Always Low Prices. Always.

The appeal of App Store fame when fortune seems out of reach

The App Store has been around since 2008, and while there are famous examples of individuals and small companies who have done very well in this ecosystem, most iOS developers would be hard-pressed to make a comfortable living and raise a family purely from App Store sales. From my experience at various companies and discussions with other developers, there seems to be a pretty troubling discrepancy between the opportunity seemingly presented by the App Store (a vast audience of customers on an engaging and convenient platform for payment and distribution), and the mediocre sales that often seem to follow.

Why is this the case? From a distance, it seems crazy. Even though there are millions of people with disposable income who walk around every day glued to devices they love (a captive audience if ever there was one), there are ultimately few profitable independents or small companies that seem to be able to leverage this situation into more than ancillary income. This was supposed to be a different, empowering platform that allowed developers to thrive. I mean, look at all those zeroes on that novelty cheque from Apple! I don’t mean to imply that nobody is making a living in this industry, in fact by most accounts it’s never been a better time to be a part of it. But ultimately most developers wind up getting paid via salaries or contracts, a level of indirection that should be somewhat correlated with the potential profitability of the app being designed, but often isn’t even close. It often seems like most of the money being paid out to developers is through established businesses trying to give their brand or business a presence in the App Store, rather than apps prevailing on their own merits.

It doesn’t seem so long ago that Clay Shirky and Chris Anderson were preaching visions of the Long Tail (capital L, capital T), a new era that would benefit all, even in (especially in?) smaller niches. From my vantage point, it has been a great benefit to consumers (a cornucopia of great, free/cheap software), and a great benefit to distributors (30% cut and tons of software to entice their customers). I don’t think it’s been as great of a deal for the producers.

I tend to be pretty immersed in this iOS ecosystem: I read the blogs, go to conferences, follow all the right people on Twitter. Yet most of the time I’ve managed to get into candid conversations with developers who I would consider very successful, I’m always surprised that they aren’t doing as well as I assumed they would be. A few months ago, I talked with a developer who had his work prominently featured in one of Apple’s iOS TV spots. I assumed that such amazing exposure to millions of people on television would have produced a windfall for him. Turns out, not so much. After an initial moderate spike, his sales numbers came back down to earth relatively quickly, and he was compelled to move on to other projects. Around the same time, I had another conversation with a developer from one of the premier iOS dev shops, a company whose name anybody in this industry would be familiar with. I thought that if anybody is making a sustainable living from the iOS App Store, it’s gotta be these guys. Turns out, they spend the vast majority of their time not on their own products (which are amazing), but on contract work. The contract work provides them with the freedom to build their own products. That’s the only way they manage to make the numbers work. Turns out.

So why are things not working out better for the producers, the developers, the makers? And why is there so much fear of another bubble? It seems like a lot of it has to do with pricing. The general unwillingness of consumers to pay for mobile software, combined with developers who respond to this reluctance by trying to sell very large quantities of inexpensive software. Developers bemoan the fact that customers will regularly pay $5 every day for a cup of fancy coffee without too much thought, but hem and haw over whether to spend 99 cents on an app they might use every day. In the earlier days of the App Store, it wasn’t unusual to see things like traffic apps priced at $9.99. That now seems long ago and far away.

So what follows? Developers will debate the suitability of the cup-of-coffee analogy, and get into big discussions about consumer psychology, motivations, and price anchoring. How to change the culture? How to tell consumers that paying more for software is in their own best interests? It all seems pretty hopeless and naive to convince consumers they should be spending more money for their own good, even if it promotes better software and reduces incentives for intrusive ads and privacy threats. But the consumer psychology aspect is only part of the problem, soon the conversation naturally turns more inward looking. Incredulity about how developers have done this to themselves. Hand wringing about races to the bottom. Somebody looks up “tragedy of the commons” on Wikipedia. Another expresses outrage at the buyout culture that provides incentives to give everything away for free, never having a sustainable business plan, and hoping for a big buyout for access to a database of monthly active users. Someone forwards the Michael Jurewitz articles that argue for higher pricing. It seems convincing… if only everyone else heeded this advice as well, things would get so much better.

Why can’t we charge more for apps? This is well-trodden ground with many factors, but there is one in particular that has always struck me as a powerful motivator that drives down prices, but one that I don’t hear discussed very much. Put simply: it’s the appeal of fame when fortune seems out of reach.

Let’s say that you’re a talented young developer. You’ve created what you believe to be a really great app, and you’re trying to figure out what to charge for it. Unless you’ve made something truly unique and amazing, odds are there’s a lot of competition out there. Today’s tools have gotten so good, the platform so expressive, and the barriers to entry so low, that the market is flooded with people all trying to solve problems big and small (let’s be honest, mostly small). You try charging for it initially. Maybe you’re ambitious with the price, or maybe you start at 99 cents. Either way, unless you’re a big name or get lucky with a promotion, it’s likely that your app becomes lost in a sea of other apps in a store that offers few possibilities for discoverability. Plus, the fact that you’ve asked for money means that your work has automatically been relegated to the smaller audience that even considers paying for things, and leaves out the larger audience that only checks the free lists. You didn’t create those conditions, but you still have to deal with them.

But what if you gave it away for free? Sure, you wouldn’t be making any money, but you’re barely making any money as it is! And really, you have plenty of time to figure out the money thing … you’re young, you don’t have a lot of expenses yet anyways, and you realize that time and effort are really the only costs you have (well, that and $99 a year for membership). Plus there’s this warm and fuzzy feeling, a measure of pride, that comes with the idea that stuff you’re making is actually getting seen by people. You think of the last company you worked at, where you laboured over a project for almost a year, only to have it shelved at the last moment because of a change in corporate priorities. All that work for nothing. You’re tired of making things that never get seen by anybody other than your friends and family. You want your creations to be used. You want influence. You want to be one of those people humblebragging about the overflowing state of their Inbox. It’s a strong appeal to ego. And maybe, just maybe, if in the future you find yourself interviewing at the software company of your dreams, the person across the table will remember using your app at one point, or might even have it installed!

Even if that seems fanciful, wouldn’t it at the very least produce a network effect that might put you on the radar of a bunch of other developers and influencers that otherwise wouldn’t know you exist? Having established your bona fides, maybe you get let into conversations with your peers that you otherwise wouldn’t be privy to, and maybe that’s where the next gig comes from? Given a choice between a pricing model that generates a modest amount of money but little traction or attention, compared with another model that generates little-to-no money but generates a modest amount of traction and attention, I believe that many people will opt for the latter, in the interest of positioning themselves for a better future foothold. All the designers producing fake portfolios for Microsoft and Apple are in this boat too.

There are things that might help. Apple could work to improve discoverability on the App Store, and do a better job of recommending specific suggestions to specific people (the current “Genius” approach is pretty pathetic, and looks to have been removed from iOS7). It would help remedy a reality where a relatively small number of apps get the vast majority of the revenue/attention. Even putting aside most of the low quality stuff that’s out there, that still leaves a ton of great stuff that just isn’t getting found. They could also make it easier to do free trials to lower the risk of somebody who worries about wasting money on an app they didn’t wind up liking. But I find it hard to believe that Apple would be sufficiently motivated to shake things up here, it’s completely in their interest to have large quantities of free/cheap high quality software for their users as a way of promoting their platform. And how concerned do we really think they are about developers being sufficiently motivated to participate in their ecosystem when WWDC sells out in 70 seconds?

I don’t know how to make things more sustainable, and certainly don’t know how to recover from a race to the bottom (if anybody knew how to do this, we wouldn’t still be buying all our clothes from Bangladesh). Maybe it’s in poor taste to start quoting lines like “be the change you want to see in the world” about things like weather apps and games instead of human rights, but something along those lines? I’m working on something new that I think will be pretty cool, something I haven’t seen anyone else try yet. I’m going to charge at least $5 for it. I’m going to try to resist the pressure to make it free, and try to do my (very minor) part to change the culture. We’ll see what happens…