App Store Economics Are Just Business Economics

Marco Arment:

I haven’t always used these particular apps to solve these problems, but it takes a lot to change my mind on one. If you make another RSS reader or Twitter client, there are certainly a lot of people who could use it, but you’ll need to compete with very mature, established apps. Competing in these categories isn’t about price: it’s about relevance and attention. If you can’t find enough customers here, it’s probably not because you’re charging $2.99 instead of $1.99 or $0 — it’s because your app isn’t convincing enough people that it’s worth using over the alternatives.

Federico Viticci also said:

This is also the same problem I run into every time I’m sent new apps to review: is this going to be better than Tweetbot, Fantastical, or Drafts for my workflow? Should my readers know about this app even if I won’t use it every day? How do I balance the expectations of my readers, who want to know about new apps, with my personal opinions and workflow preferences?

App store economics are largely just general business economics.  If I am going to start a pest control company, I've got 3 options:

1.  Offer the same product and lower my price below competitors
2.  Offer the same product at the same price as my competitors
3.  Offer a revolutionary new way of doing pest control (i.e. only needed once every 24 months)

An app developer has largely the same options when releasing a new app in a genre that is well served.

1.  Offer the same product and lower the price below competitors
2.  Offer the same product at the same price as competitors
3.  Offer a revolutionary new way of doing whatever apps in that genre do

Based on those options, a lot of developers just simply choose option 1.

Let's look at Panic's Status Board.  They are charging a premium and it seems to be selling well (based on the press around it).  It's not $.99, though.  Why can they charge a premium price? They went with option 3.  If I am wanting to launch a new service based company, I have to try to either create a market for myself or compete with the incumbent players.  My favorite Wi-Fi vendor (Aerohive) also went with option 3 when they launched controller-less enterprise WI-Fi.  They offered a product with similar goals as Aruba and Ruckus, but with a revolutionary way of doing it.  There is already a business term for this effect.  It's called Blue Ocean Strategy.  A blue ocean market is where you've changed the game and your competitors aren't relevant in the discussion.  The incumbent competitors are competing in a red ocean (for your scraps). 

My advice to app developers? Look for blue oceans and you can charge a premium.