Monday, September 30, 2013

App Store Pricing: Worth at Least as Much as a Cup of Coffee

I read an article this morning on Hacker News suggesting that most apps are worth less than a cup of coffee. In it, Florian Kugler says this, emphasis mine:
Another approach – and I would argue a more insightful one – is to learn about the nature of the market we're working in. And not only about the market as an abstract whole, but about the value of our products specifically. The economic reality is that most apps offer next to no value to people. They might say otherwise when asked about, but their actions speak pretty clearly: A cup of coffee is worth more than almost every app on the store.
I disagree. I might be a bit biased, but I think there are a lot of apps on the store worth significantly more than a cup of coffee. That being said, I also don't think that a cup of coffee is worth the price of a cup of coffee. Perhaps the fact that I think the price people pay for coffee is absurd plays into my feelings here.

The real point here isn't the price of coffee though. It isn't whether apps are worth more or less than a cup of coffee. The question is whether or not apps are providing value to people and how willing people are to pay for that value. It's easy to say "people don't pay for apps" or "most apps are crap not worth a cup of coffee." Kugler goes on to say:
That's a hard pill to swallow, but we should let it sink in. We pour all our creativity, time, and passion into creating basically worthless products. 
Finishing with: 
But we should be aware of the fact that we're in the business of creating products which offer very little value to people. It's our choice if that's what we want to pursue. 
I really don't think this is true. The thousands of reviews I have on my apps telling me how much they like my apps leads me to believe this isn't true. It's easy to cherry pick bad reviews or the trolls out there that complain about your $0.99 app being overpriced. When I get notes and emails from people telling me that my debt snowball or budgeting app helped them change their finances I get the feeling they received more than a cup of coffee worth of value. When people tell me they've used my biking app to track hundreds or thousands of miles of exercise, I suspect they've gotten some value out of my work. To the discussion at hand, when I get paid each month (more than I did at my day job) I have a good idea that some people are finding value from the things I've made.

Finally, just as an interesting side note I thought I'd look up how much Starbucks really does make. According to Yahoo Finance, Starbucks has made $7.5 billion in the last year. In June, Apple said that they have paid developers $10 billion total, and $5 billion in the last year. If you add in advertising as well as Android profits, I suspect that app sales are roughly on par with coffee sales (at Starbucks, let's be honest that's what we are talking about with "price of a cup of coffee"). App sales are also growing at a pretty fast rate. I suspect we will surpass "coffee" sales next year. Don't let anyone fool you. Apps are most definitely not worthless.

Discussion on Hacker News

If you've read this far and are interested in the mobile app market you may want to check out my book on how I make money on the mobile app stores called Building an App Business.

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