CBC Interview - iPhone App Store Economics

I was interviewed Tuesday morning for The Early Edition on the CBC.  The interview was about the Gold Rush nature of the iTunes Application Store.

The interview was later edited for the web.  Apps golden for Vancouver iPhone programmer.

Land Grab

The top 100 or so Apps in each category generate sustainable revenue for developers.  However, there are 80,000 or so Apps in the store currently.  The previous 18 months have been a land grab.  Developers have tried to generate as many downloads as possible in the space.

This strategy has led to price pressures.  The price of Apps has tended toward $0.99.  This is not sustainable for most developers.  The number of downloads at that price point have to be large to recoup the cost of development.

The other issue is that successful applications at the $0.99 price point will be quickly cloned.  There is no room for differentiation at that price point.  And differentiating based on price point is not differentiation.

Optimize For Other Metrics

Most developers have been looking at the number of downloads as the sole metric to optimize.  This is no longer the case for Apps that have shifted away from the Software-As-A-Product model to the Software-As-A-Service model.

The future of Apps is to smooth out the revenue generated from users.  Currently, the lifetime value of a customer is the $0.99 that they spent when they first downloaded the application.

As the model shifts to SaaS other metrics will become much more important.

How many times is the App launched?  100 downloads of an App with the App being launched 10 times is much more sustainable than an App that is downloaded 1000 times, launched once, and then deleted.

How long is the App launched for?  This is the attention metric.  As the amount of content becomes abundant the scarcity becomes attention.

Monetize this scarcity.  The first step to monetization is measurement.