4 ms·

Couldn't developers just build software and sell it without a recurring stream of revenue? I know the holy grail is a monthly charge, but companies are still ma

Couldn't developers just build software and sell it without a recurring stream of revenue? I know the holy grail is a monthly charge, but companies are still making a lot of money just selling software for a one time fee. Case in point, Google just purchased Quickoffice (my previous employer) which just sold software (and didn't until a few weeks before the Google acquisition have a recurring fee product).

petercooper 14y ago
They can and do but that's what Sparrow were already doing successfully. That said, everyone (including me) who is speculating a better revenue stream would have prevented them selling out in the first place is merely guessing ;-)
potatolicious 14y ago
They can, and that was the prevailing business model for a long time in the industry. The problem here is that it has little multiplicative power. Selling software is lucrative, but it will rarely make you Fuck-You-Money, and the tech industry nowadays is all about the Fuck-You-Money. Recurring revenue model = incredible potential for revenue growth = justification for insane valuation = gigantic exit, which is what everyone is now looking for in the age of Facebook and Google.
- rhizome 14y ago
  Who are you talking about when you say "the tech industry," who is "all about FYM?"
  - potatolicious 14y ago
    The tech "community", insofar as it can be generalized, in SF, SV, NYC, and beyond. People seem to have little interest in businesses that generate healthy revenues that will make a few people wealthy - people want to cash out like Sergey and Larry, and there's a stigma for settling for anything less. Note that I'm not saying this is a good thing, it probably isn't, but it's certainly the trend.
    - rhizome 14y ago
      That's kind of what I'm asking, though: how far can it be generalized to make your point? How did Sergey and Larry "cash out," by declining acquisition offers? I'm thinking that's not the best example for you here.
      - clarky07 14y ago
        Actually Larry and Sergey tried to sell to yahoo. They declined.
        rhizome 14y ago
        That's not cashing out.
emmett 14y ago
The problem with non-recurring revenue is that it's difficult to justify further investment once you saturate the market. If you want them to keep working on your product year in, year out, you have to pay for it year in, year out. The alternative is selling upgrades, but that doesn't work on iOS at all.
- evilduck 14y ago
  Couldn't this be handled via in-app purchases unlocking new features or later "versions"? It's not optimal, but it seems like it might be workable.
  - suresk 14y ago
    You could, but it would get really clumsy pretty quickly, especially if you were trying to ship multiple versions and only unlock certain ones. I'm not sure if Apple would even approve that.
- suresk 14y ago
  Indeed, you run into diminishing returns fairly quickly. I wish the various app stores had ways to allow upgrade functionality, as it would mitigate that issue. In-App purchases don't really work for a lot of situations and can make your users feel like you are nickel-and-diming them. Just releasing a new app doesn't reward or encourage existing users to upgrade, and as an end-user, it kind of sucks to have a bunch of copies of the same app lying around.
earl 14y ago
The app store for ios has exerted massive negative price pressure on apps, including creating a norm of free or $1 apps. I know it's basic psychology, but it still amazes me that tons of people using a $200 phone that costs on the order of $80/mo to use bitch endlessly in reviews and negatively rate apps for charging the ginormous price of $3. Or something equally out of line. This is exacerbated by shitty discovery in the app store. There's massive returns to being on the top app in category X list, and that's very difficult to do at higher prices. Plus you can't create paid upgrades without creating a new product in the app store, forcing you to start from zero with marketing and list rank. I predict the mac app store will likewise exert downward price pressure on app prices. Sparrow is really really cheap. A generation ago I used eudora, which cost $50 to $100, for email. So between the mid to late 90s and 2012, the price fell something like 80 to 90 percent to $10 for the mac program. The above is worsened by the rise of decent free email clients since it diminishes the audience. If you do the math, you have to sell a fuckton of $2.10 cent apps to afford salaries for good developers: say four people at $200k/year fully loaded (salary, health insurance, ss, medicare, office space, internet, diet coke, coffee, macbooks). That's 380k sales just to tread water. And we didn't deduct marketing expenses which are probably significant: you'll have someone fulltime doing seo / sem / banging on blogs and reviewers to get organic / etc. Plus, again, Apple has created a norm where apps get updated forever for free. So that $2.10 is close to being a lifetime value for a user. That means you probably can't use sem for user acquisition: a wildly optimistic 10 percent clickthrough and purchase rate (an order of magnitude high for most things) and 20 cents per click (also wildly cheap) puts you at $2.00. I presume Apple does this because of classic economics: increase demand by decreasing the price of complements. But if developers can't get paid, users can't have nice things. And I'm not an ios or mac dev, but looking at the interactions in their apps, they seem super custom. That means you have to go to the bottom of frameworks, increasing development costs.
- spaghetti 14y ago
  I'm puzzled by the psychology too. It seems counter-intuitive that people who pay a relatively large amount for the device + monthly contract would balk at paying an additional relatively small amount for an app which increases the utility of the device. I'm not 100% satisfied with any of my explanations. Here's a few ideas I've been pondering: the $80/month can be thought of as a subscription fee for the apps that come with the device. So I'm paying $80/month to use Phone, Mail, YouTube, Maps etc. The amount of time I can use my iOS device is limited by time spent at work, with family etc. Therefore adding new apps into the mix reduces the time I spend with the default apps. For example I might download a game and spend a month playing that and ignore the YouTube app. But now my "monthly subscription" for the YouTube app has been wasted. Say I use 10 of the default apps regularly. That's $8/month for each app. Ignoring YouTube app for one month means $8 down the drain. So when I'm deciding to buy your $3 app I'm subconsciously wondering if it's worth $11. And that's if I only use it for a month. What if your app is really great and I use it and ignore YouTube app for 10 months? Then I'm paying $3 + 10 * $8 for your app. Now take into account $200 for the device + $80/month is a lot for most people. And it's a lot relative to the free basic flip phone + $30/month w/o a contract we all had in the not too distant past. Now it's clear why free throw-away apps are the easiest to download. Free implies no additional upfront cost in addition to the arm + leg I'm already paying. Throw-away app implies I won't ignore the other $8/month apps I'm already subscribed to for too long. It's just a theory and I'd like to hear some counter-arguments. If it's true it could have interesting implications on tweaking value and price of apps with the goal of maximizing revenue.

petercooper 14y ago

They can and do but that's what Sparrow were already doing successfully. That said, everyone (including me) who is speculating a better revenue stream would have prevented them selling out in the first place is merely guessing ;-)

potatolicious 14y ago

They can, and that was the prevailing business model for a long time in the industry. The problem here is that it has little multiplicative power. Selling software is lucrative, but it will rarely make you Fuck-You-Money, and the tech industry nowadays is all about the Fuck-You-Money. Recurring revenue model = incredible potential for revenue growth = justification for insane valuation = gigantic exit, which is what everyone is now looking for in the age of Facebook and Google.

rhizome 14y ago
Who are you talking about when you say "the tech industry," who is "all about FYM?"
- potatolicious 14y ago
  The tech "community", insofar as it can be generalized, in SF, SV, NYC, and beyond. People seem to have little interest in businesses that generate healthy revenues that will make a few people wealthy - people want to cash out like Sergey and Larry, and there's a stigma for settling for anything less. Note that I'm not saying this is a good thing, it probably isn't, but it's certainly the trend.
  - rhizome 14y ago
    That's kind of what I'm asking, though: how far can it be generalized to make your point? How did Sergey and Larry "cash out," by declining acquisition offers? I'm thinking that's not the best example for you here.
    - clarky07 14y ago
      Actually Larry and Sergey tried to sell to yahoo. They declined.
      - rhizome 14y ago
        That's not cashing out.

emmett 14y ago

The problem with non-recurring revenue is that it's difficult to justify further investment once you saturate the market. If you want them to keep working on your product year in, year out, you have to pay for it year in, year out. The alternative is selling upgrades, but that doesn't work on iOS at all.

evilduck 14y ago
Couldn't this be handled via in-app purchases unlocking new features or later "versions"? It's not optimal, but it seems like it might be workable.
- suresk 14y ago
  You could, but it would get really clumsy pretty quickly, especially if you were trying to ship multiple versions and only unlock certain ones. I'm not sure if Apple would even approve that.
suresk 14y ago
Indeed, you run into diminishing returns fairly quickly. I wish the various app stores had ways to allow upgrade functionality, as it would mitigate that issue. In-App purchases don't really work for a lot of situations and can make your users feel like you are nickel-and-diming them. Just releasing a new app doesn't reward or encourage existing users to upgrade, and as an end-user, it kind of sucks to have a bunch of copies of the same app lying around.

earl 14y ago

The app store for ios has exerted massive negative price pressure on apps, including creating a norm of free or $1 apps. I know it's basic psychology, but it still amazes me that tons of people using a $200 phone that costs on the order of $80/mo to use bitch endlessly in reviews and negatively rate apps for charging the ginormous price of $3. Or something equally out of line. This is exacerbated by shitty discovery in the app store. There's massive returns to being on the top app in category X list, and that's very difficult to do at higher prices. Plus you can't create paid upgrades without creating a new product in the app store, forcing you to start from zero with marketing and list rank. I predict the mac app store will likewise exert downward price pressure on app prices. Sparrow is really really cheap. A generation ago I used eudora, which cost $50 to $100, for email. So between the mid to late 90s and 2012, the price fell something like 80 to 90 percent to $10 for the mac program. The above is worsened by the rise of decent free email clients since it diminishes the audience. If you do the math, you have to sell a fuckton of $2.10 cent apps to afford salaries for good developers: say four people at $200k/year fully loaded (salary, health insurance, ss, medicare, office space, internet, diet coke, coffee, macbooks). That's 380k sales just to tread water. And we didn't deduct marketing expenses which are probably significant: you'll have someone fulltime doing seo / sem / banging on blogs and reviewers to get organic / etc. Plus, again, Apple has created a norm where apps get updated forever for free. So that $2.10 is close to being a lifetime value for a user. That means you probably can't use sem for user acquisition: a wildly optimistic 10 percent clickthrough and purchase rate (an order of magnitude high for most things) and 20 cents per click (also wildly cheap) puts you at $2.00. I presume Apple does this because of classic economics: increase demand by decreasing the price of complements. But if developers can't get paid, users can't have nice things. And I'm not an ios or mac dev, but looking at the interactions in their apps, they seem super custom. That means you have to go to the bottom of frameworks, increasing development costs.

spaghetti 14y ago
I'm puzzled by the psychology too. It seems counter-intuitive that people who pay a relatively large amount for the device + monthly contract would balk at paying an additional relatively small amount for an app which increases the utility of the device. I'm not 100% satisfied with any of my explanations. Here's a few ideas I've been pondering: the $80/month can be thought of as a subscription fee for the apps that come with the device. So I'm paying $80/month to use Phone, Mail, YouTube, Maps etc. The amount of time I can use my iOS device is limited by time spent at work, with family etc. Therefore adding new apps into the mix reduces the time I spend with the default apps. For example I might download a game and spend a month playing that and ignore the YouTube app. But now my "monthly subscription" for the YouTube app has been wasted. Say I use 10 of the default apps regularly. That's $8/month for each app. Ignoring YouTube app for one month means $8 down the drain. So when I'm deciding to buy your $3 app I'm subconsciously wondering if it's worth $11. And that's if I only use it for a month. What if your app is really great and I use it and ignore YouTube app for 10 months? Then I'm paying $3 + 10 * $8 for your app. Now take into account $200 for the device + $80/month is a lot for most people. And it's a lot relative to the free basic flip phone + $30/month w/o a contract we all had in the not too distant past. Now it's clear why free throw-away apps are the easiest to download. Free implies no additional upfront cost in addition to the arm + leg I'm already paying. Throw-away app implies I won't ignore the other $8/month apps I'm already subscribed to for too long. It's just a theory and I'd like to hear some counter-arguments. If it's true it could have interesting implications on tweaking value and price of apps with the goal of maximizing revenue.