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Summary:

If you wait long enough, that app you have your eye on will eventually cost $0.99, or even nothing, depending on how patient you are. A lot of iPhone and iPod touch applications go through a distorted bell curve pricing process, whereby they start off relatively […]

If you wait long enough, that app you have your eye on will eventually cost $0.99, or even nothing, depending on how patient you are. A lot of iPhone and iPod touch applications go through a distorted bell curve pricing process, whereby they start off relatively cheap, owing to a “promotional, introductory offer”, then become more expensive (“regular price”), and then dip again, either for a set period to climb the rankings, or forever to stimulate sales for a product that otherwise wasn’t selling. A big reason for the yo-yo cost of apps is the level of competition in the App Store. We saw the number of available applications cross the 10,000 milestone recently, up from only 500 at launch. That’s a 2,000 percent increase. With those numbers, readers can afford to be choosy.

Unfortunately, for developers, attracting customer dollars often comes down to being cheaper than the other guy. The race to the bottom that results is causing problems, or at least that’s what engineer Craig Hockenberry of Iconfactory, developer of Twitterific and Frenzic, wrote Tuesday in an extended blog post directed at Steve Jobs. He claims that instead of giving iPhone app development the time and attention it deserves, developers (he speaks for his own firm, but it applies to others, as well) are focusing on limited utility and quick turnaround, in order to churn out “99¢ ringtone apps” and other apps of limited utility, but wide market appeal. The quick-hit titles are necessary just to stay solvent, according to Hockenberry.

He breaks it down into simple, dollars and cents business logic. The risk you take on when you engage in longer, more involved projects, considering the going rate for developers and designers, far outweighs the potential rewards. Essentially, a developer has to see a “perfect storm” of factors like audience and media reception, chart climbing, and extremely high weekly sales numbers to recoup on a $225K investment. If you’re looking at development from the standpoint of a responsible investor, you’re aiming for the greatest margin of return on your investment, and currently, that means developing throwaway titles with minimal turnaround and slapping a recognizable brand or internet meme in there somewhere.

There’s also the issue of volume sales, which is currently how most developers make money on their iPhone and iPod touch platforms. Hockenberry fears that given the increasing number of apps available, nabbing spots in the top lists, which is currently probably the best way to move units, will be harder and harder, especially for niche apps with handy, but very specific utility. Generally, getting to the top means having a lower price point, proven by the mad rushes on software that get discounted to the $0.99 range, as were all Pangea VR products, when they recently occupied a number of the top spots.

So how to stem the tide of bloatware and allow for an environment that encourages the development of innovative, quality applications? Hockenberry suggests introducing the ability to demo software. He believes that people will pay for quality products when they have the chance to actually compare them, not just visually, but practically, to their cheaper competitors. That’s definitely something that should be introduced. The Xbox Live Arcade is proof that the model works. Another solution? We need a cumulative independent press review site, like Rotten Tomatoes for movies, where apps won’t be priced out of the top of the charts. Promotional codes for reviewers will help increase the breadth of coverage when an app is released, but we still need a central location to connect the dots. AppShopper.com could prove a suitable venue, since it already offers a complete applications list, and the ability to browse by price and price change.

How do you make your app purchasing decisions? What do you think can be done by either Apple or the community to encourage innovative development?

  1. Well if it isn’t the twentieth blog to repeat the Hockenberry pitch. My Google Reader has been clogged with them. It seems every Apple blog had to recycle this story without at least putting a new twist or detail. The exception, I guess, is TUAW, which actually looked at the numbers. Surprise, 99cents are not selling any better than higher priced apps.
    http://www.tuaw.com/2008/12/12/stats-99-cent-apps-arent-selling-any-better/

    As an end user, the bottom line is: If it’s good, I’ll see it and I’ll buy it. Between the app store reviews and sites like AppShopper, AppVee, TouchArcade, PinchMedia, finding the cream of the crop is not hard.

    If devs really create something useful, unique and/or fun, people will buy it. Often, my favorite apps are the ones that cost some coin. To me, it starts to come off as whining. It’s not like they’ve got to try and break into a big box retailer, after all. They’re already there.

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  2. [...] Store Layout Changed – It may or may not be a response to Iconfactory developer Craig Hockenberry’s open letter, but it seems to make some improvements in the ways apps are organized, and which get highlighted. [...]

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  3. So, its less competitive in the open arena of the intarwebs, where there are many many more applications?

    I think the real solution is to merely list the applications spreadsheet style, the old itunes 1.0 way, where you can sort on any descriptive column, such as price, popularity, category. Star rankings from user ratings, as with the music, podcasts and videos, would be nice too. I keep seeing a 4+ logo in the descriptions and click on it hoping to get other apps ranked at 4 stars and up. Oops, whatever that 4+ means, I forget at the moment without context, it means something totally different.

    The problem Chockenberry is noting is that the App Store -is- a closed garden, and people are going to try to game the system to be noticed, and that is creating the wild swings. And Apple has made some minor changes to show more at a time. My current problem is, outside publicity for iPhone apps in beta, because the developers want to do things right, but by the time they are read, I have forgotten about them.

    What Chockenberry is doing a bit less well than others, is playing the outside PR game as much, although he always has. The Frenzic logo was one of the first wallpapers I downloaded for the iphone when it was first introduced. The Frenzic App did not appear until what, 15 months later?

    So apple has tweaked this and that to level the slopes a bit. Its merely a matter of presenting more at a time rather than less. Perhaps there could be a way to NOT see apps we already have.

    Oddly enough, before things like the appstore, people would pay five bucks to rent a 30 second ringtone and think nothing of it.

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  4. [...] If you wait long enough, that app you have your eye on will eventually cost {content}.99, or even nothing, depending on how patient you are. A lot of iPhone and iPod touch applications go through a distorted bell curve pricing process, whereby they start off relatively cheap, owing to a “promotional, introductory offer”, then become more expensive (”regular price”), and then dip again, either for a set period to climb the rankings, or forever to stimulate sales for a product that otherwise wasn’t selling. A big reason for the yo-yo cost of apps is the level of competition in the App Store. We saw the number of available applications cross the 10,000 milestone recently, up from only 500 at launch. That’s a 2,000 percent increase. With those numbers, readers can afford to be choosy. (more…) [...]

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  5. [...] essay on app store pricing, this time from Inside iPhone, to go with the one we talked about in an earlier article. The conclusions here are similar, but the analogy the author uses to paint a picture of [...]

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  6. [...] essay on app store pricing, this time from Inside iPhone, to go with the one we talked about in an earlier article. The conclusions here are similar, but the analogy the author uses to paint a picture of [...]

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