Appleiosdev

Apps have infinite worth

· app store · pricing · market ·
Oct 1, 2013 7 minute read

Florian Kugler wrote a post yesterday arguing that for most people the apps we write are worth next to nothing. That their value is determined by how much are people paying for that. Increasingly, that’s a dolar or nothing. Hence, we - app developers - create products of little value.

Here’s a direct quote:

Another approach – and I would argue a more insightful one – is to learn about the nature of the market we’re working in. And not only about the market as an abstract whole, but about the value of our products specifically. The economic reality is that most apps offer next to no value to people. They might say otherwise when asked about, but their actions speak pretty clearly: A cup of coffee is worth more than almost every app on the store.

This is so not true.

Value of apps is not apparent

What actually is being compared here..? How can the value of a cup of coffee be compared to an abstract concept of an app? I find that ludicrous.

A cup of coffee, a toothpick, a pack of tissues - these are (mostly) cheap physical products for which you exactly know what you are buying. Sure, the quality of each of those can differ, but there are no real suprises here - when you buy a coffee, you know it will be hot, refreshing and drinkable. If it’s bad (or “buggy” in software terms) you will be able to see that immediatelly and return it on the spot, ask for your money back or another coffee. Everything that defines that coffee is right there, in front of you so you can judge for yourself is the value you get appropriate for the price you pay.

Now, what do you know when you are buying an app? When you buy on the App Store, you see several things:

For an average customer, this is far from sufficient to make a decision to spend the money. Yes, you may have a glorious web site with videos, details, feature walkthroughs, what not. I can tell you first-hand - the number of sales vs the number of people who visited my web site is 50 to 1 or something like that. It does not even register in sales.

Most people only decide with what’s direclty in front of them - price, icon, ratings and screenshot (the first one). Yep, I’m talking about that darn cards UI in the App Store app. Those things may not reflect the value of this app at all. How could Apple improve this is a different topic, but the basic issue will still linger on.

Compare that with waiting in line in the coffee shop when you are assaulted with (hopefully) good scent the moment you enter the premises. A good roasted smell and an open window and small coffee shop is mostly done with marketing.

Jonathan Libov wrote a very good post on this very problem:

When a consumer comes across a paid app, even one with lots of positive reviews and maybe even a where-have-I-read-about-this-before brand, his mind runs through a few scenarios: Is this app going to be worth it? Might I find another app that’s just as good for free? Or just as good but allows me a sort of trial through in-app purchase?

My point here is not that consumers are unwilling to pay the price; it’s that all these thoughts are cognitively draining.

Value can only be found by trying

The only sure-fire way to any customer to figure out the value of a digital product like an app is to try it. There is no other way. That is why free apps/games with IAP are winning. Not because people don’t value apps, but because they don’t know what the value is. There’s a huge difference there.

The uncertainty of - if I spend money on this, will it actually do what I need to do? - is all gone if trials are free. No fear, no feeling of guilt if it turns out the app is a bad fit.

In the old sw world, this problem was solved through concept of shareware. Google Play tries to solve that problem with limited time-frame during which you can return the app. Apple’s App Stores solve this by free+IAP. Took me a very long time to realize this.

I have a perfect example, right here: I’m selling Go Couch to 5k app for $4.99 for almost two years. It’s probably the most expensive C25K app on the store - and there’s plenty of competition with the price of free, $0.99, $1.99 and $2.99. I was stubbornly keeping the price at 5 bucks, waiting that the word spreads it’s so good, it’s worth it (it really is, BTW). And I’ll be rich. That of course, never happened.

So last autumn, I published a free to try version, called Try Couch to 5k. It was free, had all the features of the paid version, but the running program was limited to 2 (out of 9) weeks. So you had 6 full runs to decide was the app worth that fiver. Today, montly sales (not downloads) from the paid version are 20 to 30x less than the free version. There are people who directly buy the paid version, but the vast majority goes for the free one. The much, much more vast majority goes for some other C25K app (being first counts for something on this market).

For another great example, read this blog post by Kevin Hoctor about his pricing strategy of MoneyWell for iPhone and iPad. This is the most constructive article on this topic I have read, with a refreshingly positive attitude.

There are apps when free+IAP model simply does not work. Actually, for the last few weeks I’m working on exactly such app. With such apps, there are only two viable go-to-market strategies:

Anything else and it simply won’t work, it’s not sustainable. But I digress… I hope I made it clear why I fundamentally disagree with Florian.

Apps can have infinite worth, they can have life-changing worth as Apple never fails to wonderfully show us at each WWDC. We however need to be better at showing that value up front.

The context

I think that for completeness, I should provide some context for all this talk.

Last few weeks the apps pricing chatter picked up again. Actually, one could say it never really stops, but the discussions went to a whole new level with two recent events:

First there was a kerfufle that Omni Group found themselves in, when they first published special utility to tranfer Mac App Store licenses of their software to their own custom licenses only to be forced to stop doing that. This started the talk and if you want to hear two sides of this argument, I recommend iDeveloper Podcast ep 92 where Ken Case (of Omni Group) and Drew McCormack discuss it in details. Apple has clearly answered that question, as David Chartier points out.

The fireworks though, started with decision of Realmac guys to revert their original intention of releasing iOS 7 update of Clear as new app. Note that Clear 2 was not simply an update for new iOS, it’s an Universal app now too.

Since then a lot of people people chimmed in. Steve Streza wrote that discounts and upgrades are too complex and outdated for most people. David Smith interviewed his wife trying to bring some non-tech point of view into this discussion. Marco Arment used that to proclaim that market for paid up-front apps is gone.

Lots more talk happened, including the three I linked above. I’m certain it’s not over.