How not to price your iPhone app out of existence

I came across this blog post (via Daring Fireball) about the iPhone App store, and how the ecosystem of developers undercutting each others' prices isn't something that can last. There are some really good points about the problem with the way the iPhone Apps store is organised.

In short, an application that sells for $0.99 (apparently the going rate for a basic application) isn't something that is feasible in the long term; applications need support, support takes work, and developers need things like food, a roof over their heads, some time to spend doing things other than developing. The way the apps store is skewed towards the bigger-shifting free/very cheap applications isn't in the interests of either Apple, or professional developers.

That said, there are two big problems that I see with the argument being made; Firstly, it relies on the assumption that a developer needs something like ~$50,000 a year before taxes to live. This is assuming that they don't live in a big city, but "a farmer’s wheat field in some desolate corner of Iowa." There are developers who don't need that; the first example that springs to mind is a developer who is building his iPhone apps in his spare time- perhaps while pulling in a decent living in the day writing boring software for boring businesses who pay boring six figure salaries. But how about developers living elsewhere- there are plenty of countries that you can live like a king for far less than $50,000 a year. Some of them have booming economies, and fairly significant numbers of software developers.

But secondly, it assumes that the developer who needs ~$50,000 dollars a year is getting that exclusively from sales of their application; that the iPhone application effectively sits alone in it's own little ecosystem; despite existing on one of the most interesting networked communications device that's out there.

I mean, how many people pay to visit Facebook? Other than the occasional person who actually buys virtual gifts for their friends, none. Yet Mark Zuckerberg is worth billions of dollars. Why? Because it's not the users who are giving him money. (Feel free to substitute "Google" in that sentence if you're uncomfortable with Facebook's business model.)

My favourite application is NetNewsWire. It's free. As a result of it, I can't imagine using any RSS reader other than Newsgator. I also use the Facebook application on a regular basis, and as a result, I'm more active on Facebook in general- meaning that my Facebook profile is more representative of who I am (making me more easy for Facebook to effectively target me and advertise to me), and also that I'm more likely to use the website (with ads) while at my desk. In the space of a few months Newsgator has, purely as a result of their iPhone application, gone from being a site I'd heard of but never used to one of the sites I visit several times a day.

iPhone applications make it easier and quicker to connect to a website/web service from a mobile phone. They can take away the registration/log in process. They can format the pages to fit the screen and optimise the user interface perfectly. They make the experience easier, and they are persistent- once you've tried it out, the application stays there until you decide it's unnecessary- you're not going to remember using it a couple of weeks later and not know where to find it again.

Bottom line: you wouldn't expect someone to charge you to visit a mobile website- but you wouldn't expect someone to build a website for free. When you've got developers with cheaper living costs, lower overheads or simply the free time and energy to devote to building their applications, you can't compete on price— but you can't necessarily compete on quality either.

One thing that the "Open" world (that's "open source" projects like Linux, as well as "open" information sources like Wikipedia) should have taught us by now is that the work that can come out of an organised and scalable project is impressive, and hard to compete with on a commercial level. But how many Open Source developers are getting paid to work on projects like Linux or MySql because their work, along with the work of other Open Source developers, benefits their employers? Most of the more productive contributors, it would seem.

There is most definitely money to be made in giving away your product for free. The real trick is in making the right product, giving it to the right people and figuring out where money can be brought in. That could be in the form of some sort of subscription for advanced features that a small number of users take up (eg. Flickr) or access to additional exclusive content— or just good old advertising.