Thursday, July 4, 2013 12 comments

How do App Developers Make Money? Seems Completely Unsustainable

Something that has always puzzled me is how software app developers on mobile platforms (phones, tablets) make money. Some mass market products, such as games, make money off large volume and/or advertising but how about all the others?

Writing for Stratechery, Ben Thompson illustrates the difficulty faced by app developers, particularly those developing productivity software (bolds by me):

Paper is a transformative, device-defining app, and has been awarded accordingly by both Apple and the design industry. According to App Annie, as of June 21, Paper ranked 7th in the Productivity category according to downloads (119th overall after a recent jump), and 4th in revenue (108th overall).

By every visible measure, FiftyThree, the makers of Paper, are the definition of an app store success story...
But underneath the surface, things aren't so rosy:
The problem for Paper is the same for all productivity apps in the App Store: there is no way to monetize your existing users...

My use of Paper is an essential part of stratechery, yet I needed to only pay $8.99 for two in-app purchases, for which I never need to pay again. That’s a hell of a bargain, but it’s ultimately unsustainable.
How can any developer survive on $8.99? Not only that, customers don't have to pay again for a long time (if ever).

Ben suggests (in other posts) several solutions, including the subscription model, but very few apps utilize that right now. The whole app industry seems ready to collapse in my opinion—unless their business model changes drastically.

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12 Response to How do App Developers Make Money? Seems Completely Unsustainable

July 10, 2013 at 10:37 PM

They need to do subscription model like what Evernote does.

July 11, 2013 at 12:13 PM

Hi John,

Yes, I think subscription model is probably the most logical. However, it seems we are nowhere near that. The app platforms aren't tailored for it yet, and the consumers/buyers don't understand it well either. For example, who actually handles the payments? The app store, app developer, or a 3rd party? Can we trust these no-name developers (there are thousands of them developing apps) to handle our credit card and bank payment information? If you subscribe and let it lapse (not pay for a short while) do you lose everything? And so on.

I think the subscription model is where we are headed but right now very few make use of it.

July 15, 2013 at 6:18 AM

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December 13, 2013 at 4:44 PM

Technology seems to be exploding out of sight.

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Tyler Koenig
The Sovereign Society

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