The apps monetization problem

While app stores are a great distribution channel for developers that want to sell applications, it is not the best monetization tool if you want to get a living.

There are some mechanisms in the current model of the stores that limit developers on how and what they can charge for the application and services and this has an impact on the quality of the applications and limit their potential.

Ben Thomson of Stratechery nicely list 3 problems in his From Products to Platforms post.

The problem for iPad developers is three-fold:

  • First, the lack of trials means that genuinely superior apps are unable to charge higher prices because there is no way to demonstrate to consumers prior to purchase why they should pay more. Some apps can hack around this with in-app purchases, but purposely ruining the user experience is an exceedingly difficult way to demonstrate that your experience is superior
  • Secondly, the lack of a simple upgrade path (and upgrade pricing) makes it difficult to extract additional revenue from your best customers; it is far easier to get your fans to pay more than it is to find completely new customers forever. Again, developers can hack around this by simply releasing completely new apps, but it’s a poor experience at best and there is no way to reward return customers with better pricing, or, more critically, to communicate to them why they should upgrade
  • That there is the third point: Apple has completely intermediated the relationship between developers and their customers. Not only can developers not communicate news about upgrades (or again, hack around it with inappropriate notifications), they also can’t gain qualitative feedback that could inspire the sort of improvements that would make an upgrade attractive in the first place