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The App Store Effect: Are iPhone Apps Headed for Oblivion? – The app store effect October 18, 2009

Posted by hruf in Mobile & Gadgets.
Tags: , , , , , , , , ,

A really great article about Apple’s AppStore and how business is going there could be found on the following link:

via The App Store Effect: Are iPhone Apps Headed for Oblivion? – The app store effect – Gizmodo.

A short summary  on it:

It’s uncanny. When known software gets repackaged for iPhones and iPod Touches and passes through the hallowed gates of the App Store, something happens: Almost invariably, it gets cheaper. Waaay cheaper. Good right? Well, not always.[…]

The App Store is a strange new place for developers. Veterans and newcomers engage in bareknuckle combat, driving prices down to levels people wouldn’t have imagined charging just a few years ago. Margins drop to razor-thin levels while customers expect apps to get cheaper and cheaper, but with ever increasing quality and depth.

The Problem

Most iPhone apps had no life before the App Store, and currently have no life outside it. But with those that did, you start to see a pattern. App prices could reasonably be expected to fall over time—an older game is worth less to customers than a newer game, and with other types of software, a late-stage price drop is a great way to scoop up late adopters. What’s strange, though, is how prices dramatically collapse after hitting Apple’s store.[…]

The Economy

Some of this is pure Econ 101: The store serves a massive, captive audience that’s pre-trained to spend money in iTunes. The promise of higher volume makes it easier for developers to lower prices, which they use, along with interesting features and clever marketing, to set themselves apart from the competition.[…]

It’s true that prices are falling as more and more iPhone and iPod Touch owners enter the market. But prices won’t stop falling.[…]

The Culture

Giz stories rage about app prices all the time, and in your own private way, so do most of you. Buying $1 songs and $2 TV shows has given us an expectation that apps should be cheap, no matter what their use. The glut of free apps you see filling out the app charts every day doesn’t help either. Software is worth less to us now, even though we use it more.[…]


From the outside, it appears that Apple is encouraging a race to the bottom. The top 10 lists in each App Store category—one of the only ways for an app to get any meaningful amount of iTunes visibility—are almost exclusively the territory of low-priced impulse buys, and are hard to cling onto for more than a few weeks at time. Flexer, of Duck Duck Moose, says she’s experienced it firsthand:

The ranking by volume (as opposed to revenue) on the App Store seems to drive the prices of apps down. Aside from being featured by Apple, exposure of an app is dependent on its ranking in the top lists, so developers lower prices to obtain a higher ranking.[…]

With yesterday’s announcement that Apple is allowing free apps to include in-app purchases, things just got even more tumultuous. Depending on how this is handled, the top “free” apps could all be paid apps in disguise. Either that or the paid app rankings will be dominated by free-on-a-trial-basis teasers. In either case, the rankings open themselves up for opportunistic abuse, and the highest goal for any honest, talented app developer—to just crack that list—just became more uncertain.
This is disastrous for developers, even if it’s mostly incidental, and a function of Apple trying to sell apps like they’ve been selling music for years, despite a totally different set of product types and customer needs. But Apple’s effect on pricing goes well beyond incidental. At least in some cases, Apple calls the shots.

What Happens Now

So what does the App Store Effect mean, right now? In the short term, we’ll get lower prices. This is great. But in the long term, it might not be sustainable.

The promise that sales volume will make up for the rock-bottom prices you need to charge just to be seen in your app category seems increasingly hollow, and to put it bluntly, if developers don’t have a chance in hell of recouping their fees, they’ll stop trying. And I’m not talking about 99-cent iFart app spammers here—I’m talking about big players who already make money selling software. If the navigation companies, the big game studios and the premium content providers can’t thrive in the App Store, they’ll have to leave; even playing in Apple’s sandbox threatens and undercut their (sometimes much more crucial) product lines elsewhere.

And don’t forget, Palm and Android fans, this App Store Effect sends ripples well beyond the App Store. Customers expect to see functionally identical apps priced the same way across platforms, because to us, that’s what makes sense. Can devs really afford to port an app to the webOS to sell to the tens of thousands of Pre owners, when they’re expected to tag it with iPhone prices, calculated for a base of millions? Whether by Apple’s design or totally by accident, everyone who doesn’t own an iPhone will suffer for it.

The App Store Effect illustrates a new kind of economy, and it’s not going to go away. In fact, it’s going to get worse. Developers will either adapt, die or leave. But where will they go? Until there are 50 million Android handsets and 50 million Pre offspring out there, the rest of the mobile software world is pretty much screwed.

via The App Store Effect: Are iPhone Apps Headed for Oblivion? – The app store effect – Gizmodo.



1. Johann Blake - October 19, 2009

I’ve been monitoring this market for some time now and I believe too many people continue to underestimate the potential power of Microsoft, Google and Palm. Although Microsoft screwed up and their Windows Mobile 6 platform is virtually dead, they have learned from their mistake and are now catching up. What does this mean? A lot. First off, the good-old business model that Microsoft upholds is rock-solid and advantageous for Microsoft, developers and consumers. Upcoming Windows Mobile OSs will have the same characteristics as the iPhone with Multi-touch and so on. But the big advantage is that developers are not tied into some App store. They can build their apps and sell them under their terms and not under Microsoft’s. Because Apple takes 30% of the developer’s revenue and yet developers are only seeing their prices go rock bottom, this cannot sustain itself over time. Ultimately, Apple will either have to change their attitude and business model or their product will do no better than their MACs did in the early days when they went up against Microsoft Windows. Consumers don’t give much a hoot about what operating system and development platform is used. They want great software at a low price, if not for free. But for businesses to produce high quality software and expect a decent profit, it cannot be done for such low prices or for free, no matter what kind of volumn you sell. Developing high quality applications is an expensive undertaking. It is absolutely imperative that a company’s product be easily found in an App store and obtain a justified ranking that is not based upon price but upon substance. That is what Apple cannot provide to developers and probably never will. That is why developers should take heart that while the iPhone is a hot item today, it is certain to lose its market share significantly over the next few years as Microsoft, Google and Palm heat up the competition.

2. The App Store Effect: Are iPhone Apps Headed for Oblivion? – The app store effect « Chicago Mac/PC Support - October 19, 2009

[…] October 19, 2009 by chimac The article has some interesting points.  It seems like a reasonable expectation for the future.  Perhaps developers are going to be more like adjuncts to marketing now.  Read more here. […]

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