Free and Cheap Is Great for Consumers; for Developers, Not So Good

by Michael Alexander November 18, 2008

There are an awful lot of terrific free and inexpensive apps available for downloading from the AppStore and after reading a few recent blogs on pricing at the AppStore, I'm beginning to wonder why that is.

Many devs price their apps at the bottom of the money scale thinking the cheaper it is, the more they'll sell. Big sales numbers can move apps to the top of the most-popular list and that in turns sell even more. It all seems logical enough to me, but Andy Finell's post on the economics of app pricing on his Safe from the Losing Fight blog certainly hits on reality's bottom line.

Selling apps for short money just doesn't make sense, Finell says. If those apps don't float into the top 100 sales list, the devs are pretty much looking at standing in the line at the local soup kitchen with the rest of the outsiders. Apple isn't making much money on the apps that fall below the magic top-100 line, either. Meanwhile, consumers are becoming accustomed — even trained — to pay as little as possible for anything other than super high-quality apps. Where's the win-win?

There are a couple of solutions for developers. The first is to raise prices. It's not too late to do that, but time is running out. Some free to $9.99 apps really knock me out because I get a high-quality app for so little money. There are quite a few apps that I would even pay more for, but heck, if I can get good stuff cheap, I'm not going to argue against it.

The second option, according to Fred Wilson, who writes the A VC blog is for devs to "tease" consumers with a free or low-price product and once consumers actually see how good it is, they'll be willing to fork over for a more expensive premium version.

Writes Wilson:

A developer would be much better off with 196 apps per day being downloaded with 180 of them free and 16 of them paid than 196 of them at $0.99 because there is no 'decision cost' on the free apps.

That's the strategy of Zynga — one of the companies in Wilson's portfolio — has adopted with Live Poker, which we reviewed here recently. Reviewer George Papas gave the free version one of our rare 10/10 scores. I'm sure avid poker players will bypass the free app and go straight to the $9.99 premium version based on that review alone.

I'm not a dev, but Finell and Wilson's perspectives make sense to me. But more important from the customer's point of view is that if a company consistently delivers a quality product, I'm more likely to continue buying from them because I'll know what I'm getting before I lay my money down. Meanwhile, I'll keep buying the apps that are top of charts because that's the only thing I have to go on.

rxCaptain

Andy Finell's post is pretty interesting. Check it out everyone
JoshPratt79

Just cuz its so cheap dont mean its so good
MaxxineStamos

some apps are making a killing charging way too much money for very stupid applications. And the opposite is going on for great apps that are priced too cheap. It's a wicked world we live in.
http://www.fullcontrol.dk Thomas Lund

As one of said developer of games, I can only give the article a "must read" tag for all consumers and developers.

We have a lot of apps in the store by now - and we are enaring the end of publishing more. We simply cannot deliver quality apps/games with the sales numbers we see. And I know a lot of other developers with the same.

If consumers dont start to buy apps at a fair price (and $1-2 is not a fair price for a quality app that has taken 4 manweeks to produce) - if Apple doesnt start to do something about the junk thats comming in like e.g. raise the minimum price or do quality control - if developers dont stop betting on the "I can make it into top-10 and make up my loss once I get there by trying to push the game for $1" - then the app store will be devoid of anything but $1 junk apps + a few of the big companies making yet another quick port of something never ment for the iPhone.

Inovation will simply stop and no one will be happy.

What the best approach is? I dont have a clue. We tried pricing our first game at $3.99 - thats less than a burger meal at McD in this country for a quality app that is quite innovative. And most every reviewer told us great game, but waaaaaay to expensive. Customers not buying because its "double the price of everything else" - and us ending up with $200-300 in total sales. Not even enough for us to pay the tools we used for the game - not to talk about putting food on the table for 3 weeks development.

So its a hen and egg problem for all 3 parts in this. And no one is winning this in the long run.

Any views or ideas like Andy's postings are more than needed in this time.

/Thomas Lund
http://linkity.appspot.com/ Andrew

Apple should change its rankings to be based on turnover. That way a $5 game selling 1000 units would rank the same as a $1 game selling 5000 units.
http://fotosyn.com Jim Moore

I'll admit; I have been railroaded into the 'cheaper is best' option in the development of my first iPhoneography app - simply on the premise that it was the entry level point where I would at least make some money back.

I guess I am putting the value on my work at a level where I see more sales coming. Whether this is reality I probably will never know on my first app... although I did enjoy better rankings when I went free breifly; albeit a natural dissatisfaction from some users who paid for the app.

I guess there's the balance; but possibly the low prices are devaluing what is; in reality a LOT of work and effort on the part of devs. Good or bad - the vast majority of apps have a lot of work in them.

But that said - the market now expects an all singing all dancing product at 99cents because that's the way it has been modelled - as a volume sales channel, and a channel that mainly is a considered purchase; where a more expensive cup of coffee or chocolate bar is more expensive, and doesn't last as long.
https://plus.google.com/112832679910840530390 Barbara Holbrook

Thanks for the insight, Jim. You're right people seem to expect A LOT for their 99 cents and it's extremely difficult to change the minds of consumers now that expectations have been set.

The million-dollar question is how to convince people that an app is worth more than a cup of coffee? The developer that solves this problem will be the Starbucks of the mobile gaming industry.