8 ms·

I wince a little when I read the section titled "Low iOS revenue." The iOS App Store's race to the bottom on pricing (and the parallel problem in Androidville)

by sedev 12y ago

I wince a little when I read the section titled "Low iOS revenue." The iOS App Store's race to the bottom on pricing (and the parallel problem in Androidville) are very hard on developers. Panic reports that their unit sales are nearly even on iOS and OS X - but that the revenue is on the far side of an 80-20 split, that they make more than four times the revenue from a desktop sale than from an iOS sale! Even if you assume, very generously, that an iOS app can use a smaller project scope and only take half the investment of company time, that's still a heavily skewed ratio. It's a bad situation for developers that can't absorb losses or make their money via IAP (and I'm not sure how long the IAP route will be around, considering the utterly vile marketing practices some entities are using to juice up IAP revenue). The problem is that this is not that Apple, Google, or consumers are doing something to development houses. It's an emergent feature of the market and the incentives, so there's no simple way to make it reliably financially viable to develop for mobile (subscriptions and IAP are not simple and don't fit all business models). I hope Panic can afford to stay in the business of writing iOS apps. Their apps are great. But the money those apps are making them, isn't great.

lordbusiness 12y ago
Indeed. Increasingly I'm viewing iOS apps as value-add only, that is to say apps attached to a given service or other offering, designed to augment such a service. I am sure people will cite a zillion examples of businesses that make their living from iOS apps, but increasingly this appears more like winning the lotto, akin to 'making it' in Hollywood, than as a viable business model for all comers. The reliable way to make a living as an iOS developer is to develop for a bigger company that needs an app as a side-show.
- richardwhiuk 12y ago
  Agree. Almost all of the apps on my phone are basically value add only.
- sedev 12y ago
  I think I'm gonna start looking at it that way, since that's much more actionable than what I said.
- themodelplumber 12y ago
  You're right. Half of iOS developers and 64% of Android developers are living below the "App Poverty Line"--making less than $500 USD per app, per month. Source: http://techcrunch.com/2014/07/21/the-majority-of-todays-app-businesses-are-not-sustainable/ http://techcrunch.com/2014/07/21/the-majority-of-todays-app-... Several people (a consultant I hired and a few clients) have encouraged me to develop iOS apps. This was based on anecdata, but I eventually convinced a client to hire me to build a simple one as a proof of concept. We found that interest in the app fizzled out fast and I learned that I didn't enjoy standalone business application development much. I didn't rule it out as a hobby though.
- themartorana 12y ago
  We are a no-debt, always-profitable iOS/Android game company with 6 employees that runs in a bit in constant fear. Our games are "free to play", ad-supported, and have IAP only to remove ads. We have nearly 7000 daily downloads, something like a 15% 30-day retention rate that absolutely blows the doors off of our competition, and still make very little of our revenue off of that IAP. Even some of our longest players continue to look at ads, because $1.99 seems too steep to them. The best business advice (and scummiest feeling advice) we get is that we're not milking our "whales" properly. We survive, basically, because of volume - to make it in our business you have to have at least 50,000 daily users. And that's a minimum. We'll continue to make games as long as we're profitable and can pay employees, but the 30% to Apple/Google, the incredibly low "ARPU" (avg revenue per user) and high costs of doing business have us constantly looking to where we might be able to leverage some of the tech we've built in other markets.
- neovive 12y ago
  Very true. For the majority of companies and developers, shifting resources to mobile is more viable in support of a larger, more profitable, business. As you pointed out, there are many examples of mobile-only successes, but it's a very small percentage of apps. Just getting new apps noticed on app stores is hard enough, let alone generating revenues capable of supporting full-time development.
dmishe 12y ago
Well, they price Coda Lite 1/5th the price of OSX version. So they get roughly 1/5h of the revenue. Math works out. They could try and price Coda iOS at $99, but Cabel is right — it's just not that important platform for dev tools, and I don't see people paying that much. Now if those two were incredibly (and equally) valuable products on both platforms AND priced the same AND there was much less revenue from iOS, then sure, we can show AppStore's fault. Not saying that appstore isn't broken, I think it is, but for this particular example, I don't think store is the problem.
- WoodenChair 12y ago
  What this analysis is missing, is that there are multiple times more iOS users (and therefore potential customers) than there are Mac Users. They set a lower price on iOS with a hope for making it up in unit volume. However, they're realizing now that unit volume being similar to Mac, prices must go up. I agree it's not as valuable a platform as the Mac, but it's also probably not 1/5 as valuable.
  - ehurrell 12y ago
    Is this the entire story? It's true that there are many times more iOS users than OSX users, but what percentage of each are their target market (who I would call 'power users')? Panic make great apps (I use them on both iOS and OSX), but I expect not everyone using iOS is a potential customer for a (great) ssh client, while a much higher percentage of OSX users use it because they want a Unix that has $Mac_Feature.
jmnicolas 12y ago
Maybe it's a stupid question but what stops devs to charge say 20$ for an app ? Has it ever been tried, if yes, what were the results ?
- WhitneyLand 12y ago
  It fails massively regardless of the value proposition of the app. People recoil at the price as it instinctively feels unreasonable due to the established norms of pricing. Pre-iPhone, a $20 shareware app was considered pretty cheap. Now less than 10 years later the highest quality apps from name brand companies can't command it.
  - otis_inf 12y ago
    Absolutely. And it's actually rather odd. People are tend to spent more money on a coffee they buy at starbucks than they're willing to pay for an app they use e.g. every week. Maybe it's because a lot of users have absolutely no idea how much work it takes to write an app. All they know are the Angry Bird and Minecraft success stories thinking that app makers must shit golden bricks every time they build their code. It's not only a trend among average consumers though, it's also sadly a trend among us developers: not a lot of developers are willing to spend even a single dollar on software they have to use every day. "Do you have a free version?" "Why do I have to give away the application I spend years full time on writing? Do you work for free?" I don't think this will end well. If we less and less value software on its true worth, it will become less and less attractive (or even possible) to write the software we need in a society which more and more relies on software. Watch this great presentation by Erik Meijer [1] where he addresses this problem (and others ;)) [1] http://vimeo.com/110554082 http://vimeo.com/110554082
    - jes5199 12y ago
      If I felt like it was possible to get refunds from the App Store when I bought something that promised more than it delivered, I would be more likely to spend money there. As it is, way too often I've lost $1 or $2 to an app that I immediately uninstalled. It makes me very hesitant to pull the trigger on a bigger purchase.
blub 12y ago
Actually Apple and Google are doing something to dev houses, they're commoditizing their products. When an app costs 0.99 it's easily replaced with another one and nearly worthless.
- tonyedgecombe 12y ago
  Commoditise your complements: http://www.joelonsoftware.com/articles/StrategyLetterV.html http://www.joelonsoftware.com/articles/StrategyLetterV.html
  - mooreds 12y ago
    Right, which explains why the dev houses are aggressively moving away from being commoditized, either by selling mobile dev services where the app is a value add to an existing service, or building an app that relies on the network (where there's ability to differentiate).
archagon 12y ago
Maybe. But I also feel that Panic's apps are not particularly well suited for the iOS App Store. They're a bit too "power user" for a platform that's almost never used at home, with the comfort of a keyboard. In contrast, some of the most popular games this year (Monument Valley, Wayward Souls) have come out with premium pricing, which is a refreshing change.
- WA 12y ago
  This applies to all niche apps. I have a B2C niche app that makes about 1,000€ per month, which is hardly sustainable. I'm a one-man show and supporting an iOS and an Android app slows me down in releasing new features for the SaaS. Whenever I change the SaaS, I have to change both mobile apps. This is painful.
antimagic 12y ago
I wonder if we haven't turned the corner with respect to app pricing. At first, there was a clear gold rush. Lots of developers publishing small applications, trying to make money. That "oversupply" of developers, coupled with platform limitations allowing only simple apps, immediately drove down prices to the $1 point, as the best professional shop was effectively competing against someone coding on their weekends, and it wasn't really possible to differentiate their product by building something bigger. But that's changing. With the bigger screen of the latest iPhones, more RAM in the latest iPads, and better inter-app communication, the platform is starting to be capable of hosting significant applications. All of that, plus the fact that some of these products have been under development for several years now, makes it possible to build a competitive moat that will be difficult for hobby developers to bridge. So that's what I see as positives going into the future. But app developers are going to need to do what Panic is doing, raising their prices, but they are going to have to do it gradually, maybe 10% a year, so the difference in price with competitors doesn't immediately see them reduced to zero revenue.
- cageface 12y ago
  The problem is the market has been poisoned by years of unsustainably cheap prices. Users have been trained to expect that apps are free, or, at most a dollar. An app priced above $5 will inevitably invite outraged accusations of greed. Many users still believe that the typical app developer is raking in the cash because they read about Flappy Bird. Apple made some very short-sighted decisions in the design of the app store that are going to haunt them for years to come. They need developers to write the apps that make their devices real productivity tools but they've cut the legs out from under those businesses before they could grow with their stupid policies.
  - acdha 12y ago
    Could not agree more – I've lost track of how many times one of iOS/Android developers I follow on Twitter has mentioned getting a nasty email, tweet or 1 star review because they had the audacity to charge more than $.99 for an app, even if it's targeted at business users who benefit professionally from using it.

by sedev 12y ago

lordbusiness 12y ago

Indeed. Increasingly I'm viewing iOS apps as value-add only, that is to say apps attached to a given service or other offering, designed to augment such a service. I am sure people will cite a zillion examples of businesses that make their living from iOS apps, but increasingly this appears more like winning the lotto, akin to 'making it' in Hollywood, than as a viable business model for all comers. The reliable way to make a living as an iOS developer is to develop for a bigger company that needs an app as a side-show.

richardwhiuk 12y ago
Agree. Almost all of the apps on my phone are basically value add only.
sedev 12y ago
I think I'm gonna start looking at it that way, since that's much more actionable than what I said.
themodelplumber 12y ago
You're right. Half of iOS developers and 64% of Android developers are living below the "App Poverty Line"--making less than $500 USD per app, per month. Source: http://techcrunch.com/2014/07/21/the-majority-of-todays-app-businesses-are-not-sustainable/ http://techcrunch.com/2014/07/21/the-majority-of-todays-app-... Several people (a consultant I hired and a few clients) have encouraged me to develop iOS apps. This was based on anecdata, but I eventually convinced a client to hire me to build a simple one as a proof of concept. We found that interest in the app fizzled out fast and I learned that I didn't enjoy standalone business application development much. I didn't rule it out as a hobby though.
themartorana 12y ago
We are a no-debt, always-profitable iOS/Android game company with 6 employees that runs in a bit in constant fear. Our games are "free to play", ad-supported, and have IAP only to remove ads. We have nearly 7000 daily downloads, something like a 15% 30-day retention rate that absolutely blows the doors off of our competition, and still make very little of our revenue off of that IAP. Even some of our longest players continue to look at ads, because $1.99 seems too steep to them. The best business advice (and scummiest feeling advice) we get is that we're not milking our "whales" properly. We survive, basically, because of volume - to make it in our business you have to have at least 50,000 daily users. And that's a minimum. We'll continue to make games as long as we're profitable and can pay employees, but the 30% to Apple/Google, the incredibly low "ARPU" (avg revenue per user) and high costs of doing business have us constantly looking to where we might be able to leverage some of the tech we've built in other markets.
neovive 12y ago
Very true. For the majority of companies and developers, shifting resources to mobile is more viable in support of a larger, more profitable, business. As you pointed out, there are many examples of mobile-only successes, but it's a very small percentage of apps. Just getting new apps noticed on app stores is hard enough, let alone generating revenues capable of supporting full-time development.

dmishe 12y ago

Well, they price Coda Lite 1/5th the price of OSX version. So they get roughly 1/5h of the revenue. Math works out. They could try and price Coda iOS at $99, but Cabel is right — it's just not that important platform for dev tools, and I don't see people paying that much. Now if those two were incredibly (and equally) valuable products on both platforms AND priced the same AND there was much less revenue from iOS, then sure, we can show AppStore's fault. Not saying that appstore isn't broken, I think it is, but for this particular example, I don't think store is the problem.

WoodenChair 12y ago
What this analysis is missing, is that there are multiple times more iOS users (and therefore potential customers) than there are Mac Users. They set a lower price on iOS with a hope for making it up in unit volume. However, they're realizing now that unit volume being similar to Mac, prices must go up. I agree it's not as valuable a platform as the Mac, but it's also probably not 1/5 as valuable.
- ehurrell 12y ago
  Is this the entire story? It's true that there are many times more iOS users than OSX users, but what percentage of each are their target market (who I would call 'power users')? Panic make great apps (I use them on both iOS and OSX), but I expect not everyone using iOS is a potential customer for a (great) ssh client, while a much higher percentage of OSX users use it because they want a Unix that has $Mac_Feature.

jmnicolas 12y ago

Maybe it's a stupid question but what stops devs to charge say 20$ for an app ? Has it ever been tried, if yes, what were the results ?

WhitneyLand 12y ago
It fails massively regardless of the value proposition of the app. People recoil at the price as it instinctively feels unreasonable due to the established norms of pricing. Pre-iPhone, a $20 shareware app was considered pretty cheap. Now less than 10 years later the highest quality apps from name brand companies can't command it.
- otis_inf 12y ago
  Absolutely. And it's actually rather odd. People are tend to spent more money on a coffee they buy at starbucks than they're willing to pay for an app they use e.g. every week. Maybe it's because a lot of users have absolutely no idea how much work it takes to write an app. All they know are the Angry Bird and Minecraft success stories thinking that app makers must shit golden bricks every time they build their code. It's not only a trend among average consumers though, it's also sadly a trend among us developers: not a lot of developers are willing to spend even a single dollar on software they have to use every day. "Do you have a free version?" "Why do I have to give away the application I spend years full time on writing? Do you work for free?" I don't think this will end well. If we less and less value software on its true worth, it will become less and less attractive (or even possible) to write the software we need in a society which more and more relies on software. Watch this great presentation by Erik Meijer [1] where he addresses this problem (and others ;)) [1] http://vimeo.com/110554082 http://vimeo.com/110554082
  - jes5199 12y ago
    If I felt like it was possible to get refunds from the App Store when I bought something that promised more than it delivered, I would be more likely to spend money there. As it is, way too often I've lost $1 or $2 to an app that I immediately uninstalled. It makes me very hesitant to pull the trigger on a bigger purchase.

blub 12y ago

Actually Apple and Google are doing something to dev houses, they're commoditizing their products. When an app costs 0.99 it's easily replaced with another one and nearly worthless.

tonyedgecombe 12y ago
Commoditise your complements: http://www.joelonsoftware.com/articles/StrategyLetterV.html http://www.joelonsoftware.com/articles/StrategyLetterV.html
- mooreds 12y ago
  Right, which explains why the dev houses are aggressively moving away from being commoditized, either by selling mobile dev services where the app is a value add to an existing service, or building an app that relies on the network (where there's ability to differentiate).

archagon 12y ago

Maybe. But I also feel that Panic's apps are not particularly well suited for the iOS App Store. They're a bit too "power user" for a platform that's almost never used at home, with the comfort of a keyboard. In contrast, some of the most popular games this year (Monument Valley, Wayward Souls) have come out with premium pricing, which is a refreshing change.

WA 12y ago
This applies to all niche apps. I have a B2C niche app that makes about 1,000€ per month, which is hardly sustainable. I'm a one-man show and supporting an iOS and an Android app slows me down in releasing new features for the SaaS. Whenever I change the SaaS, I have to change both mobile apps. This is painful.

antimagic 12y ago

I wonder if we haven't turned the corner with respect to app pricing. At first, there was a clear gold rush. Lots of developers publishing small applications, trying to make money. That "oversupply" of developers, coupled with platform limitations allowing only simple apps, immediately drove down prices to the $1 point, as the best professional shop was effectively competing against someone coding on their weekends, and it wasn't really possible to differentiate their product by building something bigger. But that's changing. With the bigger screen of the latest iPhones, more RAM in the latest iPads, and better inter-app communication, the platform is starting to be capable of hosting significant applications. All of that, plus the fact that some of these products have been under development for several years now, makes it possible to build a competitive moat that will be difficult for hobby developers to bridge. So that's what I see as positives going into the future. But app developers are going to need to do what Panic is doing, raising their prices, but they are going to have to do it gradually, maybe 10% a year, so the difference in price with competitors doesn't immediately see them reduced to zero revenue.

cageface 12y ago
The problem is the market has been poisoned by years of unsustainably cheap prices. Users have been trained to expect that apps are free, or, at most a dollar. An app priced above $5 will inevitably invite outraged accusations of greed. Many users still believe that the typical app developer is raking in the cash because they read about Flappy Bird. Apple made some very short-sighted decisions in the design of the app store that are going to haunt them for years to come. They need developers to write the apps that make their devices real productivity tools but they've cut the legs out from under those businesses before they could grow with their stupid policies.
- acdha 12y ago
  Could not agree more – I've lost track of how many times one of iOS/Android developers I follow on Twitter has mentioned getting a nasty email, tweet or 1 star review because they had the audacity to charge more than $.99 for an app, even if it's targeted at business users who benefit professionally from using it.