Additional Thoughts On App Store Economics

I've been thinking a lot of about the environment of App Stores (specifically Apple).  There as been a lot of discussion around the economics of the App Store model recently that seemed to start with this post by Michael Jurewitz.  I had some additional thoughts over the weekend, so I wanted to explain my thoughts further.  

The iOS App Store was a 'green field' for a few years.  There previously had been no decent way to get apps onto a mobile phone.  Apple changed all of that with a simple way to purchase and install apps.  It was a frictionless experience.  Everyone wanted to try it.  People were creating apps that solved problems that most of us did not know we had (hence the term: there's an app for that).  We were all discovering our 'mobile workflows'.  We were eager to try different types of apps.  The iPhone was still a new device, so it was growing at an incredible rate.  Since it was a new device, it was generally new to iPhone customers (rather than upgrades).  Think about your app downloading habits from 2008-2010 vs 2013.  We've all settled into our workflows and usage patterns.  We aren't actively searching for new things as often as we used to.  I've noticed an interesting thing in my usage as well.  It seems like most of the apps I download now are generally tied to a back end services (the Nest app is an example).  We aren't hearing the stories about a $1.99 game allowing a guy to quit his day job.  The iOS platform is still a profitable way to earn a living, though.  It's requiring more effort on a developers part, though.  The market is saturated with tons of quality applications in most every genre.  Developers are having to work a lot harder to stand out among the crowded.

Here is an example: a new city is created.  There would be no businesses in operation inside of this city at its founding  Lets also say that the rules of this city say that you can only do business with someone inside of the city.  I would immediately open an insurance agency.  I'd be the only approved place inside the town to buy insurance.  Would others have the same idea? Absolutely, but there would be so many new potential customers that each person would earn a nice living.  As the city grew, more people would want to sell insurance.  With each agency that opens, everyone else would get a smaller slice of the pie.  How does this equate to app purchasing?  Folks generally only have 1 or 2 'to do' applications.  There is only so many developers that can earn a living making one.  As in any business, only the strong survive.  The best apps will continue to grow, but the marginal ones will not survive.  It's no different than in the restaurant industry or any retail establishment.  You either compete on price, offer something unique, or battle for the same customers.  This is true app developers just as it is for a home builder.  The iOS App Store was like a new city, but now its a more established place to live.  It's a nice place to have a business, but you need to offer something compelling to survive.  One final thought: Consider your buying habits in the Mac App Store vs the early days of the iOS app store.  I know that I didn't spend near as much time searching for new apps in the Mac App Store as I did the iOS.  My workflows were already pretty much set by the time it was released.

I've heard a lot of developers talk about the risk of putting so much time and effort (and money) into an app and not know how it's going to sell.  How is that different with any business?  If I am going to start a restaurant, I've still got to lease/buy a building, buy equipment, buy food, and hire a staff before I can ever serve the first meal.  Choosing to develop apps is no more of a risk than buying a Taco Bell franchise or opening a clothing store.  The strong will always rise to the top.