There have been a lot of uninformed people spouting nonsense about Craig Hockenberry’s “Ringtone Apps” blog post, so I thought I’d set the record straight with some real numbers from the App Cubby bank account. There are some amazing success stories on the App Store, but for every successful developer there are quite a few who haven’t come close to recouping their investment of time and/or money. App Cubby is doing quite well, all things considered, but it took a “Staff Pick” from Apple to get us over the hump...

http://appcubby.com/blog/files/financial_realities.html

david
App Cubby

David,

First let me just say thank you for your article. So many people have not actually taken the time to read Craig's original Furbo post it's been quite discouraging. The data you elected to show makes a strong case for the points he raised and I for one want to say thanks for your show of support.

I think it's becoming obvious that something needs to change with the way apps are listed and browsed in the store, but damned if I know what that is. What I do know is that you are 100% correct on your conclusions about marketing. Our experiences with online ad-buys over the years have generally proven to be barely cost effective and more often than not, a money loser.

Tap Tap Tap may have figured out how to "attack the charts" as it were, but even with such attacks, its obvious what role the .99 price plays in their ability to stay at the top.

At the very least, the discussion has been started and that's a good thing. The more devs that speak up about the subject and offer ways to fix the problems, I think so much the better.

David,

Thanks again for the insight. As an iPhone user, I can tell you that I first go to the top 100 lists at AppShopper.com and look for the big movers. I figure that if an app is getting a good amount of downloads there must be something to support the high volume. I strongly think that getting your programs onto that top 50 or 100 list is the key to short-term success.

Once you are in that zone of the "top" apps, you just have to have confidence that your program is what the general public needs.

The closest parallel I can give you is what I see at my grocery store. I can put anything on that front table next to the check stands and it will sell... pudding cakes, oranges, bags of coffee... does not matter what the item is as the location sells the product. I can move that display to the side by just a couple of feet and all of a sudden, no matter how good the pricing, and the items will sit on the table for days.

I think that the strategy of creating a lite app... people love free samples... is important to create the presence in that "location" on the top lists to drive sales. It has worked for me on several occasions. I tried I-fishing lite and loved it so much that I paid $2.99 for the whole program. I would have NEVER bought the app without having had the ability to try it out first.

My brother, also an iPhone user, does a similar thing... he goes for all of the free apps and never buys anything. He is a cheap "cherry-picker". But we see those in the grocery store too... they only buy our loss leaders and never anything else.

David,

Great post. I applaud your bravery and candor. Your willingness to be completely financially transparent will move this debate/discussion along like nothing else could. I have a couple comments and ideas that hopefully might add to the mix:

1) The Apps Store and the iPhone 3rd Party Platform as a whole is barely 22 weeks old. And it's success is staggering. I can't think of any other computing platform (or any media platform for that matter) that has created over 10,000 totally new pieces of content in it's first 150 days. 150 days!!! So I think Apple is a bit surprised (and thrilled, no doubt) with it's unprecedented success, but I bet they're also figuring this out a bit as they go too. This is truly uncharted territory for everybody involved. That said, there are some obvious elements that could be in play. And that brings me to...

2) Retail exposure and outlets. Most other types of software (not all of course) have the ability to be boxed and displayed in hundreds of retail stores. A large part of the wall space in Apple Stores is for Mac Apps. Customers browse, discover and buy many apps like that. Games from other portable systems like the DS, PSP and others have literally tens of thousands of pegs at retail big boxes like Target, Best Buy, Walmart, etc. Even shareware has the ability to be downloaded and discovered through unlimited locations on the internet. iPhone apps shoppers have only one single place to browse, discover and buy these apps (2 if you count iTunes, but I personally find myself primarily browsing these apps on the iPhone itself, don't you?) Either way, the point is other software platforms have potentially thousands of retail outlets - the iPhone apps have one. And over 10,000 titles are now funneled through 1 teeny tiny little 'Apps Store' hole...

3) How do you compete with FREE!!! Say you walked into Target tomorrow and went to the Nintendo DS Games section. Right next to every single title - was a similar title that was FREE! How would 'any' software developer on any other platform compete with that? That's crazy. There's higher prices and there's lower prices - and then there's free! I'm sure it sounded like a good idea at the beginning, but in this rapidly expanding commercial iPhone Apps market, I'm not sure that makes sense anymore. I'm not sure how apps developers can grow a profitable business when they have to compete with free! Free trails sure, but free software won't sustain and grow a strong healthy developer base.

So, enough complaining. How about some ideas.

1) Free trail software that expires - for sure. It's a proven fair way to demo great new apps. The largest to the smallest software developers have done this successfully for years.

2) No permanently free software - at all. Everything's a minimum price of at least .99 cents. There's no significant amount of music or movies on the iTunes store that's free. Why should the software? But again the real reason is I don't think there can be a profitable viable iPhone Apps developer community if you always have to potentially compete with free. There certainly would be promotions and a few exceptions (like when an App is tied to an external hardware purchase - like a code for Apple's Remote App with every Mac sold) but on the whole - you like it - you buy it. Programmers have to eat.

3) There has to be additional retail exposure to iPhone Apps. Two ideas immediately come to mind.

First - large important titles (game titles at least) HAVE to be put in a box and sold at retail - right next to the DS and PSP titles. I don't think the iPhone will be the game platform it can be till Madden Football 20XX comes out on the iPhone, IN a box, IN Target - hanging right next to all the other platforms on the same day. Of course the box just has a Madden iTunes card inside it, but that retail wall with iPhone games hanging on it should happen - will happen, there's no doubt in my mind.

Second - I'd love to see a really cool way to try out and discover iPhone apps at the Apple Store. Certainly not the retail packages. Maybe there's a custom display super-giant iPhone model where you can play and discover new iPhone apps. Maybe video demos running on the Macs. Its not enough to just put them on the iPhones in the store, there has to be a bigger fun demonstration of the apps that customers can watch and discover by watching other people browse them too.

That's it for now. Hope these ideas help propel the discussion forward. I know the current situation isn't perfect, but I'm pretty sure things will change soon. Look at how far we've come in 150 days!

Andrew Green

Great post. I think the business model of the app store is hitting an inflection point. Just posted about how we are approaching the app store from a larger software company perspective. http://blog.cosential.com/?p=197

Great article bud. Thanks for putting your numbers up -- really interesting to see how the AppStore is unfolding.

steve (creator of trism)

Is it possible to share your Top 100 (if any?) data/trends?

I'm not a developer, just an iPhone user. I know plenty of people out there that will never pay for an app, ever. But I also know people out there that are willing to drop a good chunk of change for the perfect app.

As someone who is willing to spend money to make the most out of my iPhone, it kills me having to sift through all of the BS apps out there that are either free or $.99. That doesn't mean that I haven't bought my share of $.99 apps, because I have, it is just frustrating that after having them on my phone for a week, I delete them and never use them again.

I am someone that came across your Gas Cubby app via the Gizmodo.com article, and downloaded it right away. I did hesitate because of the price tag, but I figured it would be worth it in the long run.

One thing that both you and Craig mentioned that doesn't quite make sense to me is the ability to create trial versions of apps. Obviously I see how important that is, as I would have used that several times now before dropping down money for an app, but to me you do have the ability to do this. While you can't have a full version of an app expire after a certain amount of time, you can create a "crippled" version of an app that only allows a taste of the full apps potential. For instance in Gas Cubby, you could create a version that only allows 3 or 4 entries, after that all a user can do is view the charts and graphs up until that point. There is probably a reason that I am not thinking of as to why this won't work, but it seems like a solution to one of your biggest complaints.

Mark

Another suggestion that would really help would be Apple allowing a subscription model for the software. That way once you do sell your application you can collect from that customer each month/year for continued updates, support, service, etc. Many of the great software products for our computers are sold as a subscriptions because the model makes it easier for the developer to make money. To take this argument a step further, Apple itself sells subscription products to iPhone users but will not let iPhone developers do the same. If Apple understands the power of subscription-based products why won't it let the developers so this as well?

I hate advertising, it is a tax on our time, by definition most of it is irrelevant to us but adds to the cost of products, sometimes a lot.

Advertising products that cost a few dollars is not viable unless both of these criteria are met, 1) Manufacturing cost is near zero, 2) It sells in the millions. Snack foods and 'sugar water' being a couple of obvious examples.

Advertising costs rise according to the success of the medium and every medium is priced according to what major corporations will pay so small businesses can't afford to advertise. Don't waste your time on advertising, make a better product instead and hope to garner interest from reviewers. To a great extent we still have an honest, independent press on the net, print has mostly offered my businesses editorial either in consideration of advertising spend or in exchange for free use of content (images).

Apple clearly is aware of the problem and looking for solutions as indicated by their promotional iPhone app codes, that's a good idea which costs the developer and reviewer nothing.

Apple could introduce more varieties of lists, we've seen them all in other places, fastest movers, most viewed. Apple's headings aren't clear, I presume 'Top' means most downloaded (in the last 24 hours, week?). I'm rather less clear about 'What's Hot' is.

Apple will have to do something about free apps because their free distribution service will be abused by the advertising industry. Free apps that are merely vehicles for advertising should be got rid of altogether or priced out of the market. Excluding trial versions of course, both Lite versions and time limited trials sound good, some apps suit one or the other better.

More price points, but can we move away from everything ending in a nine!

Good news looking forward, I guess there's only around 25 million iPhones and Touches out there at the moment, that will likely double in a few months, and a few months later too.