This post is inspired by a message I received today on Twitter
They bring up a question I get asked quite frequently, and I thought It’d be a good idea to answer it here (but don’t worry, I did rely to them, I wouldn’t make them wait weeks for a blog post).
Money is a tricky concept on the App Store, because while people are happy to pay $4 for a coffee, they are far less likely to spend $3.99 on an app. The reasoning for this changes from person to person, part of the reason is you don’t have a guarantee that the app will be be good. With a cafe however, so long as you’re a regular you know you’ll get your money’s worth. Mitigating this initial difficulty can be tricky and intimidating, but it’s certainly possible.
The Developer Fee
Firstly, the developer fee is an annual $99 (USD) fee imposed by Apple. Once paid, a developer joins the Apple Developer Program, allowing them to release their apps to the world. Additionally, Apple take a 30% cut of any sale that goes through their store, such as paid apps or in-app purchases. Subscriptions are a little different, but more in that later.
A lot of indie developers worry about that annual fee, as they want to ensure that their apps will be able to pay it each year. This is why I’m often asked how an individual should price their own app.
Charging upfront for an app is very common, and gives the developer the freedom of not having to worry about tricky in-app purchase integrations, but it has its drawbacks. Let’s say you develop an app for $1.99 and release it in 2014, 5 years people may still be using your app and you’ll be forced to continue maintaining them.
The issue this presents is that you are maintaining 5 year old software someone spend just $2 for. Continuing the coffee analogy, despite paying only $2 users expect years of updates and bug fixes, but only expect one cup of coffee. Paid apps certainly have their place, however. Apps which provide a service, such as transit information or camping locations, can justify an upfront cost as they require funds to maintain their applications. Applications which don’t require funds to be maintained don’t always justify the up front cost.
Subscriptions are an increasingly popular form of payment, with even Apple encouraging developers to use them. Apple has also tried to make subscriptions more enticing for developers, as it allows them to circumvent that aforementioned 30% cut. For the first year of a users subscription, Apple will continue to collect their 30% cut, but after that year Apple will only take 15%, resulting in developers collecting 85% of the revenue. A survey by Creative Strategies found that most users are more willing to buy someone as a one-off payment, as opposed to a subscription. Justification for a subscription can be tricky, as in order for it to feel worth it to the consumer the app has to provide a constant service. Apps like Overcast achieve this by providing users with continual benefits, such as allowing them to upload their own files to the app from any device.
It’s this kind of service provided by Overcast, LLC which justifies an ongoing subscription, as it continually costs money for the developer.
This one is my favourite, in fact both of my apps depend on them. I offer one-time pay-what-you-want in-app purchases to unlock some extra features, and I encourage you to do the same (if applicable for your app). Locking certain features behind a paywall is a typically acceptable practice and one that’s understood by consumers. Offering multiple prices has proven to be one of the most financially beneficial aspects of my app. If users are willing to spend $1.99, a lot of them are willing to spend $2.99. In fact, 20% of Pro purchases in Chirp for Twitter were for higher tiers.
Tipping jars are common among indie developers offering free apps, such as Apollo for Reddit, as it provides users with a way to directly support the developer if they feel so inclined.
Tipping jars are included in both of my apps, and tips alone have paid for multiple years of an Apple Developer membership. I use tipping jars as a compliment to the main feature unlocks, and I even mention in the tipping jar that users shouldn’t feel like they need to donate if they’ve already bought pro.
So what should you use?
It’s not as simple as saying “You should use X”, or “Don’t use X, use Y”. The pricing scheme you choose for your app depends on what kind of functionality you offer. If you offer a continuous service, especially if that services incurs fees for you, consider a subscription. If you want simplicity, consider charging upfront. If you want something in the middle, in-app purchases are probably the way to go.
If you have any questions (or disagree with me), leave a comment below or message me on Twitter.