Ever since Apple unveiled the App Store, I’ve heard this sentence more than I can tell you:
I’m not going to pay for an iPhone app.
First, Some Background
When Apple announced the App Store, they offered developers two pricing options: free apps, or paid apps (set at any price above $0.99, with Apple taking 30% to cover infrastructure costs). At first glance, 30% seemed high, but the App Store not only puts every single app in front of every single iPhone and iPod touch user, but Apple takes care of all of the backend to make it possible — hosting, billing, reviews, everything.
The App Store was a game-changer. Just 18 months later, almost every phone platform has an app store setup. The concept of having all available software in one place — on every single device — is ingenious. Never before — on any platform — has selecting, buying and installing an application been so easy.
Free Apps Aren’t Free
Many free apps in the App Store are supported by ads. This allows developers to offer their app for free, and receive payment on the back end.
Ads are a huge business, as Techcrunch pointed out back in May:
The AdWhirl report says that applications that crack the top 100 in the Free Apps list make $400-$5000 a day – a wide range to be sure, but even at the low end that works out to around $12,000 a month. Among these top apps, AdWhirl is reporting an impressive $1.90 eCPM and 2.6% CTR. And while applications that do reach the peak position in the App Store eventually lose steam, revenue tends to remain consistent over time after the initial dip. Of course, making it to the top of the Free Apps list is easier said than done, and most developers make far less than $400 a day. But the same is true of the vast majority of paid applications too – in fact, there’s actually less competition on the free side of the store.
With paid apps, developers make their money when you buy the app — regardless of if it’s ever opened again. With ad-driven revenue, developers are paid based on impressions and click-throughs, meaning that if the app is never opened, they aren’t going to make any money. As fickle as iPhone customers are, this is a huge risk for developers.
Money aside, ads can take away from an app’s experience. If an ad takes 3 seconds to read, that’s 3 seconds gone from your day. Additionally, ads — if not tastefully done within an app — are annoying. Twitterrific does it well — ads show up as tweets. Some developers just slap ads at the top or bottom of the display, which is distracting.
Developers Are People, Too
Loren Britcher recently announced he would be charging $2.99 for the new version of Tweetie for iPhone. Here’s how he tells his story:
About ten months ago I was a big shot with 20 Twitter followers. In my spare time I wrote this app called Tweetie because I wasn’t satisfied with the current state of Twitter clients. A few people bought it. Then a few more bought it. Then I realized this App Store thing was actually pretty popular, and ($2.99 – 30%) x enough people = a living. So I dropped everything and devoted every working minute since to Tweetie.
If Tweetie fails, Britcher will have to find something else to pay his bills. It’s that simple — for many developers, their apps are their livelihood. Any many developers are small (Britcher works alone, for example), and surviving on ad click-throughs alone may not be possible. Without income, they’ll won’t be any developers — without developers, they’re won’t be any apps. And if history teaches us anything, it’s that a platform without apps can’t survive.
Maybe It’s Mental
I think the biggest thing that keeps people from dropping a few bucks on a mobile app is that it doesn’t feel like a real app. iPhone apps are usually one trick ponies, while desktop apps are usually more complicated. That, paired with the fact that people don’t view their phones as computers, mean some people don’t view mobile apps as worth anything, while computer programs are worth some money.
It’s too bad, really. The iPhone is a very capable device. Not buying apps for it is like buying a computer and just using the built-in programs. On the Mac, that means I couldn’t use MarsEdit, TextWrangler, Aperture, Adium, Office or the Adobe Creative Suite. That doesn’t seem too great.
The programs on the App Store — for the most part — are great, thanks to the serious manpower behind them. To avoid paid-for apps is to miss out on some great things. Don’t be afraid to drop a couple bucks here and there. Everyone will be better off if you do.