The Awkward Pricing Structure of the App Store

The Apple App Store has revolutionized the mobile phone industry, and in the process, created dozens of copycats and changed the way people purchase software. But with all of the different pricing options, what really designates value? What makes a free app worth the download and an expensive app with lots of value too pricey? To find out, we decided to dig a little deeper.

The Free App Dilemma

The problem with some free apps is that they’re really a teaser; a gateway drug as it were, designed to hook you in to the paid stuff. Take one of the original big apps, Shazam. For the uninitiated, Shazam listens to music playing in the background and then tells you who the artist is, the title of the song, and a link to buy it either on iTunes or various other sources. Originally, the app was free, offering unlimited music tagging. But as time wore on, they saw they could make money from the app and crippled the free version to just five tags a month, then offered a paid version for $4.99. What was a great app supported by advertising is now just another example of App Store greed.

screenshot

Shazam, a once free app, now with a paid and free version.

But that’s just one part of the free app problem. Then there are people just looking to make a buck through Google or iAds, and even compromise the product itself if it brings in money. Let’s take Craigsphone, for example. The other day, I was looking for a specific car and I figured that Craigslist was my best option. I opened up the app on my iPhone, typed in my search criteria, and then was presented with my options. But when I clicked on one of them, it pulled up “JamesList,” a competitor’s site that had nothing to do with Craigslist itself. Just another way to bring in money, without added value.

The 99-Cent App Dilemma

The lower the price of the app, the more popular it will be. This is probably the best place to be in the App Store, because it’s cheap enough to be an impulse buy, and will most likely sell a few thousand copies. It’s the Radio Shack principle of sales: Sell millions of a part that costs very little. Not every app at 99 cents has a lot of production value to it, but those that do will sell millions – See, Angry Birds.

screenshot

Angry Birds for the iPhone

For some consumers though, 99 cents is still too much. Some people balk at a price point that’s under a dollar because they don’t think they should have to pay anything for software. No matter what is put into it. In reality, 99 cents is a pittance to pay considering the months of development time that some Apps have into them.

The “Anything Over $4.99” App Dilemma

Here’s where it starts to get sticky. In the world of OSX, most pieces of big software run at least $50, because of the development time and resources put into them. Although it’s never really discussed this way, the more expensive the software, the more that’s assumed goes into it. If you buy Office 2011 for $199, you get a full suite of programs. If you paid $49, you’d get just one program in the suite, and so on.

screenshot

OmniFocus for the iPad

So let’s put this into use. OmniFocus is an excellent task management program available for OSX, the iPhone, and iPad, and with the exception of screen real estate, they all have the same features. Buy one version, and you have most, if not all, of the functionality of the desktop version that retails for $79.95. The iPhone version runs for $19.99, and the iPad is $39.99, which many consider to be just too expensive. In reality, it’s a bargain, offering full-priced features for half the cost. The nature of the App Store is that cheaper is better.

Final Thoughts

The App Store has truly changed the way people do things, but it has also bred a system where the lowest priced apps win. Some developers even openly complain about the forced pricing structure that Apple forces them into, claiming that they need more value at their price point. The problem is that for developers to truly make money, they need to charge more to have that return on investment. The result is that you get either high quality apps that cost a lot of money, or low quality apps that just are trying to make a buck. There are exceptions to the rule, but it seems like the App Store pricing structure is just a race to the bottom.


  • http://thisismarkus.com Markus Vad Flaaten

    Awkward*

    *Awesome

  • Pingback: The Awkward Pricing Structure of the App Store | appsfever.com

  • GVB

    I really love OmniFocus but the $19.99 price tag is a little steep. I don’t think it’s worth that much.

  • anon

    “What was a great app supported by advertising is now just another example of App Store greed.”

    To think that it is greed to charge for a well written piece of software that works amazingly is outrageous. Is it greed that a taxi driver charges you for giving you a lift? You can’t take the level of work put into a project and completely devalue it like that because you enjoy getting stuff for free. It’s like a child throwing a tantrum for not getting something it wants! For a blog devoted to appreciating well written software I’m surprised to see such a disagreeable stance being taken.

    • http://thisismarkus.com Markus Vad Flaaten

      I totally agree!

      I don’t really get why the pricing structure is that “awkward”? It’s just the same as with normal apps, you can either download a trial, that’s crippled, or/and eventually buy the full version. The pricing structure of normal programs and apps for the computer is just as awkward.

      Gotto make a living! :)

  • cak

    Wow, what a incredibly ignorant pile of trash, your explanations are rubbish, you imply all good apps at 99cents will sell millions, you seem ignorant of the amount of cost goes into an app like shazam, and that it should always be free, but you do not explain way. I had to stop reading, please give up writing such crap

    • Erik Nilsson

      I think that “cak” and “anon” missed the point of the article. The text starts out by presenting an assumed perception of the AppStore audience – that a free app that evolves info a paid app signals greed. The text then goes on to make a rather nuanced argument for why this perception is not necessarily true.

      Whilst the technique of presenting a indefensible opposed position first, and then presenting your own position – which in contrast will seem all the more reasonable – is common in oral debates as well as in print debates, it has not yet been that successful online. This is probably an effect of the low response latency in commented forums online. In this situation it is clear that readers “cak” and “anon” did not bother to read the full text before responding.

      There are three fundamentally different ways to deal with the situation:
      1. The “Daring Fireball approach”, i.e. to disallow comments. This is actually my favorite approach. Because it forces the reader to make a slightly larger effort in order to respond (e.g. by posting a response in their own blog or such), it is likely that responses will be more thought through.
      2. Ignore the comments that are obviously unreflected. This is not, in my opinion, a good solution. The perceived journalistic quality of a site is reduced by low-quality comments.
      3. Dumb-down the journalistic prose of the original articles so that they are understandable even for the more troglodytic readers of the site. This “lowest common denominator”-approach has worked OK for television, at least in a commercial sense, but has also reduced the attractiveness of the television medium for many demographic groups.

      Given that the main commercial sell-point of this site would seem to be readers such as myself – that spend lots of money buying apps – and that such readers tend to belong to the demographic groups that are most put off by dumbed down journalistic OR response texts; I’d argue for disabling the comments section of this site. Instead, in-line quotes from referring blogs, tweets, or other sources would fill the need of reader interaction.

  • Marie4ty

    Um..You obviously have a very bias opinion and that ok, we all do but its just hard to read this article when you clearly don’t know what your talking about.

  • Mike

    I’m not saying app prices are worth it when factoring in development, etc. However, my general rule is, I just won’t purchase an app over $1.99 and I only purchase apps after some reviews are posted. It’s a simple matter of market economics. An app may run for $5.99, but there are always options and alternatives.

theatre-aglow
theatre-aglow
theatre-aglow
theatre-aglow