From August 2006 to July 2008, Dan Lyons published the amusing blog The Secret Diary of Steve Jobs writing as “Fake Steve Jobs” or just “FSJ”. After over a year of people incorrectly guessing the identity of Fake Steve Jobs, Brad Stone of the New York Times finally figured out that FSJ was Lyons, who at the time was a writer Forbes. Lyons wrote a humorous book under his Fake Steve Jobs name called Options: The Secret Life of Steve Jobs – A Parody
A few months ago, and as a result of his FSJ fame, Lyons was offered the position of chief technology correspondent for Newsweek. That position had previously been held by Steven Levy, who left to become a full time writer for Wired magazine. Levy is one of my all-time favorite technology writers, and I love the book he wrote about the history of the iPod called The Perfect Thing: How the iPod Shuffles Commerce, Culture, and Coolness
That is a lot of background for today’s post, but with Christmas around the corner I thought this would be a good time to recommend both of these books as gifts for the Apple enthusiast in your life. They are both short but very enjoyable reads, especially Levy’s book on the making of the iPod. And they are inexpensive enough that they also make great gifts for yourself. (Full disclosure: if you buy something from Amazon using the links to Amazon that I sometimes place on iPhone J.D., Amazon gives me a very small referral fee, which helps to defray the costs of running this site.)
But the real reason for my post today is to point out that the current issue of Newsweek includes an interesting article by Dan Lyons about how some iPhone programmers are making a lot of money, even though most iPhone apps are really cheap, virtually all in the $1 to $10 range (if not free). This is great because it only serves to encourage more smart people to create more great iPhone apps, something that benefits us all. The Newsweek article is a good, quick read, and if you enjoy reading iPhone J.D., I think you will enjoy the latest article from Lyons as well.
I beg to differ. The fact that a few developers have managed to make a great deal of money at a low price point is actually horrible news for the platform.
The iPhone software economy has rapidly evolved to the point where there are only two ways for a developer to make enough money to be able to justify the investment in development and on-going support:
1) price super low and achieve massive volume of sales
2) price super high
Starting with number 2, this only works for very specialized software where demand is sufficient to overcome the price. Examples include some of the very specialized medical apps, and the “law in a flash” flashcard software – nervous law students are used to paying high prices when exams roll around.
As for number 1, consider that software essentially equivalent to my legal reference software would cost $19-$29 on windows mobile or palm, and I have to sell it at a tenth of that price because iphone app shoppers militantly recoil at prices above $5. While this results in a great deal for consumers in the short run, in the long run most developers are faced with two choices – abandon the platform because they can’t afford development and support costs, or create cheap and crappy software so that each $0.99 sale represents profit.
Because of the way the itunes appstore is set up, it also means there is almost no incentive to support software – one is almost always better off just releasing the next cheap app instead. One could argue that developers should rely on alternative marketing mechanisms (other than those built into the appstore) to market our software, but Apple doesn’t make that easy, either. For example, the first rule of marketing is that it’s easier to market to an existing happy customer. But Apple provides us no access to the names or contact info of customers, no way to contact existing customers (no way even to let these customers opt-in to such contacts). Apple gives us no way to price-differentiate (buy three apps, get one half-off). Apple forbids most types of cross-marketing from within the app itself (though some have done so and gotten away with it).
In any event, I submit that to encourage more smart people to create more great iPhone apps, the average app price has to increase from the $1.99 range to the $9.99 range.
Interesting points, Cliff. Some similar points are made in this post by Andy Finnell:
http://www.losingfight.com/blog/2008/11/15/how-to-price-your-iphone-app-out-of-existence/
And here is another article with more on this subject:
http://www.mobileorchard.com/iphone-app-store-gold-rush/
-Jeff