Why consumers will pay for a coffee but not your app

Photo: Stan Honda/ AFP/ Getty Images.

Can you remember the last time you bought a mobile app? I don’t mean downloading a free one, but actually paying for it.

I bet it’s been a while. But when it comes to your daily coffee hit, I can guarantee you didn’t think twice. The average app is about half the price of one coffee (and you’ve probably had a couple today), and it’s significantly longer lasting in enjoyment and usefulness. So how has it become that we’re not willing to pay more than a couple of dollars for software, but don’t even question it when it comes to something like a cup of coffee?

Think about it this way. A decade or two ago before mobile apps ever existed, you would pay anywhere between $30 – $80 for a computer game (upwards of $110 for a new Xbox or PlayStation game today). But now, for a similar game for your mobile, you wouldn’t even consider paying this much upfront. So what’s changed?

The difference between your coffee and your app purchase is that coffee is a tangible object. You can see, taste and touch it, and you know what you’re going to get when you order a coffee (well most of the time, at least). Mobile apps, on the other hand, are things you’ve likely never tried before.

That’s largely why only five per cent of the iOS App Store’s revenue is from paid apps. The remaining revenue comes from in-app purchases; effectively, allowing you to download the app for free and pony up for extra content or an ad-free experience once you’re addicted to the app itself. This points to the fact that once a consumer has tried an app and are happy with it, we’re more than happy to pay for it – especially if it is something that is going to save us time.

As an app developer then, it’s clear that it’s not as easy to make a dollar from apps as many make it out to be that. In fact, it’s estimated that only one per cent of app developers actually make any money from app development. And most of the time, this is from in-app purchases, rather than buying an app upfront. App developers — who I guarantee spent significantly more time to make that app than your local barista did to make your latté — still want to make money.

Photo: Paul Marotta/ Getty Images.

To do so, many are now looking to new and, perhaps, somewhat less ethical ways to monetise their apps.

You know those annoying pop-up ads that take over your screen every time you open your app? Well, that’s one way app developers are making a bit of cash for their apps. According to a report from Vision Mobile, almost half of independent developers are making money through ads. While that in itself is understandable, the race for money through advertising can lead to poor user experiences turn away consumers from using these apps.

The other way app developers are trying to make money is by selling your data. Ever wondered why you start receiving random emails or text messages, despite actually never signing up to them? That’s probably because your data has been offset to a third party player. Of course, this is not always the case, but as more and more apps come onto the market, with very few actually being sold for a price, it’s making it harder than ever for independent app developers.

So who is really to blame here then? It could be argued both ways. If we as consumers were more willing to pay for apps upfront, then maybe app developers wouldn’t need to rely on including annoying ads or on-selling your data to make a few bucks. But it’s also these annoying ads that’s deterring consumers from actually wanting to use the apps in the first place.

Ultimately, it’s a hugely competitive market and it’s leaving little room for independent developers to make a buck. Big software companies like Google and Facebook make beautifully designed, quality apps but they have huge dedicated teams of engineers to put together these apps and can then offer it to consumers for free. Their businesses are subsidised by the massive, ad-generating sales machines out there. Your average app development shop is lucky to be able to gain a livable wage using the same means. That’s why it’s so hard for independent developers, with smaller teams and budgets, to compete.

Despite this, the App Store continues to boom. In 2020, it’s projected that 210 billion apps will be installed.

But this doesn’t mean they will all be successful, let alone, used. Millions of apps are downloaded every year but only a few are actually used. And this will unlikely change, at least in the near future. We’re now in a world where we have a few big apps, some independent apps and a handful of free to play games with in-app purchases. But for the future of the App Store, if it is to remain sustainable, will rely on in-app purchases, advertisements or corporate cross sponsorship.

It’s fair to say the gold mine that was app development is well and truly over; that is if it ever even existed.

Seb Pedavoli is the co-founder and creative director at Proxima, an Aussie startup creating beautiful, innovative software that helps companies engage with customers through rich user experiences.

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