Yep, paid apps are dead

October 2nd, 2013 Jeremy Jeremy

paid-apps-dead
Marco Arment recently wrote what most people with top apps were thinking and what David Barnard predicted over a year ago: “Paid-up-front iOS apps had a great run, but it’s over.”

Besides being an app maker, I am a hopeless optimist. Given that my very, very favorite business model happens to be selling my wares for a simple price, it took some really hard evidence for me to come to the same unfortunate conclusion.

The new reality

I have been talking to a lot of the most successful app makers out there — who many would assume are millionaires off their top apps — and I’m hearing the same thing again and again: people just aren’t buying as many apps anymore.

By piecing together a few anecdotes I have heard, the top ten best-selling apps are selling roughly 25% as many copies as they did a year ago. If a #5 app sold 16,000 copies a day a year ago, #5 might only sell 4000 copies a day today. Now, that may still sound like a lot but apps are lucky to be #5 for a few days before dropping back into the abyss of obscurity. I’m not saying those statistics are by any means exact or even accurate but this is the kind of scale we are talking about. It is pretty drastic.

The volume just isn’t there anymore for paid apps. Premium apps that can sell for $5-$20 can probably continue to do well but the days of hit-based $0.99 apps are very much over.

Please convince me otherwise. I would really like to believe what I am saying is not true.

The way forward

Don’t get me wrong, this is by no means the appocalypse™. People are downloading more apps than ever before and there are still incredible opportunities. Developers who can adapt have an extremely bright future! The question is, how are indie developers going to not only survive, but thrive in this changing environment?

Sure, Apple could allow for trial versions but…

  1. Without trials in the actual marketplace, it is very difficult to predict if or how much free trials would actually affect sales.
  2. More importantly, Apple is unlikely to do it any time soon.

In-app-purchases for non-games have been used with some success by some of my App Store buddies. It is definitely worth exploring. David Barnard tweeted the four main factors that work together in a good IAP strategy:

  1. Massive download numbers
  2. High conversion rates
  3. High prices
  4. Reccurring revenue

He says “You’ve got to get the blend just right to make good money. High conversion rates don’t matter if downloads and prices are low. A niche app that only gets a few hundred downloads a day needs really high conversion rates, high prices, and/or reoccurring revenue.”

Then he posted a screenshot of sales for two of his apps…

iap

Mirror makes 50x more than Timer in a day, showing the crazy amount of variance with the IAP model. Grades 2 had nearly half a million downloads and, though we didn’t do too much to increase our price or conversion rates, it made a laughable amount of money for a reasonably well known, Apple Design Award winning app. The IAP equation is just really difficult for niche apps, though some developers have pulled it off through remarkably high conversion rates and prices.

As a general rule: with IAPs, go big or go home.

Getting a little more radical…

IAPs are great but I am not sure they are the ultimate answer, at least not for my company.

My thinking has changed quite a bit over the past few months and here is what I have come up with: we need to stop making apps and start making businesses.

What on earth does that mean? It basically means that the simplistic business models aren’t working any more and we might need to think bigger and more creatively about how our apps generate revenue. It means we might need to start thinking about business models that go beyond charging users for the app.

HoursIcon

Hours is a perfect example. The old thinking goes like this: sell Hours for a few bucks, try to have a big launch. Rinse and repeat for updates. Since we’ve learned some things about launching great apps, we can probably do fairly well with this model and make, say, $100k.

That would be considered a successful app. But $100k isn’t enough to support a business like Tapity. It’s not nearly enough.

But what if we think bigger? Yes, release the app and sell a lot of copies but don’t stop there. Use that to prove to big companies that Hours is the absolute best time-tracker out there, hook into the back-ends that those companies use, and sell it to them at the corporate level for big bucks. Build some web and Mac integration. Maybe even hire a small salesforce. Make it a company.

Yeah, it’s going to be hard but that may be what it takes to stay in the game for the long term.

A lot of apps don’t have the potential to be bigger businesses. I don’t think I can afford to be interested in those ideas any more, at least not until we can get the cash cow apps figured out first.

The App Store is what it is and I intend to make the best of it. I think there is a certain stigma in the indie app community for thinking bigger. We need to get over that. I’m actually really excited because I believe thinking bigger will let me continue doing the work that I love and maybe even make a couple bucks along the way.

To finish, I’ll leave you with a quote from David Barnard’s forward thinking article on the same topic:

“The future of sustainable app development is to give away as much value as possible and empower those who receive more value to pay more for it.”

-Jeremy Olson

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13 Responses to “Yep, paid apps are dead”

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