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Apple Doesn't Want Your iPhone App to Make Money (hellosorld.com)
34 points by stanleydrew on April 19, 2010 | hide | past | favorite | 24 comments

And yet, apple has taken concrete steps to try to encourage more high quality (i.e. pricier) apps, including adding the "top grossing category" to the app store.

The post also fails to give any examples whatsoever of how apple is actively encouraging the cheap/free apps. One might argue that they kind of discourage it by charging the $99 fee to join the program that lets you post apps. Apple makes it so that it costs you money to give away your programs.

At most, the only case made here is that Apple doesn't care one way or the other if you make any money selling your app; as long as apps are there and people are using them, Apple is happy.

The apps are a marketing tool for Apple. While they make some money reselling them, I can't imagine it's enough to get stockholders excited. All the sound and fury regarding app rejections and keeping the riffraff (Flash) out has more to do with brand management than technology or protectionism (not that Apple isn't protectionist...)

They're not just a marketing tool - they're also a switching cost. When you buy a new phone you have to consider which apps you'll have to replace, and which data you might need to move across. Less so than a large iTunes music collection, but still.

You are right. A better title would have been "Apple Doesn't Care Whether Your iPhone App Makes Money."

Maybe, if Apple weren't collecting a commission on app sales. The brilliant thing is, whatever app hits the price point that maximizes profit * quantity, Apple collects the commission. Apple doesn't have that much motivation to artificially lower prices, if they just let the market go to work the market will maximize profits for them.

That's not to mention that the cost of apps is so low compared to the expensive iPhone/iPad that they are already effectively commodities. Unless you see a lot of $30 apps running around, which I don't.

Unless you see a lot of $30 apps running around, which I don't.

Right, but that's kind of the point. Apple has already commoditized the app market. Some apps cost a lot in terms of developer time, but you can't realistically charge more than $5 per app. I think there's still room for prices to sink lower though.

It'd be the point if people weren't already making a lot of money at the 99c and sub-$5 price points. But they are. Apple indeed encouraged cheap apps on the iPhone, but the market didn't really suffer.

I'm not sure what your point is.

People can make a living off the app store. A handful of people get very rich, and many don't. It's not different from any other market.

"The conventional wisdom is that a lot of people are making a lot of money selling apps in the App Store."

That's not true in the professional app developer community. Hobbyists can make golf-money on the app store, and of course everyone likes to point out the few runaway success apps, but anyone professionally making games, for instance, knows that the business case for iPhone development is weak if you're not one of the really big guys like EA.

Indie game devs are far more interested in Facebook. Mobile is still more work for less pay and everyone seriously playing in the space knows it.

I don't think the author of this blog post supports his argument well enough. I don't personally see a conspiracy from Apple to make free succeed.

I don't think there's a conspiracy either. I'm only suggesting that Apple would rather your app cost $1.99 than $19.99, and that they have an incentive to make you believe you can make a lot of money even when the App Store is quickly becoming a race to the bottom.

I'd actually argue the complete opposite, that the race to the bottom has come and gone. You can't go any lower than $0.99 and free, and we hit those points a long time ago.

This next bit is anecdotal. There's so much shovelware and apps without polish on the app store, and many of them typically reflect this free and $0.99 price point. I'm starting to see trends of quality apps that originally priced at $0.99 to compete, changing their price points to $2.99 or $4.99 because compared to the competition, they're apps are of a premium and well-maintained quality.

There were several free apps in the top-grossing list last time I checked. And I think ad profits are worth mentioning. iAd is a pretty significant investment on Apple's part... not that they aren't hoping to profit from it -- but the more devs profit, the more they profit -- I think that's the real point. To say they "don't want" devs to profit confuses me.

but the more devs profit, the more they profit

The average App Store customer buys less than $20 worth of apps last time I saw numbers quoted. 30% of $20 is $6. Apple is a hardware manufacturer that sells $X00 phones at one of the highest markups in the industry and also gets a kickback from AT&T for every customer they bring to monthly billing.

Apples' incentives are almost totally non-related to developers' incentives: their primary interest in apps is to move more hardware and contracts.

You're right, I don't think apple is that interested in devs' profitability, or for that matter, app store profits. But I also don't think they have any incentive to actively harm devs' chances of being successful... It's the "don't want them to profit" part that I can't understand. Maybe "don't care"... But "don't want"?

>There were several free apps in the top-grossing list last time I checked.

Okay, how many of them are making a serious profit? How many are breaking even? How many are profiting primarily due to an existing customer base? (I'm thinking of Pandora as an obvious example; they're making money off of Apple's platform, but they were making money before they wrote an iPhone app.)

As with so many articles about Apple, this post completely ignores the issue of quality. If you assume that Apple would just as a soon have a bad app as a good one, then sure, this argument makes sense. But I don't think most people would make that argument, especially people who know Apple. It's not in Apple's interests to have lots of nonprofitable apps because developers have little incentive to support those.

Where is the evidence? People like to make random statements a lot now days.

Right! This is why the iPhone App Store defaults to the Free section of each category, massively reducing potential Paid sales.

Oh. Wait...

Apple encourages two App business plans. They encourage high-volume cheap/ad-based apps, and expensive niche apps. Either of those can be profitable, but nobody's going to sell a $10+ App to an appreciable fraction of iPhone/iTouch/iPad users.

The high-volume cheap apps (free to $10) are for the general public, and in that area, the blog post is correct - Apple is mostly interested in competition resulting in cheap and good general-interest apps, because it enhances "there's an App for that".

If you want to sell a $50+ iPhone app, you need to look at niche fields. There's a bar exam prep app for $1000[1], and one of the apps demo'd before the App store launch. In general, the really expensive iPhone apps add a killer-app feature - a feature that justifies buying the iPhone itself. Like the "check your security cameras while patrolling"[2] app, or the "every medical and pharmacological reference ever written in the palm of your hand and instantly searchable" app (#8 on the list in [2]) or the "control your multi-thousand-dollar home automation system" app from ROSIE[3]. These types of Apps literally sell iPhones by themselves. I mean, the tuning forks you need to tune a high-end piano cost $450[4], so a $300 app which is a million times easier to use is a no-brainer if you're a piano repairman or performer.

[1] - http://www.edibleapple.com/bar-exam-preparation-app-for-the-... [2] - http://www.businessinsider.com/the-10-most-expensive-iphone-... [3] - http://www.businessinsider.com/most-expensive-iphone-apps-20... [4] - http://www.mypianoshop.com/store/product.php?productid=16630...

I disagree with this premise. Apple makes money from App Store sales ($27M to $170M per quarter according to various estimates found on Google) which, while small compared to total revenue, is non-trivial. Also, paid apps tend to be higher quality, and it is strongly in Apple's best interest to maintain a high quality standard in the App Store. If Apple suddenly makes it hard for developers to make money, as the article insinuates, then they will deal with a larger percentage of low quality app submissions because it isn't worth the time to make high-end apps.

free is actually a problem for apple, as the money goes directly to the developer/google for the banners. no cut for apple

hence. iAds

but they face an uphill battle against the monetization of mobile adsense

But they would want your free App's ads to make money.

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