Madison Reed has raised $32.1 million since launching 15 months ago.
Is fee or free a better business model for app developers?
The utility app market today reminds me a lot of publishing industry. Like publishers, developers who want to make money off their apps have two ways of going about it: Charging advertisers or charging users.
I’ve always wondered who pays more than 99 cents or so for an app. This came to mind again while writing an article today about a new app launched by ratings and reviews publication Consumer Reports. The app costs $9.99 per year and will increase to $14.99 January 1. For that fee, shoppers can use their phones to scan a bar code on a product and get access to Consumer Reports ratings, reviews, buying guides, a comparison shopping engine, prices for the product at nearby stores and more. The app is basically a beefed-up version of free apps already on the market such as myShopanion and eBay’s RedLaser.
As for me, I’ve decided to stick with the freebies. When it comes to my phone, I don’t want much information—I want the basics. I like my mobile life quick and easy. I don’t need nor do I desire to do the same things on my phone that I would with my PC or TV.
I’d rather use a less extensive comparison shopping app such as myShopanion via my phone and pay for a subscription to the Consumer Reports web site where I can spend an hour on my couch researching a significant purchase like a fridge or a patio set. Unless stuck in an airport or on an elevator, I’m not going to use my phone to do this. (Elevators don’t usually get reception anyways).
Other apps I’ve found that charge such as games and budgeting tools fall into the same boat. If I’m really into gaming, I’ll pay to play it on the big screen with a bigger picture and a controller that gives me more tools to manipulate my army or superhero or football player. For an app, give me a basic wordplay game that will keep me occupied on my train ride home. As for robust budgeting apps, I don’t need those on my phone either. Who wants to analyze their spending patterns over the past several months on a phone? I’ll do that at home in my comfy leather chair, on a full size Excel spreadsheet and likely with a glass of wine to ease the pain. For my phone, give me something pared-down and simple, perhaps an alert if I’m overdrawn on my account or a notification when my paycheck posts.
Now comes the second question: if developers don’t charge much or anything for apps, how will they make money? Advertising is one answer. I’d happily endure a small banner at the bottom of a game or view a five-second ad after I scan a bar code if the app were free. Developers also can charge affiliate fees, much like web sites. If an app user visits a shopping app advertised on a gaming app and ends up buying, the app developer could collect a fee.
I know that complaining about $9.99 and even $14.99 a year may seem trivial. It’s the equivalent of around 4 cents a day. But if charging for apps becomes the norm, those prices could steadily begin to add up. I already paid $200 for my phone and I pay $100 per month to keep it on. I’d really prefer not to add any more fees under the “mobile” category in my budget.
I love apps, they make my life more entertaining (Words with Friends), keep me informed (New York Times, NPR) and come in quite handy at times (Urban Spoon, Happy Hours). But I just need a nibble of the serving I would want at home or on my computer. And if you try to charge me for the whole plate, I’m not buying.