Ryan at untoldentertainment recently went to an interesting place, perhaps via my post on iPhone App Store Marketing, particularly the part where I discuss pricing too low and the negative reviews you may receive.

From Ryan’s post:

“A fifty dollar steak will generally taste better than a six dollar steak, even if they’re the same cut and are prepared by the same chef. Humans are funny that way.

All this is enough to make me rethink the benefits of free-to-play models, as both a business owner and a consumer.”

This “free-to-play” model is basically the same as the Shareware model. Free for a start, and then pay to keep playing, or unlock content.

I see many, many more downloads of my Mac software than I see registrations. My Mac Shareware apps are actually way worse off than the 2-5% registration rate that is normally reported. I’m yet to figure out exactly why. 

Perhaps it’s the horrible lengthy form that users have to fill out to actually purchase. Perhaps it’s the design of my site, or other parts of the registration process that put people off. Perhaps I offer too much or too little content in the free version. Perhaps my applications just aren’t worth the price I’m charging.

But whatever the reason, I have long been wondering if the Shareware model is the best way to sell Mac applications and games, and if there is a viable alternative.

So this blog post is me saying that Shareware sucks, why I think it sucks, and where the alternatives may lie.

For consumers, downloading Shareware should seem like a win. With very little effort, possibly a tiny cost in bandwidth, and a short wait while you do something else, you can try it out. It’s probably easier, and as cheap, as downloading a free iPhone app.

But that potential downloader knows that it’s limited somewhere. The future potential for having to pay something will put some people off even downloading an app. Freeware apps look better than Shareware apps. 

Developers take a major hit from this small negative slant towards Shareware. It’s not just the few people who don’t download it because it may cost something, it’s the few people who they won’t recommend it to. It’s the few review sites that won’t bother to review it, or the few places in various ranking systems that are lost. These few add up, and feedback on themselves, and ultimately result in a major difference in the number of downloads. 

Just look at apple – most recent vs apple – most popular and count the number of Freeware apps in each. It’s a small sample, but I would be surprised if the number of freeware apps in the most recent category ever exceeded those in the most popular category.

No matter what a Shareware app’s limitations are, there is always some content given away. Right now, enough developers give enough stuff away that anyone who really doesn’t want to pay anything can probably get what they want with what is freely available.

A developer might see a gap in the market, make a Shareware app to fill it, and perhaps unknowingly provide for free exactly the functionality that was only in the paid version of another app. Consumers that are willing to spend time trying, and learning, how to use the free parts of Shareware apps to save a few bucks are probably common.

It’s not certain that these consumers would ever pay for any software – in fact they probably won’t. But developers have created this situation. Developers have fought each other by price to get attention, and price is a major consideration for consumers – be it money, time, or any other cost. Consumers expect to be able to get any functionality via price-free means. The majority seem to end up happy to spend an hour to save a dollar. This hour is probably fun. It’s amusement to attempt to get something for free, and they saved a dollar. Hourly rate equations don’t apply.

Of course, piracy doesn’t help. Any consumer can get a copy of any software off their family 16 y/o ‘hacker’ who got it off their 18 y/o facebook friend named Brandy (aka 40 y/o George), who got it off some dodgy website located on a server in some offshore country. Any developer who offers a complete app, with code-based protections to limit it to Shareware will be cracked within days, if not hours.

A Shareware app download is nearly always a giveaway. Those that don’t download the cracked version are probably quite happy playing within the limits of the free part. Very, very few will reason that it’s worth spending money because the developer did a good job and deserves to be paid for it. A few more might get frustrated enough with the limitations to pay to get the rest. Which brings me on to my next point.

The main reason that the vast majority of people buy a Shareware app is because it’s pissed them off enough that they have to. 

Whether  it’s a game with only 5 out of x levels, or an app with only 30 days of usage, it’s the same tactic. Give something away for free that is broken, and charge people to fix it. It’s like a boat repairer giving away leaky ships.

Anyone who is entering their credit card details on a developer’s website is bound to be reluctantly handing over their cash to be able to do the thing that the app said it did on the box. Chances are that they were in the middle of an epic struggle to beat the previous high score, or are on a tight deadline that could do with the use of the app in question. It’s annoying. ‘Awesome, I’ll just do this…. Oh crap, it’s expired…Hmmm… Guess I’ll buy it then.’ Or even worse, if they weren’t that dependent on it: ‘Oh crap, it’s expired. Oh well, I’ll just use some other app.’

In general, artificially limiting people is a bad way to get money. It’s a bad user experience; it’s a bait and switch tactic; it’s extortion; it’s wrong.

I’m yet to find anything close to a decent way of actually selling Shareware licenses online. I am using eSellerate, which at least makes my side of the dealings relatively painless. But the user experience is horrid.

Ideally, it should be two clicks. One to purchase, one to confirm.

But as it is, purchasers usually have to:

1. Find the menu/button that will register the app, and click on it to launch a web browser or bring up a form
2. Decide if they can trust this form with their credit card details
3. Fill out a stupid amount of personal details
4. Find a piece of plastic and copy 16 random numbers from it, plus 3 that are usually obscured on the back
5. Find some large sequence of random numbers and letters in an email that might show up at some point or perhaps somewhere in some subsequent screen
6. Find in your app the place where this number has to be entered
7. Type the number in, or copy and paste it in, with NO MISTAKES!!! NO SPACES AT THE END!!!

It’s just crazy. It requires a lot of effort, and a lot of trust. At no point can a user be sure that their money won’t just disappear into a black hole. Of course it probably won’t, it’ll probably all work out, but there is no way a user can know this for sure. It’s stressful, difficult, and time consuming.

And then they can’t even be sure that they actually own it. Can they unlock another version on another machine they own? If their machine dies and they have to re-install their OS will they be able to continue using it? There is no consistency, no history to deserve trust. It’s a punt on an unknown developer that only a small percentage of experienced users will be prepared to take.

A good viable alternative to Shareware for small developers is way overdue, and I’d be really interested to hear from anyone who thinks they have found one. I’m just going to mention a few alternatives, and my thoughts on them.

There is no doubt that online distribution is the future (well, the present, really), so putting CDs in a local store is out. 

Getting a publisher may help a little, as it provides some consistency with payment systems, but at what cost? For me, I like to control my marketing efforts, as well as own the complete rights to my software, so this is not an option. But even if a publisher seems the right way to go, the increase in trust applies to a limited number of purchasers. And it’s probably still Shareware. It’s still giving stuff away for free, annoying people, etc.

Advertising in a free application is a viable alternative. Again, I’d never go there, as I hate ads and the time (and hence productivity) that they waste across the world to force crap products on people who don’t really want them – but that’s another story. It’s viable, for some. A few developers are making money out of advertisement placement in games/apps, and most consumers don’t seem to mind too much.

Charging for the full version, while offering no feature limited version, or a real ‘demo’ (with only videos/tutorials) is also an option. For users this may seem like a bad deal, but with a good description, a YouTube video and some unbiased reviews it can work. It gets rid of some of the difficulties with payment/registration, doesn’t offer any real content, so helps with the annoyance factor, and doesn’t really give anything away. Currently however, most of the ways that people will initially find an app come from download sites. Without having a popular download (usually by offering some real content), some serious marketing effort is required.

I am hoping above all else that Apple will create a Mac App Store. Apple must either already have it planned, or has decided it’s not feasible for some reason, but the potential benefits are huge. For developers it would solve pretty much all of the Shareware issues, and provide another gold rush. For Apple, it would provide a drawcard for developers to develop for the Mac again, after the iPhone stole so many Mac developers, and would also create some extra revenue using the back-end they have already created for the iPhone App Store. For users it would mean a huge number of fart apps… err, I mean quality software at lower prices, easy to get, easy to buy. It’s win, win, win! Or perhaps I’m missing something… It seems too easy.

So Shareware sucks. It sucks for developers, it sucks for users, it sucks for purchasers. But right now it’s the best we have. Time for a change. But to what?

I recently did an interview with AppCraver, a lot of which adds to what I have said in previous blog posts.

From the article:

David Frampton, creator of DuckDuckDuck and Chopper, says that all he wants is for the best apps to float to the top of the best-sellers list, customers to find the best apps for what they want and for the developers of the best apps to make the most money. That’s not the case but it could be worse, Frampton adds. AppCraver talked to Frampton via email about life as a developer in the App Store.

Note: This blog post is now over 2 months old. The App Store is still rapidly evolving so though some of my comments and statistics still stand, others are already out of date.

I’ve had an iPhone app peak at #13 priced at $7.99, dropped the price to $0.99 four months later, and seen it rise to #2. I’ve also had an iPhone app that has not yet come close to paying me for the work I put into it.

But since the App Store launched in July 2008, I have been carefully watching the top 100, the free vs paid difference, the lite version influence, everything that seems to affect sales.

So I’d like to share my thoughts on pricing strategy in this crazy App Store sandbox.

Many apps have dropped to $0.99 permanently, and my own DuckDuckDuck also dropped to $0.99.

I regret it.

One of the problems with hitting this price point is in the long term income. A month after the price drop, 6 months, 2 years… People who like an app, and then recommend it, are the best form of advertising. These wonderful, loyal customers perhaps unknowingly convince their friends to pay well for the recommendation. But not just yet. The tail of 1000 sales today lasts a hell of a long time. When their friends do happen to buy an iPhone, and then try out the App Store, and then buy an app or two, your app might be it. Hopefully it’s not $0.99.

But the biggest problem with setting an app price at the lowest possible value is that there is no room to move. Dropping the price may seem a good revenue increase initially, but sales will tail off. Then what can you do? Nothing. You’re selling two copies a day at 99c.

LESSON LEARNED:

If you’re thinking beyond the end of this month, don’t permanently drop the price of your app.

Every developer has seen the apps that appealed to the $0.99 market. Maybe based on bodily functions, seemingly simple ideas, shiny objects…

And they do well… for a short while.

At $0.99 you’re aiming for everyone. EVERYONE who has an iPhone/iPod Touch. At the absolute lowest price that actually makes money, all of the people who wouldn’t normally buy your app are invited to give your app a one star review.

And a $0.99 app will get MANY one star reviews, even after increasing the price. Two months later reviews like this will still show up:
“…i vot it for 99cents and now its a wopping 5bucks woow…”

Of course it might get positive reviews too, but ranking seems to go down as you price too low. DuckDuckDuck went from ~4 stars to ~2 stars after the two week $0.99 -> free offer.

LESSON LEARNED:

If you price your app too low, you will get bad reviews.

That sale on DuckDuckDuck was when it was doing really poorly at a couple of sales a day at $0.99. At that point I could do whatever I wanted as $2 a day is worth a piss in the wind. So I made it free over xmas and got a bit of press. DuckDuckDuck is now selling at $0.99 again, and has averaged about 20 sales a day since the increase. While free it was downloaded around 5000 times a day.

So my stats indicate that iPhone owners are about 250 times more likely to download a free app than a 99c app. So people are way way way more keen to download whatever the crap they can get for free than anything half decent that costs a dollar.

LESSON LEARNED:

If your iPhone app is selling poorly but might be appealing to some niche market, make it free for a while….. and most iPhone owners are freetards.

It’s completely unintuitive, but if you’re high in the charts you can get higher with a lower price. However, if you’re out of the charts you can earn more at a higher price.

If you’re anywhere near the top 100, a lower price will increase your rank. Once you get there, and in particular once you get into the top 25, if you have any kind of momentum, you have a chance at the top 10. The #1 app in the paid top 100 is usually getting more than 10,000 sales a day. And at a good time, or with a good app, you might get 50,000 sales for a day or two. At #15 you’re looking at about 1,500 sales a day, #50 roughly 500 sales, #100 roughly 300 sales. (all early 2009… Hi future people!, bad search!)

There is an interesting curve here for statisticians, but right now if you get to the top 10 it doesn’t matter what your app is priced at, you are making a shit load of money.

On the flip-side, if your app isn’t high on any charts, then you have a market that is almost normal. You can experiment to see where your greatest revenue lies, you can put your app on sale, or make it free for a while… you don’t really have anything to lose. Try it.

If you manage to get featured by Apple, it’s even more interesting. You can just ride it out at your current price, and get a nice bump in revenue, or you can drop your price immediately and try to ride the charts for a week…. or more if you have something shiny.

In general though, if you are close to the top 100, over a couple of weeks, low price will give better revenue, until you get high, then high price will give better revenue… until you get low… But change your price too often and you’ll die…

… and then there are the apps that sit happily in the top 25 at 99c for months… You cannot get there. 1 in a million now, they’re all old flash games and shit. Glider could do it, where is Glider?

LESSON LEARNED:

If the rank drops, increase price, if it sores, decrease price. Yeah, it’s backwards.

Chopper went from obscurity to #2 top paid in about 2 weeks. The cause of this was a price drop: $4.99->$0.99. At $0.99 It quickly rose for a couple of weeks, then quickly fell for a couple of weeks. It also went from 4 and a half stars to 3 and a half stars. When it got below #25 I put the price back to $4.99, and have mostly been getting higher revenue than #25 at 99c.

The App Store tail is getting fatter. 6 months ago if you weren’t featured, you made nothing. 4 months ago, if you weren’t in the top 100 you made nothing. Now… it’s getting better… I think it will get better still… #500 at >$2.99 is probably making a living. The App Store is still attractive, it’s just getting harder to get noticed. At Roughly # 300, at $4.99, Chopper is making $500US+ a day right now. Thats OK in my book.

LESSON LEARNED:

It’s OK. make some apps… you probably have a better chance on the iPhone than anywhere else.