More than 1 billion apps have been downloaded from the iTunes app store. Believe it or not, there are lots of people who still don’t think of it as a serious marketplace. A billion is 1,000 million folks. That’s pretty serious.
Here are 5 things that the app store has taught me
- Free is a legitimate business plan.
- Financial success isn’t so much about profit margins, it’s about price point.
- Traditional high margin businesses with complicated business plans can’t compete.
- The one hit wonder is just as powerful today as it was yesterday.
- Big business will always manipulate a free market system.
Some brief explanations to unpack the list above.
Free is a legitimate business plan
Would you have an account on Facebook, Twitter, or Gmail if it cost you $2.99 each to belong? Of course not. But how did Google, Twitter, and Facebook get to become some of the most powerful companies in the world without charging you a dime? TV has been doing it for years.
Financial success isn’t so much about profit margins, it’s about price point
When I developed my first apps for YS, the content was valued based on the retail price of the book. Consequently, they never took off. People aren’t going to pay the same $7.99 for an app version of a book that they’d pay for a hard copy because the perceived value is different. The question app buyers are asking is, “Will I get the free version or will I pay $.99?” Remember… all of Facebook, Google, and Twitter are 100% FREE! So your buyer wants to know why your app, compared to what they know is already free, has more value to them than that. To pay more than $.99 for an app you have to demonstrate ridiculous value. Consequently, if you lower your price point or eliminate the cost, you will access millions more customers and potentially make infinitely more money as a result.
Traditional businesses with complicated business plans can’t compete
Traditional media and brick/mortar retailers are struggling to figure out how to take advantage of apps. Look for yourself. Retailers apps aren’t really necessary but are just attempts to have “something” in the app store. An online catalog is pointless because of Google. A store finder is pointless because of Google Maps. Most traditional brands apps aren’t adding value– they are marketing. And people are extraordinarily good at sniffing out marketing thanks to the popularity of bloggers like Seth Godin. Companies with simple business plans are beating them in the app store because simple business plans have lower overhead, can take more brand risk, are more nimble, and will rely less on expensive “experts.” (If an app maker is an “expert” than why would they sell your company something for thousands when “experts” are becoming millionaires? Additionally, the counter-intuitive business strategy of free is nearly impossible for traditional business leaders to comprehend.
The one hit wonder is just as powerful today as it was yesterday
Angry Birds is to the app store what Don McLean is to the record business. Except we live in an age when a company that has a one-hit wonder in the app business will get a royalty checks from Apple for millions of dollars per month. Not bad for some college students from Finland, eh? Take that– Mattel or EA or any of the other major players in the game industry! Each of the original creators of Angry Birds will not only make a lot of money off of Angry Birds… they are now solid gold for life.
Big business will always manipulate a free market system
The editors at Apple have always claimed a certain level of editorial control of the app market. In other words the stuff at the top of the pile is at the top of the pile mostly because it is the best in the marketplace. But, in truth, they have allowed that to be manipulated by some levels of marketing of new stuff. Go to the app store today on your iPod, iPhone, or iPad and you will see ads for featured items. That wasn’t free and it is almost always big, publicly traded companies, who have bought that influence. Consequently, some of the biggest selling apps are not, indeed, the best apps in a totally free marketplace. There has been some manipulation.