The Realities of App Pricing

Yesterday a second client went free.

Riposte made the decision to follow Tapbots and make their iOS client free. This has yet again caused a lot of controversy about the economics of app development on the nascent platform. I think much of the controversy is misguided and starting from poor assumptions. I have a number of concerns about the implications of this trend but am pragmatic enough to see that this was almost certainly inevitable.

According to Appnetizens there are currently 32k users. That number though is probably a bit more optimistic than the reality of the ecosystem. Again according to Appnetizens there are only somewhere around 2.3k unique users posting to the service each day. While that doesn’t indicate the total number of users using the service (reading but not posting) that likely means that the total active users is smaller than 32k. Optimistically assuming the 90–9–1 principle where 90% of users simply lurk would imply around 23k active users.

The economics of that situation just don’t encourage a sustainable ecosystem for traditionally supported software development. If every one of those users purchased an app priced at $3 the developer would net $48k after Apple’s commission. $48k is certainly not an insignificant amount of money but it is hard to sustain long-term development of an application with that as the absolute ceiling of what you could expect to make. I suspect the actual market penetration of any single app is much smaller than that. It might work for a single developer but quickly gets very tricky for a team of even two people.

The alternative to this business model is the Developer Incentive Program. Where each month $20k is split between the various applications that make use of the service API. Securing 20% of this pool would net the application developer $48k in the first year of an app’s life. This is comparable to what they could hope for in the best case with the traditional paid market but has the added advantage of being an ongoing, renewable source of income.

I am a huge supporter of small independent software developers. That is how I make my living and I got to where I am by slowly building a base of income that wasn’t always especially significant. The reality, however, is that I am far more interested in that developers are able to make a living than in how they make that living. If the economics of this particular market dictate that an alternative method of income is more sustainable (which clearly seems to be the case based on individual developer’s actions) then great.

Let’s try to not turn this into a personal attack on the motives and values of individuals. The reality is that making a sustainable living in software development is hard, I’d much rather developers seek creative approaches to their business than to simply give up and leave the market.

David Smith