Underscore Price Dynamics
This is the real reason why Apple doesn’t care about upgrade pricing: there’s no demand from customers. The market has shown that free apps will be downloaded at least an order of magnitude more than paid-up-front apps, and smart use of in-app purchase in a free app is likely to make more money. Over time, this trend has only become stronger and more clear.
Paid-up-front iOS apps had a great run, but it’s over. Time to make other plans.
A large part of this is due to the way Apple has set up the rules and incentives in its marketplace. Apple thinks it benefits from having a very large number of free or cheap apps. It’s in the business of selling $550 phones and wants to commoditize the complements. The more interchangeable apps are, the more power the owner of the store has. From Apple’s point of view, the App Store probably “behaves correctly.”
However, I think it reflects poorly on the platform to have so many apps that are junk or abandoned. It makes me unhappy that I “throw away” the majority of the apps that I buy, after quickly finding that they didn’t work the way I wanted. I feel like I’m funding development of apps that look superficially good while underpaying for the genuinely good ones that I like and use.
But the market for app stores is not competitive, so we don’t get to see what might have been. The dysfunction is just the way things are. The products we get will be the ones that can survive in this world.
What Marco is reporting here is that the old-fashioned “make something and get people to pay for it” business is much harder to pull off and likely to always be left in the dust by someone making the same thing for free, getting 100x the user base, and getting 1% of them to pay for some value added feature.
It’s a shame that psychology works this way. The more businesses do this, the harder it becomes for others not to do so. And most don’t seem to be able to provide good support for 100x the users.
Update (2013-09-30): Kevin Hoctor suggests In-App purchase; Mike Rundle suggests trials.
