Life and Death in the App Store
Since Kaneko founded the company with Scott Sykora in 2009, Pixite has released eight applications dedicated to photo editing and design. Each has been featured by Apple as a Best New App; photo editor Tangent and design tool Assembly won year-end awards from Apple. Between 2013 and 2014, downloads of Pixite apps jumped from 395,472 to 3.1 million, and annual revenue doubled to $943,000. Pixite grew along with its cash flow, expanding from two to six employees as it explored ways to link its apps together and grow a loyal base of customers.
Then the bottom fell out. Last year downloads flattened, and Pixite’s revenues plunged by a third, to $629,000. Suddenly, a company that needed to bring in $2,000 a day to break even found itself making $1,000 or less.
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But for a large swath of these app developers — particularly those without venture capital and sophisticated marketing tactics — the original App Store model of selling apps for a buck or two looks antiquated. In 2011, 63 percent of apps were paid downloads, selling for an average of $3.64 apiece. By last year, a mere 27 percent of downloads were paid, and the average price had fallen to $1.27. Today, profiting from the App Store most often requires a mix of in-app purchases, subscriptions, and advertising.
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Meanwhile, a fatigue is setting in among customers. There are now more than 1.5 million apps in the App Store (Android users have 1.6 million to choose from), but by 2014, the majority of Americans were downloading zero apps per month. And it turns out people simply don’t use most of the apps they do download. According to ComScore, the average person spends 80 percent of their time on mobile devices using only three apps.
The most telling part to me:
And Pixite clung to using the one-time purchase business model, which led to a perpetual cycle of boom and bust as each launch generated a single revenue spike followed by a rapid decline. […] Pixite aimed to release one app a quarter, giving it just three months to design, code, and ship each product.
This is exactly what Wil Shipley and others predicted would happen given the App Store’s policies of no trials or upgrades.
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@Barry Nobody knows whether those are a solution because they’ve not been tried on iOS. They seem to work OK on the desktop. It seems obvious that the App Store policies were not designed to promote sustainability. Better policies would not make every developer successful, but they would certainly help the better products/businesses.
In the twenty years I've been doing this, only one advertising attempt was even as good as break even (that was advertising on MacUpdate where people are already ready to download software). On the other hand, building a loyal following into a successful business using trials and upgrades works because the paid upgrades ensure you are continually working to improve the program for existing customers (who have the major advantage of being by far the easiest to sell to), and helps you fund the development as word of mouth from those same loyal customers grows your user base in to a sustainable business. I've done this twice now, and there is little in the way of lottery in it (some luck, sure, but nothing like the App Store). My one real disagreement with the Pixite article is the "now" in the quote "the App Store itself now resembles a lottery" - the App Store has been more like a lottery than a sensible business for many years.
@Barry: I think everybody agrees that there are a lot of factors involved in creating a successful product (though whether advertising is among those factors is debatable). It's just that, pretty much all of the factors Apple can influence (complex apps being more likely to be rejected, lack of update prizing, optimizing for number of apps rather than quality, complete absence of trial versions, etc), Apple influenced to the detriment of quality developers.
Still can't believe that you and other developers are so deluded that you think trials and paid upgrades are going to make you successful. These guys haven't even started advertising until this year. They're not going to fail because of App Store policies, they're going to fail because they're bad at business (and any other developers else who subscribe to this view).