How Much Is Your iPhone App?

The care and feeding of my iPhone is an interesting illustration of the role of competition and the ability of suppliers to price-discriminate. I wanted apps that would translate words (no need for full phrases or sentences — that’s done nicely on itranslate.com) between German and English, and between Dutch and English. There were expensive ones, but the Dutch/English app was $24.99, while the German/English app was “only” $19.99. That was far beyond my price range, so I shopped for cheap ones. The cheap German app was $0.99; the cheap Dutch app $1.99. The German apps at each level of complexity were more numerous than the Dutch, so it’s not surprising that with more competition they should be less expensive. I wonder if this is the kind of difference pervades the sale of iPhone apps?


Frank

It seems apple uses price discrimination in more than just their iPhone apps. I think first degree price discrimination, such as buying a car, should be used in any transaction (whether how cumbersome it may be for that particular exchange). There is no such thing as a market for something, unless there is an active buyer and seller. In any case, I believe competition will reduce cost, iPhone apps included. Just like when the first DVD player came on the market for over $500 dollars, as soon as the technology spread...it forces the market down to merely 20 bucks today at walmart.

On to the bigger issue - apple found that they own a monster portion of the mp3 player market...therefore, they set in place a sort of price floor, that their ipods will never go below upon new arrival. They've built this in place so that when new items hit the street, it is no surprise to consumers. However, when iTunes started charging $1.29 for all the new songs (or "hot" songs like holiday music after Thanksgiving) people were in an uproar - but guess what, they paid anyway....as they always will when there's a demand

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Colin

These will become moot once google iPhonifies www.google.com/dictionary - which I'd bet will happen within the next month tops. Once again Google does something valuable, better, for free.

Frank

Sorry - update...I didn't mean to compare apple's use of price discrimination to "first degree" as it may appear in the above post.

Colin

And to append to my above post [#2], Google will likely bypass the App Store completely in favor of creating a web app that is just as useable but not subject to Apple's draconian restrictions. Ultimately they may be able to wipe out an entire category of iPhone app without even setting foot in the App Store.

MikeM

I'm not an economist, but I thought price discrimination was something different. I thought it was offering the same good in different markets or at different consumers at different prices. This is two distinct products, with different supply and demand curves.

Ben D

what's wrong with google translate?

KB

That's pretty neat how it works out with complexity/programming difficulty. How do other apps price? I remember seeing some by donation.

Tim Novikoff

SAT vs. GRE

I made an iPhone app for studying SAT vocabulary words using word roots. It's called Flash of Genius: SAT Vocab. I sell it for 99 cents and it sells well.

I will be releasing a GRE version soon, and I'm considering charging $4.99 even though it will be essentially the same app but with more obscure words.

My theory is that college students essentially recognize that the "expected value" of studying vocabulary words before an exam like that is quite high, whereas high school students don't realize the value of studying vocabulary words. Of course, I don't really know what the most profitable price points are; I'm just taking a wild guess, like most developers. But I did notice that GRE apps tend to be more than SAT apps in general.

Another interesting question is pricing on Android Marketplace vs. iPhone App Store. This is seemingly the perfect way to do price discrimination, since iPhone owners are probably more affluent. My guess is that you'll see a lot of this type of price discrimination.

Not from me though; I'll be selling Flash of Genius: SAT Vocab for 99 cents on all platforms, I think. I just find the volume more satisfying than the higher margins. (I think a lot of independent software developers prefer the satisfaction of knowing their software is being widely used to more money.)

Except I plan on releasing a free version on the One Laptop Per Child devices. I'm looking for a developer to do this mostly pro bono, by the way. Any OLPC developers out there want to join me in making a great vocab app for the $100 laptop? (The Android version was recently voted into the Top 10 in the Android Developer's Challenge. I think this is legitimately a good app and it would be a great thing to make it available for free in the third world.)

-Tim Novikoff
Flash of Genius
www.flash-of-genius.com

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OGenius

There also seems to be a ?distortion» effect (of change) in the prices applied to the apps, depending on which store you buy your services. I mean, when you buy an app on the american App store at 4.99$, why do they charge you 3.99 $ in Europe for the same service?
Or comparing 99$ to 99$, there is always someone who is paying higher...for the same ?product»...or lower, depending from where you buy it!

And according to me, this is the opportunity cost, rather than the conversion cost!!! ;)

OGenius
http://www.macaficionados.wordpress.com

dio_316

How about the free app titled iDict which helps translate word /phrases in 27 languages- brrrup!

Prashant Sarkar

Use "myLanguage"... It's free and good... and translates numerous languages.

Nicholas

In my company's experience making iPhone apps, niche apps are usually priced somewhat higher, for two main reasons:

1) Less competition (as you mentioned), and/or
2) Lower overall expected sales (since the market is smaller), therefore the price has to be higher to make it worth the developer's time investment.

In our experience, at least until now, targeting a topical niche (such as your example of Dutch-speakers) is more reliable than targeting a regional niche (such as Dutch people).

It's not even really about making a mint these days -- the App Store is definitely not the gold rush that the media makes it out to be, and developers either learn to carefully consider whether an app is economically viable, or they soon quit in frustration. (Note: a lot more have tried and quit than you ever hear about.)

Josh Miller

I don't understand if you have a tool for translating full phrases and sentences you couldn't just put single words in there...

rob u

My Android phone has an app that accesses the Google translation service, including a text to speech option, that costs....nothing. Free. I don't have to pay the iPhone tax.

Michael

The AppStore is economics in motion. Compared to other mobile platform software stores, iPhone apps are on average cheaper for the same software due to high numbers of apps creating intense competition

Michael Dohrn

What I find remarkable is the giant price discrepancy between Android Marketplace and Apple's App Store. #8's on to something but only touches it - the most expensive app that I've seen in Marketplace is 5bux, though I know there isn't a ceiling on Market pricing. What this reflects, I'm not entirely sure -- could be perceived value pricing as reflects Apple's golden marketing, or relative affluence (real or perceived) of iPhone vs. Android-platform users.

But... yeah, Google is the win, especially since the new version of Maps (with "What's Nearby?") and Google Goggles. I just don't see Apple competing very effectively with Google's ability to develop web-platform software in the long term. Apple's going to try and sell it, where Google's going to give it for free as long you agree to let them use the data to improve their systems (and likely to mine for other reasons various and sundry).

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Richard Lawler

Price is one of the only mechanisms available to the app developer to increase app visibility in the saturated App Store marketplace with 110,000 products.

tommystinson

translate.google.com seems free, but if you use your at&t phone in europe then you pay extra for overseas data rates.

molly

@ [8]: Yep, Tim, I paid $4.99 for a GRE app. I noticed that the SAT ones were cheaper; I should have bought a SAT app instead. The GRE app (the Kaplan one) really sucked, both in terms of vocab and interface. Make a better one, please. Intelligent people will shell out for a quality one - you can capitalize on their angst.

Steve Myres

In addition to greater competition among the greater number of German apps, don't forget economies of scale. Assuming the German and Dutch apps take an equal time to write, if you can sell twice as many copies of the German one, you can charge half the price, and spread the revenue over more copies. Not that you WOULD without competition forcing you to, but the greater sales enables you (and your competitors) to price lower.