

Trouble in the 99 Cent App Store - matt1
http://apple20.blogs.fortune.cnn.com/2008/12/10/trouble-in-the-99-cent-app-store/

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jfarmer
There is no "trouble." The App Store solves a distribution problem, not a
marketing problem.

What developers really want to do is stimulate demand. If you believe the App
Store is your marketing channel then the only way to do that is to cut prices
and try to get that top spot. That's what everyone is doing.

Instead developers should be looking for ways to market their app outside the
App Store. They should be driving people to the store, rather than hoping the
people already browsing will just happen to buy their app.

I wrote about this, here: <http://20bits.com/articles/the-099-app-store/>

~~~
pxlpshr
I don't disagree with you at all, but...

I have a problem with Apple taking 30% because the store is far too polluted
now. I feel it should be scaled back to 20% due to the amount of marketing and
press expenses people (read: indie developers) must now incur. I have no
problem engaging in marketing activities, it's just expensive.

Also, I just had a huge argument with Apple in which they did not budge to
correct a massive bug that has ultimately affected our sales:

\- app was approved but would not go on sale till our bank contracts were
approved. (+2 extra weeks)

\- once contracts were approved, app was listed as being 2 weeks old, rather
than showing a release date that was true to it's availability on the store.
it's first day on the store, it was listed near the end of page 1.

\- within a week, our app is now on the 2nd page. not normal for this section.
should have had ~3 weeks of Page 1 exposure.

\- customer's impression of the app is now distorted, they think it's 3 weeks
old with only a few comments and possible not worth the download... as oppose
to a brand new app that's accurately dated.

For 4 months I've bootstrapped this company and our first (premium) app has
now had it's sales potential chopped at the knees. Here's where I get real
mad:

I talked with multiple representatives about this glaring problem with no
luck. Nobody will fix the date. I'm sick of their lack of transparency and
unclear requirements around their publishing system. I've sent in screenshots
and plenty of proof where their system has failed, and they are in complete
denial. Supposedly they'll pass my complaint...

I'm tempted to write a long blog about it because I'm that furious about their
stubbornness over this issue. Give me my 10% back, and the 7 weeks you stalled
processing my bank contracts...

Sorry, had to vent.

~~~
netcan
From your story, it seems you do disagree.

You're problem with Apple was that you saw your 'deal' with Apple beign: 'We
make an app,' 'You promote & distribute it. If it sells, we split it 30/70.'

Now you feel conned because you didn't get the implied exposure. You didn't
get a fair shot at grabbing a couple of those who 'happened to be browsing,'
get the appropriate number of comments, etc.

You imply that your deal with Apple is: 'We do the product & price it. You do
the promotion & distribution.'

BTW, I think you are correct & this is your deal with them. But I think this
puts you on the same side as the letter writer & on the opposite side to
jfarmer.

~~~
jfarmer
Good way to distill it.

I think the App Store is mostly about distribution, with the only marketing
benefit being the usual ones that come with being a distributor, i.e., it's in
the interests of the distributor to promote the products its distributing.

But in that framework everyone prices their apps according to the
distributor's whims. In this case that means all prices tend to zero.

The only way to break out of this cycle, as I see it, is to take the marketing
portion into your own hands and draw in people from outside the App Store.

~~~
netcan
I think is important to look at the macro question: If you are looking at the
market as a whole (all the apps that get bought) will most of the
discovery/purchase decision have taken place within the confines of the app
store (where Apple rules) or outside of it (from word of mouth to TV ads).

I think you might agree that most (or at least a significant portion) of apps
will get most of their 'promotion' within the confines of the app store. This
is both because of the distribution monopoly & because of the market mindset.
Consumers are often buying 'apps' not 'app X' or even 'app that does X.' There
will continue to be a big number of App store browsers making decisions based
only on the things they encounter in this environment. Therefore, the app
store is the no. 1 promotional channel as well as the only distribution
channel.

Since Apple is the main influence on this, the letter makes sense. If you
think that this environment is problematic on the whole, Dear Steve is your
answer.

I guess I agree with you from an individual perspective. I do not know enough
about this market to have a real opinion. But it seems rational to say to
developers: "Do not go after the main part of the market (let's keep calling
it the ringtone app market). The way Apple has set up the market, there is a
tendency towards the ringtone apps. If you do not want to sell them, you still
have other options. Base your strategy on those option."

But I guess my point is that the advice you are giving is 'be unconventional'
which is not something you can expect everyone to do. It's like telling online
merchants not to base their e-commerce strategy on Adwords/SEO or telling a
supermarket not to go after middle income families. That might be good advice,
but it's niche advice.

~~~
jfarmer
More I think that the App Store is a tiny segment of a larger market, one in
which price is what drives demand.

There are larger segments where other marketing techniques are more
applicable, where nobody is playing.

So, go play there!

~~~
netcan
I'm not sure I understand. The app store is a tiny segment of the app market.

------
jsdalton
I read the blog post that was cited in this article yesterday.

I mean no offense (particularly if the author hangs out here on HN), but it
sounded an awful lot like whining to me. Why does it come as any surprise that
consumers are flocking to the cheaper alternatives? And of course, given that
application developers are competing with one another, price is one of the key
ways they are going to do that. This is classic supply and demand at work.

Maybe this is just because I look at it from the perspective of a web
application developer, and think to myself, "If ONLY there was an easy way to
charge people a low price like $0.99 to use my app instead of having to rely
on Google Ads for revenue..."

All of this said, it does sound like Apple could make some changes to the
iTunes app store experience to help application developers better showcase the
experience of higher priced apps.

Another interesting idea would be for Apple to facilitate a way for
application developers to create charges from within the app itself. So maybe
you could download the app itself for free, but the app could charge you for
premium features, or pennies for certain kinds of usage, etc.

~~~
jfarmer
The App Store is doing the right thing -- putting the apps that make them the
most money in a place where they have the opportunity to make even more money.

That's fine and expected.

The mistake developers are making is relying on the App Store to solve their
marketing problem, when it only really solves the distribution problem.

If you're trying to stimulate demand in that environment your only option is
to lower your price (see, e.g., 3-for-2 sales at Borders). What developers
should be doing is looking for marketing channels outside the App Store that
drive people _to_ the App Store with the intent of buying their app.

------
patio11
The real problem with the App Store is not that apps are 99 cents. Its not
that apps are sorted by price.

It is that the customer is fundamentally _APPLE'S CUSTOMER_ and not _YOUR
CUSTOMER_. No matter what the exact arrangement is, only those vendors who
catch a lucky break from Apple are going to do well.

This is the same lesson everyone should have learned from the casual game
industry: the portals make out like bandits. A very few megahits make obscene
amounts of money. Every other content producer gets shafted, because they are
systematically tying themselves into a hit-driven, rapid-obsolescence, no-
value-added business model.

This serves the portals great: churn and burn apps get them lots of repeated
transactions and incentivize their best customers to come back every day to
see whats new. This is _terrible_ for developers because you get like a two-
week period to make back your development expenses and then, boom, residual
sales asymptotically approach zero.

(Its sort of like being in the music business, incidentally, except the
residuals die off even faster.)

Compare the sales graph for _any_ App Store app, I don't care what the quality
is, to the sales graph for a software company with its own website. (Sorry for
the self-preening but since most people don't publish them I don't know of any
except my own: <http://www.bingocardcreator.com/stats/sales-by-month> ) Don't
focus on the numbers, focus on the shape of a curve.

If your curve is "Peaks in 48 hours and then falls off a cliff", you'll have
no revenues to sustain a post-launch marketing campaign or ongoing improvement
to the app, which are major sources of revenue. You won't get the _gradual
march upward_ , instead, you are immediately thrown back into the meatgrinder
to make another churn and burn app.

An additional salutary benefit of the own-your-own-app-and-your-own-customers:
you're not dependent on Apple's good graces and business fortunes to continue
to make a living on their platform, and when you come out with version 2.0 or
RelatedApp 1.0 you can use your existing customers as both a source of
marginal revenue and a source of springboard marketing.

(Hypothetically assuming that my next app was also pitched to elementary
schoolteachers, where exactly would one go about getting a list of 1,200
elementary schoolteachers with a demonstrable interest in software which helps
them out? Oh, yeah... "select * from customers;". Any of you have blogs? Oh
you do! How lovely.)

------
bprater
It's good to hear mainstream covering this. I'd like to hear more back from
Apple.

Where art thou App Store Evangelist at Apple?

~~~
matt1
My wife -- who barely understands what HTML is -- found this on CNN and sent
me the link. There's nothing like negative mainstream media coverage to get a
company's attention...

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lacker
This is only trouble from the point of view of _developers_. From a user's
point of view, I would like all apps to be free! Why wouldn't the App Store
gravitate to a model like the internet, where there is tons of cool stuff for
free, and my software hardly ever nags me for a dollar. That might be too bad
for developers hoping to make money with applications that aren't really
groundbreaking, but it might be good for users. There's certainly no shortage
of cool free games on the internet.

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old-gregg
Programmers and designers cost $150-200/hour? WTF is he talking about?

Is it so hard to make a point without exaggerating the hell out of your
arguments?

~~~
jfarmer
They're referencing an O'Reilly blog post that cites those numbers:
[http://blogs.oreilly.com/iphone/2008/11/turning-ideas-
into-a...](http://blogs.oreilly.com/iphone/2008/11/turning-ideas-into-
application.html)

They've gone from the realm of anecdote to Known Fact, unfortunately.

------
tocomment
I was in the #iphonedev irc room last night, and before they told me to leave
and buy a book because I was asking too many dumb questions, they were talking
about pricing strategies. They seemed to think that anything above .99 is all
the same so you might as well charge 4.99. This guy even provided "evidence":
<http://bang2d.com/?p=47>

------
dougp
The comments on that blog post are something else. "I would buy Starcraft on
the iPhone for $9.99 in a heartbeat." Yeah I would too but it will never
happen because starcraft for the computer is still over 10 dollars.

