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The market for paid iOS apps isn’t dead

I’ve seen lots of discussion about the paid-app market recently, but most of what I’ve read hasn’t sat quite right with me.

Lex Friedman’s piece tries to persuade customers to pay more, which is a nice sentiment, but it won’t achieve meaningful change. Nobody can yell loudly enough at enough people to change the app market’s pricing expectations and behavior. The market is far bigger than any of our audiences.

Chris Adamson argues that there’s effectively no market for paid apps, and most iOS-developer income comes from contract work:

Earth to MacWorld: It’s already too late. The market has spoken, and it refuses to pay for apps, even when the toxic side-effects of that are manifest. …

Of all the full-time iOS developers I know, almost none of them work primarily in writing apps for sale to end-users. Nearly all of them, myself included, work for clients for whom an app makes sense in some other business model.

Certainly, it’s easier to make a living working for other people than trying to make your own product. But that has always been true in the iOS market, and in fact, it’s true everywhere: iOS development, Mac development, Windows development, web development, and most other industries in the world.

When you work for someone else, they’re taking the risk (or already have). You get paid regardless. (Well, most of the time.) The downsides are that your earnings are effectively capped and you have far less control over what you make.

This is a good balance in most cases, including development, because there isn’t enough demand for individual mainstream apps from every developer capable of writing them. In other words, just because you can write and sell your own app doesn’t mean that there will be a substantial market for it. Imagine if 1,336,300 people in the U.S. alone each designed a new kitchen utensil: a few thousand may be useful to a good number of people, but the rest probably won’t be different enough to be noteworthy, will solve problems that too few people have, or will simply suck.

Michael Jurewitz’ excellent Understanding App Store Pricing series inspired both aforementioned articles. In Part 4, he details why not every app can command a high price:

Above all, build software to meet a need and don’t become a commodity or enter a commodity space. Not all needs are equal. I need air way more than I need another drink cozy. Weather apps and Twitter apps are fun, beautiful, and engaging, but they are also very difficult to earn sustainable revenue.

He’s right. The issue with the iOS market is about more than price: it’s about demand.

I currently have 91 non-Apple apps on my iPhone, but I only use about six of them frequently. The rest are mostly utilities for specific, occasional needs, or games that I played for a few hours a long time ago and don’t have the heart to delete. Six is probably below the average for frequently used apps, but I bet this ratio isn’t too far off the mark.

My Big Six — Instapaper, Downcast, Reeder, Tweetbot, Instagram, and Dark Sky — solve big problems exceptionally well, and with the exception of Instagram, these are problems I’ve used apps to solve for almost the entire time I’ve owned iPhones.

I haven’t always used these particular apps to solve these problems, but it takes a lot to change my mind on one. If you make another RSS reader or Twitter client, there are certainly a lot of people who could use it, but you’ll need to compete with very mature, established apps. Competing in these categories isn’t about price: it’s about relevance and attention. If you can’t find enough customers here, it’s probably not because you’re charging $2.99 instead of $1.99 or $0 — it’s because your app isn’t convincing enough people that it’s worth using over the alternatives.

For these “Big Six” apps, price is almost irrelevant. If your app is useful enough for many of its customers to use it almost every day, they’ll pay a decent price for it. (Not all of them will — but you don’t need all of them.) The challenge is either making your app that much better than the alternatives, or finding new app roles that are that useful to a lot of people.

If you eschew common app categories and try to address a smaller niche to give your app a better chance of standing out, you run a different risk: your niche might be a lot smaller than you think. Usually, this happens:

  1. Paid app isn’t gaining traction.
  2. Developer lowers the price to boost purchases and climb the ranks.
  3. App doesn’t sell much better, and developer just makes less money.
  4. GOTO 2.

I’ve seen so many developers fall into this trap, even with good apps: an app can be good but not compelling enough to attract many customers. A game can be beautifully crafted but just not fun.

This isn’t a pricing problem.

Pricing does skew the market in other areas, and the App Store’s poor design exacerbates much of the dysfunction in its dominant top-list culture. And pricing can sometimes hinder an app’s chances of success by its nature: if your app has a substantial social component and it isn’t very useful without it, you need as many people as possible to start using it as quickly as possible, so social apps must almost always be free.

That’s not really a pricing problem, per se. It doesn’t matter what your price is — it only matters whether you charge at all, because that slows the rate of new users. This is complicated because you’re not giving people much value in the app itself: you’re relying on the customers to provide most of the app’s value to each other, and you probably need a lot of them to give substantial value to any of them. Social apps must therefore almost always seek indirect, deferred revenue because having as many users as possible is worth much more, long-term, than hindering growth with a paywall.

Since a few successful social products have been so big and high-profile in the last few years, many people mistakenly assume that the must-be-free rule is the new norm for all web and software markets, but that’s not the case. Even in social, it’s a massive gamble — since they rely so much on being extremely widespread to have much value, most social products don’t succeed. There’s not much of a “middle class” of social products. The big ones get bigger, and unsuccessful attempts become nearly worthless. Chris Adamson’s theory is actually correct in the social market, but these rules don’t apply to non-social categories.

In most categories, if you either solve a new problem that a lot of people have, or solve an old problem in a new and better way, you can sell a paid app today just as well as you could in 2008. In fact, the market is much bigger now. But, as with any maturing market, you’ll need to do more to get noticed since so many problems have already been solved so well.

The bar is higher, but the market is fine.

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