Vertical Paper

App pricing

Only a few years ago the concept of a mobile app store did not exist. Or at least not in a sense as we know it today. Yes, it was possible to get third party apps for your smartphone (mainly Symbian or Java), but the experience was quite lame — no integrated environment, no common policy, no app reviews or ratings, very difficult traceability, no updates, complicated installation. The list goes on and on. 

Today, on the other hand, every smartphone platform has its own app store — be it Apple’s App Store, Google’s Market, RIM’s App World, Nokia’s (now almost dead) Ovi, Microsoft’s Marketplace or Amazon’s Appstore. With varying degrees of success and major differences in user experience and app selection, all these app stores* aim to provide a seamless and integrated user experience for discovery, purchase, installation and updates of applications for a range of mobile devices. App stores truly revolutionised the way we perceive value of our mobile devices and the mobile ecosystem as such. And a completely new domain of the SW industry evolved from it.

Now, today we have a selection of modern and, for the most part, quite useful and polished mobile SW platforms. We also have a ton of apps (Android and iOS  stores combined now offer almost a million) to choose from, many of them for free. While the proportion of paid apps differs significantly from platform to platform (e.g. iOS has a high percentage of paid apps) the overall business model and price level is actually very similar in all the main app stores. Yes, there are also in-app purchases and subscriptions, but the overwhelming majority of apps is still sold on a pay-once-get-updates-for-free basis for between 69p and £5. And this whole setup works rather well. The question is for how long.

This may not be obvious, but most apps are in fact priced very moderately given the amount effort and money the developer has to spend on the app design, implementation, testing and customer support. Just compare it with the average price for PC apps of similar size/complexity. I mean, how many really good computer apps can you buy for under a fiver? 

We are likely to see two mutually opposite forces affecting the average price level of quality apps — increasing competition and maturing ecosystem. The former tends to keep prices low. More and more small developers will try to make money in an already fiercely competitive environment and many of them will attempt use low price or temporary discounts as their key competitive advantage. 

As the platform matures though, customer’s will get more and more picky about what they pay for. While this may sound counterintuitive, in the sea of mediocre apps (just browse through the almost unmoderated Android Market today) the truly exceptional ones can easily charge a premium and still become super popular. This force is going to act against the low-end competitors one and will push app prices up.

Another consequence of a mature and large ecosystem is that even developers or SW houses that up until now resisted entering the system cannot afford to do so anymore as they can see the opportunities and revenues they are missing. As a result, we are likely to see more advanced and more expensive apps entering the marketplace in much higher numbers. It will be very interesting to observe how app store policies, level of moderation, commercial models and customer’s behaviour will change in response to these forces. 

* For a lack of a universally accepted term, I am using “app store” as a generic term to describe any integrated system designed to sell mobile apps. The same term, but capitalised (“App Store”) refers to Apple’s specific implementation of an app store.


Want to know more? This is Vertical Paper, a rather randomly updated personal blog about technology, web, photography, business as well as life in its entirety. Created and maintained by Milan Juza.

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  1. milanjuza posted this