App Store Pricing (It's not a free market)

http://appcubby.com/blog/files/app_store_pricing.html

by pxlpshr • 18 years ago

20 28 18 years ago

pxlpshr3• 18 years ago

For anyone interested on this topic, another good read is here:

http://www.polarbearfarm.com/blog/

We were making good money off our Jailbreak apps selling them for $10 a piece, some people liked them so much they donated over $80 a piece for them. We invested countless hours developing them, not only because it was a fun challenge, but because the support was there from our customers to be able to live off this and be able to develop them full time.

The reality is that we barely manage to match the money we were making with our Jailbreak applications through the App Store. Even at the peak so far, where “Record” was Top 10 paid downloads in 22 countries, and DuckShoot in 10 countries, sales barely reach those seen in Jailbreak.

mdasen• 18 years ago

This is a good thing. Ideally, companies wishing to sell their wares will compete like this. Consumers should have this type of knowledge rather than the supermarket style selling.

The problem occurs because no other industries are being forced to scrape the bottom like this. These people (iPhone devs) are earning the type of money you'd get from close to perfect competition, but they're having to buy things (food, TVs, etc.) at prices that aren't anywhere near that. The problem isn't that they're having to price down so much as all the other industries aren't having to do likewise. Their prices are being squeezed down by consumers having good knowledge and lots of competition, but they're having to buy things from people who aren't under that price squeeze.

wmf3• 18 years ago

Ideally, companies wishing to sell their wares will compete like this.

Is it ideal for products to be ranked on number of units sold and nothing else? Says who?

mattmaroon2• 18 years ago

The real problem seems to be that nobody has yet found a good way to market apps outside of the app store.

pxlpshr3• 18 years ago

I think marketing outside of the AppStore would be a lot more viable if there wasn't such a significant pressure to down-price your application. There's just no ROI to be found at .99 + marketing expenditures, IMO, unless you're realizing something on the backside like a subscription service, etc.. but then you might as well price your app for free and use iTunes for its marketing benefits in that regard.

wmf3• 18 years ago

If the only reason people are setting the 0.99 price is App Store promotion but you decide to use a different method of promotion, then you can set a higher price.

brandonkm• 18 years ago

I think that problem stems from apples vice grip on the app store environment and iphone development ecosystem rather than lack of marketing creativity on the developers part.

palish2• 18 years ago

I considered creating an iPhone game where each player would participate in a shared world that would be designed around the constraints of the high-latency EDGE network. The game would be free on the app store, but would cost $5/mo after 30 days. (I'd prompt each user for billing info from within the app.)

The reason I didn't devote my energy to that project is because I don't want to develop a product that hinges on a billing mechanism that circumvents the app store, because that seems like it could (perhaps rightfully) piss Apple off, since they wouldn't be getting their cut, and my game would be vaporized at Apple's discretion. Not that there's anything wrong with that -- it's their platform, and they can manage it how they like. But the lack of "subscription" billing for apps probably precludes many larger projects.

redorb• 18 years ago

if other app developers are selling themselfs short, the only answer is to wait until they go out of business and if they don't then they probably weren't selling themselves short.... Or they have deep pockets..or until apple changes something ( but I'm pretty sure they don't mind having cheap apps)

wmf3• 18 years ago

Because the cost of entry is so low, we should expect a revolving door of app developers heading to the gold rush. For every one that gives up, another will take his place.

GavinB• 18 years ago

Every market has a tail that looks like that. The App store is not unique in having a long tail.

palish2• 18 years ago

Is it unique in having an incredibly shallow tail?

fauigerzigerk• 18 years ago

Yes but I think his argument is that ranking apps by volume creates an incentive to compete solely on price in order to get the volume in order to get the visibility in order to get the volume... Kind of like if expensive low volume laptops at an electronics store were stacked away somewhere in the basement.

But I don't agree with his conclusion that this is not a free market. Every market is organised according rules that someone artificially creates. It is up to sellers and buyers whether they want to use that market or not. So there is a market of markets and that's what makes each of them free.

Of course Apple's dominant position in that particular market of iPhone app markets is a problem for everyone. That's why I would think very hard before I creating apps on top of someone elses proprietary platform. I'm not saying I wouldn't do it or that it's somehow unethical. I'm just making the observation that these are the problems that come with proprietary platforms.

boucher4• 18 years ago

It's a huge mistake to buy into the argument that you need to sell at $0.99 to make any money. More than half of the top 100 paid apps on the store cost more than $0.99. Many of those cost >$5.

meterplech• 18 years ago

true, but as we have discussed, the apps at each position can get tenfold the sales of lower positions. selling 13k apps a day for 99c a la Ocarina is obviously advantageous over selling 200 a day for $10 each if you have the number 100 spot. No one is saying its impossible to make money with apps priced > 99c, its just a lot easier if they are

boucher4• 18 years ago

But the number one app on the store, the one selling "13k a day", costs $10 right now. The number 5 app costs $5. Clearly price is not the determining factor.

jamiequint• 18 years ago

The argument that its not a free market (a market in which property rights are voluntarily exchanged at a price arranged completely by the mutual consent of sellers and buyers) is poor.

However, the point that iTunes placement is the biggest factor in marketing an app, and placement is driven by sales volume, which in turn affects the way the market acts is interesting. Maybe iTunes should judge apps by some sort of hybrid rating system (volume + ratings). Seems like a tough thing to come up with an accurate metric for.

drbarnard2• 18 years ago

"Free markets contrast sharply with controlled markets or regulated markets, in which governments directly or indirectly regulate prices or supplies, which distorts market signals according to free market theory."

I'd say my assessment is pretty right on.

david

App Cubby

boucher4• 18 years ago

David, Apple (the "government") does not directly or indirectly regulate the prices of apps (and there is no supply to regulate).

Individual developers are choosing to price their apps at $0.99 (or not). In fact, as I pointed out, most of the apps on the top of the chart are not $0.99.

More importantly, though, is that the charts are just one tool. They offer insight into what is already selling on the store. The charts aren't voodoo, and you don't just magically appear on them one day. Sure, they have an obvious positive impact on sales, but it has absolute no effect on the ability of other apps to sell or make it onto the charts themselves.

Changing the way the charts work is a bad idea, for a lot of reasons. The most important is that the proposed solutions are even easier to game then the current system. The real solution to the perceived problem is to add more ways to discover apps.

Search on the store needs work, and "featured" is entirely editorial (and the choices aren't that great in my opinion). More ways to find new products like a "movers and shakers" view, a "top rated" view, etc, are better ways Apple could actually improve the situation for developers and customers.

kragen• 18 years ago

If anything, the sales distribution he shows is significantly flatter than a normal Zipf ("long-tail" or "scale-free" or "80/20") distribution, as you would expect in a free market; app #1 should sell 50× as much as app #50, not merely 10–20× as much, and 100× as much as app #100, not merely 30–50×. It's great that unknown developers can get free marketing by making it to the App Store's top 50 list. Maybe that's why the distribution is flatter than you'd expect?

jackowayed• 18 years ago

why not rank it by money brought in rather than volume of sales? So it would be sales * price. Then the only way for someone to get into that top 50 is to maximize their profit, which is what they're trying to do anyway. Then the app store encourages people to try to make the most money all the way along, rather than selling a lot and only making money BECAUSE they make the top 50.

cjc• 18 years ago

That graph is nearly identical to the distribution of youtube videos with X number of views:

http://christopherhan.tumblr.com/post/61871360/how-many-vide...

(not my blog, it belongs to Chris Han: http://vimeo.com/2519605)

gamble• 18 years ago

It's been interesting to watch the decline of the App Store from a license to print money to a source of frustration for developers. The App Store is operating like a microcosm of the overall market for PC software, but at an accelerated rate. With no manufacturing cost acting as a check, there's always a temptation to give away software if doing so bolsters another, more lucrative line of business - particularly if everyone else is also racing to the bottom.

App Store Pricing (It's not a free market)

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