4 ms·

Can you explain that point a bit more? It doesn't seem to make any sense to me. You revenue is going to be number of sales * price - (number of refunds * price

by emtel 6y ago

Can you explain that point a bit more? It doesn't seem to make any sense to me. You revenue is going to be number of sales * price - (number of refunds * price * 0.3). Factor, and you get price * (sales - number of refunds * 0.3). Your unit cost is 0, so the only thing that matters is if your revenue exceeds your fixed costs. I don't see how this would explain a disincentive to charge higher prices.

esrauch 6y ago
Perhaps the refund-rate is higher on $100 apps than $1 ones? If you find out your kid made an unauthorized purchase of $2 you're not likely to refund it, if its $100 you definitely will.
nkrebs13 6y ago
I'm not the person you're asking, but I can probably try to explain. Take other payment processing platforms like Stripe as an example. Stripe charges $0.30 + 2.9% to process a purchase. To help build your (and my) mental model: Price of item -> Stripe revenue (rounded) $1 -> $0.33 $5 -> $0.45 $100 -> $3.20 Apple's 30% cut makes sense if they were expecting most apps to be roughly $0.99 (anecdotally, I remember this being true during the early days of the App Store) and the (presumed) few apps that cost more than $1 would be the "whale" developers that would subsidize Apple software development. But nowadays apps are a lot more powerful, feature-full, and development-intensive so higher prices are required for any hope of profit. So the math you have is right, it's just that the path to profit is a lot harder when the ONLY way to sell your product is to have >=30% cut out immediately upon sale. Some stores set a minimum (e.g. $5) sale amount for using a credit card and those payment processing platforms have fees orders of magnitude less than Apple's App store
ivalm 6y ago
Your profit (at 0 unit cost) will be (Sales not refunded * 0.7-refunds * 0.3) * price If Sales not refunded/refunds<0.3/0.7 ~ 43% Then profit can be negative (you lose money because more people refund than not). >57% refund rate literally makes you lose money from listing. But even if just quarter of people refund that eats almost half of profit.
strgcmc 6y ago
You missed the key point of the OP: you only get 70% of the gross revenue (units * price), but when a user requests a refund, you the app developer have to pay out of pocket to return 100% of the price back to the user (Apple doesn't refund the 30% it took off the top). So you are losing 30% on every refund, and in the extreme case, if every sale is refunded (i.e. from a malicious online viral thing directed against you), you can lose unlimited money scaling linearly with the number of sales (again, if every sale is refunded or close to it). EDIT: ofc in the Twitter thread, there's few disputing that if this is actually true, or if maybe Apple does different things in different markets, etc. so everything with a grain of salt I suppose

by emtel 6y ago

esrauch 6y ago

Perhaps the refund-rate is higher on $100 apps than $1 ones? If you find out your kid made an unauthorized purchase of $2 you're not likely to refund it, if its $100 you definitely will.

nkrebs13 6y ago

I'm not the person you're asking, but I can probably try to explain. Take other payment processing platforms like Stripe as an example. Stripe charges $0.30 + 2.9% to process a purchase. To help build your (and my) mental model: Price of item -> Stripe revenue (rounded) $1 -> $0.33 $5 -> $0.45 $100 -> $3.20 Apple's 30% cut makes sense if they were expecting most apps to be roughly $0.99 (anecdotally, I remember this being true during the early days of the App Store) and the (presumed) few apps that cost more than $1 would be the "whale" developers that would subsidize Apple software development. But nowadays apps are a lot more powerful, feature-full, and development-intensive so higher prices are required for any hope of profit. So the math you have is right, it's just that the path to profit is a lot harder when the ONLY way to sell your product is to have >=30% cut out immediately upon sale. Some stores set a minimum (e.g. $5) sale amount for using a credit card and those payment processing platforms have fees orders of magnitude less than Apple's App store

ivalm 6y ago

Your profit (at 0 unit cost) will be (Sales not refunded * 0.7-refunds * 0.3) * price If Sales not refunded/refunds<0.3/0.7 ~ 43% Then profit can be negative (you lose money because more people refund than not). >57% refund rate literally makes you lose money from listing. But even if just quarter of people refund that eats almost half of profit.

strgcmc 6y ago

You missed the key point of the OP: you only get 70% of the gross revenue (units * price), but when a user requests a refund, you the app developer have to pay out of pocket to return 100% of the price back to the user (Apple doesn't refund the 30% it took off the top). So you are losing 30% on every refund, and in the extreme case, if every sale is refunded (i.e. from a malicious online viral thing directed against you), you can lose unlimited money scaling linearly with the number of sales (again, if every sale is refunded or close to it). EDIT: ofc in the Twitter thread, there's few disputing that if this is actually true, or if maybe Apple does different things in different markets, etc. so everything with a grain of salt I suppose