"Two days ago Craig Hockenberry wrote an open letter to Steve Jobs complaining about the prevalence of 99 cent apps on the App Store and the "rush" to that price point. He suggests the rush to the bottom is damaging the chances of more significant apps being developed for the platform. We've covered the "gold rush" on the iPhone App Store before, and dissected the App Store data to discover that the cheapest apps aren't the ones making the most money (sounds obvious, but many of the complaints assume it isn't so). 99 cent (or free!) apps do no more harm to pricier iPhone apps than open source or shareware apps do to commercial PC or Mac software. But the point still stands.. are 99 cent apps really that popular on the App Store? In terms of quantity, there are a lot, but are they significantly more popular than more expensive apps?"
The takeaway here is obvious: pricing your app doesn't, in a tangible way, affect the sales of that application. While Craig Hockenberry may have a point in that applications cost more to develop than meets the eye, his other point, that $0.99 apps are hurting sales of more expensive apps and making the App Store an unsustainable business, doesn't seem to be supported by the numbers.
I have a ton of problems with Hockenberry's "Open Letter," and this is just one of them. I'm glad someone addressed it with statistics rather than anecdotal "evidence."
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[...]pricing your app doesn't, in a tangible way, affect the sales of that application
It's a huge jump from saying lower-priced apps don't hurt sales of higher-priced apps to saying how you price your app doesn't affect sales (which is basically what you said). The article addresses how other applications' pricing affected sales of your application; your comment was about how pricing your own application affected your own sales, something quite different, and I'm not sure the former implies the latter. In fact, I suspect that if I price my simple app at $100, I won't get many sales (unless, maybe, I'm the Make Me Rich guy).
However, the original article shouldn't compare Apps to Oranges. It did a better analysis and compared apps in the same genre. However, those genres are very broad and don't indicate whether the higher-priced and lower-priced apps had similar functionality. For example, does it make sense to compare a higher-priced Facebook application with a lower-priced Twitter application (or vice versa)? It's not likely one would affect the sales of the other at all.
It seems obvious to me that a $0.99 electronic wallet would sell more copies than a $9.99 electronic wallet with basically the same features (assuming they were equally visible in the App Store). The really interesting analysis would show how fully-featured, but more costly, apps do against basic, cheaper apps.
The article implies that lower-priced apps are somewhat more popular, but the higher-priced ones may generate more revenue. That's somewhat irrelevant to the premise, though; if the apps were priced competitively, would the originally lower-priced one still have sold as many copies? Would the originally higher-priced one pick up more sales due to less price competition? The article wasn't clear on that.
It's also notable that they treated $0.99 apps as one band and anything more expensive (even $1.00) as a different band. I'm not sure that's a good indicator, but at least they have one graph showing actual price points for the apps.
It's a huge jump from saying lower-priced apps don't hurt sales of higher-priced apps to saying how you price your app doesn't affect sales (which is basically what you said). The article addresses how other applications' pricing affected sales of your application; your comment was about how pricing your own application affected your own sales, something quite different, and I'm not sure the former implies the latter. In fact, I suspect that if I price my simple app at $100, I won't get many sales (unless, maybe, I'm the Make Me Rich guy).
What I said was pricing your application in the $0.99 tier or the $0.99+ tier isn't an automatic predictor of your sales. Hockenberry's point was that $0.99 apps are hurting sales of more expensive apps by virtue of their price. That simply isn't the case and almost all paid apps in almost all categories are distributed equally between pricing tiers. If Hockenberry's premise was true, we'd see a huge disparity in application sales between $0.99 apps and $0.99+ apps.
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Originally Posted by Pony99CA
It seems obvious to me that a $0.99 electronic wallet would sell more copies than a $9.99 electronic wallet with basically the same features (assuming they were equally visible in the App Store). The really interesting analysis would show how fully-featured, but more costly, apps do against basic, cheaper apps.
It would also seem obvious that cheap apps would sell the hell out of paid apps and, not counting the free ones, that isn't even close to happening.
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Originally Posted by Pony99CA
It's also notable that they treated $0.99 apps as one band and anything more expensive (even $1.00) as a different band. I'm not sure that's a good indicator, but at least they have one graph showing actual price points for the apps.
That was the premise of Hockenberry's "open letter," so they took his claim and analyzed it. You should probably read it when you have a chance.
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I knew before clicking on the comments link that Pony99 was the lone reply
I have you beat by a mile. I not only knew it was him, I knew that he would find 3000 faults with what I wrote, even though it was only about 4 sentences.
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First, I'm glad you tackled this topic. It's good to see folks thinking about this. At the same time, while I find your article and the original interesting, I believe that the conclusions being are not accurate.
1. "The takeaway here is obvious: pricing your app doesn't, in a tangible way, affect the sales of that application."
I disagree in a big way. Pricing your app affects the sales of your application in a very real way. What may be true is that "Within a certain range of prices, pricing your app higher will not affect sales." At the same time, pricing your App low enough that it is a bargain, or high enough that it falls outside the range the consumer finds acceptable, has a VERY tangible impact. Throw in the wild card of a competing product at a different price, and you skew the results even further.
What MAY be true is that Apps don't HAVE to be $.99 to do well. It depends on a lot of factors, though.
2. The statistics support the idea that $.99 isn't necessarily the best selling price.
They posted an update ( http://www.mobileorchard.com/wp-cont.../12/graph4.png ) to the article where they break it out by all prices. Other than free, $.99 is the best selling and most popular price range. After that, the number of apps and their popularity drop off significantly. If you group every other app of every other price into the same category, sure, you get a different result, but that isn't a realistic means of measuring the popularity of $.99 applications.
Also, from a consumer POV, $1.99 and $.99 are both "no-brainer" prices - that is to say, they buy them without thinking about the cost. For many consumers this range extends to $2.99 or even $3.99. As a result, JUST looking at the $.99 group fails to address the real question - do no-brainer priced apps negatively impact the sales of higher priced applications?
3. "It would also seem obvious that cheap apps would sell the hell out of paid apps and, not counting the free ones, that isn't even close to happening."
Cheap apps of decent quality ARE outselling higher cost apps. Crappy, cheap apps are selling JUST as well as higher quality, higher priced apps. Free apps of decent to poor quality "outsell" higher priced apps. Terrible apps that are free get decent "sales".
And what is "Cheap?" See my comment above.
4. "Hockenberry's point was that $0.99 apps are hurting sales of more expensive apps by virtue of their price. That simply isn't the case."
A blanket statement like this doesn't work. There are plenty of $.99 apps with no $9.99 competitor. There are plenty of $4.99 apps with no $.99 analog. Unless you look at a specific type of application and look at how pricing of THAT app and the competing products is affecting sales, it is impossible to make a resonable guess on this.
If you REALLY want an answer to this, pick an application type - say, ToDo list apps, and compare their prices/popularity/etc. Then you can get a realistic assessment of the impact of price on sales.
And don't forget to include other factors like Time on Market. And when the app went into the app store. And whether or not the application was/is featured on the top page of the AppStore at any time (which HUGELY impacts sales.) And what the App price started at vs the current price (since # of downloads carry over to new prices.) All of these will warp your results (fatally in some cases) if not taken into account.
5. "It would also seem obvious that cheap apps would sell the hell out of paid apps and, not counting the free ones, that isn't even close to happening."
Sure it is. Look at the expanded numbers they posted. Except for a small band at $9.99, the vast majority and the most popular applications are $4.99 or less. $4.99 is cheap considering that in the past, mobile developers could expect $9.95 to $19.95+ for their efforts. With a HUGE majority of tha pps in the $4.99 or less category, pricing your application at the usual $19.95 or even $9.95 when there is even a single decent competitor in your market can be the kiss of death.
I have a HUGE interest in applications selling for more than they are right now. It would be GREAT. The problem is that when there are LOTS of well designed applications (yeah, I know there is a lot of crap as well - a different topic) selling for $4.99 or less, the hard reality is that a higher priced application is going to struggle no matter how broad you make your statistics or how you group them.
I've always wondered though why applications in the Apple App Store generally are so much less expensive than apps for Windows Mobile and Blackberry. It's really hard to find any decent applications for WinMo or BB for less than $10 and the really good ones can get pretty expensive.
I also wonder why there are so many "foolish" apps on the App store. A lot of them don't really serve any purpose other than to demonstrate the capability of the iPhone or iPod Touch. It seems that there are a lot of "junk" apps in the App Store.
I have noticed that in cases where the same application or similar functionality exists with WM applications, the App Store version does tend to be more elegant just because the platform itself is more so. But I always wonder at the price difference. Generally speaking, App Store apps are fairly inexpensive compared to their counterparts on other platforms.
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I've always wondered though why applications in the Apple App Store generally are so much less expensive than apps for Windows Mobile and Blackberry. It's really hard to find any decent applications for WinMo or BB for less than $10 and the really good ones can get pretty expensive.
If you're interested, I'll share my experience and opinion on this.
First, there is Monkey Ball. It (and other big name apps) hit the store at $9.99. They set the expectation for application prices. Anyone who wanted to charge more, had to convince the consumer that "Hey, we put a lot more work into ours." Naturally, this isn't logical since big name companies can charge less due to volume/existing infrastructure/etc. but that is how the consumer thinks. Even games like Scrabble, which can sell for $19.95 to $29.95 for PC, is $4.99 on the iPhone.
Second, mass market consumers (not early adopters) are much more price sensitive, and that is who is buying these applications. Even $.99 apps get slammed with "Why am I paying? All software should be free!" It's a different world.
Third, there's the competition factor. (See my next point).
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Originally Posted by crimsonsky
I also wonder why there are so many "foolish" apps on the App store. A lot of them don't really serve any purpose other than to demonstrate the capability of the iPhone or iPod Touch. It seems that there are a lot of "junk" apps in the App Store.
Unlike other platforms, it is exceptionally easy and inexpensive to become an iPhone developer and there is VERY little risk in trying. Sure, you have to BE a developer, but that's really all it takes. Grab the SDK, whip something up, and fire it off. You saw a similar scenario in the early days of Palm OS. Remember the 10,000+ applications in the PalmGear store? Anytime you have such easy entry to a market, you're going to get a million wannabes firing off crappy applications.
This "easy to get in" factor, also leads to folks with no overhead, a lot of free time, and no plans to offer long term support, firing off crapware clones of good applications and selling them for a song (or free.) This makes it VERY hard for a quality application of the same type to charge what it is worth.
Quote:
Originally Posted by crimsonsky
I have noticed that in cases where the same application or similar functionality exists with WM applications, the App Store version does tend to be more elegant just because the platform itself is more so.
And Apple gives you the tools to make the application elegant.
In the end, I'm not convinced we're going to see the pricing change. It doesn't matter how much we, as developers, believe our application is worth, or how much it IS worth for that matter. The fact of the matter is that THIS is how much iPhone consumers are willing to pay. Will this change? Well, when is the last time you've seen consumers willing to pay MORE for products as a market matures?
All this pricing talk has finally pushed me to do it - I'm going to have to do a iPhone Pricing blog post tomorrow.
Unlike other platforms, it is exceptionally easy and inexpensive to become an iPhone developer and there is VERY little risk in trying. Sure, you have to BE a developer, but that's really all it takes. Grab the SDK, whip something up, and fire it off. You saw a similar scenario in the early days of Palm OS. Remember the 10,000+ applications in the PalmGear store? Anytime you have such easy entry to a market, you're going to get a million wannabes firing off crappy applications.
This "easy to get in" factor, also leads to folks with no overhead, a lot of free time, and no plans to offer long term support, firing off crapware clones of good applications and selling them for a song (or free.) This makes it VERY hard for a quality application of the same type to charge what it is worth.
I never liked the freetards, personally, but I have to be honest; your post comes off as a hair dismissive. The Windows Mobile barrier to entry is pretty high and there are enormous amounts of garbage out there for WinMo. I know. I've used most of it and reviewed a bunch of it (check the 2006 Smartphone Mag Panel; I was on it). Making it expensive to be a WinMo developer hasn't ensured that what appears there any more or less succeptible to crapware and shovelware.
The truth is that the App Store is the first software market where the price was set by consumers, or at least in favor of consumers. Hockenberry, for example, argues that dev costs are very high and they may very well be, but that doesn't mean I have to like paying as much as some developers charge and it certainly doesn't mean that if I pay less I'm somehow getting less of a product.
I never liked people saying they can't charge what something is worth. You could. If the alternatives are as crappy as you say they are because of any number of factors, then eventually, they'll disappear from the market and you'll be on top. Word of mouth is a powerful thing and if you have an app that's as good as you say it is, no amount of crap unsupported shovelware will keep it from being successful.
In the end, the beauty of the App Store is that it puts all price ranges and all categories in an easily choosable location. It's relatively easy to comparison shop and sometimes people do shop on price. Be competitive on features and offer good support and if your theory is true, then you'll make money.
Hell, E-Wallet was always a spendy product and it sold pretty well, right?
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If prices are so cheap that its economically unfeasible for developers to continue to develop for the platform then the consumers only benefit in the short term. People are cheap as a rule. While I appreciate and understand why things are priced higher than I may want to pay if application sales at a certain price won't pay the bills then the developer may be unable to continue supporting the platform.
I don't think the price of the applications is what's important. It sounds to me as if the actual problem is how applications show up in the app store in relation to their price. Handango doesn't have shovelware as its featured applications and the app store for Apple shouldn't either.
Statistically, $0.99 vs. $0.99+ Means Nothing
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