iOS Developer David Barnard: 'Trying to Make the Boxed Software Model Work at $0.99 is a Fool's Errand'

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Original poster
Apr 12, 2001
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iOS developer David Barnard has written an interesting piece on App Store pricing, and whether freemium is the inevitable pricing model for iOS apps, or if there is another model that hasn't been considered yet.

The full piece is worth a read for anyone involved in app development or marketing, but an excerpt is below.
I've argued that Apple caused the race to the bottom in App Store pricing, but now I'm starting to think that Apple just accelerated the inevitable. The App Store is by no means a free market, but it is an efficient one. Early on I was able to charge $9.99 for my app Trip Cubby, but now most people use free or cheaper alternatives, even though I dropped the price all the way to $2.99. The odd thing about paying a fixed, one-time price for software is that people who find the most value are essentially subsidized by people who pay, but don't end up liking/needing/using the app.

There's also the matter of value over time. As shown in this brilliant chart -- created by the founder of Pocket, and inspired by the CEO of Evernote -- paying a one-time, fixed price for something really only makes sense for commodities that diminish in value:
Chart created by Nate Weiner

Barnard continues:
And that's exactly what we've seen in the App Store. People have no problem paying 99¢ for a gimmick, and don't mind risking 99¢ on an app whose value is unproven, but trying to make the boxed software model work at 99¢ a pop is a fool's errand. Sure, gimmicks and mass market apps like Camera+ seem to prove the opposite, but they are the outliers. The vast majority of apps are financial flops even though they deliver tremendous value to their niche.

And all of this brings us back to Sparrow. Most Mac and iOS users are content with Apple's free Mail apps, and of those who find Mail lacking, only a small percentage really care enough to spend money on an alternative. So, Sparrow was ultimately a very niche app. But as we saw in the days after Google acquired Sparrow, the niche it served found a lot of value in the app and were incredibly disappointed to see the app shelved. I'm still not sure how Sparrow could have empowered those who received more value to pay more for it, but developers who crack that nut are the ones who will still be making a living on apps in the years to come.
Barnard is the developer behind Launch Center Pro and other iOS apps.

Article Link: iOS Developer David Barnard: 'Trying to Make the Boxed Software Model Work at $0.99 is a Fool's Errand'
 
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nagromme

macrumors G5
May 2, 2002
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It’s a real bind, when the free market/human nature leads obnoxious IAP-based and ad-based business models to massive success (sometimes) while a great app that goes the route of “buy it and you have it!” is all too often a financial failure.

And there’s limited hope of being able to charge more (one-time or by subscription) even if an app is well worth it: because there will always be 10 competitors willing to jump in and undercut your price... and then go out of business, to be replaced by 10 more!

I exaggerate a bit and there are exceptions, but... it’s discouraging. I have no app to sell, but I have a game I hope to release one day. I’ll just treat it as a hobby and not worry if it flops. I won’t quit my day job :) Which is exactly why it’s still not done...

People would be willing to pay if iOS let you test apps before buying them.
Many apps do exactly that—but they still struggle to get the sale.
 

iPhoneApple

macrumors 6502
Jan 24, 2011
417
0
Isn't that what 'Lite' apps are for?

Although there aren't as many 'Lite' apps as there used to be, due to in-app purchases.
The issue with lite apps are that developers block you from using major parts of the app. Apple should allow fifteen minute trials where you can use all parts of the app.
 

spillproof

macrumors 68020
Jun 4, 2009
2,028
2
USA
I bet developers make more money off me from a free app with ads then a one time 70 cent earning. Or am I wrong, just curious?
 

shurcooL

macrumors 6502a
Jan 24, 2011
920
70
We should be getting people more used to be paying recurring fees, like $0.35 per month for something.

Another idea is take advantage of the fact that out of 100 people who use your app, 99 might be willing to pay you $0, but 1 person will be willing to pay $30 over the course of a year. So instead of charging $0.99 for the app, sell it for $0 and get the 1 person's $30 somehow. Instead of getting only 1 $0.99 from that person.
 

APlotdevice

macrumors 68040
Sep 3, 2011
3,120
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One of the problems I personally see with lite apps is that they are completely separated from the full ones. The consumer is forced to look for it, assuming they are even aware that one exists for that particular app. The app store should take a page from the iBooks store (no pun intended) and provide a demo/try button right underneath the buy button.
 
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mattraehl

macrumors 6502
Feb 26, 2005
384
1
People would be willing to pay if iOS let you test apps before buying them.
While this isn't a magic bullet, I absolutely agree with the point. I've bought several apps from the Mac App Store in the $15-$50 range, but only because I was able to download time-limited trials from the developer's website first.

It's true that not all boxed software had demos, but it's also true that the software market used to be so much smaller because having to get a box an a retail shelf was a huge barrier to entry into the market. With an artifically small market, we could rely on professional reviews of the few choices, and spend larger amounts on software before buying.

But now the barriers to entry are as small as they ever been. You just need a $100 for a dev license and you can potentially sell your app to millions. So the market is flooded with choices. But we can't try before we buy, we can't get refunds, and there are so many apps that trying to find solid reviews of all the alternatives is hopeless.

I think a trial period would go a long way toward improving the situation.

I also think the App Store is sorely in need of improvements in app ratings and discovery. Amazon's review system is the gold standard. Reviewer scores, reviews ranked by helpfulness, and the ability to comment on reviews, it puts the App Store review system to shame. Adding a social aspect to app discovery would also be huge - if I could easily see that someone I know has bought or recommends and app, it makes it so much easier to talk to a real person about the app, or maybe even try it on their device. Absent trial periods or refunds, simply making these improvements would give consumers more confidence in spending more on an app.
 

Rodimus Prime

macrumors G4
Oct 9, 2006
10,136
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People would be willing to pay if iOS let you test apps before buying them.
Not really. It might get you a few more sell but really not much. The increase sells is mostly from people getting the 5 mins to look to see if that is what they really want.

Apple started this race to the bottom but pretty much all the players help speed it up.
 

Westside guy

macrumors 603
Oct 15, 2003
5,434
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The soggy side of the Pacific NW
The absolutist statements made by this guy are silly. At any price point, whether it's $0.99 or $99.99 - the successful model is to convince your customers they'll get that amount of value out of the app, whether it's in the short-term or over the long-term.

I do agree it would be beneficial for developers if Apple would allow time-limited free trials of apps.
 

PlutoPrime

macrumors regular
Oct 15, 2009
123
179
I bet developers make more money off me from a free app with ads then a one time 70 cent earning. Or am I wrong, just curious?
I wish that was the case, but unfortunately you're not correct.

A paid app purchase is orders of magnitude more profitable than a free app user. On average, realistic returns from free app users is in the range of fractions of a penny. 0.5 to 1 cent are more realistic (and maybe too optimistic but varies with demographic). At 0.5 cents per user, 70 cents from a 99c purchase is a 140x difference in returns.
 

mattraehl

macrumors 6502
Feb 26, 2005
384
1
Thinking about this some more. When someone buys an app in the App Store, there are a number of risks they face:

1. The app won't have a specific function they wanted.
2. The app doesn't work as advertised.
3. The app isn't stable.
4. The app is confusing or hard to use.

In all of these cases, literally the only recourse the user has, is to give a bad review. If it's a $1 app, fine, no big deal. But it makes it a lot harder to risk $5 or $10 on an app when my only recourse is some review that will be buried in a few days.

And it's a vicious cycle, because it's hard for a developer to risk the time and effort of building a great app, if nobody is willing to pay more than $1 for it.

My percived risk goes down if I can:

1. Find reliable reviews of the app.
2. Try the app before buying.
3. Get a refund if the app doesn't work.

Improvements in any of these areas will help reduced the perceived risk of paying for an app. In the App Store, #1 is barely passable, and #2 and #3 don't exist. I think it would be a win for Apple, Developers, and Consumers, if Apple would work on improvements in those three areas.
 

Moonjumper

macrumors 68020
Jun 20, 2009
2,038
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Lincoln, UK
I wish that was the case, but unfortunately you're not correct.

A paid app purchase is orders of magnitude more profitable than a free app user. On average, realistic returns from free app users is in the range of fractions of a penny. 0.5 to 1 cent are more realistic (and maybe too optimistic but varies with demographic). At 0.5 cents per user, 70 cents from a 99c purchase is a 140x difference in returns.
You can do a lot better than that with ads, but it does take extra work after release.

My game ShootStorm has a free version with the only differences being ads and only one life per game (it is an arcade shoot-em-up). The free version was only meant as a promotional tool, but is has earned about 50% of what the paid version has. It has about 12x as many users. So that is roughly a 24x difference, much less than 140x.

There is a lot of difference between ad networks. I have moved around a fair bit as I have learnt how to read the figures and as income changed. That is part of the ongoing work to keep income up.

I have the ads at the top of the screen and the controls at the bottom, so I am not trying to cheat with getting accidental clicks to get these figures.

But the ad view income rates (eCPM) do seem to be dropping as more and more apps want to show them, so the advertisers don't need to pay so much to get the slots as they haven't jumped in numbers at the same rate.

It also means the free charts have got more competitive. It was never an easy choice to chose free or paid. It still isn't.
 

gorskiegangsta

macrumors 65816
Mar 13, 2011
1,279
85
Brooklyn, NY
The issue with lite apps are that developers block you from using major parts of the app. Apple should allow fifteen minute trials where you can use all parts of the app.
That's what many desktop "trial" apps do as well. Full featured "time trials" are the best way to showcase extensively featured, expensive $40+ apps because customers need to see what they're buying themselves into. However, for sub $5, and even sub $10, specialized apps there's really no point of offering full featured trials. Most "lite" or "free" versions of mobile apps already allow one to use most features. For example: some photo "lite" apps will allow you to do everything except save a full res version of the photo; a printer app I recently bought (Printer Pro ($6.99)) has a lite version which allows you to print the first couple of pages in a document. In the end, it's all up to developers, not Apple, to come up with ways to offer fair trials (depending on app's price and feature set) through "lite" and "free" versions of their apps.
 

k1121j

macrumors 6502a
Mar 28, 2009
803
485
New Hampshire
so when was there ever a boxed market for software on a smart phone? I'm looking at the money apple has paid to developers 2 billion ish hmm something is selling. So perhaps marketing plays a part u know like they did for the boxed market or even take a note from apple and innovate stop reinventing the wheel. this is no race to the bottom actually I see apps like touch chat Hd sell every day it's almost 300.00 bucks also how many of the iOS apps get pirated as opposed to the "boxed software" further more the world does not go to the store for a lot of things now like to rent a movie, buy a song, get a prescription, buy software, etc. stop blaming apple because u can't sell ur app put it in a box and see how u do.
 

rmwebs

macrumors 68040
Apr 6, 2007
3,140
0
People would be willing to pay if iOS let you test apps before buying them.
I disagree. Android allows for refunds within 15 minutes of purchase (more than enough) but you don't see apps being priced more for android at all....quite the opposite.
 

nutmac

macrumors 601
Mar 30, 2004
4,299
2,205
The issue with lite apps are that developers block you from using major parts of the app. Apple should allow fifteen minute trials where you can use all parts of the app.
I would like Apple to go even further and offer iBookstore-style "TRY IT" button where developers can specify the trial period (which can be few hours for games, several days for productivity apps).
 

acslater017

macrumors 6502a
Jul 25, 2006
710
98
San Francisco Bay Area
People would be willing to pay if iOS let you test apps before buying them.
Agree. IMO more people would buy a returnable $4.99 app than a "use a crippled version for free then pay $4.99 for all the good stuff". It's an entirely different experience.

Apple customers are clearly willing to pay for quality. But the utility of an unknown piece of software is so abstract, and quality can be so suspect. I'd totally be willing to pay more upfront if I could return a lemon.

Maybe a "return within 48 hours" policy for full refund? Or a "try it on" download where it has a watermark, or the equivalent of a garment's tag until you commit to ownership?