Whats An App Worth?

3 minute read

#8 in Overall Paid Apps Only Equals $302

“Software is eating the world!” Cries Marc Andreessen. Moore’s law means that the smartphones in our pocket will eventually relegate desktop computers and laptops to the has-beens category, right next to mainframes and minicomputers. But what is a computer without software?

This is a question we need to begin considering more seriously. The app Redacted, created by Sam Soffes was released on May 6. It caught fire and rose to the top of the App Store rankings, topping out at #8 in Overall Paid Apps. So now Sam is an internet phenom and probably rich? Wrong. He made $300. Granted, Redacted is not a complex app as many pointed out in this MacRumors post. However, the fact that #8 in Paid Apps is equal to just over $300 is a warning sign for developers. Basically, you don’t make money making apps (*Exceptions noted below).

This is a problem for us as a people whose lives are growing more and more intertwined with technology. Remember those computer games and Playstation games that used to cost $50-$60? Not in the future. These are going to be free!!

Awesome right? Wrong. Free games means no one makes money, which means no one makes your games. No games at all doesn’t sound so sweet does it.

So we’re in the future, and nobody’s making games. Sounds like a great market to enter with a $60 game? Wrong!

Nobody’s going to buy your $60 game because they remember games on phones are supposed to be free. Early smart phone developers combined with venture capital has moved the anchor point for mobile app pricing to $0.00. You’re going to have to shoot the moon to get anyone to cough up even $10 for an app now.

On a macro scale this has implications for indie and large developers.

Indies: There is little incentive for anyone to develop mobile applications in the future, even though everyone is using mobile phones 24/7. This means smartphones never rise to their full computing potential. It also means we enter a technological dark age of sorts while waiting for the next big thing (maybe virtual/augmented reality) where app developers can actually make money again. **Note: This is already happening.

Two: Venture Capital continues to back apps, so no one has to charge any money. Then these apps go public, eventually have to monetize, and lose all of their users to the next round of venture backed free apps that are undercutting the market. Venture capital gets rich and the stock markets take an absolute beating until one day no one cares about the latest app’s pending IPO. Then venture capital dries up, no one can afford to develop apps, and the market completely disappears until the next big thing.

It’s a weird situation to be sure. Basically there’s a market, but a psychological barrier to profitable entry keeps out all products. Maybe it won’t be this way. I hope not.

Exceptions to the Apps Don’t Make Money claim:

  • Netflix: Doesn’t count as paid app because subscriptions are made on Netflix.com, outside of Apple’s App Store. Makes tons of money, but Apple counts it as a Free App.

  • Clash of Clans: Listed as a Free+ App, with all revenue coming from in-App purchases. Makes lots of money as well, but still considered a “Free App”

The 2014 Panic Report by Panic Inc, a multi-million dollar software business who is facing low iOS income and rethinking their strategy in the market

This essay on unsustainable pricing and how the App Store incentivizes poor customer service and development practices

This follow up on how people are reluctant to pay for intangible goods

Follow me on Twitter: @c_h_wood

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