The Relative Value Of Software

By Nic Schlueter | Monday, Nov 9, 2015

Apple is my default platform. I earn my living building iOS apps for clients. I have been using Apple exclusively for over a decade. You could say that they are my favorite computing platform. But lately, their actions have made me consider diversifying my skills.

Since the arrival of the App Store over the past 7 years people have been constantly devaluing software. This is not surprising since the App Store has lowered the barrier to distribution. For apps that don't require a server, there is no additional cost to distributing an app. Since there is no cost associated, it is completely rational to solve for the greatest $ where:

C = Number of customers
P = Price of the app

C * P = $

The graph of that formula is different for each app, but you can imagine more people will buy it at 1.99 than 9.99. If there are more than 5 times more people at 1.99 it is logical to lower the price from a purely financial point of view. There are other non monetary reasons that go into app pricing, but we won't get into those now.

But when the price goes to 0, there is no number of customers that can "make up for it in volume." You either need to make money on it indirectly or not make money on it. Indirect ways of making money include, hardware sales, advertisements, selling the user's data or selling an upgrade. I am intentionally not talking about services that are supported by an app or apps that sell things, because those are not dependent on the app store for monetizing.

Apple themselves has done this with most of their software, including their operation system upgrades. This is great for developers building apps for those devices, but it sets an expectation with consumers that software is cheap, even complicated software. You frequently hear customers say, "I never pay for apps." That is a completely rational thing to say. If you try an app and it is good enough most of the time, you would never pay for an app.

On the flip side of the coin, you hear developers saying, "It is cheeper than a cup of coffee. You buy coffee and don't think about it." The real question they are asking is, "why do you value software the way you do?". There are a couple reasons why developers think software is worth more than non developers. Obviously, they built it, so they know how much effort it takes and they value their time more than customers do. The other reason is a developer's definition of good enough is going to be much higher than a customer's definition. A typical developer sees ads and only sees the wasted screen space, bandwith, battery and user attention. A typical user just ignores the ads and never thinks about it again.

Apps have to be at least 1 of 3 things to make any money:

  • Very good
  • Very lucky
  • Justifiable for work

Even better they are more 2 of those or more.

Based on all of this, I have sadly come to the conclusion that building an app and selling it is not a very good use of my time. The question becomes, what is a better use of my time?

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