Apple likes to characterise itself as a friend to startups.
They recently announced the App Store has paid out over $10 billion to developers.
But Ben Thompson of Stratechery argues that the current App Store model caters to more flash-in-the-pan success for small app developers — and is far from sustainable.
Thompson uses the example of FiftyThree’s popular mobile creation app, Paper. Paper has been awarded Apple’s Design and App of the Year awards, and recently recieved $15 million in funding.
And with an initial team of only five people, Paper is a classic success story, right?
FiftyThree has recently made some changes that shed light on how unsustainable their original model was. Paper is a free app, with the option to upgrade to a fully-featured Paper app for $8.99.
And then what happens?
And that’s a problem, according to Thompson.
For a team of developers that need steady salaries, even if a majority of iPhone and iPad users pay to fully upgrade their app (buying things like additional paints and brushes), the revenue quickly turns from a torrent to a trickle.
And so developers start creating more and more in-app purchases, in an attempt to get users to pay a dollar or two and get a new colour set or some new artistic effect.
But this often angers loyal users, who can begin to feel like they’re being nickle and dimed.
Thompson argues that one alternative is for app developers to charge for seasonal updates that include these smaller upgrades, which might be viewed as a more acceptable charge than à la carte features.
Another option is to expand the app’s focus by implementing features such as a social component.
Taking it one step further, some apps have branched out and produced hardware to go hand-in-hand with the app, which can bring in far more revenue than small in-app purchases.
FiftyThree is adapting, choosing to focus on collaboration and new hardware too. Paper already advertises for the Pogo Stylus, which costs $79.95, but they could end up developing their own.
The app game is changing, and developers would be smart to plan for ways to keep the money flowing even after initial adoption.
You can take a glance at Thompson’s in-depth analysis on Paper and FiftyThree here.
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