If $0.99 Apps Are A Gamble, Why Do Paid Outsell Free?

A recent post by Josh Lehman made some interesting arguments about why the comparison between the purchase of a $0.99 app and a cup of coffee may be erroneous. While the author makes some very cogent points, there’s only one problem: paid apps outsell free apps, at least on the iTunes App Store. His arguments about a known, repeatable product (a cup of coffee from Starbucks) makes good sense. We do know what we are getting, the process is transparent, and it isn’t much of a gamble.

But the argument that betting 99 pennies on an app is a “total gamble” is at odds with the economics of the iTunes App Store. Paid apps outsell free apps, and have for a few years now. Steve Jobs said as much in the keynotes for WWDC in 2009 and 2010. Apparently this “total gamble” isn’t as much of a problem, again at least for iOS, as it would seem. I don’t disagree that people are taking a chance. But the economics of that risk are pretty low. And the existence of free alternatives isn’t stopping iOS customers from paying for most of their apps.

If people want to know why their $0.99 app isn’t selling, ask one question: how much have you done to promote the app and build awareness? Your app is one of over 600,000 apps (and growing). Discovery is very, very hard in iTunes (and Google Play), and while some things could improve discovery, the reality is that it is a lot of noise to get lost in. Without promotion, marketing, brand-building and buzz, your app will get lost in the morass of apps around it. It won’t matter if it is substantially better, easier to use, more stable or more feature rich than similar apps.

Putting something on any app store is only one important step. That takes care of distribution and payment. That’s a good thing. But it doesn’t change the fact that your app is one of hundreds of thousands of apps in the 2 biggest stores. The $0.99 price point as a gamble isn’t holding it back. Being nearly invisible to the marketplace has more to do with it.