

App Store Pricing (It's not a free market) - pxlpshr
http://appcubby.com/blog/files/app_store_pricing.html

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pxlpshr
For anyone interested on this topic, another good read is here:

<http://www.polarbearfarm.com/blog/>

 _We were making good money off our Jailbreak apps selling them for $10 a
piece, some people liked them so much they donated over $80 a piece for them.
We invested countless hours developing them, not only because it was a fun
challenge, but because the support was there from our customers to be able to
live off this and be able to develop them full time._

 _The reality is that we barely manage to match the money we were making with
our Jailbreak applications through the App Store. Even at the peak so far,
where “Record” was Top 10 paid downloads in 22 countries, and DuckShoot in 10
countries, sales barely reach those seen in Jailbreak._

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mdasen
This is a good thing. Ideally, companies wishing to sell their wares will
compete like this. Consumers should have this type of knowledge rather than
the supermarket style selling.

The problem occurs because no other industries are being forced to scrape the
bottom like this. These people (iPhone devs) are earning the type of money
you'd get from close to perfect competition, but they're having to buy things
(food, TVs, etc.) at prices that aren't anywhere near that. The problem isn't
that they're having to price down so much as all the other industries aren't
having to do likewise. Their prices are being squeezed down by consumers
having good knowledge and lots of competition, but they're having to buy
things from people who aren't under that price squeeze.

~~~
wmf
_Ideally, companies wishing to sell their wares will compete like this._

Is it ideal for products to be ranked on number of units sold and nothing
else? Says who?

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mattmaroon
The real problem seems to be that nobody has yet found a good way to market
apps outside of the app store.

~~~
pxlpshr
I think marketing outside of the AppStore would be a lot more viable if there
wasn't such a significant pressure to down-price your application. There's
just no ROI to be found at .99 + marketing expenditures, IMO, unless you're
realizing something on the backside like a subscription service, etc.. but
then you might as well price your app for free and use iTunes for its
marketing benefits in that regard.

~~~
wmf
If the only reason people are setting the 0.99 price is App Store promotion
but you decide to use a different method of promotion, then you can set a
higher price.

~~~
pxlpshr
I agree with you in principle but I disagree in reality. Due to the influx of
equal parts quality and junk, a lot of consumers have experienced buyers
remorse on the AppStore. Particularly in the first few months... remember the
flack the AppStore was receiving for the junk?

That said, there's a significant barrier that even a premium 'niche' app must
now overcome aside from generating awareness. Couple this with the app likely
having very few reviews, not in the Top 50, etc.. then a buyer will become
very cautious. (Myself included). In addition, user review system is broken
(1-way channel), significantly less than 20% of customers will leave feedback,
and upon uninstalling the app rating defaults to 1-star.

I've been struggling with trying to figure out how to best overcome this as a
marketer. It's difficult, costly, frustrating, and the .99 trend certainly
doesn't help things when 12,000 apps are battling for 50 slots on a poorly
weighted popularity curve.

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GavinB
Every market has a tail that looks like that. The App store is not unique in
having a long tail.

~~~
fauigerzigerk
Yes but I think his argument is that ranking apps by volume creates an
incentive to compete solely on price in order to get the volume in order to
get the visibility in order to get the volume... Kind of like if expensive low
volume laptops at an electronics store were stacked away somewhere in the
basement.

But I don't agree with his conclusion that this is not a free market. Every
market is organised according rules that someone artificially creates. It is
up to sellers and buyers whether they want to use that market or not. So there
is a market of markets and that's what makes each of them free.

Of course Apple's dominant position in that particular market of iPhone app
markets is a problem for everyone. That's why I would think very hard before I
creating apps on top of someone elses proprietary platform. I'm not saying I
wouldn't do it or that it's somehow unethical. I'm just making the observation
that these are the problems that come with proprietary platforms.

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jamiequint
The argument that its not a free market (a market in which property rights are
voluntarily exchanged at a price arranged completely by the mutual consent of
sellers and buyers) is poor.

However, the point that iTunes placement is the biggest factor in marketing an
app, and placement is driven by sales volume, which in turn affects the way
the market acts is interesting. Maybe iTunes should judge apps by some sort of
hybrid rating system (volume + ratings). Seems like a tough thing to come up
with an accurate metric for.

~~~
drbarnard
"Free markets contrast sharply with controlled markets or regulated markets,
in which governments directly or indirectly regulate prices or supplies, which
distorts market signals according to free market theory."

I'd say my assessment is pretty right on.

david

App Cubby

~~~
boucher
David, Apple (the "government") does not directly or indirectly regulate the
prices of apps (and there is no supply to regulate).

Individual developers are choosing to price their apps at $0.99 (or not). In
fact, as I pointed out, most of the apps on the top of the chart are _not_
$0.99.

More importantly, though, is that the charts are just one tool. They offer
insight into what is _already selling_ on the store. The charts aren't voodoo,
and you don't just magically appear on them one day. Sure, they have an
obvious positive impact on sales, but it has absolute no effect on the ability
of other apps to sell or make it onto the charts themselves.

Changing the way the charts work is a bad idea, for a lot of reasons. The most
important is that the proposed solutions are even easier to game then the
current system. The real solution to the perceived problem is to add more ways
to discover apps.

Search on the store needs work, and "featured" is entirely editorial (and the
choices aren't that great in my opinion). More ways to find new products like
a "movers and shakers" view, a "top rated" view, etc, are better ways Apple
could actually improve the situation for developers and customers.

~~~
drbarnard
Well, technically Apple is regulating the distribution, which is factor of
supply. I'm not an economist and may be mixing certain terms, but the bottom
line is that I can't sell an app directly to a customer, so the App Store is
inherently not a free market. Therefore, Apple IS regulating the supply of my
products! How much is debatable, but as someone who has several apps in the
store, and talks quite frequently with other developers, I'd say my argument
in the blog post is the reality of the current market.

Also, the charts are "voodoo" in their ability to create exposure for an app.
You have to have enough sales to first get into the charts, but once you're
there, it's amazing how things change. I've had developers describe it as
being "sucked" up into the top 10. There is an undeniable momentum that is
created once you break the top 50.

As far as changing how the charts work, did you read my blog post? What I
suggested is that apps be ranked by volume _price or even (2_ volume)*price to
calculate the rankings. That's no easier to game then the current system.
People have to buy the app either way, and raising the price will only benefit
apps that have enough value to warrant a higher price. The idea of the App
Store charts is to get the best apps in front of people. My argument is that
by ranking only by price, you're getting cheap apps in front of people, not
necessarily the best ones. By taking price into account, amazing niche market
apps that can demand a higher price will get the same exposure as a broad
market $.99 app.

I definitely agree that search needs work, but even with search, there has to
be an order in which they are displayed. For a long time it was also volume.
Recently it changed, but I can't find any pattern to it. With a ton of crappy
apps in the store, showing search results in a random order doesn't help the
consumer. Popular apps should still be rewarded with good placement. I'm just
questioning how that popularity is determined.

~~~
boucher
Popular apps do get preferential placement in search -- so much so that exact
searches for some apps do not match in the first page.

Putting niche apps that demand a higher price doesn't do that much good,
because the majority of people looking at the charts won't be in that niche.
That's why apps with broad appeal get on the charts. It's also why there are
sub charts in each category.

As for the the supply issue, you're right. You can't sell anything you want on
the store. If anything, though, I think it hurts your argument. By your own
definition, Apple is exercising at least some quality control, and preventing
you from having to compete with total crap. Unless your app gets blocked from
the store (which plenty apps have for no reason), Apple's manipulation in this
regard just keeps out your competition.

You're wrong, though, about it not being easier to game your proposed chart
metric. You're not taking into consideration price manipulation (or
questionable ethics). I'm not going to go into specifics, but it doesn't take
much imagination.

Ultimately, its not only cheap apps that are getting in front of people, which
is where I think your argument falls down. The majority of apps are not $1.
60% of the top 10 apps cost more than $1, and 40% cost $5 or more. This holds
up for the top 20 as well.

You talk about the "voodoo" momentum, and I agree, there is a _huge_ upside to
getting to the top of the charts. But it isn't the only way to make money on
the store. If that was your entire plan, you only have yourself to blame if it
doesn't happen. The evidence shows that price is _not_ the determining factor.

~~~
ntoshev
Ordering by volume * price is in fact ordering by sales volume measured in
dollars, and is bound to maximize that. It makes sense economically for the
app store, not just the developers.

It's not about gaming the system but about having the proper economic
incentives in place.

------
jackowayed
why not rank it by money brought in rather than volume of sales? So it would
be sales * price. Then the only way for someone to get into that top 50 is to
maximize their profit, which is what they're trying to do anyway. Then the app
store encourages people to try to make the most money all the way along,
rather than selling a lot and only making money BECAUSE they make the top 50.

------
boucher
It's a huge mistake to buy into the argument that you need to sell at $0.99 to
make any money. More than half of the top 100 paid apps on the store cost more
than $0.99. Many of those cost >$5.

~~~
meterplech
true, but as we have discussed, the apps at each position can get tenfold the
sales of lower positions. selling 13k apps a day for 99c a la Ocarina is
obviously advantageous over selling 200 a day for $10 each if you have the
number 100 spot. No one is saying its impossible to make money with apps
priced > 99c, its just a lot easier if they are

~~~
boucher
But the number one app on the store, the one selling "13k a day", costs $10
right now. The number 5 app costs $5. Clearly price is not the determining
factor.

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kragen
If anything, the sales distribution he shows is significantly flatter than a
normal Zipf ("long-tail" or "scale-free" or "80/20") distribution, as you
would expect in a free market; app #1 should sell 50× as much as app #50, not
merely 10–20× as much, and 100× as much as app #100, not merely 30–50×. It's
great that unknown developers can get free marketing by making it to the App
Store's top 50 list. Maybe that's why the distribution is flatter than you'd
expect?

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gamble
It's been interesting to watch the decline of the App Store from a license to
print money to a source of frustration for developers. The App Store is
operating like a microcosm of the overall market for PC software, but at an
accelerated rate. With no manufacturing cost acting as a check, there's always
a temptation to give away software if doing so bolsters another, more
lucrative line of business - particularly if everyone else is also racing to
the bottom.

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cjc
That graph is nearly identical to the distribution of youtube videos with X
number of views:

[http://christopherhan.tumblr.com/post/61871360/how-many-
vide...](http://christopherhan.tumblr.com/post/61871360/how-many-videos-on-
youtube-have-over-100-million)

(not my blog, it belongs to Chris Han: <http://vimeo.com/2519605>)

------
redorb
if other app developers are selling themselfs short, the only answer is to
wait until they go out of business and if they don't then they probably
weren't selling themselves short.... Or they have deep pockets..or until apple
changes something ( but I'm pretty sure they don't mind having cheap apps)

~~~
wmf
Because the cost of entry is so low, we should expect a revolving door of app
developers heading to the gold rush. For every one that gives up, another will
take his place.

