My App Costs $2. Buy it. Or Don’t. | Mitch McLachlan

My App Costs $2. Buy it. Or Don’t.

Marketing | Tuesday, October 8th, 2013

There has been a lot of talk recently about app pricing, business models and even the viability of the market. I have developed one iOS app, but I am not trying to make a living as an independent app developer. This is an experiment and learning opportunity. At some point prior to launching my app, I decided to price it for $2. I’ll explain why. Then you can buy it. Or not.

The Investment

My simple app, Find The Game, helps you find radio stations that are nearby and affiliated with your favorite sports teams (currently MLB, NFL, and NASCAR). I sell it a couple dozen times a month at less than a buck and a half a pop after Apple’s cut. I have put hundreds of hours into it. That’s right: hundreds of hours. The latest version dropped last week. Here’s how that effort broke down:

  • Clean up existing data: 16 hours
  • Add new data for NFL: 32 hours
  • Update for iOS 7: 2 hours
  • Testing: 2 hours
  • Rebranding and creating new graphics for icons and App Store: 7 hours
  • Submitting to Apple: 1 hour
  • Updating Facebook page, Twitter profile and marketing site for new branding: 6 hours
  • Setting up, deploying and testing analytics and affiliate links: 4 hours
  • Total effort for a single version update: 70 hours

Yep, this one fairly minor update took me 70 hours. I value my time at $100/hour. Even at half this rate, that’s $3,500. This is the third similarly-sized update that I have done on this app. Total effort: about 200 hours. Total cost: approximately $10k. This does not count the time to develop the initial version, which required roughly the same effort. So when you add it all up, this one simple little iOS app has taken me about 400 hours. Even at a “friends and family” freelancing rate of $35/hour, that’s $14,000. One item that is missing from this list is marketing the app, which I haven’t really done yet. Also not included is the $2,000 of hardware and software required to even begin iOS development.

The Value

The investment outlined above is one side of the equation; on the other side is the value it returns. My revenue projection for the first year is a few hundred dollars. Because I charge $2 for the app, this is actual currency as opposed to the hypothetical costs invested. Still, that is a poor return on investment. However, this paltry sum is not the only value I have gained. As an experiment and learning opportunity, I also value these returns:

  • Learning a new skill (iOS development)
  • Learning a new programming language (Objective-C)
  • Acquiring experience in all other facets of the process: design, marketing, social media, and product management
  • Adding a new digital channel to my repertoire

All of this adds up, so while it does not look like this particular app will ever make me very much money, I still consider it to provide me on-going value. Therefore, I count it as a success. At this point you are probably asking why do I even charge at all? If the app is valuable to me beyond the minuscule revenue it provides, why not drop it to $.99 to get more sales? Or even just make it free?

Business Models

Beyond charging up front for an app, other business model options include:

  • Serving ads
  • Recurring subscriptions for content or services, such as Newstand apps or the Netflix streaming service required for its free app
  • In-app purchases for new content or consumables: purchasing individual issues of publications, or EA’s loathed model for acquiring new plays, players and even energy required to play Madden 25 for iOS

I don’t love those options, because:

  • I hate ads. As a consumer, I am willing to spend a couple of bucks on an app to avoid them. As a product owner, it’s a user experience issue I refuse to subject my customers to. Oh, and also, the payout is microscopic. Even if I made my app free in exchange for 100 times as many downloads, I’d likely make less money than I am today.
  • Subscription content does not apply to my app.
  • I toyed with the idea of offering my app for free, including one sport, with in-app purchases to add other sports. But the most profitable model of in-app purchasing does not align with my app.
Preditary In-App Purchasing

“Buying Pixie Diamonds costs real money and will charge your iTunes account.”

It turns out that most of the market is going towards free apps—mainly because the mass market will not pay up front for apps. This creates pressure for other developers to go free as well. And as of now, the most profitable business model is a free app with in-app purchasing. But this takes a different form than I could do with my app. The roadmap for app gold today is to create an addictive gameplay experience, and then charge customers small amounts of money for consumables required to continue advancement. While EA has gotten a lot of scorn and bad press for their attempt to do this in the iOS version of Madden 25, a lot of companies are making a lot of money this way. Candy Crush, currently the 7th most popular free game in the Apple App Store for iPhone, is actually the highest grossing app. What does that mean? Well, Think Gaming is currently estimating that Candy Crush is making over $850,000 per day for its publisher.

Candy Crush Profitability Metrics

As of October 3, 2013

In fact, there are hardly any paid apps in the top 20 highest grossing lists at any given time. So, the only apps making loads of money are free apps with small, addictive in-app purchases. While not every example of in-app purchasing is questionable, the approach can get very predatory very quickly. See the now removed Disney Fairies Fashion Boutique above. With a six-year-old daughter, I’m not cool with that.

So how would one really make a living as an independent app developer? Answer: it’s extremely difficult, and extremely rare. Or perhaps the answer is, You don’t.

You, the Consumer

Turns out that you, the app consumer, do not buy apps. You refuse to pay for them. There are lots of reasons for this. Some people naively believe that every app is some how paid for by Apple, or that all app developers are Apple employees. Some people see all the cool and useful and free apps that Apple creates and decide that apps should be free. And others can often enough always find a ‘good enough’ free alternative.

Pay for an iPad
Pay for an app

Lots of other app developers, especially indy developers, will try to change you and your non-buying ways. They’ll guilt you, or berate you, or analogize for you. I’m not going to do that. And here’s why: The market is the market. There is an opportunity or there isn’t. I am not trying to make a living as an independent app developer. But I am trying to make a living as an independent product developer.

My Solution

I will soon be launching another business experiment, a SaaS product. I have observed a real-world problem. I have hypothesized a solution. And I am going to test whether I will be able to find paying customers for that solution.

I may not pass this test, and true to the Scientific Method, that’s okay. Don’t get me wrong, I will be extremely disappointed if six months of work result in a failure. But I am pragmatic and realistic: I am not entitled to paying customers or success; not even the meager success that would bring in enough to help me support my family. There is a market. And their might be an opportunity. This, like all product development, is an experiment to see if I can execute in a way that capitalizes on that perceived opportunity. It’s a business experiment. Business means making money—money that I need to support my family. In other words, this product and business is not only an experiment, it’s a gamble with very real stakes.

Just like my SaaS product, my iOS app follows the same equation. I had my own real-world problem: trying to find my favorite teams’ broadcasts on the radio during long car trips. I devised a solution. Looking at what I invested in this app, you can see that the solution is worth more than $2 to me.

Find the Game: Stations Nearby

I invested a lot in this. You can invest $2 in it. But you have alternatives too.

Most of the chatter and data against the business of developing apps applies mainly to games and content-delivery apps. There is one category of apps that is still viable as a paid app: Utilities. Guess what, that’s exactly what my app is. It solves a real problem and I think it has real, monetary value. I am so confident in that fact that I will readily admit that there are other free options out there. I’ll even give you some of of those alternatives below so that you don’t need to buy my app. I am also including some bonus helpful tips so you can avoid the pitfalls that hampered me. WARNING: Do not undertake any of these activities while you are driving. Please delegate this to a passenger, or find a safe place to pull over before looking at your phone.

The Alternatives

  1. I have only found one other iOS app that does the same thing as mine, and lucky for you, it’s free! The descriptively named Sports Radio Affiliate Locator actually looks a lot like my app, both in presentation and functionality. It was released after I had begun development on my app, but before I launched. I had not seen in it until now and I may have abandoned my app completely if I had found it in those painfully slow early days. There are two catches however:
    • Remember the business models section above? The makers of this app opted to make their app free, but you have to pay $.99 for each team’s network that you want via in-app purchases. I am not sure how many teams they offer, but I currently provide 60 networks across three sports for $1.99, with 62 more more coming in the next month. While no user would buy every single team, if your area includes four professional sports teams, then my app would be cheaper. I would love to know if this approach has been more profitable for them than my paid app.
    • I downloaded the app on both my iPhone 4S and iPad, both on iOS7, but it keeps crashing before it can load. The description says it is compatible with iOS 5 and up. I don’t have any iOS 5 or 6 devices to test it against, but maybe you will have more luck than me, or perhaps it will be upgraded someday.
  2. In non-app options, most pro sports teams have a page on their website that lists their affiliates. You can find it if you Google it, or hunt around, or search their sites. Unfortunately, not all teams actually provide their networks on their sites. You have to download the 2013 Tampa Bay Buccaneers media guide, a 70MB PDF, to see a list of its affiliates. It should only take about 5 minutes on 3G. It’s free, but additional data fees may apply. All the stations are in there, just find a way to navigate to the 517th page. Last caveat on the Bucs: as of the time that the media guide went to print, an affiliate in Jacksonville was TBD. Perhaps this will be updated by the time you download it.
  3. Even when you find the list of your affiliates, it is not likely to be in a very friendly format. Most are organized into HTML tables, sorted by arbitrary parameters, such as alphabetically by location city or call sign. This can make it tough to figure out which stations you might actually be near. Some come in PDF form. You can find all 54 Texas Rangers affiliates in a map image. Just figure out where you are on that map, see what the call sign is of a station that you are in range of, then find the call sign in the sidebar list to figure out which frequency to tune in. You may want to use city name instead though, because that’s the order that the list is sorted by, not call sign. My personal favorite is the Minnesota Vikings, who use a screen shot of a spreadsheet, including garish colors to help organize stations by state.
    Texas Rangers Affiliate Map
    Minnesota Vikings Affiliates, Screenshot of Spreadsheet
  4. A word of warning: every single list of affiliates that I processed had at least one error. Some of these are relatively harmless, for example, a typo in a call sign, which won’t affect you as long as the frequency is right. Unfortunately, sometimes there are typos in the frequency as well, so you will think you can’t get a station carrying the game, when in reality you are actually tuned in to the wrong frequency. Other errors include using outdated call signs and frequencies (the most out of date one I found was for a station that moved on the dial and changed call signs 5 years ago), or including stations that no longer exist. I know this can be frustrating, but here are some tips if you would like to fact check the lists you use:
    • You can query the FCC’s databases by a number of parameters, such as call sign, frequency, or FCC license number, assuming your data source is not in error: AM Station Query or FM station query. Unfortunately, as of the time of writing, the US Federal Government Shutdown has taken the FCC’s website, APIs and web services offline.
      FCC Shutdown Notice

      “FCC online systems will not be available until further notice.”

    • If the FCC is still down when you need to search, you can try searching Wikipedia for the call sign, though this is less helpful if your data source has typos or out of date information. Be sure to search the call sign in all caps; Wikipedia is case sensitive. If you search for “wake”, you will get the definition of “the region of recirculating flow immediately behind a moving or stationary solid body, caused by the flow of surrounding fluid around the body” and not information about the oldies station in Valparaiso, IN.
    • As a last resort, I recommend Googling for the frequency and city name. Sifting through the results can help you piece together where the error might be to help you get on track.
    • Finally, if the above seems a bit too complicated, try this old-fashion, low-tech approach: use your car radio’s scan function and let it cycle through the dial in the hopes of finding your game. You may need to do this every 15-45 minutes as you travel in and out of range of various affiliates.

It’s Just Business: Why My App Costs $2

In building my businesses, I need to make sure to target markets that are financially viable. As Amy Hoy points out, some people value their time more than their money, and are therefore willing to pay for something that saves them time or provides convenience (say $2 to quickly find the closest station carrying the 49ers game). Some people have so little money or value it above anything else. These people will not pay for anything if there is a free alternative, no matter how inconvenient it might be (see above). There is nothing wrong with that. The key is in realizing that you cannot convert non-payers into payers. I’m building my first business, albeit tiny, around this app. Right now my objective is best served by its $2 price point. If my priorities change, I reserve the right to change this strategy. This experiment and learning experience is really about building a business, not building an app. That means creating value that can be converted into paying customers. It’s practice for the next business, and the one after that. It’s a low-stakes testing ground. The stakes are about to go up.

So there you have it. Twenty-five hundred words about why my app is $2. If you happen to have the same problem I did, and I convinced you that my app has value, and you are someone who values time or convenience over a couple of bucks, buy my app. Or don’t. It’s not for everyone, and that’s okay.

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