This is an interesting and definitely non-trivial economic issue. What we're presented with it the classic supply and demand pricing problem, with some fun complications.
I'm assuming a horizontal supply curve (and marginal cost approaching zero), which implies that pricing comes down to substitutability and demand.
The pricing strategy in the article implies that to break into the top 10, your app has to be priced at $.99. To me this suggests that quality apps are perfect substitutes, and are selling at as close to marginal cost as possible. Once you fall out of the top 10, however, the competition is more monopolistic, and you can raise your price such that you sell the quantity where marginal cost equals marginal revenue.
This seems backwards to a traditional market, where the competition is more monopolistic in the higher quality products, and more perfectly comptative in the lower quality products. Interesting.
At the end of the article he makes the assumption that he would sell 50K no matter what the price is, but earlier in the article states that decreasing the price can raise you in rank which can be 10X the units sold...
I think this is the central question though - are app store customers price sensitive at those levels? His calculations assume they are not, common "wisdom" assumes they are. Now I need to ask where is the data? The one app I have (not a game) that does any sales to speak of, but so low it probably is not statistically significant, suggest they may not be - at least going from .99 to 1.99.
Huh? He comes right out and says that you need to be .99 to break the top 50. The problem is, being .99 isn't enough to get you in the top 50, and at that price point, you're betting the farm to get there.
>>rankings based on the standard "best seller" definition cannot be maniuplated
Why not?(I don't have an iPhone, so I really don't know anything about it.) It would be fairly easy to buy your own app. A $0.99 app and 30% fee to apple, you could buy your app 300 times a week for $90. If it is really that much of a hit driven market it might be worth it. Apple would love it(cash and being able to claim the next billion sold that much faster.)
Like what movie studios do. The general 'most popular' list is the highest grossing films of all time, which is based on box office receipts not the number of tickets sold.
Apple could do something similar - highest grossing games, not just number sold. Would balance out factors like those the OP discuss.
Why does the project have to pay back its 2 months' development costs in just an initial surge of 2 months' sales?
Sure, games are hit-driven and their sales peak early... but the iPhone/Touch platform is very young and still growing. These games will still be playable and sell in small quantities years from now, when the platform's installed base is much larger.
Read carefully, the author explains it very well. Basically, 90% of app sales are made during first 6 weeks, which happens only and only if your app hits to top 100 (which is 99.95% less probable for an average developer). After that sales slow down to virtually zero (1-2 sales a week).
PS. Developers want to eat, support their families, pay their mortgages, etc. so patience is not an option here.
PS. Developers want to eat, support their families, pay their mortgages, etc. so patience is not an option here.
If this is their main concern, then why are they spending their time on such a low payout time consuming endeavor? "Not enough people are buying my iPhone app fast enough for long enough" isn't something a mortgage lender or a hungry kid wants to hear.
Just a reminder, lots of things in that article are simplified quite a bit for the sake of putting together a coherent argument. The app store, in our experience, has an AWFULLY long tail. But our games have also been pretty successful - I would say the more complete statement is that you will do 50% of your lifetime revenue in the first 2 months, but it will take at least a year or so to earn the other half. That's not insubstantial by any means, but it also means that that revenue isn't terribly useful for building your next project (this is again a simplification, as the situation changes when you have more than one app bringing in that stream, etc etc).
So yea, I didn't mean for it to sound quite so dramatic, like the app store doesn't have any tail at all, because that's not really true. But for getting a read on your product's success and earning some useful revenue for the next project, those first 2 months in my experience are key.
That is probably a conservative estimate on the AppStore (and people ask me why I won't develop for it).
By way of comparison, roughly .3% of my sales to date were within 6 weeks of release. If you consider the release of my web version to also count, then about that bumps up to about 5%.
The App Store is only 17 months old; it's premature to say what the long term patterns will be with so little data, and while marketing strategies and Apple's own presentation of "top seller" lists keeps changing.
Old PS2 games still sell, 10 years after the platform was introduced. A good, simple game for the iPhone platform may still be sellable, in some format, in 2019. And the installed base of compatible devices could be 20x larger.
PS. There was an invention hundreds of years ago that addresses exactly the need for paying current costs while waiting for long-term profitable projects to pan out. It's called 'finance'. Considering only 2-month windows of costs and revenues as if we were talking about subsistence farmers is a rookie myopia.
It is also possible to sell virtual goods from within your (cheap or even free) application:
http://www.insidesocialgames.com/2009/11/30/ngmocos-free-to-...