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The cost of goods on a cup of Starbucks coffee is substantial (servers, beans, equipment, rent, utilities, cup, creamer) The cost of goods on your $1 app is cl

by tarr11 9y ago

The cost of goods on a cup of Starbucks coffee is substantial (servers, beans, equipment, rent, utilities, cup, creamer) The cost of goods on your $1 app is close to, and perceived to be, zero.

0xCMP 9y ago
If you develop and maintain the app yourself. People hire teams to develop apps all the time and not always for some larger/high-margin business.
- creatonez 9y ago
  The consumer has no straightfoward way of knowing whether or not an app was developed in one person's free time or 10 people's work time.
Alacart 9y ago
I think you could argue up front and ongoing costs for either scenario. The duplication of an app for each install is technically very low cost (although you could say that the app store taking 30% is a cost there), that doesn't mean there weren't large up front costs and ongoing ones as well. What about maintenance, support, infrastructure like servers/services/bandwidth. For anything of a decent size you probably have to do these things, which means you probably need staff, which means you probably need an office, benefits, insurance, all the usual business costs. That's not even bringing up the constant updates, new features, and supporting the ever changing platform or environment it runs on, which is all completely expected by users. Apps are as much of a regular business as anything else, not some magic special case.
sinatra 9y ago
Why is customer acquisition cost (which can be many $s) not considered part of the cost of the app if it's considered part of the cost of Starbucks (through rent)? Why is Starbucks server a cost, but your app's developer isn't? Why is Starbucks equipment a cost, but app's infrastructure isn't?
- tarr11 9y ago
  You are comparing R&D with Cost of Goods - they are different things. Cost of goods refers to the production cost of an individual item. COG for app store is zero. You don't even pay for hosting your app on the app store. Software developers are R&D, not cost of goods. There is R&D associated with Starbucks coffee as well (researching beans, refining the blends, etc), but nobody really factors that into its perceived value.
  - sinatra 9y ago
    - I don't see why customers would be so specific that they only want to look at cost of goods and not other costs. Most products and services people buy are based on their value for them, not based on their cost of goods. - If you include equipment, rent, and utilities in your cost calculations, then you have to include software developers and servers that are powering the app. I am not talking about apps that you build, publish and forget. Most apps have backend and engineers maintaining and supporting them. - You ignored my point about the customer acquisition cost which is likely to be the biggest cost for most apps.

by tarr11 9y ago

The cost of goods on a cup of Starbucks coffee is substantial (servers, beans, equipment, rent, utilities, cup, creamer) The cost of goods on your $1 app is close to, and perceived to be, zero.

0xCMP 9y ago

If you develop and maintain the app yourself. People hire teams to develop apps all the time and not always for some larger/high-margin business.

creatonez 9y ago
The consumer has no straightfoward way of knowing whether or not an app was developed in one person's free time or 10 people's work time.

Alacart 9y ago

I think you could argue up front and ongoing costs for either scenario. The duplication of an app for each install is technically very low cost (although you could say that the app store taking 30% is a cost there), that doesn't mean there weren't large up front costs and ongoing ones as well. What about maintenance, support, infrastructure like servers/services/bandwidth. For anything of a decent size you probably have to do these things, which means you probably need staff, which means you probably need an office, benefits, insurance, all the usual business costs. That's not even bringing up the constant updates, new features, and supporting the ever changing platform or environment it runs on, which is all completely expected by users. Apps are as much of a regular business as anything else, not some magic special case.

sinatra 9y ago

Why is customer acquisition cost (which can be many $s) not considered part of the cost of the app if it's considered part of the cost of Starbucks (through rent)? Why is Starbucks server a cost, but your app's developer isn't? Why is Starbucks equipment a cost, but app's infrastructure isn't?

tarr11 9y ago
You are comparing R&D with Cost of Goods - they are different things. Cost of goods refers to the production cost of an individual item. COG for app store is zero. You don't even pay for hosting your app on the app store. Software developers are R&D, not cost of goods. There is R&D associated with Starbucks coffee as well (researching beans, refining the blends, etc), but nobody really factors that into its perceived value.
- sinatra 9y ago
  - I don't see why customers would be so specific that they only want to look at cost of goods and not other costs. Most products and services people buy are based on their value for them, not based on their cost of goods. - If you include equipment, rent, and utilities in your cost calculations, then you have to include software developers and servers that are powering the app. I am not talking about apps that you build, publish and forget. Most apps have backend and engineers maintaining and supporting them. - You ignored my point about the customer acquisition cost which is likely to be the biggest cost for most apps.