In a supermarket people are very cost sensitive. An extra 30¢ can be the difference between customers choosing one jar of instant coffee over another. That's less than one cent per cup of coffee. Enough with the cup of coffee already. If it helps you make a sale, go for it. If you are using cups of coffee to justify to yourself why people should be buying your stuff when they are not, don't.
There is a chasm between $0 and $0.01 for digital goods that is confusing but undeniably there. Yelling at it that it shouldn't be there and holding up your overpriced cup of coffee as proof that selling stuff should be easier is useless.
It's hard to sell software with a value anywhere in the ballpark of a cup of coffee regardless of price. That is reality. It was hard before the App store. It's still hard. It's also hard to sell (ppv) episodes of Breaking Bad (even though they're awesome), digital subscriptions to newspapers (even though the paper versions were clearly worth something to some people). We can discuss why the experience of buying software or TV shows isn't as rewarding as the experience of buying coffee, but lets not try to argue that it is or should be when it clearly isn't.
Coffee has its own culture and rituals around it. Some people tend to be snobby (for lack of a better word) about coffee. Our office provides free coffee, but lots of people bring in their own coffee shop coffee at a cost of a few bucks a day. Sitting in a coffee shop is kinda a "thing" to do, even though you can make coffee at home and sit in your living room for pennies. People hang out there, do work, read, what have you.
Some developers are willing to sell for $1, and make quite a bit of profit because that brings in lots of customers. Why "shouldn't" they do that?
Imagine if App store and Play store didn't exist and you'd have to individually find developers and buy/download their apps. That would certainly result in higher prices.
So you're saying that Apple and Google are providing most of the value here. Maybe they "should" be getting 90% of the revenue instead of 30%.
People also have no freaking clue how hard it is to make apps.
It's hard to make microprocessors. Should Intel and ARM make an agreement to triple their prices so that their engineers can be properly rewarded?
If a large enough group of people start raising awareness and refusing to release their work for peanuts
As a cell phone customer in the US I appreciate price-fixing cartels as much as anyone. But first you should really do something about those open source communists who have been devaluing software development for decades.
> So you're saying that Apple and Google are providing most of the value here. Maybe they "should" be getting 90% of the revenue instead of 30%.
Maybe they already are. Another way to think about this might be, apps might nominally cost $20 or so, and Apple/Google do take 90% -- but they also choose to give an (invisible, constant) 80% discount to encourage purchases. Developers then get paid from net, rather than gross, profits.
_Imagine if App store and Play store didn't exist and you'd have to individually find developers and buy/download their apps. That would certainly result in higher prices._
Higher prices .. and much, much lower sales.
The analogous situation is developing with PC games and Steam; rather than spending £40 each on a very small number of games I find myself spending £4 - £15 on a large number of games.
Some sort of ridiculous Galtian producer's strike will get you nowhere here. People have plenty of other choices.
> If a large enough group of people start raising awareness and refusing to release their work for peanuts we'll see a shift in the market price towards more realistic numbers.
This is always the dream of the producer whose output is "underpriced", whether he's a laborer or capitalist.
"If we all band together and restrict supply, we can force prices up." But if someone breaks rank, our cartel collapses.
There have been at least temporary successes: trade unions, the Steel Trust, OPEC.
The tagline for the post is assuming a cup of coffee, i.e a physical product has the same value of a virtual one.
To that end, is software value not dependent on the crowd which buys it? However, I cannot share your cup of coffee you buy from Starbucks.
My point only further raises the question: Do consumers see Apps as shared content? Or, Do they equate physical and virtual App products as being worth the same?
That's an overly negative interpretation. An app can can be worth a lot more than a cup of coffee to someone, but if there's a free alternative, why would they pay?
The business impact is the same under either interpretation of course, and the conclusion would be: don't expect it to be easy to launch a business in a space where people offer free alternatives.
What justification does OP offer for calling mobile apps 'basically worthless' (followed by the condescending 'let it sink in', but let's ignore that)?
I'm confused: is this whole thing supposed to be sarcasm? Or does OP mean that apps are viewed by users as worthless because they are so cheap?
He's not trying to denigrate the amount of work or talent people put into making apps - he's saying that if no-one wants to pay for it (perhaps because they can use any one of a hundred free alternatives) then it is de-facto worthless.
The author's argument is faulty. The value from being able to take notes / manage to-dos properly on a multitouch device may be rather great to many people.
However, the price is not determined by this. The price is the result of an equilibrium. There is a process of underbidding going on which lowers the price for the app very close to cost of producing it, until it is unattractive for new competitors to enter the market.
The magic thing about this is that it delivers these products to the world in great number at close-to-zero pricing and that's pretty nice for the world as a whole.
Think about it this way: It was worth buying mainframe computers at many million dollars a piece and with embarissingly low computing power back in the 70s to some people.
Obviously, when these people buy a computer with a million times the performance at 1/1000th of the price they get a great deal. So it's fair to say that the value of commodity computers is to some people much much higher than the market price. That does not change the fact that producing commodity computers is a cut-throat business with ultra slim margins.
So what I am trying to say is that this emotional / ethical notion of value needs to be seen as distinct from market pricing.
If you're making a todo/notetaking app, you're entering a really crowded marketplace. And from my experience, you're probably also doing it wrong.
I mean first things first: does your app sync with anything standard or are you promising me your webservice? Because a quick glance through the non-existent featurelist from the app's website, and the only thing I see is "sync with iCloud".
So you know, worthless. To me and anyone else who has IMAP/WebDAV/Exchange accounts/CalDAV calendaring/Google calendars. Your apps are worthless because they're not that useful to start with.
What I find particularly messed up is the huge relative difference in the price of the mobile device and the apps that people install on it.
When it comes to buying the device, thousands of people line up outside Apple stores and pay - I don't know - $600 for their device.
Android devices are the same, many people easily spend ~$400-$600 on their device that they may only use for one year.
So a good chunk of mobile users are people with good income, living in rich countries and are well capable of paying $5-$10 for their apps that they run on their expensive/high-end devices.
Yet when it comes to paying for apps they struggle as if their monthly income is $10.
There are many factors involved but I think the most significant one is by far the psychological perception of the value of apps that has been created due to App store and Play store pricing.
There are also many people who are willing to release free and good-enough quality apps because it's their hobby or maybe they want to create a portfolio for themselves.
This reduces the perceived value of these apps.
In contrast people can't find other professional services/tools for free. I mean, say, lawyers, doctors, accountants, electrical engineers, etc... don't produce and provide their services/work for free where you can download a free health checkup from a doctor whose hobby is being a doctor.
So the perceived value remains high.
Software engineers are unique in this regard because they 'discount' their work constantly and justify it by saying 'i love doing this'.
I would argue that authors are with software engineers on this. You can find many free works online from authors who were unable to get a publisher interested. They may not be as organized as software engineers, but they are definitely out there.
One minor reason could be lack of physical media. In old days people received a bunch of disks or a dvd with nice cover art which they can put on a bookshelf.
Now it is all 1's and 0's coming over the wire(less). There is no sense of ownership. People are reluctant to pay for something that they don't touch or own.
One reason could be that consumers aren't technically owning anything, but merely being sold a license to use an application/movie/music for some random amount of time.
Here in the EU, the CJEU rejected the 'it's only a licence' argument and characterised software downloads (that aren't explicitly limited to a fixed length of time) as normal sales, in Oracle v Usedsoft -- in particular, they're sales for the purposes of the First Sale Doctrine. So I could buy your app, use it, then extract the apk and sell it on to someone else, and you couldn't sue me for copyright infringement (as long as I remove the apk from my own phone, of course). (IANAL).
I'm not familiar with US law but my impression is that, on the whole, most states' legal systems are a whole lot less consumer-friendly than the EU, so presumably the same is not true over there.
I don't think it is app pricing that is the issue. I think it is far simpler. With a phone, you are spending a lot of money, but you are getting an actual physical thing.
With software, you are spending money on bits. Spending even small amounts of money and getting nothing physical in return just feels very odd after decades of consumerist stuff acquisition and a few hundred thousand years of hunting and gathering.
A case to counter your argument: Magic: the gathering online. Many people are paying hundreds of dollars per year for what's essentially bits and a purely digital experience. That experience is just worth that much to them though.
The moral here would be: make something as good, market it accordingly, and see the money rolling in.
> the business of creating products which offer very little value to people
my view is it's not that most apps offer little value, but the consumers' perception of value is skewed. You can buy tools today for <$5 that would have cost $50, $100 or more a few years ago, and are miles better than their old counterparts. Also, in a way, Apple is forcing the trial + buy model to become free + in app purchase, so paid upfront becomes a huge negative.
Why is it emotionally easier to spend $5 on a coffee vs spending $5 on an app?
I have a theory on this - I think we price experiences differently from objects, and have a much higher bar for buying an object vs buying an experience. And I think the reason for that is ultimately loss aversion - if we buy a bad coffee it's gone and we can forget about it, whereas if we buy an object we're stuck with it, a constant reminder of how we made a bad choice and lost money.
I rarely buy a cup of coffee (I buy beans). But when I do it's because I need/want it now and I have no alternative, for example at the train station. With apps that usually doesn't happen.
A $5 coffee also buys you a place to sit down and use WiFi, and a bit of social interaction or "lifestyle". Nobody pays $5 per cup of coffee at a supermarket.
No app developers include "installed by a human" and the permission to go sit on a couch at their office for half an hour in the price!
Someone has made and maintained the app over a few person-months of effort, and can sell millions of copies of it. In order to pay for their time spent making the app, I need to give them one millionth of the cost of their time developing it. When there's lots of competition in the app market, app makers will have to sell their time at competitive prices.
Compare that to coffee. There are three baristas on this street who can make me a coffee, so they're also in a stiffly competitive market. But they have to make me my coffee personally, one at a time. I have to buy a larger portion of their time, since they can only make a few dozen coffees per hour (and they have more physical supply-chain issues to manage, like sourcing beans and managing a property).
It's emotionally easier to pay for the coffee in part because no-one down the street is offering it for half the price, or for free. They can't. An app developer can. And they'll have to, because if they don't, someone else will. Because they can.
People generally judge value by looking at the competition. A good coffee shop is better value than Starbucks, so it's good value. A good $1 app is waaaay more expensive than a free one, so it's a rip-off.
As someone who bought Clear I fully disagree with the premise of this post. All they had to do was recompile the app and potentially fix a few small bugs. You can't sit there and act like it was some monumental change that warranted screwing over your existing users. If they are unhappy with how much money they are making then they simply need to raise their prices.
Unless you were the person who works at Realmac, and personally performed the iOS 7 update, I'm not sure how you can possibly say something like this. I didn't do it either, so it might be that you're correct. The notion that asking someone to pay for your work is "screwing over your existing users", is exactly the problem that is being discussed. Personally I don't think that it's that strange to ask people to give you a few dollars so that it is worth your time to keep working on things for them. But hey that's just me.
Your final point shows that you either didn't read the article, or you didn't read the first sentence that you wrote. If Realmac ups their prices because they are unhappy with the money they are making, then everyone (including you since you feel entitled to free upgrades for life) will just leave.
>All they had to do was recompile the app and potentially fix a few small bugs.
That's all they had to do eh. It's all so simple.
>If they are unhappy with how much money they are making then they simply need to raise their prices.
Haha. Or charge for upgrades?
The 99c app business, is shit-business. I feel for app developers. You can't build a company around that price point. Either you charge more or you go down the recurring revenue model. Neither is easy. If you're a game developer you go freemium, and you try to squeeze as much revenue out of your customer base.
Actually, there are many people (me included) who don't mind paying 10$ for a game, but avoid freemium games like the plague. So there is a psychological difference between raising up-front prices and upgrade pricing, even if I spend the same money in the end.
I hear ya. My first experience with freemium was TF2 and I was a fan. I thought Valve made it work. The game was great. You can choose to pay for hats and upgrades but if you didn't, it's still super fun. It doesn't take that long to find some cool weapons and gear, and it doesn't take that long to craft or trade for anything you need. I've actually put in around $20-30 because I just wanted Valve to have some money, given the amount of enjoyment I got out of the game.
The problem is that freemium no longer works like this. Instead of it being a business model ("this is how we sell our game"), it's a core aspect of the game. Instead of designing a game to maximize fun, the gameplay is designed to suck out as much money from the customer as possible. I loved the original PvZ. It was a fun game, with fun challenges and I got tons of hours of enjoyment. I downloaded the freemium update (not even PvZ 2, but an update to the original), and now it's all repetitive grind in order to get you to the point where you'll use your credit card to skip over the purposely tedious parts. Who designs a game to be purposely tedious!! Freemium devs do, that's who. It's insane! Shit. What a terrible genre. It should die in a fire.
>So there is a psychological difference between raising up-front prices and upgrade pricing
I know. That sucks. The reality may be that freemium is the only way you can make money from the app store. The typical app store price-points (99c - 4.99$) are not enough to make any sort of money and to build companies around. And for some reason, no game studio feels like they can charge a proper $10-$50 price for a high-quality AAA title. And now, apparently charging $1 for an app upgrade is a big no-no as well (prior to this appstore business, that's how all software was sold. You buy version 2 and you then you pay for version 3). And that sucks.
Please don't down vote this guy for being "wrong". His view point is seemingly widely held and very appropriate for this conversation, even if it is not completely correct.
Then I'll add another point of view, hoping that I'm not the only one: The issue for me was not that I expected a free update for iOS 7 or a universal app, but that pulling the old app AND replacing it by a paid app with the same name was very misleading. Please name it "Clear 2", "Clear HD" or "Clear+", so that customers have a chance to understand what happened. Not everyone reads blogs.
After updating to iOS 7 (and before learning of the drama surrounding Clear), I wanted to download Clear to my phone again and almost bought it by accident: after all, the icon, app name and app platform (iPhone) were the same, so I figured that the price still being displayed was an App Store bug.
It's not that I care about paying 'a cup of coffee' for an app _at all_, but this felt like a scam. OmniGroup handled this a little better with OmniFocus: They've also pulled the old version, but the new one looks different and is called OmniFocus 2.
I am the engineer behind both Clear for iPhone and Clear+. Your statement could not be further from the truth - it has taken a lot of effort to make the iPad component.
I'll give you a taste of some of the work that needed doing (completely describing everything would take ages). Here's a few examples:
- With iOS7, we switched to using TextKit so that we can vary the text sizes (both internally and via Dynamic Text). This involved a significant refactoring as in the previous codebase, we had to hardcode offsets. Why was it all hardcoded? Anyone who's had to deal with the problem of editable inline text would know that there were no APIs to match the drawing of text and editing via UITextView (which was previously based on UIWebKit; while you could the drawing either via the convenience NSString methods or via CoreText; if you used CT, you'd end up with mismatched visuals when editing / displaying). Did you also notice that when completing items on iOS6, the strikethroughs extended beyond the text on items with more than 1 line? Not anymore, due to the new internals.
- The architecture on the iPad is completely different vs the iPhone - on the iPhone, you have a single "list view" (custom implementation to be able to provide all the advanced gestures). On the iPad, you now have two view controllers that need to stay in sync, animate in sync, etc. It also meant that I had to do significant refactoring to abstract away all the controller logic as it had to be embedded in different controller hierarchies - you really don't want to duplicate all that logic.
- List peeking on the iPad. This required adding support to both the list view and to the item views, again - something many people might not even use but it's extremely handy when you need it.
- Drag and drop on the iPad. iOS does not provide a standard API to drag between views, so I had to implement my own which is fully animated and interactive. Try to dragging tasks to lists on the iPad - the feedback is immediate and you will see the 3D animations when items drop. These are all little details but they take a lot of effort to get right.
- If you run the iPad app, you will see that it has a completely interactive tutorial. We spend significant amount of time on that, to make it feel super nice and provide the best way to acquaint users with the interface. Again, anyone who cares about details will tell you that the final 10% take a considerable amount of the total time.
- You're also not seeing a significant amount of research and testing. We had experimental interactions that never made it to production. We've made many prototypes throughout the life of the app, none of them publicly available. We learn a lot from these but that's all invisible to our users.
The above points just scratch the surface on the work that was needed to bring Clear to the iPad. I hope it illustrates the point that it's not a simple job of just recompiling.
The issue is that users have come to expect free updates for the life of the product. I've had five-star apps get 1 star reviews because 'it hadn't been updated in months' – in one case, with an app that already saw nearly three years of continually free updates that each brought a ton of (painstakingly) added technological complexity. Most of our users love the product. We've gotten an award, and have been featured by Apple.
Those 1 star reviews, as you know, are very detrimental. I've had one or two in the past because they _thought_ we were going to charge for an update that we announced.
Anyway, point being that while I feel your pain -- this stuff is never easy to build -- many users do not.
The majority of those changes aren't visible to users. As a corporate developer, I can tell you that it's extremely hard to get funding to make even the most necessary technical changes to an existing piece of software. Normally, the best you can do is sneak it in with a big redesign that has features worth paying for.
The problem is that the difference between $2 and $1 is not the same as the difference between $1 and $0 (i.e. free). Humans are not rational in this way, and the abundance of free apps kills it for everybody else in the market. If one company would start giving away really awful-quality chocolate (or any product) for free in every supermarket, the chocolate prices & industry would crash.
Dan Arielly did a couple of interesting experiments on this. He had people paying for products in a cashier line (i.e. people who had their wallet out anyway) choose between two really good offers: Hershey chocolate for $0.10 and Lind chocolate for $0.20 (or something like that, I forgot the detailed numbers, it may have been $1/$2 or $0.5/$1). In that case, most people choose the more expensive Lind chocolate as it was clearly the superior product (i.e. higher quality).
When he repeated the experiment with $0.10 for the Lind and $0.0 (i.e. Free) for the Hershey's, the game changed. Everybody took the Hersheys. Even though the pricing didn't really change, they only both became cheaper, by the same amount.
The verdict, really, is that if there's something free around, we go nuts and quality doesn't matter much anymore, because it is free.
If free apps, on the app store, would be at least $0.50, or even $0.10, I think it would totally change the game. (I.e. if Apple would change the Free Tier).
But as it is right now, I think the downward spiral will continue. The only way out is to create a high quality superior product (many features, etc) with a high price tag and hope that you get enough customers to survive. That also should lead to less support load.
This Ariely experiment is unconvincing because it's quoted with percentages.
Are the free customers switching down from the luxury product, or are they new customers who otherwise would have gone for neither option?
The percentages withhold that information.
I think the only way out is to allow demo apps. I find it really hard to justify $10 or $20 on an app which may or may not fit into my workflow.
That's on top of the problem of determining whether something is of reasonable quality (i.e. even does what it claims) from a few screenshots and likely-gamed reviews.
The problem gets worse the more complex the app... Yes, reviewer A might find it useful because some subset of the features work OK for them, but perhaps I just want one specific feature which they don't care about?
Without a demo I'm left with the size of the community around and app, and a general 'buzz', both of which make it harder to enter the market at all.
What about giving away the first version of the application, and charging only for upgrades? This way the user has a chance to integrate the application into their life before you ask them for money. Nobody likes shareware--if you have an explicit time limit then people won't feel comfortable with making that app 'apart of them'.
I think pricing like this could work well for open source applications too. I see people now putting up donation suggestions with the download (see elementaryos for an example[0]). The problem is I am not going to pay for something that I have never used before. However, if I like the application, payment is easy, and the pricing is reasonable, the warm and fuzzy feeling of helping a community project that is apart of my workflow would probably be worth the money.
Or instead of a demo, a good preview film showing how the app works. (Like Apple does on it's website, http://www.apple.com/ios/design/ (scroll down). Enough already with the static PNG files.
Reviews are very, very tricky in my experience. A few things I have noticed on my own app:
1. Any negative review hurts. It doesn't matter if it's a legitimate negative review, someone you're pretty sure isn't even referencing your product in the review, or a positive review where they thought 1 star meant great rather than 5 stars.
2. One negative review hurts worse than zero reviews. One or more negative reviews will consistenly drop my daily sales by around 30%.
3. People will almost never read beyond the current reviews. Those that do will ignore the date the review was posted, and often the top reviews shown are from years prior in the All Versions tab. Apparently Apple knew this too because that tab no longer shows the date on the iPad/iPhone App Store apps (iTunes still shows it).
4. Gaming the review system by submitting a new version works. This clears the reviews from the default tab (Current Version) and is the only way to "remove" abusive reviews. Flagging a reviews does absolutely nothing.
Oh boy are you looking at this wrong. Only someone from a western country with a middle class wage could so utterly fail to distinguish between a choice between two costs in resources to a choice between a cost of resources and one of no resources.
Think of this another way. How many chocolates can you afford at a cost of $0.20 each? How many can you afford at a cost of $0.10 each? Now, how many can you afford at a cost of $0.00 each? The experiment artificially avoids this by manufacturing a situation in which purchasers only had a one-time choice, but the purchasers didn't necessarily know it was a on-time deal. For all they know, they may be faced with the same choice every time they go back to that store, even if it was advertised as a one-time deal. We get on-time offers pushed at us all the time these days.
So, is a marginal decrease in cost of $0.10 equivalent in both circumstances? Of course not. A cost in resources is always a cost. A cost of no resources is not a cost at all. Comparing two different costs is completely different to comparing a cost with no cost at all. To understand this, instead of adding costs together over a few transactions, try multiplying them by many decisions instead and you'll see that multiplying by zero has some very special advantages when it comes to resource preservation.
What I think is happening is that analyses like the above are considering only individual translations, but App store users download many apps. Multiplying costs over many purchases, even small costs balloon while free is always free no matter how outrageously you indulge your App store downloading habit.
That's without taking into account that not everybody considers buying a cup of coffee in Starbucks something that requires no thought or consideration. I certainly don't think that way for a start.
Sorry, but I found the parent's comment much more insightful, lucid and relevant to the point being discussed (why a large majority always seems to prefer free apps over paid ones) than yours.
And the utterly pointless ad hominem attack right at the beginning didn't help either.
You also seem to have mixed up "price" with "cost" at places. For instance I don't quite know what these lines mean:
> a choice between two costs in resources to a choice between a cost of resources and one of no resources (what do you mean by resources? Whose resources?)
> a marginal decrease in cost of $0.10 (the cost of the chocolate is borne by its manufacturer while a consumer pays the price)
I'm sure you have a valid counterpoint in there somewhere, but it's not clear what it is.
Sure, it's an explanation. But I find no evidence to believe that it is the only explanation. Or even that it is a better explanation than the parent's (that people behave irrationally when presented with anything "free").
To me it's about the stress of decision-making. I like simply saying "hey, let me check out _____ type of app" then doing a search and downloading up to a half dozen different ones just to try out.
On the other hand if I had to pay a few bucks for an app I'd probably spend a while reading the descriptions, reviews, weighing options, etc. It would turn into work.
The experiment artificially avoids this by manufacturing a situation in which purchasers only had a one-time choice
Well how many times are you going to download the same free app? And how many free apps can you really stomach having crowding up your phone all at once?
I'm not sure I really understand what you're trying to say, but it really thinks as if you're proving my point: What I wanted to say was that the difference between $0 and $1 is entirely different to the user than the difference between $1 and $2. Just like you say, you're not investing any resources for the $0 case. However, from a purely rational perspective, it looks like this:
Imagine that the quality of the chocolate is a utility-function. The cheap chocolate doesn't taste good, so you only gain 0.1 points of utility on a scale from 0 - 1. The Lind chocolate tastes really great, it makes you smile and happy, it has a utility of 0.3.
In this case, if you decide to buy Lind instead of Hershey's, you are willing to pay $0.10 more than what's necessary in order to gain more utility. The added value of the better chocolate has a worth of $0.10 which you're willing to pay.
In the free case, the utility is the same, and the price difference is the same, so if you, earlier, were willing to pay an added $0.10 for the added utility, you should still be willing to pay an added $0.10. But of course, when there is a free alternative, people don't.
You're outlining some of the reasons for that, and they all make sense, I'm just saying that this is standard human behaviour which affects the realities of the app store even though it is not rational. On a Micro Level, human beings are oftentimes not rational at all and this is a good example of that.
Btw. there is a limitation in the study: People could only buy the chocolate once, so even if it is free, you could not take 100. So the no-resources point does not totally explain the behaviour either. There does not need to be a logical explanation to this anyway, it may be something that's still stuck from the Lizard Brain that's causing this.
I think the point is that even if it's only a one time study, a default strategy of preferring free to paid can be rational since we participate in a huge number of transactions in daily life. You are viewing this as an irrational sacrifice of quality for $0.10, but it's really a question of longterm strategy, even if the calculation is done on a subconscious level.
The point of the original experiment was to have the charges be near-zero but tiered with respect to the other items available. It could easily be adapted to another country and currency. And it wasn't a buy as many as you want thing, it was a one-time-only deal offered in the checkout line. So, it's not about multiplying zero. It's about a single instance. Free breaks the logic of most people.
Yup - I read the post and immediately thought of Dan. Free kills everything.
One "solution" is to write great apps that no one else can make, like Amazing Slow Downer, and charge a premium price ($15). But not every app is that "significant," so we end up with twenty guitar tuner apps, or Tabata apps, or whatever.
I'm just here to smirk at the old narrative - that the iOS customer doesn't balk at paying for stuff - being slowly whittled away as the march towards smartphone commoditization continues at pace.
The "iOS customer" of five years ago (the wealthy early adopter) didn't mind paying for stuff. Those customers are still there, and still buying iPhones (probably gold 5Ses now), and apps for them. But now there are way more, more price-sensitive consumers (the people buying those 5Cs, the people who still have an iPhone 4, etc.) and they have much the same buying behavior as (commodity) Android consumers.
In other words, there's still money in the market -- but it's a fixed supply of money (there are a fixed number of wealthy early adopters) vs. an ever-growing number of developers grabbing at it. The only way to get back to where we were would be to make a new app store that required new apps to be designed from scratch for the wealthy users to early-adopt all over again. (...and that's fairly clearly what iOS7 is trying to do, isn't it?)
Nothing like another example of a todo list app to illustrate the downward spiral of app store pricing. Creativity can still get a high price in app store. Find a niche, and develop a great app, and customer will pay. Case in point: Cubasis https://itunes.apple.com/us/app/cubasis/id583976519
Absolutely agree. My coworker built a business app that sold very well for $120, until the company that provides the API crushed it with their own $10 app (bummer).
>>That's a hard pill to swallow, but we should let it sink in. We pour all our creativity, time, and passion into creating basically worthless products.
Obviously not. A cup of coffee is worth $2, period. An app only worth $0.50 to a million people is worth $500k.
Author is saying a cup of coffee is worth $2 to the customer, but an app is not worth even the $0.50 to that same customer.
In this example, you seem to switch out this comparison where instead you compare the cup of coffee the customer buys, to the amount you could possibly make for a $0.50 app bought by a million people.
Agreed, but the point is that the "total worth" of an app is the total utility that it creates in the world across all its customer base.
Of course you're right that to each individual customer the worth remains less than a cup of coffee; if this affects the app writer psychologically, hopefully the size of his/her bank account will be a consolation.
>We pour all our creativity, time, and passion into creating basically worthless products... we're in the business of making products that provide very little value to people.
People who buy coffee at Starbucks are buying a luxury version of a luxury item + they are buying time in a public venue. Does Starbucks actually outsell (in numbers) coffee made at home? seems very unlikely to me. In fact most people buy coffee in a supermarket, which is seems almost free when you actually make a cup (you don't pay everytime you make one).
A cup of coffee is like temporary marijuana to drown out the dreary feeling of going to work. To me, the value is much much greater than most apps, no question. Coffee to me is like having a shower. Sure, a shower is basically just splashing water to your body.. but it's also one of the few places where you can think to yourself with no distractions.
If your paid app can't compete against a free app... that's hardly the fault of the user or the app store. It's the fault of the app maker. What you're basically saying is "my app is so easy to make, that someone could make it without even caring to get paid for it".
It's competition. Yes, if someone can recreate your application for free, then your application wasn't as valuable as you think it was, by definition. Make a better app, or turn it into a service that generates revenue past app deployment.
I think many app developers have gotten spoiled by tales of people getting rich off of P.O.S. apps, and expecting that to happen to them. That happened back in the day because there was a scarcity of applications and app developers. That scarcity no longer exists. Most of the easy stuff has been done, and a lot of free versions have been made because, let's face it, most apps really aren't terribly complex.
So, make something big and hard to duplicate. Make it part of a service you provide with recurring charges and give away your app. It's a better model, anyway.
Couldn't agree more. It's not the users or Apple who are racing the app market to the bottom. It is the developers and the competition amongst them. And it's because creating an app is not that hard. Perhaps designing a great one one and creating and and building a market for it is quite hard. But cloning that exact app [even if it is inferior] and providing it for free or supported with IAP or ads is really not terrifically difficult or time consuming once the idea is proven. It is basically impossible to build a competitive moat.
Games are a bit different given how much art and content is often associated with the production, but users are looking for a fun distraction. Perhaps one should try to build a $2 game with a $50,000 art budget rather than a $500,000 art budget. The users don't really care. It sounds more profitable. Tiny Wings FTW.
How is this true at all? It depends on the programmer, what they are building and the tools they are using to build it. Apps are no different to building desktop or web software. In fact the constraints arguably make it more difficult.
I would say at least that it's much easier now than it was a few years ago.
XCode and iOs have improved tremendously in terms of usability and functionality, compared to the first releases, and I expect that the Android SDK has gone through a similar evolution.
In addition, you'll probably find a tutorial or a Stack Overflow answer for every problem or question you could possibly have, while at first it was largely undiscovered territory.
In short, barriers of entry have lowered tremendously.
For the raw coding part you are describing that is true, but the bar for what people consider a worthwhile app has also risen substantially in the same amount of time. I can build a native iOS app in a day, but I wouldn't consider it releasable to the app store without a good bit more work.
No, i think it's true. Programming for mobile and programming for desktop are both about equally challenging, and have their unique difficulties, but the threshold for what constitutes an "app" is a lot lower on mobile than it is on other platforms. Desktop apps are expected to have a full feature set, mobile apps are often only expected to do one usually simple task. Think about how hard it would be to write the client-side of 'app' for iPhoto on Mac vs the instagram app.
The app in question is a "to do list" app. There are thousands of to do lists on the App store. Lamenting why they can't get someone to pay for an app that is usually free and should come with the phone is fruitless. Big whoop if you can do everything with just 'gestures'. Tapping an onscreen button is usually easier to remember and reliably do than a gesture.
In other words, you are exactly right. They aren't providing value. I could write their app in one week, tops.
Really? There's big difference between someone not choosing to pay for an app and exploiting people who may have no other choice or fallen in hard times.
Do you have any articles about this? I would be interested in reading the arguments for/against.
I am a programmer who can't get a job at Facebook. Do I take a job at X Corp paying $5/hr, or do I spend 100 hr writing an app that will only gross $500?
Sure the app COULD gross more, but in my low talent niche, it is well known how much revenue MotoX Flashlight can generated. Should Google be allowed to publish my app, knowing it will never clear more than $500 revenue?
If so, why shouldn't they pay me $600 (still below min wage) to write the app for them?
>> We pour all our creativity, time, and passion into creating basically worthless products... we're in the business of making products that provide very little value to people. <<
If you take nothing away from the article but that you've gained some insight.
If you take a way someone's smart phone with a handful of paid apps on it and give them a dumb phone they'll get by just fine. They will lose no significant advantage for either work or personal life.
To drive up the price of something with little value you introduce artificial scarcity. Nintendo does this well. If the Nintendo game platforms were open games would be priced like apps. But Nintendo gives their Seal of Approval to everything that goes on their platforms, and there is a high barrier to entry.
I doubt that the software development community would like that model, either. I'm not even sure it's more profitable. But it does seem to create more valuable software. Nothing on smart phones comes close to the quality and polish of a good Nintendo game.
All the time i did not understand why so many developer jump on the App-Train. Most of them did not make money with their apps. But thats another problem.
The real problem is, that everybody try to be cheaper than others and so all developer destroy their own markets.
Why did so many sell a good product for 99 Cent ? CRAZY !
If somebody likes your app and find it usefull, this person will pay more than 99 Cent (ONCE IN HIS LIFE).
Ok, admittedly, it exists millions of todo apps, so you have a special problem with many competitors, but this can't be the reason to be cheap.
While I do agree that the App Store and the Play Store both trend toward the free apps being the most successful ones, I disagree with his mentality about the value of apps completely.
Yes, there are plenty of apps on my iPhone/iPad that I rarely use, but there are also a whole host that I use every single day.
The author cites Clear as an example in his article. I use it every day to make lists and keep track of things for work.
There are also apps like Downcast (a podcast player) and Comic Zeal (a comic reading app) that I have gotten 10x the value of what I paid for them, since I use them so frequently.
Here's a potential solution to this mess. We treat app store placement like it's a free resource right now since it doesn't take up any physical space. However, it does increase its users cognitive load. All apps that have ever been produced sit on the app store unless their creators explicitly choose to take them down. That's like a department store that houses every invention ever made no matter how antiquated or outdated. Apple could introduce a "property tax". If you want to take up shelf space, you've got to pay a yearly tax or make way for other apps that will more productively use that space.
You're confusing profitability with productivity, and potentially killing lots and lots of very useful apps that are distributed for reasons other than profit.
This is an interesting thought, but history has already shown the outcome. Shelf space dominated by the big players and defacto price fixing.
A better approach would be for a few very high quality niche apps to get together an open their own app store. They sell only though their store and price the apps appropriately. Thus starting boutique markets. Could happen now with Android but currently not Apple.
Without needing to support sideloading, Apple could let users group apps on the store into their own collections, which other users could browse. They could even let the users theme them, somewhat like Apple's own decorated collections -- and give the "curator" a user ends up purchasing from a small cut (5-10%) of the sale price.
In other words, replicate the well-trodden player-vendor system from MMOs.
No ... a couple quick examples. Kids don't go to Walmart looking for the Abercrombie & Fitch department. They want the fantasy built around the brand and that means their own stores. Stihl when the dealer route because they wanted to differentiate their higher quality and provide a more personal customer relationship than Walmart would allow.
Gotta get Apple out of that lock-in in order to support true boutique shops.
I guess that depends on whether you see the App Store as a single shop, a department store, or a mall. There might not be Abercrombie & Fitch departments in Walmart, but there are certainly Apple-store-themed electronics sub-departments within Best Buy.
You got it. I think the sub-departments is exactly the wrong model. Completely separate stores with completely separate and unique identities. Apps not also sold in the app store. Boutique shops selling and supporting a very narrow vertical.
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[ 2.9 ms ] story [ 174 ms ] threadWhat a weird conclusion. For me, the take-home is rather "why don't I stop doing this and try to figure out something that is actually worth something to someone?"
"But we should be aware of the fact that we're in the business of creating products which offer very little value to people. It's our choice if that's what we want to pursue."
Most productivity applications (anecdotally) are bought on a whim and oft are never used but at all.
I wonder if Apple was aware the App Store would lead to basically infinite supply of (in many cases) beautiful and high quality apps for little to no cost.
With 200 million+ users, many of whom have a greater than average tendency to pay $$$ for apps than your average smartphone user, an outstanding Apple developer has some chance of making money on the App Store - (That old saw about capturing 1% of a very large market) - but I really pity the third and fourth tier platforms - they are going to struggle.
It's an IAP future.
Quality does not enter the equation. Most people will opt for a free cup of coffee over a paid one if the paid cup is the best coffee in the world and the free one is barely a step over ground-up dried shit.
(Of course I'm talking about Kopi Luwak)
I'm not an app developer and I disagree that most apps provide next to no value (some apps, like everything else sure, but many of them do provide more value than their price).
For example there are many games priced $0.99 or $1.99 that people might play for hours and hours. Shouldn't that cost more?
The reason that the prices are low is not because people are not prepared to pay for them. It's because Google and Apple want it that way and also because developers are slashing prices to the extreme to compete.
Imagine if App store and Play store didn't exist and you'd have to individually find developers and buy/download their apps. That would certainly result in higher prices.
The bottom line is app developers have no one to blame but themselves for creating this perception about their apps and allowing this expectation of $0.99 apps to grow.
People also have no freaking clue how hard it is to make apps. For example most people think mobile apps are a lot easier to make than software/web apps, perhaps because mobile devices are 'small' so they tend to think of mobile apps as 'tiny' little widgets that someone pushes 20 buttons and it magically gets created.
If a large enough group of people start raising awareness and refusing to release their work for peanuts we'll see a shift in the market price towards more realistic numbers.
I think the author is wrong here; apps do offer real value but they are still close to being worthless economically. What developers should start realizing is they shouldn't spend so much effort on todo lists, podcast clients, rss readers, or any other trivial app category that many people do as side projects for free for fun.
As a result we might get more genuinely innovative apps as developers look more closely at what niches are being underserved.
There is a new era of apps being ushered in as a result of Bluetooth LE. Take advantage of it.
If the only way to do anything in mobile is to constantly be outrunning the onrushing boulder of the shitty free knockoffs, it probably makes more sense to just go do something else. (This is where I'm at now; there are no good applications for a number of things I really want, but there's also no way to recoup the time investment of making one just so you can get one-star reviews for "$5 is too expensive".)
I have purchased a few apps, namely ones I was familiar with on my desktop and wanted a portable version of. Yet for nearly every paid "other" app I could find one or more free ones.
the idea of finding a "large enough group" to correct pricing is laughable, go for it, the ease of development is that ideas undoing. Yeah, it does not guarantee good apps, but that old adage about a million monkeys and Shakespeare applies here too
I imagine Apple and Google are largely indifferent. Low price points make their platform more attractive. Higher price points, make them more money.
It's just competition. The barrier to entry is incredibly low (lower than it's ever been on desktop, because billing and distribution is done for you), and now it's a race to the bottom.
Not sure it applies to Apple. They've made their position on the low/mid-range clear. If anything, having an App Store full of shovelware makes it harder to distinguish iOS from Android, which is what they've bet the company on being able to do.
I fail to see where they have had any influence. Apple at least has historically priced a number of their applications pretty high (not all of them though, basically "core feature" applications such as ibooks or podcasts were free, but iwork applications are $10 each, and garageband and imovie are $5)
> also because developers are slashing prices to the extreme to compete.
Mostly that one, from very early on there's been an insane tendency to price-dump and race to the bottom.
> That would certainly result in higher prices.
It would also result in extremely low sales, as known by anyone who developed for S60 or Blackberry back in the bad old days.
> If a large enough group of people start raising awareness and refusing to release their work for peanuts we'll see a shift in the market price towards more realistic numbers.
That's completely unrealistic. It would require a buy-in from every single developer.
These are enormously complex, rich applications that supplant historic applications costing hundreds of dollars. If Garageband is $5, it makes it that much more difficult for anyone not making a significant application with a team of developers to demonstrate value for a couple of dollars.
This is incorrect. Apple has historically priced their software very low, and their hardware very high. Their office suite is very inexpensive compared to MS Office, for instance. Their OS is also very inexpensive compare to Windows.
On the mobile side, their $5 and $10 price points make it hard for others to justify charging that much for less complex software (a point corresation has also made).
Their software pricing agrees with the points Spolsky made on http://www.joelonsoftware.com/articles/StrategyLetterV.html .
Now of course they are giving away their mobile software, which I think helps both themselves and 3rd party developers, so I think it's one of the few steps they've taken to help 3rd party developers charge more. (Last time around it was the creation of a "premium" category.)
Apple's consumer apps were cheap, not business apps.
The reality is that Apple & Google have their interests driving them, user have theirs & App developers have their own. Anyone who finds themselves frustrated and complaining into a void needs to channel the stoics and devote their emotional energy to stuff that can be changed, preferably by them.
That said, I don't quite agree with his approach. The price of a cup of coffee is not a good benchmark unless you happen to be selling tea or biscuits or something else in the coffee shop. The Cup of Coffee is a little anomaly involving self esteem, addictive substances, morning routines and other bits and pieces of dark magic. Every environment has its own price dynamics and very few are similar at all to coffee shops'. In a supermarket people are very cost sensitive. An extra 30¢ can be the difference between customers choosing one jar of instant coffee over another. That's less than one cent per cup of coffee. Enough with the cup of coffee already. If it helps you make a sale, go for it. If you are using cups of coffee to justify to yourself why people should be buying your stuff when they are not, don't.
There is a chasm between $0 and $0.01 for digital goods that is confusing but undeniably there. Yelling at it that it shouldn't be there and holding up your overpriced cup of coffee as proof that selling stuff should be easier is useless.
It's hard to sell software with a value anywhere in the ballpark of a cup of coffee regardless of price. That is reality. It was hard before the App store. It's still hard. It's also hard to sell (ppv) episodes of Breaking Bad (even though they're awesome), digital subscriptions to newspapers (even though the paper versions were clearly worth something to some people). We can discuss why the experience of buying software or TV shows isn't as rewarding as the experience of buying coffee, but lets not try to argue that it is or should be when it clearly isn't.
Some developers are willing to sell for $1, and make quite a bit of profit because that brings in lots of customers. Why "shouldn't" they do that?
Imagine if App store and Play store didn't exist and you'd have to individually find developers and buy/download their apps. That would certainly result in higher prices.
So you're saying that Apple and Google are providing most of the value here. Maybe they "should" be getting 90% of the revenue instead of 30%.
People also have no freaking clue how hard it is to make apps.
It's hard to make microprocessors. Should Intel and ARM make an agreement to triple their prices so that their engineers can be properly rewarded?
If a large enough group of people start raising awareness and refusing to release their work for peanuts
As a cell phone customer in the US I appreciate price-fixing cartels as much as anyone. But first you should really do something about those open source communists who have been devaluing software development for decades.
Maybe they already are. Another way to think about this might be, apps might nominally cost $20 or so, and Apple/Google do take 90% -- but they also choose to give an (invisible, constant) 80% discount to encourage purchases. Developers then get paid from net, rather than gross, profits.
Higher prices .. and much, much lower sales.
The analogous situation is developing with PC games and Steam; rather than spending £40 each on a very small number of games I find myself spending £4 - £15 on a large number of games.
Some sort of ridiculous Galtian producer's strike will get you nowhere here. People have plenty of other choices.
This is always the dream of the producer whose output is "underpriced", whether he's a laborer or capitalist.
"If we all band together and restrict supply, we can force prices up." But if someone breaks rank, our cartel collapses.
There have been at least temporary successes: trade unions, the Steel Trust, OPEC.
To that end, is software value not dependent on the crowd which buys it? However, I cannot share your cup of coffee you buy from Starbucks.
My point only further raises the question: Do consumers see Apps as shared content? Or, Do they equate physical and virtual App products as being worth the same?
The business impact is the same under either interpretation of course, and the conclusion would be: don't expect it to be easy to launch a business in a space where people offer free alternatives.
I'm confused: is this whole thing supposed to be sarcasm? Or does OP mean that apps are viewed by users as worthless because they are so cheap?
However, the price is not determined by this. The price is the result of an equilibrium. There is a process of underbidding going on which lowers the price for the app very close to cost of producing it, until it is unattractive for new competitors to enter the market.
The magic thing about this is that it delivers these products to the world in great number at close-to-zero pricing and that's pretty nice for the world as a whole.
Think about it this way: It was worth buying mainframe computers at many million dollars a piece and with embarissingly low computing power back in the 70s to some people.
Obviously, when these people buy a computer with a million times the performance at 1/1000th of the price they get a great deal. So it's fair to say that the value of commodity computers is to some people much much higher than the market price. That does not change the fact that producing commodity computers is a cut-throat business with ultra slim margins.
So what I am trying to say is that this emotional / ethical notion of value needs to be seen as distinct from market pricing.
I mean first things first: does your app sync with anything standard or are you promising me your webservice? Because a quick glance through the non-existent featurelist from the app's website, and the only thing I see is "sync with iCloud".
So you know, worthless. To me and anyone else who has IMAP/WebDAV/Exchange accounts/CalDAV calendaring/Google calendars. Your apps are worthless because they're not that useful to start with.
When it comes to buying the device, thousands of people line up outside Apple stores and pay - I don't know - $600 for their device.
Android devices are the same, many people easily spend ~$400-$600 on their device that they may only use for one year.
So a good chunk of mobile users are people with good income, living in rich countries and are well capable of paying $5-$10 for their apps that they run on their expensive/high-end devices.
Yet when it comes to paying for apps they struggle as if their monthly income is $10.
There are many factors involved but I think the most significant one is by far the psychological perception of the value of apps that has been created due to App store and Play store pricing.
There are also many people who are willing to release free and good-enough quality apps because it's their hobby or maybe they want to create a portfolio for themselves.
This reduces the perceived value of these apps.
In contrast people can't find other professional services/tools for free. I mean, say, lawyers, doctors, accountants, electrical engineers, etc... don't produce and provide their services/work for free where you can download a free health checkup from a doctor whose hobby is being a doctor.
So the perceived value remains high.
Software engineers are unique in this regard because they 'discount' their work constantly and justify it by saying 'i love doing this'.
And in the Appstores case the free alternative is even legal!
Now it is all 1's and 0's coming over the wire(less). There is no sense of ownership. People are reluctant to pay for something that they don't touch or own.
Here in the EU, the CJEU rejected the 'it's only a licence' argument and characterised software downloads (that aren't explicitly limited to a fixed length of time) as normal sales, in Oracle v Usedsoft -- in particular, they're sales for the purposes of the First Sale Doctrine. So I could buy your app, use it, then extract the apk and sell it on to someone else, and you couldn't sue me for copyright infringement (as long as I remove the apk from my own phone, of course). (IANAL).
I'm not familiar with US law but my impression is that, on the whole, most states' legal systems are a whole lot less consumer-friendly than the EU, so presumably the same is not true over there.
With software, you are spending money on bits. Spending even small amounts of money and getting nothing physical in return just feels very odd after decades of consumerist stuff acquisition and a few hundred thousand years of hunting and gathering.
The moral here would be: make something as good, market it accordingly, and see the money rolling in.
This is all basic economics, supply and demand and marginal cost.
my view is it's not that most apps offer little value, but the consumers' perception of value is skewed. You can buy tools today for <$5 that would have cost $50, $100 or more a few years ago, and are miles better than their old counterparts. Also, in a way, Apple is forcing the trial + buy model to become free + in app purchase, so paid upfront becomes a huge negative.
I have a theory on this - I think we price experiences differently from objects, and have a much higher bar for buying an object vs buying an experience. And I think the reason for that is ultimately loss aversion - if we buy a bad coffee it's gone and we can forget about it, whereas if we buy an object we're stuck with it, a constant reminder of how we made a bad choice and lost money.
No app developers include "installed by a human" and the permission to go sit on a couch at their office for half an hour in the price!
Compare that to coffee. There are three baristas on this street who can make me a coffee, so they're also in a stiffly competitive market. But they have to make me my coffee personally, one at a time. I have to buy a larger portion of their time, since they can only make a few dozen coffees per hour (and they have more physical supply-chain issues to manage, like sourcing beans and managing a property).
It's emotionally easier to pay for the coffee in part because no-one down the street is offering it for half the price, or for free. They can't. An app developer can. And they'll have to, because if they don't, someone else will. Because they can.
People generally judge value by looking at the competition. A good coffee shop is better value than Starbucks, so it's good value. A good $1 app is waaaay more expensive than a free one, so it's a rip-off.
Your final point shows that you either didn't read the article, or you didn't read the first sentence that you wrote. If Realmac ups their prices because they are unhappy with the money they are making, then everyone (including you since you feel entitled to free upgrades for life) will just leave.
That's all they had to do eh. It's all so simple.
>If they are unhappy with how much money they are making then they simply need to raise their prices.
Haha. Or charge for upgrades?
The 99c app business, is shit-business. I feel for app developers. You can't build a company around that price point. Either you charge more or you go down the recurring revenue model. Neither is easy. If you're a game developer you go freemium, and you try to squeeze as much revenue out of your customer base.
Actually, there are many people (me included) who don't mind paying 10$ for a game, but avoid freemium games like the plague. So there is a psychological difference between raising up-front prices and upgrade pricing, even if I spend the same money in the end.
The problem is that freemium no longer works like this. Instead of it being a business model ("this is how we sell our game"), it's a core aspect of the game. Instead of designing a game to maximize fun, the gameplay is designed to suck out as much money from the customer as possible. I loved the original PvZ. It was a fun game, with fun challenges and I got tons of hours of enjoyment. I downloaded the freemium update (not even PvZ 2, but an update to the original), and now it's all repetitive grind in order to get you to the point where you'll use your credit card to skip over the purposely tedious parts. Who designs a game to be purposely tedious!! Freemium devs do, that's who. It's insane! Shit. What a terrible genre. It should die in a fire.
>So there is a psychological difference between raising up-front prices and upgrade pricing
I know. That sucks. The reality may be that freemium is the only way you can make money from the app store. The typical app store price-points (99c - 4.99$) are not enough to make any sort of money and to build companies around. And for some reason, no game studio feels like they can charge a proper $10-$50 price for a high-quality AAA title. And now, apparently charging $1 for an app upgrade is a big no-no as well (prior to this appstore business, that's how all software was sold. You buy version 2 and you then you pay for version 3). And that sucks.
After updating to iOS 7 (and before learning of the drama surrounding Clear), I wanted to download Clear to my phone again and almost bought it by accident: after all, the icon, app name and app platform (iPhone) were the same, so I figured that the price still being displayed was an App Store bug.
It's not that I care about paying 'a cup of coffee' for an app _at all_, but this felt like a scam. OmniGroup handled this a little better with OmniFocus: They've also pulled the old version, but the new one looks different and is called OmniFocus 2.
I'll give you a taste of some of the work that needed doing (completely describing everything would take ages). Here's a few examples:
- With iOS7, we switched to using TextKit so that we can vary the text sizes (both internally and via Dynamic Text). This involved a significant refactoring as in the previous codebase, we had to hardcode offsets. Why was it all hardcoded? Anyone who's had to deal with the problem of editable inline text would know that there were no APIs to match the drawing of text and editing via UITextView (which was previously based on UIWebKit; while you could the drawing either via the convenience NSString methods or via CoreText; if you used CT, you'd end up with mismatched visuals when editing / displaying). Did you also notice that when completing items on iOS6, the strikethroughs extended beyond the text on items with more than 1 line? Not anymore, due to the new internals.
- The architecture on the iPad is completely different vs the iPhone - on the iPhone, you have a single "list view" (custom implementation to be able to provide all the advanced gestures). On the iPad, you now have two view controllers that need to stay in sync, animate in sync, etc. It also meant that I had to do significant refactoring to abstract away all the controller logic as it had to be embedded in different controller hierarchies - you really don't want to duplicate all that logic.
- List peeking on the iPad. This required adding support to both the list view and to the item views, again - something many people might not even use but it's extremely handy when you need it.
- Drag and drop on the iPad. iOS does not provide a standard API to drag between views, so I had to implement my own which is fully animated and interactive. Try to dragging tasks to lists on the iPad - the feedback is immediate and you will see the 3D animations when items drop. These are all little details but they take a lot of effort to get right.
- If you run the iPad app, you will see that it has a completely interactive tutorial. We spend significant amount of time on that, to make it feel super nice and provide the best way to acquaint users with the interface. Again, anyone who cares about details will tell you that the final 10% take a considerable amount of the total time.
- You're also not seeing a significant amount of research and testing. We had experimental interactions that never made it to production. We've made many prototypes throughout the life of the app, none of them publicly available. We learn a lot from these but that's all invisible to our users.
The above points just scratch the surface on the work that was needed to bring Clear to the iPad. I hope it illustrates the point that it's not a simple job of just recompiling.
Those 1 star reviews, as you know, are very detrimental. I've had one or two in the past because they _thought_ we were going to charge for an update that we announced.
Anyway, point being that while I feel your pain -- this stuff is never easy to build -- many users do not.
That depends on how elastic their pricing / demand is. You can raise prices and see your actual revenue decrease because fewer people use the thing.
The inputs to apps are nearly invisible and or hard to understand. Therefore the results of those inputs are undervalued.
Dan Arielly did a couple of interesting experiments on this. He had people paying for products in a cashier line (i.e. people who had their wallet out anyway) choose between two really good offers: Hershey chocolate for $0.10 and Lind chocolate for $0.20 (or something like that, I forgot the detailed numbers, it may have been $1/$2 or $0.5/$1). In that case, most people choose the more expensive Lind chocolate as it was clearly the superior product (i.e. higher quality). When he repeated the experiment with $0.10 for the Lind and $0.0 (i.e. Free) for the Hershey's, the game changed. Everybody took the Hersheys. Even though the pricing didn't really change, they only both became cheaper, by the same amount.
The verdict, really, is that if there's something free around, we go nuts and quality doesn't matter much anymore, because it is free. If free apps, on the app store, would be at least $0.50, or even $0.10, I think it would totally change the game. (I.e. if Apple would change the Free Tier).
But as it is right now, I think the downward spiral will continue. The only way out is to create a high quality superior product (many features, etc) with a high price tag and hope that you get enough customers to survive. That also should lead to less support load.
Are the free customers switching down from the luxury product, or are they new customers who otherwise would have gone for neither option? The percentages withhold that information.
That's on top of the problem of determining whether something is of reasonable quality (i.e. even does what it claims) from a few screenshots and likely-gamed reviews.
The problem gets worse the more complex the app... Yes, reviewer A might find it useful because some subset of the features work OK for them, but perhaps I just want one specific feature which they don't care about?
Without a demo I'm left with the size of the community around and app, and a general 'buzz', both of which make it harder to enter the market at all.
I think pricing like this could work well for open source applications too. I see people now putting up donation suggestions with the download (see elementaryos for an example[0]). The problem is I am not going to pay for something that I have never used before. However, if I like the application, payment is easy, and the pricing is reasonable, the warm and fuzzy feeling of helping a community project that is apart of my workflow would probably be worth the money.
[0] http://elementaryos.org/
1. Any negative review hurts. It doesn't matter if it's a legitimate negative review, someone you're pretty sure isn't even referencing your product in the review, or a positive review where they thought 1 star meant great rather than 5 stars.
2. One negative review hurts worse than zero reviews. One or more negative reviews will consistenly drop my daily sales by around 30%.
3. People will almost never read beyond the current reviews. Those that do will ignore the date the review was posted, and often the top reviews shown are from years prior in the All Versions tab. Apparently Apple knew this too because that tab no longer shows the date on the iPad/iPhone App Store apps (iTunes still shows it).
4. Gaming the review system by submitting a new version works. This clears the reviews from the default tab (Current Version) and is the only way to "remove" abusive reviews. Flagging a reviews does absolutely nothing.
Think of this another way. How many chocolates can you afford at a cost of $0.20 each? How many can you afford at a cost of $0.10 each? Now, how many can you afford at a cost of $0.00 each? The experiment artificially avoids this by manufacturing a situation in which purchasers only had a one-time choice, but the purchasers didn't necessarily know it was a on-time deal. For all they know, they may be faced with the same choice every time they go back to that store, even if it was advertised as a one-time deal. We get on-time offers pushed at us all the time these days.
So, is a marginal decrease in cost of $0.10 equivalent in both circumstances? Of course not. A cost in resources is always a cost. A cost of no resources is not a cost at all. Comparing two different costs is completely different to comparing a cost with no cost at all. To understand this, instead of adding costs together over a few transactions, try multiplying them by many decisions instead and you'll see that multiplying by zero has some very special advantages when it comes to resource preservation.
What I think is happening is that analyses like the above are considering only individual translations, but App store users download many apps. Multiplying costs over many purchases, even small costs balloon while free is always free no matter how outrageously you indulge your App store downloading habit.
That's without taking into account that not everybody considers buying a cup of coffee in Starbucks something that requires no thought or consideration. I certainly don't think that way for a start.
And the utterly pointless ad hominem attack right at the beginning didn't help either.
You also seem to have mixed up "price" with "cost" at places. For instance I don't quite know what these lines mean:
> a choice between two costs in resources to a choice between a cost of resources and one of no resources (what do you mean by resources? Whose resources?)
> a marginal decrease in cost of $0.10 (the cost of the chocolate is borne by its manufacturer while a consumer pays the price)
I'm sure you have a valid counterpoint in there somewhere, but it's not clear what it is.
I had not thought about this one. But it is correct and explains the resoning of consumers.
On the other hand if I had to pay a few bucks for an app I'd probably spend a while reading the descriptions, reviews, weighing options, etc. It would turn into work.
Well how many times are you going to download the same free app? And how many free apps can you really stomach having crowding up your phone all at once?
Btw. there is a limitation in the study: People could only buy the chocolate once, so even if it is free, you could not take 100. So the no-resources point does not totally explain the behaviour either. There does not need to be a logical explanation to this anyway, it may be something that's still stuck from the Lizard Brain that's causing this.
One "solution" is to write great apps that no one else can make, like Amazing Slow Downer, and charge a premium price ($15). But not every app is that "significant," so we end up with twenty guitar tuner apps, or Tabata apps, or whatever.
In other words, there's still money in the market -- but it's a fixed supply of money (there are a fixed number of wealthy early adopters) vs. an ever-growing number of developers grabbing at it. The only way to get back to where we were would be to make a new app store that required new apps to be designed from scratch for the wealthy users to early-adopt all over again. (...and that's fairly clearly what iOS7 is trying to do, isn't it?)
Obviously not. A cup of coffee is worth $2, period. An app only worth $0.50 to a million people is worth $500k.
How many apps are worth $0.50 to a million people?
In this example, you seem to switch out this comparison where instead you compare the cup of coffee the customer buys, to the amount you could possibly make for a $0.50 app bought by a million people.
Of course you're right that to each individual customer the worth remains less than a cup of coffee; if this affects the app writer psychologically, hopefully the size of his/her bank account will be a consolation.
Yikes.
I think the price of a "Cup of Coffee" needs to be defined here. Coffee can be made for $0.07/cup [ http://thekrazycouponlady.com/finance/a-wake-up-call-a-price... ].
People who buy coffee at Starbucks are buying a luxury version of a luxury item + they are buying time in a public venue. Does Starbucks actually outsell (in numbers) coffee made at home? seems very unlikely to me. In fact most people buy coffee in a supermarket, which is seems almost free when you actually make a cup (you don't pay everytime you make one).
It's competition. Yes, if someone can recreate your application for free, then your application wasn't as valuable as you think it was, by definition. Make a better app, or turn it into a service that generates revenue past app deployment.
I think many app developers have gotten spoiled by tales of people getting rich off of P.O.S. apps, and expecting that to happen to them. That happened back in the day because there was a scarcity of applications and app developers. That scarcity no longer exists. Most of the easy stuff has been done, and a lot of free versions have been made because, let's face it, most apps really aren't terribly complex.
So, make something big and hard to duplicate. Make it part of a service you provide with recurring charges and give away your app. It's a better model, anyway.
Games are a bit different given how much art and content is often associated with the production, but users are looking for a fun distraction. Perhaps one should try to build a $2 game with a $50,000 art budget rather than a $500,000 art budget. The users don't really care. It sounds more profitable. Tiny Wings FTW.
How is this true at all? It depends on the programmer, what they are building and the tools they are using to build it. Apps are no different to building desktop or web software. In fact the constraints arguably make it more difficult.
XCode and iOs have improved tremendously in terms of usability and functionality, compared to the first releases, and I expect that the Android SDK has gone through a similar evolution.
In addition, you'll probably find a tutorial or a Stack Overflow answer for every problem or question you could possibly have, while at first it was largely undiscovered territory.
In short, barriers of entry have lowered tremendously.
In other words, you are exactly right. They aren't providing value. I could write their app in one week, tops.
Do you have any articles about this? I would be interested in reading the arguments for/against.
Sure the app COULD gross more, but in my low talent niche, it is well known how much revenue MotoX Flashlight can generated. Should Google be allowed to publish my app, knowing it will never clear more than $500 revenue? If so, why shouldn't they pay me $600 (still below min wage) to write the app for them?
If you take nothing away from the article but that you've gained some insight.
If you take a way someone's smart phone with a handful of paid apps on it and give them a dumb phone they'll get by just fine. They will lose no significant advantage for either work or personal life.
To drive up the price of something with little value you introduce artificial scarcity. Nintendo does this well. If the Nintendo game platforms were open games would be priced like apps. But Nintendo gives their Seal of Approval to everything that goes on their platforms, and there is a high barrier to entry.
I doubt that the software development community would like that model, either. I'm not even sure it's more profitable. But it does seem to create more valuable software. Nothing on smart phones comes close to the quality and polish of a good Nintendo game.
The real problem is, that everybody try to be cheaper than others and so all developer destroy their own markets.
Why did so many sell a good product for 99 Cent ? CRAZY !
If somebody likes your app and find it usefull, this person will pay more than 99 Cent (ONCE IN HIS LIFE).
Ok, admittedly, it exists millions of todo apps, so you have a special problem with many competitors, but this can't be the reason to be cheap.
Yes, there are plenty of apps on my iPhone/iPad that I rarely use, but there are also a whole host that I use every single day.
The author cites Clear as an example in his article. I use it every day to make lists and keep track of things for work.
There are also apps like Downcast (a podcast player) and Comic Zeal (a comic reading app) that I have gotten 10x the value of what I paid for them, since I use them so frequently.
A better approach would be for a few very high quality niche apps to get together an open their own app store. They sell only though their store and price the apps appropriately. Thus starting boutique markets. Could happen now with Android but currently not Apple.
In other words, replicate the well-trodden player-vendor system from MMOs.
Gotta get Apple out of that lock-in in order to support true boutique shops.
I quickly stopped using it because that is my M.O. with all ToDo list apps. I've never found one to replace a folded up envelope in my back pocket.