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David Smith on Evolving App Store Business Models

David Smith:

I don’t have solid data going all the way back to 2008 when I launched my first app, but I do from 2012. In the last 4.5 years the split of where my revenue comes from has followed a clear, inexorable march from being paid-based to advertising-based. Starting in 2012 advertising in my apps made up around 10% of sales whereas now it is nearly 80%. That increase has come almost entirely from a near collapse of my paid upfront sales (with my in-app purchase income largely unchanged). […]

As I have looked back on these last few years I’ve come to the conclusion that the change is mostly been in the App Store market, rather than in my own attitudes. In many cases adding advertising to my apps has been something I’ve fought and resisted as long as possible. But in the end the pragmatic answer has been to not swim upstream and instead follow where my customers have moved to.

The market has been pulling me along towards advertising based apps, and I’ve found that the less I fight back with anachronistic ideas about how software “should” be sold, the more sustainable a business I have.

Three thoughts:

  • This jibes with my conclusions about Vesper. There’s still a strong market for paid-up-front Mac apps, but with mobile apps, you really have to treat them more like websites: free to use, with either advertising, paid extras, or both.

  • Smith saw a nice jump in advertising revenue earlier this year when he switched from iAd to AdMob. That means Apple is getting a much lower percentage of the revenue generated by Smith’s apps.

  • I wouldn’t be surprised if we see more popular iPhone apps move toward advertising.

Monday, 5 September 2016