The Cost of Making Apps

I’m going to talk about a somewhat touchy subject, which is good, I’d love to get some different opinions in the comments section. Are we as mobile application developers, selling ourselves and each other short? I’m sure many of you have noticed the change to apps following the “freemium” business model, where the app is free and then you can choose to pay if you want upgrades, get more lives, etc. The obvious reason behind this change is because it’s popular and it’s what sells.

Some people argue that developers did this to themselves. One person offered an app for $1.99, another person made a similar app for $0.99. Not to be outdone, another person made their app for free and/or added an in-app purchase (IAP). Other people argue that this happened because it’s what the consumers demanded and it needed to be done to keep their business afloat.

From the consumer side, I don’t mind paying for a great app that I’ll use often. I always thought it was odd how people will buy a $6 latte, $15 lunch, and $25 dinner without batting an eye, but they’re weary of spending $1-$5 on an app that might give them days of entertainment or help them in their daily lives. I guess the biggest argument is that an app is not something you can physically hold and it doesn’t have that connection with the consumer. This probably why a lot of people still prefer paper books over eBooks, it’s that physical connection you have with the product that can’t be deleted by simply pressing a button.

On the developer side, I kind of feel like maybe we should all start selling apps for at least $1.99. Not all apps, but the ones that we really spend a lot of time and money on to create a nicely polished product. Let’s say that the average person earns about $30,000 annually. I know in some major cities, $30k a year might be the poverty line, but let’s just pretend. You paid your $99 Apple developer fee for the year, so your mobile app profit is already at a whopping negative $99. You spend 2 months from start to finish building an app, which would normally result in $5,000 ($30,000 divided by 12 months multiplied by 2 months), so now you’re at negative $5,100. Apple takes a 30% cut, so you earn about .70 cents for your app if you price it at the lowest price tier. That means you’d need to sell at least 7,286 copies of your app in 2 months to make back the money you lost. Depending on your app, this might be easy to do or it might never sell that many copies.

This is all assuming you’re a full-time indie developer and $30,000 a year is the median salary in your area, but you still get my point. It could also be argued that the $99 developer fee will be split up by multiple apps you release that year, but also there’s costs like advertising, marketing, and anything you can’t create like sounds, music, artwork, etc. Regardless, I think we owe it to ourselves as developers to take a good look at how we price our apps.

Maybe the “freemium” model isn’t nearly as bad as it sounds, maybe it’s the answer to all of our problems, I’m not quite sure. I would love to hear what you think about app pricing, though.

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