Get paid, go broke

Why paid apps are no longer sustainable for developers and what are the alternatives?

It used to be simple. Have a good idea, create an app, and sell it. OK, much digital ink has been spilt on how difficult it is to write a good app, and then get it found in the overflowing app stores. But if you actually make a successful app, and you top the charts it is time to finally post that resignation letter, right? Not so fast!

Take a moment to think a little down the line:

  • Do you plan to release updates?
  • Do you have any frictional costs after the sale?

Most developers will answer yes to both. You really need to be releasing regular updates to keep your users happy, and most apps now have some server side element, an ongoing cost to you. Whereas a customer used to be added value to the company, now they can easily be a burden. For example, to keep that customer satisfied they expect future updates and releases. They also continue to use your server each time they use the app. But who is going to pay for this after the initial purchase price has been used up, and you likely sold for less than a price of coffee, so it soon will be. The answer is future customers, smartphone sales are exploding, you'll be fine. Sound like a Ponzi scheme, it is! The problem is a perfect storm of a few variables. Firstly, app store discovery is truly broken, so an inevitable race to the bottom with prices ensued. Secondly, smartphone sales are exploding, and we're still a long way of saturation point. Therefore, for the time being the Ponzi scheme is still intact. Thirdly, app stores promote this model by not allowing the sale of updates, you need to release it as a new app and have no way to discount it to existing customers. Lastly, a certain fruit based app store doesn't even class them as your customers, so you can't even contact them with future products of interest!

London Undergound is a good example (disclosure: MonkeySource develop the Android version for Visual IT), where they took a two pronged approach. Sell the app for a fair price, and give the same app away for free with adverts to support. Interestingly, releasing the London Underground Free actually increased sales of the paid app (again it's exactly the same app, just without the ads). But more interesting, Visual IT are now seeing that the paid app isn't sustainable. Customers paid £1.99 and will continue to receive updates (about 6 a year) for the lifetime of the app. Hopefully, a long time! Plus, paid users are the heaviest users and hit the server daily. So they've now got the situation that the users of the free app are subsidising the paid users, and it's the free app that will keep the development funded. Kinda freemium, but on it's head!

So before releasing that new app, think carefully about the long term viability. It's tempting to stick a price on it and hope the market keeps growing. But this can't happen forever, so ask yourself will you gain value from the user who's still using your app five years from now, or will that become a burden you can't truly afford? As they say, good things come to those who wait.

Post by Ryan