It seems like there's a key point you're missing, which is that there is currently a constant stream of people entering the market to write $2 apps. They write an app, it fails, and they move on, but instead of a situation where the surviving app makers can now raise their prices due to scarcity, instead the people who left are replaced my someone else who tries to do the same thing. The end result is that no one can raise their prices, because the instant they do, some college kid comes along and does the same thing for $1. And of course the acquisitions of instagram and Sparrow make this even worse, because now there are 10 times more college kids thinking they're going to make $1b by making an app and getting acquired.
Of course, the key to being able to charge a premium comes down to marketing, and positioning yourself well in the market, but that's obviously not a fairly difficult thing to do, especially in these competitive markets.
Actually no. Like most things it takes a while for the market to correct.
The quantity of crap produced is large, it begins to swell and what emerges is a discrimination filter. Be it review magazines, web sites, or even word of mouth. Take a look at computer games, initially people were putting out what seemed like lunar lander clones in BASIC and selling them on the Apple II and becoming zillionaires. And a lot of crap followed in little baggies. Sometimes there were gems like Ultima, but a lot of times there was crap. And to filter through the crap came user groups and other communication venues where the goal was to not bother with the crap but buy the 'good stuff'.
The total crap fell by the wayside and the cost of entry got higher because you needed talent a few production points to make it past the crap filter. Lots of magazines made a ton of money being crap filters. PC Gamer was one of my favorites at the time. The market matured and you got the 'studio' system and even higher production values. Some people made it big in computer games but it required actual talent or at least a decent idea.
The 'AppStore' as an environment for software delivery has been around 5 years. We're in the Microsoft Flight Simulator 1.0 era relative to that. The arguments were the same "You can't make any money selling games, its too hard, no one buys them, the market is illusory." But the reality was that the market was developing, and during development early movers get an advantage but they don't necessarily win or even complete the race.
People have needs that can be filled by applications running on their phone/tablet that would serve them better than a similar application running on a laptop. Selling applications that can solve those problems can support a development team working on the problem. There are multiple ways to monetize now that didn't exist before. Solve a need, get paid. But understand that some great ideas solve no problems and are thus not convertible into cash.
Until you can talk to your computer and it can figure out what you want and synthesize a solution on the fly, there will be a market for 'apps.' Give it another 5 - 10 years before you write it off.
> We're in the Microsoft Flight Simulator 1.0 era relative to that. The arguments were the same "You can't make any money selling games, its too hard, no one buys them, the market is illusory." But the reality was that the market was developing, and during development early movers get an advantage but they don't necessarily win or even complete the race.
Indeed, the article's conclusion is flawed: the gold rush is not over. We blindfold ourselves with a scenario where a hypothetical gold rush would make every arriver rich, observe that it is currently not the case, and justify not trying our luck by saying that therefore, it's over and there's no use trying.
As long as there are constant or increasing numbers of people "thinking they're going to make $1b by making an app and getting acquired.", there's — by definition — a rush.
As long as there are constant or increasing numbers of people "thinking they're going to make $1b by making an app and getting acquired.", there's — by definition — a rush.
And rushes, by definition, inevitably end. I'm sure there were gold miners that showed up in the Sierra's and were disheartened by all of the claims everywhere. They, being in the later wave, no doubt cursed their luck at missing out on the 'easy' riches. I can tell you that very few independent miners are wandering the Sierras these days to stake a claim (surprisingly it is not zero but that is a different story).
Forming a rock band is not a viable business plan. Hasn't been for years, since long before the music industry's current woes. The music industry survived for years and years parasitically feeding on the free labor that would-be stars put into skills for their hoped-for careers. The movie industry and the sports industry similarly harvest the freely available talent of would-be stars. And some musicians, some actors and some athletes indeed make lots of money but total final rewards look like very little if you divide them by the effort expanded by those aspiring to success. And consideration of the problems involved here can easily avoided if everyone who fails in any of these fields is dismissed from consideration as a "loser".
This stuff may not sustainable but it can be sustained for longer than one might imagine.
I heard once that the only ones who got rich in the gold rush was the ones selling pans. Too bad Apples seems to have a monopoly on the mobile-app equivalent.
> I heard once that the only ones who got rich in the gold rush was the ones selling pans. Too bad Apples seems to have a monopoly on the mobile-app equivalent.
Others can 'sell pans' by creating products that target developers (cloud backends (like Parse), mobile advertising, mobile testing infrastructure, etc.). Note that doing this makes you very susceptible to a tech bubble popping, though.
This is a fallacy of the 'goods' economy. It goes like this,
"If something is free to reproduce and distribute, the marginal cost for an additional good is zero, so new entrants simply reduce the profit they take until the price of the good stabilizes at its lowest possible price (the bottom)"
The problem with this fallacy is that it doesn't capture the 'cost' of the good which involves creativity and implementation, combined with a system of copyrights. So while it may be true that a generic good like a text editor might reach a price point near the cost of maintenance, something like AngryBirds generates revenue over a longer life cycle. Things that people want, they pay money for if they cannot get value out of a 'free' offering. Capturing that value requires understanding a bit about what the actual user value is and how they weight it, but as we read in another set of comments about people weighing the pros and cons of an app vs plonking down $5 for a cup of coffee without even batting an eye, the market for coffee is mature, people know what they are going to get for their $5 so the value proposition is in the bag, not so with Apps yet, and perhaps not for many years yet. But that education process continues.
Of course, the key to being able to charge a premium comes down to marketing, and positioning yourself well in the market, but that's obviously not a fairly difficult thing to do, especially in these competitive markets.