Hi! I’m John Fonte, a software engineer for Learning A-Z. I build custom websites and hack on apps and circuits.

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It’s Just an App

The current dominant business model for mobile applications is free with one-time purchases. This model is outdated, incorrect, and harmful to the developer and the consumer - especially when the developer is a single person or very small team.

The iTunes Store and Google Play

The iTunes Store and Google Play(as Android Market) launched in 2008. These marketplaces were great sources of innovation - they allowed single developers to create applications for smartphones that would make them money, and it gave consumers apps that they would never think of on their own. Two ideals that carry through to the iTunes Store today are that apps should be tightly controlled, and that the basic price of apps is ‘Free’. Google Play shares the second of these ideals, with a reverse approach in control that applies harsh testing to allow an app to become “Verified”.

One-time purchases are bad for all of us

If you’ve purchased an app through Google Play or the iTunes Store, chances are that you’ve hated the app or expected much more from it than it gave you. App consumers have been conditioned to expect free apps, with the less ads the better. As a consumer, you’ll constantly question “why pay for this, when I could not pay for the other thing?” It then falls upon the developer to convince you of any monetary value whatsoever.

The price any developer competes with is always ‘Free’. This is a weak position to market from. This leads to bad applications because there is no incentive for people to make free apps other than advertising or as a platform to get you to buy their actual product. There are many successful companies that create apps which circumvent this model completely. This tells me we should replace the normal payment model.

Subscription software model

The best solution to bolster our ad-ridden app marketplaces is subscription-based payment. A small monthly payment ensures that a developer can continue to generate cashflow if they are providing you with more value through use of their app than you are paying back to them. The developer stays invested in listening to their customers beyond a one-time payment, and the consumer can re-evaluate whether they still need the app at will. All current subscription-based apps are paid directly, outside of the app stores. It’s hard work to market and build an app that can generate subscription sales.

Case Study: MyFitnessPal

The nutrition app MyFitnessPal had previously subsisted on app revenue and investments. It was recently bought by UnderArmour, who quickly introduced a ‘Premium’ tier. The downside, though, is that many MyFitnessPal users need convincing in order to upgrade to the paid version. This incentive simply does not exist within the current system.

MyFitnessPal manufactured incentive by explaining that the Premium payment option removes advertisements and unlocks additional features. This tactic alienated some users, while others think it is a fair assessment of the daily value they gain from the app. A third category of users is indifferent and will continue to use the free, ad-included version.

Why MyFitnessPal’s success isn’t normal

MyFitnessPal has advantages over any single-developer app when it comes to introducing a subscription tier. They have a large development team and huge amounts of funding. Also, their users already trusted the app on a daily basis (a metric known as addiction).

This kind of leverage is difficult to generate naturally, because MyFitnessPal essentially offered a free app and is finally getting rewarded for quality. But there’s no hard and fast rule for when apps can start charging, or how to generate incentive for users. So creating a revenue stream is very difficult on small mobile apps, where users aren’t used to paying for anything except by watching ads.

What could be done better

It’s difficult to see app markets switching completely away from free apps. This would make the barrier to entry too high. However, Google Wallet allows apps and web services to set up subscription payments. If a subscription option was introduced in the store, Google could convince app developers to use it as their main method of payment on web and Android.

The main problem, though, is that our culture doesn’t value the apps we use each day with our wallet - only with our words. When that stops floating the apps we love, hopefully we’ll do something about it.



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