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App Store Pricing: Worth Less than a Cup of Coffee

189 points by floriankugler 13y ago

kranner 13y ago
What justification does OP offer for calling mobile apps 'basically worthless' (followed by the condescending 'let it sink in', but let's ignore that)? I'm confused: is this whole thing supposed to be sarcasm? Or does OP mean that apps are viewed by users as worthless because they are so cheap?
- feintruled 13y ago
  He's not trying to denigrate the amount of work or talent people put into making apps - he's saying that if no-one wants to pay for it (perhaps because they can use any one of a hundred free alternatives) then it is de-facto worthless.
theneb 13y ago
The tagline for the post is assuming a cup of coffee, i.e a physical product has the same value of a virtual one. To that end, is software value not dependent on the crowd which buys it? However, I cannot share your cup of coffee you buy from Starbucks. My point only further raises the question: Do consumers see Apps as shared content? Or, Do they equate physical and virtual App products as being worth the same?
timruffles 13y ago
That's an overly negative interpretation. An app can can be worth a lot more than a cup of coffee to someone, but if there's a free alternative, why would they pay? The business impact is the same under either interpretation of course, and the conclusion would be: don't expect it to be easy to launch a business in a space where people offer free alternatives.
svantana 13y ago
>That's a hard pill to swallow, but we should let it sink in. We pour all our creativity, time, and passion into creating basically worthless products. What a weird conclusion. For me, the take-home is rather "why don't I stop doing this and try to figure out something that is actually worth something to someone?"
- ekurutepe 13y ago
  Isn't that exactly the same conclusion as the article? "But we should be aware of the fact that we're in the business of creating products which offer very little value to people. It's our choice if that's what we want to pursue."
- easytiger 13y ago
  I don't see those as incompatible end points.
  - Ntrails 13y ago
    The question becomes whether the meaning is that all smartphone apps are worthless, or that you should work on one that isn't
    - easytiger 13y ago
      My goodness. What are we all doing. None of this is real :(
- digitalengineer 13y ago
  Yes. Like developing Apps for clients, not consumers. They can do with the App what they like. (usually give it away for personal data).
easytiger 13y ago
Not what I expected but I completely agree. Most productivity applications (anecdotally) are bought on a whim and oft are never used but at all.
ghshephard 13y ago
What is the worth of something precious or valuable, if all around it that same precious and valuable thing (or a very close substitute) is available for no charge at unlimited quantity? I wonder if Apple was aware the App Store would lead to basically infinite supply of (in many cases) beautiful and high quality apps for little to no cost. With 200 million+ users, many of whom have a greater than average tendency to pay $$$ for apps than your average smartphone user, an outstanding Apple developer has some chance of making money on the App Store - (That old saw about capturing 1% of a very large market) - but I really pity the third and fourth tier platforms - they are going to struggle. It's an IAP future.
Kurtz79 13y ago
I guess that, given the chioce, most people would opt for a free cup of coffee over a paid one, if quality was similar.
- masklinn 13y ago
  > most people would opt for a free cup of coffee over a paid one, if quality was similar. Quality does not enter the equation. Most people will opt for a free cup of coffee over a paid one if the paid cup is the best coffee in the world and the free one is barely a step over ground-up dried shit.
  - highace 13y ago
    Ground-up dried shit is some of the most expensive coffee! (Of course I'm talking about Kopi Luwak)
borplk 13y ago
> The economic reality is that most apps offer next to no value to people. I'm not an app developer and I disagree that most apps provide next to no value (some apps, like everything else sure, but many of them do provide more value than their price). For example there are many games priced $0.99 or $1.99 that people might play for hours and hours. Shouldn't that cost more? The reason that the prices are low is not because people are not prepared to pay for them. It's because Google and Apple want it that way and also because developers are slashing prices to the extreme to compete. Imagine if App store and Play store didn't exist and you'd have to individually find developers and buy/download their apps. That would certainly result in higher prices. The bottom line is app developers have no one to blame but themselves for creating this perception about their apps and allowing this expectation of $0.99 apps to grow. People also have no freaking clue how hard it is to make apps. For example most people think mobile apps are a lot easier to make than software/web apps, perhaps because mobile devices are 'small' so they tend to think of mobile apps as 'tiny' little widgets that someone pushes 20 buttons and it magically gets created. If a large enough group of people start raising awareness and refusing to release their work for peanuts we'll see a shift in the market price towards more realistic numbers.
- Touche 13y ago
  I have my doubts that prices are going anywhere but down. You can stubbornly keep your app's price high if you want but a couple of dozen others will gladly step in your place. I think the author is wrong here; apps do offer real value but they are still close to being worthless economically. What developers should start realizing is they shouldn't spend so much effort on todo lists, podcast clients, rss readers, or any other trivial app category that many people do as side projects for free for fun. As a result we might get more genuinely innovative apps as developers look more closely at what niches are being underserved.
  - threeseed 13y ago
    Exactly. If you can't build something unique then don't complain if there are 100 other developers (some of whom may come from developing countries) who are happy to do for it less. There is a new era of apps being ushered in as a result of Bluetooth LE. Take advantage of it.
jhh 13y ago
The author's argument is faulty. The value from being able to take notes / manage to-dos properly on a multitouch device may be rather great to many people. However, the price is not determined by this. The price is the result of an equilibrium. There is a process of underbidding going on which lowers the price for the app very close to cost of producing it, until it is unattractive for new competitors to enter the market. The magic thing about this is that it delivers these products to the world in great number at close-to-zero pricing and that's pretty nice for the world as a whole. Think about it this way: It was worth buying mainframe computers at many million dollars a piece and with embarissingly low computing power back in the 70s to some people. Obviously, when these people buy a computer with a million times the performance at 1/1000th of the price they get a great deal. So it's fair to say that the value of commodity computers is to some people much much higher than the market price. That does not change the fact that producing commodity computers is a cut-throat business with ultra slim margins. So what I am trying to say is that this emotional / ethical notion of value needs to be seen as distinct from market pricing.
- XorNot 13y ago
  If you're making a todo/notetaking app, you're entering a really crowded marketplace. And from my experience, you're probably also doing it wrong. I mean first things first: does your app sync with anything standard or are you promising me your webservice? Because a quick glance through the non-existent featurelist from the app's website, and the only thing I see is "sync with iCloud". So you know, worthless. To me and anyone else who has IMAP/WebDAV/Exchange accounts/CalDAV calendaring/Google calendars. Your apps are worthless because they're not that useful to start with.
borplk 13y ago
What I find particularly messed up is the huge relative difference in the price of the mobile device and the apps that people install on it. When it comes to buying the device, thousands of people line up outside Apple stores and pay - I don't know - $600 for their device. Android devices are the same, many people easily spend ~$400-$600 on their device that they may only use for one year. So a good chunk of mobile users are people with good income, living in rich countries and are well capable of paying $5-$10 for their apps that they run on their expensive/high-end devices. Yet when it comes to paying for apps they struggle as if their monthly income is $10. There are many factors involved but I think the most significant one is by far the psychological perception of the value of apps that has been created due to App store and Play store pricing. There are also many people who are willing to release free and good-enough quality apps because it's their hobby or maybe they want to create a portfolio for themselves. This reduces the perceived value of these apps. In contrast people can't find other professional services/tools for free. I mean, say, lawyers, doctors, accountants, electrical engineers, etc... don't produce and provide their services/work for free where you can download a free health checkup from a doctor whose hobby is being a doctor. So the perceived value remains high. Software engineers are unique in this regard because they 'discount' their work constantly and justify it by saying 'i love doing this'.
- Ilverin 13y ago
  I would argue that authors are with software engineers on this. You can find many free works online from authors who were unable to get a publisher interested. They may not be as organized as software engineers, but they are definitely out there.
- Kurtz79 13y ago
  Just as well: there are people spending thousands of dollars in cutting edge PCs or Home Theatre systems, and then playing only pirated games. And in the Appstores case the free alternative is even legal!
  - reddit_clone 13y ago
    One minor reason could be lack of physical media. In old days people received a bunch of disks or a dvd with nice cover art which they can put on a bookshelf. Now it is all 1's and 0's coming over the wire(less). There is no sense of ownership. People are reluctant to pay for something that they don't touch or own.
ricardobeat 13y ago
> the business of creating products which offer very little value to people my view is it's not that most apps offer little value, but the consumers' perception of value is skewed. You can buy tools today for <$5 that would have cost $50, $100 or more a few years ago, and are miles better than their old counterparts. Also, in a way, Apple is forcing the trial + buy model to become free + in app purchase, so paid upfront becomes a huge negative.
czr80 13y ago
Why is it emotionally easier to spend $5 on a coffee vs spending $5 on an app? I have a theory on this - I think we price experiences differently from objects, and have a much higher bar for buying an object vs buying an experience. And I think the reason for that is ultimately loss aversion - if we buy a bad coffee it's gone and we can forget about it, whereas if we buy an object we're stuck with it, a constant reminder of how we made a bad choice and lost money.
- lleims 13y ago
  http://www.joshlehman.com/thoughts/stop-using-the-cup-of-coffee-vs-0-99-cent-app-analogy/ http://www.joshlehman.com/thoughts/stop-using-the-cup-of-cof...
- Semaphor 13y ago
  I rarely buy a cup of coffee (I buy beans). But when I do it's because I need/want it now and I have no alternative, for example at the train station. With apps that usually doesn't happen.
- ProblemFactory 13y ago
  A $5 coffee also buys you a place to sit down and use WiFi, and a bit of social interaction or "lifestyle". Nobody pays $5 per cup of coffee at a supermarket. No app developers include "installed by a human" and the permission to go sit on a couch at their office for half an hour in the price!
  - aestra 13y ago
    My supermarket has a Starbucks inside, without seats or WiFi. It stays there because presumably people are buying $5 coffee from there.
- fburnaby 13y ago
  Someone has made and maintained the app over a few person-months of effort, and can sell millions of copies of it. In order to pay for their time spent making the app, I need to give them one millionth of the cost of their time developing it. When there's lots of competition in the app market, app makers will have to sell their time at competitive prices. Compare that to coffee. There are three baristas on this street who can make me a coffee, so they're also in a stiffly competitive market. But they have to make me my coffee personally, one at a time. I have to buy a larger portion of their time, since they can only make a few dozen coffees per hour (and they have more physical supply-chain issues to manage, like sourcing beans and managing a property). It's emotionally easier to pay for the coffee in part because no-one down the street is offering it for half the price, or for free. They can't. An app developer can. And they'll have to, because if they don't, someone else will. Because they can.
threeseed 13y ago
As someone who bought Clear I fully disagree with the premise of this post. All they had to do was recompile the app and potentially fix a few small bugs. You can't sit there and act like it was some monumental change that warranted screwing over your existing users. If they are unhappy with how much money they are making then they simply need to raise their prices.
- shadesandcolour 13y ago
  Unless you were the person who works at Realmac, and personally performed the iOS 7 update, I'm not sure how you can possibly say something like this. I didn't do it either, so it might be that you're correct. The notion that asking someone to pay for your work is "screwing over your existing users", is exactly the problem that is being discussed. Personally I don't think that it's that strange to ask people to give you a few dollars so that it is worth your time to keep working on things for them. But hey that's just me. Your final point shows that you either didn't read the article, or you didn't read the first sentence that you wrote. If Realmac ups their prices because they are unhappy with the money they are making, then everyone (including you since you feel entitled to free upgrades for life) will just leave.
- macspoofing 13y ago
  >All they had to do was recompile the app and potentially fix a few small bugs. That's all they had to do eh. It's all so simple. >If they are unhappy with how much money they are making then they simply need to raise their prices. Haha. Or charge for upgrades? The 99c app business, is shit-business. I feel for app developers. You can't build a company around that price point. Either you charge more or you go down the recurring revenue model. Neither is easy. If you're a game developer you go freemium, and you try to squeeze as much revenue out of your customer base.
  - gurkendoktor 13y ago
    > Haha. Or charge for upgrades? Actually, there are many people (me included) who don't mind paying 10$ for a game, but avoid freemium games like the plague. So there is a psychological difference between raising up-front prices and upgrade pricing, even if I spend the same money in the end.
terhechte 13y ago
The problem is that the difference between $2 and $1 is not the same as the difference between $1 and $0 (i.e. free). Humans are not rational in this way, and the abundance of free apps kills it for everybody else in the market. If one company would start giving away really awful-quality chocolate (or any product) for free in every supermarket, the chocolate prices & industry would crash. Dan Arielly did a couple of interesting experiments on this. He had people paying for products in a cashier line (i.e. people who had their wallet out anyway) choose between two really good offers: Hershey chocolate for $0.10 and Lind chocolate for $0.20 (or something like that, I forgot the detailed numbers, it may have been $1/$2 or $0.5/$1). In that case, most people choose the more expensive Lind chocolate as it was clearly the superior product (i.e. higher quality). When he repeated the experiment with $0.10 for the Lind and $0.0 (i.e. Free) for the Hershey's, the game changed. Everybody took the Hersheys. Even though the pricing didn't really change, they only both became cheaper, by the same amount. The verdict, really, is that if there's something free around, we go nuts and quality doesn't matter much anymore, because it is free. If free apps, on the app store, would be at least $0.50, or even $0.10, I think it would totally change the game. (I.e. if Apple would change the Free Tier). But as it is right now, I think the downward spiral will continue. The only way out is to create a high quality superior product (many features, etc) with a high price tag and hope that you get enough customers to survive. That also should lead to less support load.
- ronaldx 13y ago
  This Ariely experiment is unconvincing because it's quoted with percentages. Are the free customers switching down from the luxury product, or are they new customers who otherwise would have gone for neither option? The percentages withhold that information.
- bigfudge 13y ago
  I think the only way out is to allow demo apps. I find it really hard to justify $10 or $20 on an app which may or may not fit into my workflow. That's on top of the problem of determining whether something is of reasonable quality (i.e. even does what it claims) from a few screenshots and likely-gamed reviews. The problem gets worse the more complex the app... Yes, reviewer A might find it useful because some subset of the features work OK for them, but perhaps I just want one specific feature which they don't care about? Without a demo I'm left with the size of the community around and app, and a general 'buzz', both of which make it harder to enter the market at all.
skc 13y ago
I'm just here to smirk at the old narrative - that the iOS customer doesn't balk at paying for stuff - being slowly whittled away as the march towards smartphone commoditization continues at pace.
- derefr 13y ago
  The "iOS customer" of five years ago (the wealthy early adopter) didn't mind paying for stuff. Those customers are still there, and still buying iPhones (probably gold 5Ses now), and apps for them. But now there are way more, more price-sensitive consumers (the people buying those 5Cs, the people who still have an iPhone 4, etc.) and they have much the same buying behavior as (commodity) Android consumers. In other words, there's still money in the market -- but it's a fixed supply of money (there are a fixed number of wealthy early adopters) vs. an ever-growing number of developers grabbing at it. The only way to get back to where we were would be to make a new app store that required new apps to be designed from scratch for the wealthy users to early-adopt all over again. (...and that's fairly clearly what iOS7 is trying to do, isn't it?)
twilightfog 13y ago
Nothing like another example of a todo list app to illustrate the downward spiral of app store pricing. Creativity can still get a high price in app store. Find a niche, and develop a great app, and customer will pay. Case in point: Cubasis https://itunes.apple.com/us/app/cubasis/id583976519 https://itunes.apple.com/us/app/cubasis/id583976519
- gurkendoktor 13y ago
  Absolutely agree. My coworker built a business app that sold very well for $120, until the company that provides the API crushed it with their own $10 app (bummer).
arbuge 13y ago
>>That's a hard pill to swallow, but we should let it sink in. We pour all our creativity, time, and passion into creating basically worthless products. Obviously not. A cup of coffee is worth $2, period. An app only worth $0.50 to a million people is worth $500k.
- bilbo0s 13y ago
  So the question is ... How many apps are worth $0.50 to a million people?
  - arbuge 13y ago
    Well, you're already beating the cup of coffee if they're worth $0.50 to 5 people.
    - jbigelow76 13y ago
      How long does it take to build an app vs brew a cup of coffee?
- rythie 13y ago
  A lot of people pay a lot less than $2 for coffee.
- swang 13y ago
  Author is saying a cup of coffee is worth $2 to the customer, but an app is not worth even the $0.50 to that same customer. In this example, you seem to switch out this comparison where instead you compare the cup of coffee the customer buys, to the amount you could possibly make for a $0.50 app bought by a million people.
  - arbuge 13y ago
    Agreed, but the point is that the "total worth" of an app is the total utility that it creates in the world across all its customer base. Of course you're right that to each individual customer the worth remains less than a cup of coffee; if this affects the app writer psychologically, hopefully the size of his/her bank account will be a consolation.
ktd 13y ago
>We pour all our creativity, time, and passion into creating basically worthless products... we're in the business of making products that provide very little value to people. Yikes.
rythie 13y ago
This is distorted based on the idea that most people pay more than $0.99 for a cup of coffee - which is not true. I think the price of a "Cup of Coffee" needs to be defined here. Coffee can be made for $0.07/cup [ http://thekrazycouponlady.com/finance/a-wake-up-call-a-price-comparison-of-popular-coffee-options/ http://thekrazycouponlady.com/finance/a-wake-up-call-a-price... ]. People who buy coffee at Starbucks are buying a luxury version of a luxury item + they are buying time in a public venue. Does Starbucks actually outsell (in numbers) coffee made at home? seems very unlikely to me. In fact most people buy coffee in a supermarket, which is seems almost free when you actually make a cup (you don't pay everytime you make one).
- AznHisoka 13y ago
  A cup of coffee is like temporary marijuana to drown out the dreary feeling of going to work. To me, the value is much much greater than most apps, no question. Coffee to me is like having a shower. Sure, a shower is basically just splashing water to your body.. but it's also one of the few places where you can think to yourself with no distractions.
- easytiger 13y ago
  The biggest cost in most cups of coffee is the cost of renting/buying the space in which you sell it.
NateDad 13y ago
If your paid app can't compete against a free app... that's hardly the fault of the user or the app store. It's the fault of the app maker. What you're basically saying is "my app is so easy to make, that someone could make it without even caring to get paid for it". It's competition. Yes, if someone can recreate your application for free, then your application wasn't as valuable as you think it was, by definition. Make a better app, or turn it into a service that generates revenue past app deployment. I think many app developers have gotten spoiled by tales of people getting rich off of P.O.S. apps, and expecting that to happen to them. That happened back in the day because there was a scarcity of applications and app developers. That scarcity no longer exists. Most of the easy stuff has been done, and a lot of free versions have been made because, let's face it, most apps really aren't terribly complex. So, make something big and hard to duplicate. Make it part of a service you provide with recurring charges and give away your app. It's a better model, anyway.
- hemancuso 13y ago
  Couldn't agree more. It's not the users or Apple who are racing the app market to the bottom. It is the developers and the competition amongst them. And it's because creating an app is not that hard. Perhaps designing a great one one and creating and and building a market for it is quite hard. But cloning that exact app [even if it is inferior] and providing it for free or supported with IAP or ads is really not terrifically difficult or time consuming once the idea is proven. It is basically impossible to build a competitive moat. Games are a bit different given how much art and content is often associated with the production, but users are looking for a fun distraction. Perhaps one should try to build a $2 game with a $50,000 art budget rather than a $500,000 art budget. The users don't really care. It sounds more profitable. Tiny Wings FTW.
  - k-mcgrady 13y ago
    >> "creating an app is not that hard" How is this true at all? It depends on the programmer, what they are building and the tools they are using to build it. Apps are no different to building desktop or web software. In fact the constraints arguably make it more difficult.
cognivore 13y ago
>> We pour all our creativity, time, and passion into creating basically worthless products... we're in the business of making products that provide very little value to people. << If you take nothing away from the article but that you've gained some insight. If you take a way someone's smart phone with a handful of paid apps on it and give them a dumb phone they'll get by just fine. They will lose no significant advantage for either work or personal life. To drive up the price of something with little value you introduce artificial scarcity. Nintendo does this well. If the Nintendo game platforms were open games would be priced like apps. But Nintendo gives their Seal of Approval to everything that goes on their platforms, and there is a high barrier to entry. I doubt that the software development community would like that model, either. I'm not even sure it's more profitable. But it does seem to create more valuable software. Nothing on smart phones comes close to the quality and polish of a good Nintendo game.
prottmann 13y ago
All the time i did not understand why so many developer jump on the App-Train. Most of them did not make money with their apps. But thats another problem. The real problem is, that everybody try to be cheaper than others and so all developer destroy their own markets. Why did so many sell a good product for 99 Cent ? CRAZY ! If somebody likes your app and find it usefull, this person will pay more than 99 Cent (ONCE IN HIS LIFE). Ok, admittedly, it exists millions of todo apps, so you have a special problem with many competitors, but this can't be the reason to be cheap.
iwasakabukiman 13y ago
While I do agree that the App Store and the Play Store both trend toward the free apps being the most successful ones, I disagree with his mentality about the value of apps completely. Yes, there are plenty of apps on my iPhone/iPad that I rarely use, but there are also a whole host that I use every single day. The author cites Clear as an example in his article. I use it every day to make lists and keep track of things for work. There are also apps like Downcast (a podcast player) and Comic Zeal (a comic reading app) that I have gotten 10x the value of what I paid for them, since I use them so frequently.
shizzy0 13y ago
Here's a potential solution to this mess. We treat app store placement like it's a free resource right now since it doesn't take up any physical space. However, it does increase its users cognitive load. All apps that have ever been produced sit on the app store unless their creators explicitly choose to take them down. That's like a department store that houses every invention ever made no matter how antiquated or outdated. Apple could introduce a "property tax". If you want to take up shelf space, you've got to pay a yearly tax or make way for other apps that will more productively use that space.
- icebraining 13y ago
  You're confusing profitability with productivity, and potentially killing lots and lots of very useful apps that are distributed for reasons other than profit.
- commentzorro 13y ago
  This is an interesting thought, but history has already shown the outcome. Shelf space dominated by the big players and defacto price fixing. A better approach would be for a few very high quality niche apps to get together an open their own app store. They sell only though their store and price the apps appropriately. Thus starting boutique markets. Could happen now with Android but currently not Apple.
  - derefr 13y ago
    Without needing to support sideloading, Apple could let users group apps on the store into their own collections, which other users could browse. They could even let the users theme them, somewhat like Apple's own decorated collections -- and give the "curator" a user ends up purchasing from a small cut (5-10%) of the sale price. In other words, replicate the well-trodden player-vendor system from MMOs.
    - commentzorro 13y ago
      No ... a couple quick examples. Kids don't go to Walmart looking for the Abercrombie & Fitch department. They want the fantasy built around the brand and that means their own stores. Stihl when the dealer route because they wanted to differentiate their higher quality and provide a more personal customer relationship than Walmart would allow. Gotta get Apple out of that lock-in in order to support true boutique shops.
jaynos 13y ago
Comparing the Clear app to a cup of coffee is interesting, especially since I received the app for free from a Starbucks promotion. I quickly stopped using it because that is my M.O. with all ToDo list apps. I've never found one to replace a folded up envelope in my back pocket.
paul_f 13y ago
"The economic reality is that most apps offer next to no value to people." This is completely wrong. The author of this article confuses price with value. Apps have tremendous value. But because of market dynamics, human nature, free alternatives, etc, they cannot sustain a high price. Price and value are different things altogether.
- icebraining 13y ago
  I agree. The problem to paid app sellers is that the extra value they provide - the difference between the free app and theirs - is low, not the absolute value. Even if your app solved half of my life problems, it'd still not be worth a lot if the free competitor solved 49% of them.
crazygringo 13y ago
The whole problem comes from Apple not allowing trial apps. I would easily pay $20 for Dark Sky, or Moves, or FitnessFast, InstaPaper, even ExitStrategy -- but I would never pay $20 upfront. It takes a couple weeks using an app to see if it turns into an invaluable daily tool, or if you just delete it. (Which is why free software trials for desktop apps have existed for decades.) I refuse to pay $1 or $2 for apps just to try them out, not because of the money, but because of the moral issue -- I don't want to be rewarding crappy spammy developers with their $1 or $2 just as much as the truly good app developers out there, because that's just contributing to the problem. Marco Ament took down the Instapaper Free version. But I never would have downloaded the paid version if I hadn't been able to try the free version first.
- deleted 13y ago
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- pjc50 13y ago
  The strange thing is that games can effectively be "trial" by structuring themselves with in-app purchases to overcome obstacles. I wonder how well this would work with "productivity" apps.
  - jonnathanson 13y ago
    Indeed. Big game publishers can afford to give out their games for free, then harvest millions of dollars a week from in-app purchases, pour that money back into paid user acquisition, top the charts, and repeat until their next game comes out. That business model is all well and good if you're a game publisher, and especially if you're a well-funded game publisher. But it kind of sucks for anyone who's not in a category that benefits so dramatically from in-app purchases. In-app purchases are not a magic-bullet solution to pricing problems for most other categories of apps. (Now, one could certainly argue that games provide more value to the user than other apps do. While there's something to that argument, it's not sufficient. Surely the solution to this problem isn't "every app becomes a game"). So what should you do if you're an app developer, and you're not making a game? To be honest, you're in a tough spot. The deck is stacked against you. Prices are converging on zero, in-app purchases probably won't keep the lights on, and the prospect of flooding your app with advertisements probably makes you (or your UX designer) cringe. This is where the freemium model should make sense, IMO. Create something of general value to a large TAM, but of extraordinary value to a smaller slice of that TAM. Give away the basic version to the TAM, but upsell the power version to the power users. It may be the case that your app is better for the power users than existing solutions for which they're paying hundreds, or even thousands of dollars. If that's the case, don't be afraid to charge higher than $.99 for the premium version. If the delta in utility between Your App and Existing Solution is extremely high, and the price gap between Existing Solution and Your App is big, you've got a lot of room in pricing, and that pricing will be justified. Unfortunately, absent a fantastic way to do trial versioning, the existing methods are pretty inelegant. Apple needs to get better about allowing developers to do trial versions, or this overall pricing and monetization problem is going to get worse.
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tsunamifury 13y ago
Do the smaller developers realize that the hardware manufactures pay development houses to do this? I've been paid by pretty much every AppStore provider to develop apps, which subsidizes me to undercut competition. I feel like most app developers have a severe lack of business intelligence and the allure of easy money has kept them from thinking rationally about how to succeed in the market. Provide a high quality cheap product at scale, while reducing risk of investment in every way possible. Companies like S2BB can replicate your cute app in days and provide it for free using carrier, oem, or AppStore provider subsidy. I don't think smaller app devs even realize the uphill battle they are about to be playing.
- bilbo0s 13y ago
  A couple of reasons... One, the casual developer. A lot of these apps are being developed by programmers sitting in their underwear watching ESPN Gameday on Saturday morning. Or teenagers with nothing better to do. If they make money... well, that'd be great... but they really have other motivations. That alone would flood the App Stores with product. The second point, is economics. ie - it doesn't matter. If you live in an agrarian society... most likely, you have to be a farmer. It's largely irrelevant how many other farmers there are... it's probably the only thing you can do. I think there is a similar dynamic in the app world. There are an AWFUL lot of unemployed programmers... chances are... they are going to ... well ... program. What else are they going to do with their time? It's actually a pretty smart thing for them to do as well. Keeping the skills sharp and all that. So... I think that's, most likely, where a lot of the apps are coming from. And those two groups will only grow in the future.
- pnathan 13y ago
  A thought. I'm working on a virtual pet game (Firefox OS/Web based), and it's designed to be a mobile game. It's clear that I can't compete against, say, OMGPOP or Zynga. What I've chosen to do is target a very specific niche - "smart people". People like me, in other words, who aren't really very well served by the games on the market right now. I want my game to be intriguing and have depth of thought, if at all possible. I see this targeting as very different from a typical "Farmville" style game, and thus fairly lucrative.... if I can swing the business/sales/marketing side of it. edit: Plug, plug - it will be alpha at some point in the next month or two, I hope. If my description intrigues you, email me, and I'll add your name to the tester list.
satyrnein 13y ago
Reading some of the comments here reminds me of the Adam Smith quote: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
programminggeek 13y ago
You know how you can offer a free trial? By offering a free trial! No seriously, make your users create an account and give them a time-limited trial. Offer them an IAP upgrade. It's doable. The problem is to hit the mass market of millions, well you have to be free or have a good marketing/advertising strategy. Actually, you probably need to be a bit of both. Anyway, it's dumb to complain about the pricing cuz it's been this way for what 3 or 4 years now. It's not a new phenomenon. On Google Play, it's even harder to get people to pay for an app up front.
kemiller 13y ago
I have a somewhat different perspective on this. Apps cost people something much more valuable than the small amounts of money in question: attention. Most people find learning new software to be a chore. So every app they download has a cost in attention, in learning how to use it, however simple that might be, and some of them have a cost in money as well. If the app is free, they know they can abandon it instantly if it doesn't give them value right away, and lose almost nothing. If it costs money, they will feel obliged to get more value out of it, but that means committing to spend even more attention. When you buy a cup of coffee, you're getting attention back because someone else is taking on the slightly fiddly business of making coffee, and once you have it, there is nothing to learn, you can just enjoy it. Viewing software transactions as paying attention, rather than money, for value, makes a lot of these markets make more sense. Because if you offer something that will reduce the net amount of attention they have to pay, they'll often gladly give you money for it.
- aestra 13y ago
  This is a great point. There is a useful free app that I use which has a 5 star rating. I looked at one of the 1 star reviews to see what they said out of curiosity. It said something along the lines of "I had to customize the settings and the user interface isn't standard."
andrewljohnson 13y ago
This idea that Apple does not allow trials is a total misconception. I just released a subscription boating app that has a basic free version, and then a button to let you "Test Drive" the complete app. You can trial the paid version over and over. Previously, I have released a product that had limited functionality, and prompted you to upgrade or buy the paid app. People interpret the App Store guidelines very literally: Rule 2.9: "Apps that are "beta", "demo", "trial", or "test" versions will be rejected" https://developer.apple.com/appstore/resources/approval/guidelines.html https://developer.apple.com/appstore/resources/approval/guid... This doesn't mean you can't set up an app to have a trial, it just means you can't submit garbage. You're best understanding that there is a certain twisted humanity to the app review process.
- deleted 13y ago
  [deleted]
  - kamjam 13y ago
    You get this a lot in Google Play too, was wondering why this is not possible in Apple Store e.g. https://play.google.com/store/apps/details?id=net.cdeguet.smartkeyboardtrial https://play.google.com/store/apps/details?id=net.cdeguet.sm... https://play.google.com/store/apps/details?id=net.cdeguet.smartkeyboardpro https://play.google.com/store/apps/details?id=net.cdeguet.sm...
- robterrell 13y ago
  Some of us interpret the guidelines literally because we've been burned before. A couple of years ago, I spent months working on an app, including paying a designer, and I was really proud of the final product. After it got reviewed, Apple added a new rule to the guidelines and rejected the app. That was a seriously expensive lesson. Now I recommend interpreting the guidelines as strictly as possible... even if you know of other apps that squeak past the rule, it doesn't mean you won't get burned. > Apps that are "beta", "demo", "trial", or "test" versions will be rejected It sure sounds like your app breaks this rule. I'd ask what your app is, but I don't want Apple to see this and reject you.
useful 13y ago
I happily pay $60/year for Strava. But I would never buy the app.
clarky07 13y ago
>The economic reality is that most apps offer next to no value to people. They might say otherwise when asked about, but their actions speak pretty clearly: A cup of coffee is worth more than almost every app on the store. Two things. 1. That's probably true for a lot of apps, but I don't think it's fair to say "most." Perhaps "many". There are a lot of apps out there that provide huge amounts of value. Of course, I don't think a cup of coffee is worth anywhere close to the price of a cup of coffee and I make my living selling apps. I might be biased. 2. Starbucks made 7.5 billion last year. Apple alone paid out 5 billion to devs for apps. If you include advertising revenue and Android revenue, I'd guess that people actually spent a similar amount on apps as they did coffee.
clarky07 13y ago
We get posts like this all the time, but it isn't actually what is playing out in the world. Apple paid out $5 billion to developers last year and that obviously doesn't include advertising revenue and Android profits. People ARE paying for apps. Developers ARE creating value. These things aren't worthless. I know because I sell lots of paid apps every day, and every month Apple and Google deposit money into my bank account. My response to this article - https://news.ycombinator.com/item?id=6471131 https://news.ycombinator.com/item?id=6471131
hawkharris 13y ago
"A cup of coffee is worth more than almost every app on the store." That is a "hard pill to swallow," but it's true and poignant. The problem is not only systemic (i.e. Apple's fault). It's that many developers jump into creating apps withour conducting market research to prove that their products will have a long-lasting utility from a consumer's point of view. I don't mean to be cynical or overgeneralize. To be fair, not all apps are created equal. But in my experience, the vast majority seek to provide a fleeting sense of entertainment (as opposed to utility). And the more practical apps are simply unimaginative iterations of existing solutions (e.g. fitness trackers and to-do lists). We need to think differently about the purpose and expect more from them in the way of tangible impact on consumers. For instance, the Robert Wood Johnson foundation is using apps as part of nationwide campaigns to inprove childhood nutrition.
dscrd 13y ago
Umm, no. A cup of coffee is worth about $0.1
fburnaby 13y ago
It's not that your app doesn't have value. It's that the marginal value compared to a free app is small.
fburnaby 13y ago
If something is worth $10,000 to me and I can get it for $0.99, I will not pay $10,000 for it.
jennyjitters 13y ago
While I agree with the people here saying that many apps are "worthless" due to the sheer number of free apps available, I can't help but compare this issue to starting a business (likely because that's what many app developers are trying to do). Most startups fail. That's just the way it goes. Starting and running a successful business requires success in a lot of areas: product dev, design, marketing, customer service, etc. I think the claim that apps are worth less than a cup of coffee is a bit narrow-minded. If you look at the (huge) number businesses that have incorporated over the last several years, and then compare that to the number of those same businesses that are currently "successful", those numbers will likely look a lot like the number of "successful" apps vs total apps. It's hard to create something that people love, whether that be a physical product or an app. I think there's still a market for well-designed, useful, paid apps. Just like it's still possible for a startup to be successful. It's just really damned difficult.
lnanek2 13y ago
A cup of coffee can only be consumed by a person, or maybe another splitting it. A digital offering can be copied for almost no cost. This is why Bill Gates is rich. You pay to write the software, then you sell it over and over and over again with little cost to you. You can't do that with coffee. So I see the low price of apps to be more indicative of this advantage being shared with the buyers rather than it indicating the app is worth less to a person than a cup of coffee. You can have a successful app business selling at very low prices because if it becomes a hit you will still make a lot. And being cheap helps you become a hit. So everyone does it and you have to compete with those people doing it.
- judk 13y ago
  Howard Schultz did pretty well selling coffee.
zxcvvcxz 13y ago
Here's my perspective as both a user and developer. Most paid apps there are the equivalent of small side projects. They're simple things that should exist, and after enough time, someone will make them for free. The ones that are not free tend to have better visual design. Big whoop. I'll take my coffee please. Here's an example of something that's worth more than a coffee: Shazam. It identifies music around you by doing some crazy audio processing and database magic. Aaaand I'm still using their free app (haven't had the need to upgrade yet). So if someone offering that much value still can't convert me to a paying customer, how will you? I'm a developer as well. It's hard to create something worthwhile, I get it (I still haven't really). My theory is that if it's not technically defensible in some way, or doesn't get a network-growth lock-in effect quickly, then it's easily replicated as a free app. Would love to hear counter-arguments to any of this. Frankly all I see is people complaining about everything except the intrinsic value of the apps, which is exactly what the article mentioned would happen. We live in an era of increasingly less low-hanging fruit.
sanjkris 13y ago
Note to all my iphone app users: -Yes. I just tripled the price of my app. Why you may ask. Read on -You whined about missing features; I added them. You whined about in-app purchases. I removed them. You whined about a missing help section. I gave you videos & pics inside the app. You never saw them. Dont lie to me-I see all your clicks inside the app. -Oh yeah! You are threatening me with a 1-star review because you forgot to check your inbox for the result from the app. You are an app review terrorist. I just tripled the price of my app as insurance against such terror threats -You asked for a discount on the app when it was priced $2.99!! I am responding by tripling my app price. I HAVE read all my competitor's reviews. They priced it $0 for a reason. ok...got to go catch my flight to Hawaii and relax. With your $$$ thanks
FiddlerClamp 13y ago
So, in comparison - would the same people who want prices on apps to be higher be willing to avoid using contest sites like 99 Designs? Seems like the same principle to me...being unwilling to pay someone 'the going rate' to design a logo because you're not sure about the value of the underlying process sounds a lot of like being unwilling to pay what developers consider a 'fair rate' for an app when you can pick a free one instead....

189 points by floriankugler 13y ago

What justification does OP offer for calling mobile apps 'basically worthless' (followed by the condescending 'let it sink in', but let's ignore that)? I'm confused: is this whole thing supposed to be sarcasm? Or does OP mean that apps are viewed by users as worthless because they are so cheap?

feintruled 13y ago
He's not trying to denigrate the amount of work or talent people put into making apps - he's saying that if no-one wants to pay for it (perhaps because they can use any one of a hundred free alternatives) then it is de-facto worthless.

theneb 13y ago

The tagline for the post is assuming a cup of coffee, i.e a physical product has the same value of a virtual one. To that end, is software value not dependent on the crowd which buys it? However, I cannot share your cup of coffee you buy from Starbucks. My point only further raises the question: Do consumers see Apps as shared content? Or, Do they equate physical and virtual App products as being worth the same?

timruffles 13y ago

That's an overly negative interpretation. An app can can be worth a lot more than a cup of coffee to someone, but if there's a free alternative, why would they pay? The business impact is the same under either interpretation of course, and the conclusion would be: don't expect it to be easy to launch a business in a space where people offer free alternatives.

svantana 13y ago

>That's a hard pill to swallow, but we should let it sink in. We pour all our creativity, time, and passion into creating basically worthless products. What a weird conclusion. For me, the take-home is rather "why don't I stop doing this and try to figure out something that is actually worth something to someone?"

ekurutepe 13y ago
Isn't that exactly the same conclusion as the article? "But we should be aware of the fact that we're in the business of creating products which offer very little value to people. It's our choice if that's what we want to pursue."
easytiger 13y ago
I don't see those as incompatible end points.
- Ntrails 13y ago
  The question becomes whether the meaning is that all smartphone apps are worthless, or that you should work on one that isn't
  - easytiger 13y ago
    My goodness. What are we all doing. None of this is real :(
digitalengineer 13y ago
Yes. Like developing Apps for clients, not consumers. They can do with the App what they like. (usually give it away for personal data).

easytiger 13y ago

Not what I expected but I completely agree. Most productivity applications (anecdotally) are bought on a whim and oft are never used but at all.

ghshephard 13y ago

What is the worth of something precious or valuable, if all around it that same precious and valuable thing (or a very close substitute) is available for no charge at unlimited quantity? I wonder if Apple was aware the App Store would lead to basically infinite supply of (in many cases) beautiful and high quality apps for little to no cost. With 200 million+ users, many of whom have a greater than average tendency to pay $$$ for apps than your average smartphone user, an outstanding Apple developer has some chance of making money on the App Store - (That old saw about capturing 1% of a very large market) - but I really pity the third and fourth tier platforms - they are going to struggle. It's an IAP future.

Kurtz79 13y ago

I guess that, given the chioce, most people would opt for a free cup of coffee over a paid one, if quality was similar.

masklinn 13y ago
> most people would opt for a free cup of coffee over a paid one, if quality was similar. Quality does not enter the equation. Most people will opt for a free cup of coffee over a paid one if the paid cup is the best coffee in the world and the free one is barely a step over ground-up dried shit.
- highace 13y ago
  Ground-up dried shit is some of the most expensive coffee! (Of course I'm talking about Kopi Luwak)

borplk 13y ago

> The economic reality is that most apps offer next to no value to people. I'm not an app developer and I disagree that most apps provide next to no value (some apps, like everything else sure, but many of them do provide more value than their price). For example there are many games priced $0.99 or $1.99 that people might play for hours and hours. Shouldn't that cost more? The reason that the prices are low is not because people are not prepared to pay for them. It's because Google and Apple want it that way and also because developers are slashing prices to the extreme to compete. Imagine if App store and Play store didn't exist and you'd have to individually find developers and buy/download their apps. That would certainly result in higher prices. The bottom line is app developers have no one to blame but themselves for creating this perception about their apps and allowing this expectation of $0.99 apps to grow. People also have no freaking clue how hard it is to make apps. For example most people think mobile apps are a lot easier to make than software/web apps, perhaps because mobile devices are 'small' so they tend to think of mobile apps as 'tiny' little widgets that someone pushes 20 buttons and it magically gets created. If a large enough group of people start raising awareness and refusing to release their work for peanuts we'll see a shift in the market price towards more realistic numbers.

Touche 13y ago
I have my doubts that prices are going anywhere but down. You can stubbornly keep your app's price high if you want but a couple of dozen others will gladly step in your place. I think the author is wrong here; apps do offer real value but they are still close to being worthless economically. What developers should start realizing is they shouldn't spend so much effort on todo lists, podcast clients, rss readers, or any other trivial app category that many people do as side projects for free for fun. As a result we might get more genuinely innovative apps as developers look more closely at what niches are being underserved.
- threeseed 13y ago
  Exactly. If you can't build something unique then don't complain if there are 100 other developers (some of whom may come from developing countries) who are happy to do for it less. There is a new era of apps being ushered in as a result of Bluetooth LE. Take advantage of it.

jhh 13y ago

The author's argument is faulty. The value from being able to take notes / manage to-dos properly on a multitouch device may be rather great to many people. However, the price is not determined by this. The price is the result of an equilibrium. There is a process of underbidding going on which lowers the price for the app very close to cost of producing it, until it is unattractive for new competitors to enter the market. The magic thing about this is that it delivers these products to the world in great number at close-to-zero pricing and that's pretty nice for the world as a whole. Think about it this way: It was worth buying mainframe computers at many million dollars a piece and with embarissingly low computing power back in the 70s to some people. Obviously, when these people buy a computer with a million times the performance at 1/1000th of the price they get a great deal. So it's fair to say that the value of commodity computers is to some people much much higher than the market price. That does not change the fact that producing commodity computers is a cut-throat business with ultra slim margins. So what I am trying to say is that this emotional / ethical notion of value needs to be seen as distinct from market pricing.

XorNot 13y ago
If you're making a todo/notetaking app, you're entering a really crowded marketplace. And from my experience, you're probably also doing it wrong. I mean first things first: does your app sync with anything standard or are you promising me your webservice? Because a quick glance through the non-existent featurelist from the app's website, and the only thing I see is "sync with iCloud". So you know, worthless. To me and anyone else who has IMAP/WebDAV/Exchange accounts/CalDAV calendaring/Google calendars. Your apps are worthless because they're not that useful to start with.

borplk 13y ago

What I find particularly messed up is the huge relative difference in the price of the mobile device and the apps that people install on it. When it comes to buying the device, thousands of people line up outside Apple stores and pay - I don't know - $600 for their device. Android devices are the same, many people easily spend ~$400-$600 on their device that they may only use for one year. So a good chunk of mobile users are people with good income, living in rich countries and are well capable of paying $5-$10 for their apps that they run on their expensive/high-end devices. Yet when it comes to paying for apps they struggle as if their monthly income is $10. There are many factors involved but I think the most significant one is by far the psychological perception of the value of apps that has been created due to App store and Play store pricing. There are also many people who are willing to release free and good-enough quality apps because it's their hobby or maybe they want to create a portfolio for themselves. This reduces the perceived value of these apps. In contrast people can't find other professional services/tools for free. I mean, say, lawyers, doctors, accountants, electrical engineers, etc... don't produce and provide their services/work for free where you can download a free health checkup from a doctor whose hobby is being a doctor. So the perceived value remains high. Software engineers are unique in this regard because they 'discount' their work constantly and justify it by saying 'i love doing this'.

Ilverin 13y ago
I would argue that authors are with software engineers on this. You can find many free works online from authors who were unable to get a publisher interested. They may not be as organized as software engineers, but they are definitely out there.
Kurtz79 13y ago
Just as well: there are people spending thousands of dollars in cutting edge PCs or Home Theatre systems, and then playing only pirated games. And in the Appstores case the free alternative is even legal!
- reddit_clone 13y ago
  One minor reason could be lack of physical media. In old days people received a bunch of disks or a dvd with nice cover art which they can put on a bookshelf. Now it is all 1's and 0's coming over the wire(less). There is no sense of ownership. People are reluctant to pay for something that they don't touch or own.

ricardobeat 13y ago

> the business of creating products which offer very little value to people my view is it's not that most apps offer little value, but the consumers' perception of value is skewed. You can buy tools today for <$5 that would have cost $50, $100 or more a few years ago, and are miles better than their old counterparts. Also, in a way, Apple is forcing the trial + buy model to become free + in app purchase, so paid upfront becomes a huge negative.

czr80 13y ago

Why is it emotionally easier to spend $5 on a coffee vs spending $5 on an app? I have a theory on this - I think we price experiences differently from objects, and have a much higher bar for buying an object vs buying an experience. And I think the reason for that is ultimately loss aversion - if we buy a bad coffee it's gone and we can forget about it, whereas if we buy an object we're stuck with it, a constant reminder of how we made a bad choice and lost money.

lleims 13y ago
http://www.joshlehman.com/thoughts/stop-using-the-cup-of-coffee-vs-0-99-cent-app-analogy/ http://www.joshlehman.com/thoughts/stop-using-the-cup-of-cof...
Semaphor 13y ago
I rarely buy a cup of coffee (I buy beans). But when I do it's because I need/want it now and I have no alternative, for example at the train station. With apps that usually doesn't happen.
ProblemFactory 13y ago
A $5 coffee also buys you a place to sit down and use WiFi, and a bit of social interaction or "lifestyle". Nobody pays $5 per cup of coffee at a supermarket. No app developers include "installed by a human" and the permission to go sit on a couch at their office for half an hour in the price!
- aestra 13y ago
  My supermarket has a Starbucks inside, without seats or WiFi. It stays there because presumably people are buying $5 coffee from there.
fburnaby 13y ago
Someone has made and maintained the app over a few person-months of effort, and can sell millions of copies of it. In order to pay for their time spent making the app, I need to give them one millionth of the cost of their time developing it. When there's lots of competition in the app market, app makers will have to sell their time at competitive prices. Compare that to coffee. There are three baristas on this street who can make me a coffee, so they're also in a stiffly competitive market. But they have to make me my coffee personally, one at a time. I have to buy a larger portion of their time, since they can only make a few dozen coffees per hour (and they have more physical supply-chain issues to manage, like sourcing beans and managing a property). It's emotionally easier to pay for the coffee in part because no-one down the street is offering it for half the price, or for free. They can't. An app developer can. And they'll have to, because if they don't, someone else will. Because they can.

threeseed 13y ago

As someone who bought Clear I fully disagree with the premise of this post. All they had to do was recompile the app and potentially fix a few small bugs. You can't sit there and act like it was some monumental change that warranted screwing over your existing users. If they are unhappy with how much money they are making then they simply need to raise their prices.

shadesandcolour 13y ago
Unless you were the person who works at Realmac, and personally performed the iOS 7 update, I'm not sure how you can possibly say something like this. I didn't do it either, so it might be that you're correct. The notion that asking someone to pay for your work is "screwing over your existing users", is exactly the problem that is being discussed. Personally I don't think that it's that strange to ask people to give you a few dollars so that it is worth your time to keep working on things for them. But hey that's just me. Your final point shows that you either didn't read the article, or you didn't read the first sentence that you wrote. If Realmac ups their prices because they are unhappy with the money they are making, then everyone (including you since you feel entitled to free upgrades for life) will just leave.
macspoofing 13y ago
>All they had to do was recompile the app and potentially fix a few small bugs. That's all they had to do eh. It's all so simple. >If they are unhappy with how much money they are making then they simply need to raise their prices. Haha. Or charge for upgrades? The 99c app business, is shit-business. I feel for app developers. You can't build a company around that price point. Either you charge more or you go down the recurring revenue model. Neither is easy. If you're a game developer you go freemium, and you try to squeeze as much revenue out of your customer base.
- gurkendoktor 13y ago
  > Haha. Or charge for upgrades? Actually, there are many people (me included) who don't mind paying 10$ for a game, but avoid freemium games like the plague. So there is a psychological difference between raising up-front prices and upgrade pricing, even if I spend the same money in the end.

terhechte 13y ago

The problem is that the difference between $2 and $1 is not the same as the difference between $1 and $0 (i.e. free). Humans are not rational in this way, and the abundance of free apps kills it for everybody else in the market. If one company would start giving away really awful-quality chocolate (or any product) for free in every supermarket, the chocolate prices & industry would crash. Dan Arielly did a couple of interesting experiments on this. He had people paying for products in a cashier line (i.e. people who had their wallet out anyway) choose between two really good offers: Hershey chocolate for $0.10 and Lind chocolate for $0.20 (or something like that, I forgot the detailed numbers, it may have been $1/$2 or $0.5/$1). In that case, most people choose the more expensive Lind chocolate as it was clearly the superior product (i.e. higher quality). When he repeated the experiment with $0.10 for the Lind and $0.0 (i.e. Free) for the Hershey's, the game changed. Everybody took the Hersheys. Even though the pricing didn't really change, they only both became cheaper, by the same amount. The verdict, really, is that if there's something free around, we go nuts and quality doesn't matter much anymore, because it is free. If free apps, on the app store, would be at least $0.50, or even $0.10, I think it would totally change the game. (I.e. if Apple would change the Free Tier). But as it is right now, I think the downward spiral will continue. The only way out is to create a high quality superior product (many features, etc) with a high price tag and hope that you get enough customers to survive. That also should lead to less support load.

ronaldx 13y ago
This Ariely experiment is unconvincing because it's quoted with percentages. Are the free customers switching down from the luxury product, or are they new customers who otherwise would have gone for neither option? The percentages withhold that information.
bigfudge 13y ago
I think the only way out is to allow demo apps. I find it really hard to justify $10 or $20 on an app which may or may not fit into my workflow. That's on top of the problem of determining whether something is of reasonable quality (i.e. even does what it claims) from a few screenshots and likely-gamed reviews. The problem gets worse the more complex the app... Yes, reviewer A might find it useful because some subset of the features work OK for them, but perhaps I just want one specific feature which they don't care about? Without a demo I'm left with the size of the community around and app, and a general 'buzz', both of which make it harder to enter the market at all.

skc 13y ago

I'm just here to smirk at the old narrative - that the iOS customer doesn't balk at paying for stuff - being slowly whittled away as the march towards smartphone commoditization continues at pace.

derefr 13y ago
The "iOS customer" of five years ago (the wealthy early adopter) didn't mind paying for stuff. Those customers are still there, and still buying iPhones (probably gold 5Ses now), and apps for them. But now there are way more, more price-sensitive consumers (the people buying those 5Cs, the people who still have an iPhone 4, etc.) and they have much the same buying behavior as (commodity) Android consumers. In other words, there's still money in the market -- but it's a fixed supply of money (there are a fixed number of wealthy early adopters) vs. an ever-growing number of developers grabbing at it. The only way to get back to where we were would be to make a new app store that required new apps to be designed from scratch for the wealthy users to early-adopt all over again. (...and that's fairly clearly what iOS7 is trying to do, isn't it?)

twilightfog 13y ago

Nothing like another example of a todo list app to illustrate the downward spiral of app store pricing. Creativity can still get a high price in app store. Find a niche, and develop a great app, and customer will pay. Case in point: Cubasis https://itunes.apple.com/us/app/cubasis/id583976519 https://itunes.apple.com/us/app/cubasis/id583976519

gurkendoktor 13y ago
Absolutely agree. My coworker built a business app that sold very well for $120, until the company that provides the API crushed it with their own $10 app (bummer).

arbuge 13y ago

>>That's a hard pill to swallow, but we should let it sink in. We pour all our creativity, time, and passion into creating basically worthless products. Obviously not. A cup of coffee is worth $2, period. An app only worth $0.50 to a million people is worth $500k.

bilbo0s 13y ago
So the question is ... How many apps are worth $0.50 to a million people?
- arbuge 13y ago
  Well, you're already beating the cup of coffee if they're worth $0.50 to 5 people.
  - jbigelow76 13y ago
    How long does it take to build an app vs brew a cup of coffee?
rythie 13y ago
A lot of people pay a lot less than $2 for coffee.
swang 13y ago
Author is saying a cup of coffee is worth $2 to the customer, but an app is not worth even the $0.50 to that same customer. In this example, you seem to switch out this comparison where instead you compare the cup of coffee the customer buys, to the amount you could possibly make for a $0.50 app bought by a million people.
- arbuge 13y ago
  Agreed, but the point is that the "total worth" of an app is the total utility that it creates in the world across all its customer base. Of course you're right that to each individual customer the worth remains less than a cup of coffee; if this affects the app writer psychologically, hopefully the size of his/her bank account will be a consolation.

ktd 13y ago

>We pour all our creativity, time, and passion into creating basically worthless products... we're in the business of making products that provide very little value to people. Yikes.

rythie 13y ago

This is distorted based on the idea that most people pay more than $0.99 for a cup of coffee - which is not true. I think the price of a "Cup of Coffee" needs to be defined here. Coffee can be made for $0.07/cup [ http://thekrazycouponlady.com/finance/a-wake-up-call-a-price-comparison-of-popular-coffee-options/ http://thekrazycouponlady.com/finance/a-wake-up-call-a-price... ]. People who buy coffee at Starbucks are buying a luxury version of a luxury item + they are buying time in a public venue. Does Starbucks actually outsell (in numbers) coffee made at home? seems very unlikely to me. In fact most people buy coffee in a supermarket, which is seems almost free when you actually make a cup (you don't pay everytime you make one).

AznHisoka 13y ago
A cup of coffee is like temporary marijuana to drown out the dreary feeling of going to work. To me, the value is much much greater than most apps, no question. Coffee to me is like having a shower. Sure, a shower is basically just splashing water to your body.. but it's also one of the few places where you can think to yourself with no distractions.
easytiger 13y ago
The biggest cost in most cups of coffee is the cost of renting/buying the space in which you sell it.

NateDad 13y ago

If your paid app can't compete against a free app... that's hardly the fault of the user or the app store. It's the fault of the app maker. What you're basically saying is "my app is so easy to make, that someone could make it without even caring to get paid for it". It's competition. Yes, if someone can recreate your application for free, then your application wasn't as valuable as you think it was, by definition. Make a better app, or turn it into a service that generates revenue past app deployment. I think many app developers have gotten spoiled by tales of people getting rich off of P.O.S. apps, and expecting that to happen to them. That happened back in the day because there was a scarcity of applications and app developers. That scarcity no longer exists. Most of the easy stuff has been done, and a lot of free versions have been made because, let's face it, most apps really aren't terribly complex. So, make something big and hard to duplicate. Make it part of a service you provide with recurring charges and give away your app. It's a better model, anyway.

hemancuso 13y ago
Couldn't agree more. It's not the users or Apple who are racing the app market to the bottom. It is the developers and the competition amongst them. And it's because creating an app is not that hard. Perhaps designing a great one one and creating and and building a market for it is quite hard. But cloning that exact app [even if it is inferior] and providing it for free or supported with IAP or ads is really not terrifically difficult or time consuming once the idea is proven. It is basically impossible to build a competitive moat. Games are a bit different given how much art and content is often associated with the production, but users are looking for a fun distraction. Perhaps one should try to build a $2 game with a $50,000 art budget rather than a $500,000 art budget. The users don't really care. It sounds more profitable. Tiny Wings FTW.
- k-mcgrady 13y ago
  >> "creating an app is not that hard" How is this true at all? It depends on the programmer, what they are building and the tools they are using to build it. Apps are no different to building desktop or web software. In fact the constraints arguably make it more difficult.

cognivore 13y ago

>> We pour all our creativity, time, and passion into creating basically worthless products... we're in the business of making products that provide very little value to people. << If you take nothing away from the article but that you've gained some insight. If you take a way someone's smart phone with a handful of paid apps on it and give them a dumb phone they'll get by just fine. They will lose no significant advantage for either work or personal life. To drive up the price of something with little value you introduce artificial scarcity. Nintendo does this well. If the Nintendo game platforms were open games would be priced like apps. But Nintendo gives their Seal of Approval to everything that goes on their platforms, and there is a high barrier to entry. I doubt that the software development community would like that model, either. I'm not even sure it's more profitable. But it does seem to create more valuable software. Nothing on smart phones comes close to the quality and polish of a good Nintendo game.

prottmann 13y ago

All the time i did not understand why so many developer jump on the App-Train. Most of them did not make money with their apps. But thats another problem. The real problem is, that everybody try to be cheaper than others and so all developer destroy their own markets. Why did so many sell a good product for 99 Cent ? CRAZY ! If somebody likes your app and find it usefull, this person will pay more than 99 Cent (ONCE IN HIS LIFE). Ok, admittedly, it exists millions of todo apps, so you have a special problem with many competitors, but this can't be the reason to be cheap.

iwasakabukiman 13y ago

While I do agree that the App Store and the Play Store both trend toward the free apps being the most successful ones, I disagree with his mentality about the value of apps completely. Yes, there are plenty of apps on my iPhone/iPad that I rarely use, but there are also a whole host that I use every single day. The author cites Clear as an example in his article. I use it every day to make lists and keep track of things for work. There are also apps like Downcast (a podcast player) and Comic Zeal (a comic reading app) that I have gotten 10x the value of what I paid for them, since I use them so frequently.

shizzy0 13y ago

Here's a potential solution to this mess. We treat app store placement like it's a free resource right now since it doesn't take up any physical space. However, it does increase its users cognitive load. All apps that have ever been produced sit on the app store unless their creators explicitly choose to take them down. That's like a department store that houses every invention ever made no matter how antiquated or outdated. Apple could introduce a "property tax". If you want to take up shelf space, you've got to pay a yearly tax or make way for other apps that will more productively use that space.

icebraining 13y ago
You're confusing profitability with productivity, and potentially killing lots and lots of very useful apps that are distributed for reasons other than profit.
commentzorro 13y ago
This is an interesting thought, but history has already shown the outcome. Shelf space dominated by the big players and defacto price fixing. A better approach would be for a few very high quality niche apps to get together an open their own app store. They sell only though their store and price the apps appropriately. Thus starting boutique markets. Could happen now with Android but currently not Apple.
- derefr 13y ago
  Without needing to support sideloading, Apple could let users group apps on the store into their own collections, which other users could browse. They could even let the users theme them, somewhat like Apple's own decorated collections -- and give the "curator" a user ends up purchasing from a small cut (5-10%) of the sale price. In other words, replicate the well-trodden player-vendor system from MMOs.
  - commentzorro 13y ago
    No ... a couple quick examples. Kids don't go to Walmart looking for the Abercrombie & Fitch department. They want the fantasy built around the brand and that means their own stores. Stihl when the dealer route because they wanted to differentiate their higher quality and provide a more personal customer relationship than Walmart would allow. Gotta get Apple out of that lock-in in order to support true boutique shops.

jaynos 13y ago

Comparing the Clear app to a cup of coffee is interesting, especially since I received the app for free from a Starbucks promotion. I quickly stopped using it because that is my M.O. with all ToDo list apps. I've never found one to replace a folded up envelope in my back pocket.

paul_f 13y ago

"The economic reality is that most apps offer next to no value to people." This is completely wrong. The author of this article confuses price with value. Apps have tremendous value. But because of market dynamics, human nature, free alternatives, etc, they cannot sustain a high price. Price and value are different things altogether.

icebraining 13y ago
I agree. The problem to paid app sellers is that the extra value they provide - the difference between the free app and theirs - is low, not the absolute value. Even if your app solved half of my life problems, it'd still not be worth a lot if the free competitor solved 49% of them.

crazygringo 13y ago

The whole problem comes from Apple not allowing trial apps. I would easily pay $20 for Dark Sky, or Moves, or FitnessFast, InstaPaper, even ExitStrategy -- but I would never pay $20 upfront. It takes a couple weeks using an app to see if it turns into an invaluable daily tool, or if you just delete it. (Which is why free software trials for desktop apps have existed for decades.) I refuse to pay $1 or $2 for apps just to try them out, not because of the money, but because of the moral issue -- I don't want to be rewarding crappy spammy developers with their $1 or $2 just as much as the truly good app developers out there, because that's just contributing to the problem. Marco Ament took down the Instapaper Free version. But I never would have downloaded the paid version if I hadn't been able to try the free version first.

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pjc50 13y ago
The strange thing is that games can effectively be "trial" by structuring themselves with in-app purchases to overcome obstacles. I wonder how well this would work with "productivity" apps.
- jonnathanson 13y ago
  Indeed. Big game publishers can afford to give out their games for free, then harvest millions of dollars a week from in-app purchases, pour that money back into paid user acquisition, top the charts, and repeat until their next game comes out. That business model is all well and good if you're a game publisher, and especially if you're a well-funded game publisher. But it kind of sucks for anyone who's not in a category that benefits so dramatically from in-app purchases. In-app purchases are not a magic-bullet solution to pricing problems for most other categories of apps. (Now, one could certainly argue that games provide more value to the user than other apps do. While there's something to that argument, it's not sufficient. Surely the solution to this problem isn't "every app becomes a game"). So what should you do if you're an app developer, and you're not making a game? To be honest, you're in a tough spot. The deck is stacked against you. Prices are converging on zero, in-app purchases probably won't keep the lights on, and the prospect of flooding your app with advertisements probably makes you (or your UX designer) cringe. This is where the freemium model should make sense, IMO. Create something of general value to a large TAM, but of extraordinary value to a smaller slice of that TAM. Give away the basic version to the TAM, but upsell the power version to the power users. It may be the case that your app is better for the power users than existing solutions for which they're paying hundreds, or even thousands of dollars. If that's the case, don't be afraid to charge higher than $.99 for the premium version. If the delta in utility between Your App and Existing Solution is extremely high, and the price gap between Existing Solution and Your App is big, you've got a lot of room in pricing, and that pricing will be justified. Unfortunately, absent a fantastic way to do trial versioning, the existing methods are pretty inelegant. Apple needs to get better about allowing developers to do trial versions, or this overall pricing and monetization problem is going to get worse.

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tsunamifury 13y ago

Do the smaller developers realize that the hardware manufactures pay development houses to do this? I've been paid by pretty much every AppStore provider to develop apps, which subsidizes me to undercut competition. I feel like most app developers have a severe lack of business intelligence and the allure of easy money has kept them from thinking rationally about how to succeed in the market. Provide a high quality cheap product at scale, while reducing risk of investment in every way possible. Companies like S2BB can replicate your cute app in days and provide it for free using carrier, oem, or AppStore provider subsidy. I don't think smaller app devs even realize the uphill battle they are about to be playing.

bilbo0s 13y ago
A couple of reasons... One, the casual developer. A lot of these apps are being developed by programmers sitting in their underwear watching ESPN Gameday on Saturday morning. Or teenagers with nothing better to do. If they make money... well, that'd be great... but they really have other motivations. That alone would flood the App Stores with product. The second point, is economics. ie - it doesn't matter. If you live in an agrarian society... most likely, you have to be a farmer. It's largely irrelevant how many other farmers there are... it's probably the only thing you can do. I think there is a similar dynamic in the app world. There are an AWFUL lot of unemployed programmers... chances are... they are going to ... well ... program. What else are they going to do with their time? It's actually a pretty smart thing for them to do as well. Keeping the skills sharp and all that. So... I think that's, most likely, where a lot of the apps are coming from. And those two groups will only grow in the future.
pnathan 13y ago
A thought. I'm working on a virtual pet game (Firefox OS/Web based), and it's designed to be a mobile game. It's clear that I can't compete against, say, OMGPOP or Zynga. What I've chosen to do is target a very specific niche - "smart people". People like me, in other words, who aren't really very well served by the games on the market right now. I want my game to be intriguing and have depth of thought, if at all possible. I see this targeting as very different from a typical "Farmville" style game, and thus fairly lucrative.... if I can swing the business/sales/marketing side of it. edit: Plug, plug - it will be alpha at some point in the next month or two, I hope. If my description intrigues you, email me, and I'll add your name to the tester list.

satyrnein 13y ago

Reading some of the comments here reminds me of the Adam Smith quote: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

programminggeek 13y ago

You know how you can offer a free trial? By offering a free trial! No seriously, make your users create an account and give them a time-limited trial. Offer them an IAP upgrade. It's doable. The problem is to hit the mass market of millions, well you have to be free or have a good marketing/advertising strategy. Actually, you probably need to be a bit of both. Anyway, it's dumb to complain about the pricing cuz it's been this way for what 3 or 4 years now. It's not a new phenomenon. On Google Play, it's even harder to get people to pay for an app up front.

kemiller 13y ago

I have a somewhat different perspective on this. Apps cost people something much more valuable than the small amounts of money in question: attention. Most people find learning new software to be a chore. So every app they download has a cost in attention, in learning how to use it, however simple that might be, and some of them have a cost in money as well. If the app is free, they know they can abandon it instantly if it doesn't give them value right away, and lose almost nothing. If it costs money, they will feel obliged to get more value out of it, but that means committing to spend even more attention. When you buy a cup of coffee, you're getting attention back because someone else is taking on the slightly fiddly business of making coffee, and once you have it, there is nothing to learn, you can just enjoy it. Viewing software transactions as paying attention, rather than money, for value, makes a lot of these markets make more sense. Because if you offer something that will reduce the net amount of attention they have to pay, they'll often gladly give you money for it.

aestra 13y ago
This is a great point. There is a useful free app that I use which has a 5 star rating. I looked at one of the 1 star reviews to see what they said out of curiosity. It said something along the lines of "I had to customize the settings and the user interface isn't standard."

andrewljohnson 13y ago

This idea that Apple does not allow trials is a total misconception. I just released a subscription boating app that has a basic free version, and then a button to let you "Test Drive" the complete app. You can trial the paid version over and over. Previously, I have released a product that had limited functionality, and prompted you to upgrade or buy the paid app. People interpret the App Store guidelines very literally: Rule 2.9: "Apps that are "beta", "demo", "trial", or "test" versions will be rejected" https://developer.apple.com/appstore/resources/approval/guidelines.html https://developer.apple.com/appstore/resources/approval/guid... This doesn't mean you can't set up an app to have a trial, it just means you can't submit garbage. You're best understanding that there is a certain twisted humanity to the app review process.

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- kamjam 13y ago
  You get this a lot in Google Play too, was wondering why this is not possible in Apple Store e.g. https://play.google.com/store/apps/details?id=net.cdeguet.smartkeyboardtrial https://play.google.com/store/apps/details?id=net.cdeguet.sm... https://play.google.com/store/apps/details?id=net.cdeguet.smartkeyboardpro https://play.google.com/store/apps/details?id=net.cdeguet.sm...
robterrell 13y ago
Some of us interpret the guidelines literally because we've been burned before. A couple of years ago, I spent months working on an app, including paying a designer, and I was really proud of the final product. After it got reviewed, Apple added a new rule to the guidelines and rejected the app. That was a seriously expensive lesson. Now I recommend interpreting the guidelines as strictly as possible... even if you know of other apps that squeak past the rule, it doesn't mean you won't get burned. > Apps that are "beta", "demo", "trial", or "test" versions will be rejected It sure sounds like your app breaks this rule. I'd ask what your app is, but I don't want Apple to see this and reject you.

useful 13y ago

I happily pay $60/year for Strava. But I would never buy the app.

clarky07 13y ago

>The economic reality is that most apps offer next to no value to people. They might say otherwise when asked about, but their actions speak pretty clearly: A cup of coffee is worth more than almost every app on the store. Two things. 1. That's probably true for a lot of apps, but I don't think it's fair to say "most." Perhaps "many". There are a lot of apps out there that provide huge amounts of value. Of course, I don't think a cup of coffee is worth anywhere close to the price of a cup of coffee and I make my living selling apps. I might be biased. 2. Starbucks made 7.5 billion last year. Apple alone paid out 5 billion to devs for apps. If you include advertising revenue and Android revenue, I'd guess that people actually spent a similar amount on apps as they did coffee.

clarky07 13y ago

We get posts like this all the time, but it isn't actually what is playing out in the world. Apple paid out $5 billion to developers last year and that obviously doesn't include advertising revenue and Android profits. People ARE paying for apps. Developers ARE creating value. These things aren't worthless. I know because I sell lots of paid apps every day, and every month Apple and Google deposit money into my bank account. My response to this article - https://news.ycombinator.com/item?id=6471131 https://news.ycombinator.com/item?id=6471131

hawkharris 13y ago

"A cup of coffee is worth more than almost every app on the store." That is a "hard pill to swallow," but it's true and poignant. The problem is not only systemic (i.e. Apple's fault). It's that many developers jump into creating apps withour conducting market research to prove that their products will have a long-lasting utility from a consumer's point of view. I don't mean to be cynical or overgeneralize. To be fair, not all apps are created equal. But in my experience, the vast majority seek to provide a fleeting sense of entertainment (as opposed to utility). And the more practical apps are simply unimaginative iterations of existing solutions (e.g. fitness trackers and to-do lists). We need to think differently about the purpose and expect more from them in the way of tangible impact on consumers. For instance, the Robert Wood Johnson foundation is using apps as part of nationwide campaigns to inprove childhood nutrition.

dscrd 13y ago

Umm, no. A cup of coffee is worth about $0.1

fburnaby 13y ago

It's not that your app doesn't have value. It's that the marginal value compared to a free app is small.

fburnaby 13y ago

If something is worth $10,000 to me and I can get it for $0.99, I will not pay $10,000 for it.

jennyjitters 13y ago

While I agree with the people here saying that many apps are "worthless" due to the sheer number of free apps available, I can't help but compare this issue to starting a business (likely because that's what many app developers are trying to do). Most startups fail. That's just the way it goes. Starting and running a successful business requires success in a lot of areas: product dev, design, marketing, customer service, etc. I think the claim that apps are worth less than a cup of coffee is a bit narrow-minded. If you look at the (huge) number businesses that have incorporated over the last several years, and then compare that to the number of those same businesses that are currently "successful", those numbers will likely look a lot like the number of "successful" apps vs total apps. It's hard to create something that people love, whether that be a physical product or an app. I think there's still a market for well-designed, useful, paid apps. Just like it's still possible for a startup to be successful. It's just really damned difficult.

lnanek2 13y ago

A cup of coffee can only be consumed by a person, or maybe another splitting it. A digital offering can be copied for almost no cost. This is why Bill Gates is rich. You pay to write the software, then you sell it over and over and over again with little cost to you. You can't do that with coffee. So I see the low price of apps to be more indicative of this advantage being shared with the buyers rather than it indicating the app is worth less to a person than a cup of coffee. You can have a successful app business selling at very low prices because if it becomes a hit you will still make a lot. And being cheap helps you become a hit. So everyone does it and you have to compete with those people doing it.

judk 13y ago
Howard Schultz did pretty well selling coffee.

zxcvvcxz 13y ago

Here's my perspective as both a user and developer. Most paid apps there are the equivalent of small side projects. They're simple things that should exist, and after enough time, someone will make them for free. The ones that are not free tend to have better visual design. Big whoop. I'll take my coffee please. Here's an example of something that's worth more than a coffee: Shazam. It identifies music around you by doing some crazy audio processing and database magic. Aaaand I'm still using their free app (haven't had the need to upgrade yet). So if someone offering that much value still can't convert me to a paying customer, how will you? I'm a developer as well. It's hard to create something worthwhile, I get it (I still haven't really). My theory is that if it's not technically defensible in some way, or doesn't get a network-growth lock-in effect quickly, then it's easily replicated as a free app. Would love to hear counter-arguments to any of this. Frankly all I see is people complaining about everything except the intrinsic value of the apps, which is exactly what the article mentioned would happen. We live in an era of increasingly less low-hanging fruit.

sanjkris 13y ago

Note to all my iphone app users: -Yes. I just tripled the price of my app. Why you may ask. Read on -You whined about missing features; I added them. You whined about in-app purchases. I removed them. You whined about a missing help section. I gave you videos & pics inside the app. You never saw them. Dont lie to me-I see all your clicks inside the app. -Oh yeah! You are threatening me with a 1-star review because you forgot to check your inbox for the result from the app. You are an app review terrorist. I just tripled the price of my app as insurance against such terror threats -You asked for a discount on the app when it was priced $2.99!! I am responding by tripling my app price. I HAVE read all my competitor's reviews. They priced it $0 for a reason. ok...got to go catch my flight to Hawaii and relax. With your $$$ thanks

FiddlerClamp 13y ago

So, in comparison - would the same people who want prices on apps to be higher be willing to avoid using contest sites like 99 Designs? Seems like the same principle to me...being unwilling to pay someone 'the going rate' to design a logo because you're not sure about the value of the underlying process sounds a lot of like being unwilling to pay what developers consider a 'fair rate' for an app when you can pick a free one instead....