The App Store Business: do we need Paid Upgrades or can we live with In-App Purchase only?

The App Store Business: do we need Paid Upgrades or can we live with In-App Purchase only?

Posted on 27 August 2013 | Reading time: 5 minutes

Since the introduction of the App Store, and even more when the Mac App Store arrived, a lot of discussion has been made around apps’ pricing models. Only last year a debate about the need for paid app upgrades raised among developers, but it eventually fade off… until a couple of weeks ago, when Apple released Logic Pro X as a separate, full-priced, app - deprecating the existing Logic Pro on the Store.

With this launch, Apple has reclaimed its intention of not allowing any paid upgrade to apps. Moreover, by a quick analysis of the apps featured by Apple in the last few months, it also appears that they prefer the freemium model over paid apps in general, although most of theirs aren’t actually free. Games are the only kind of apps that actually sees a major featured rate even when they’re in sale or free. What developers can do then to guarantee themselves an income after the initial sale then?

As well noted by Rene Ritchie in his article about the Logic Pro X update and what it means for developers, publishers basically have 3 ways to handle apps’ updates:

Each of this has a drawback for either the developer or the customer… or both, as somebody might argue. Many have already faced the hard choice of going for one of this options and results, we saw it with Twitterrific, may vary. If you are an independent developer and you haven’t updated an app for a while like me, or if you’re reworking one of your apps from scratch you’re likely to face this choice yourself.

##The case for trial periods and paid updates

Some people rightfully raised concerns about visibility on the App Stores. How are people supposed to find your great apps among hundreds of similar apps? Just search for ‘Twitter’ or ‘Todo’ or ‘Calendar’ on the App Store and you’ll get hundreds of different results, all formatted the same way and most likely with similar app icons. Now, this might appear as a separate issue, and in part it is, but what happens when hundreds of developers start publishing and keeping on the Stores two or more versions of the same app? We’ll have millions of apps, all doing the same things and therefore polluting the App Stores, which of course means that the chances to be visible to customers gets greatly reduced compared to what it used to be once or what it is today.

I agree with Elia Freedman when he says that the App Store problem is not price. Trials might improve discovery of great apps without getting the user to spend money on different apps before they find yours. Moreover it would cut the need for a ‘light’ version of the app and thus for duplications that make other apps less visible. I’d also like to see videos embedded in the details page of apps on the App Store.

Somebody, I can’t remember who, also argued that with iOS 7 the discovery of good apps should get a boost thanks to the new design which will make old/non-maintained apps look… well, old. I couldn’t agree more. This is a perfect time to update your app if you’ve been delaying it for a while and it’s also a good change to submit the update as a separate app and charge full price for it.

This leads us to the paid upgrade proposal many are trying to push. Although I can see why fellow developers want to charge for upgrades I actually agree with the position taken by Apple on this front: you should publish a new, separate, app if, and only if, you feel the effort needed to produce it overcome the disadvantages that doing so implies. Otherwise, you should take advantage of the in-app purchase mechanism to charge for your latest and greatest features.

##The solution

I don’t fully agree with Dave Addey when in his post ‘Apps are too cheap’ he says:

Although IAPs can be used to purchase additional functionality, this doesn’t fit with user expectations of how new functionality is generally made available. The expectation is that if an update is free to download, any new functionality within that update should be free to access, and shouldn’t require an IAP to unlock it.

What I expect as a user from an update is that known issues had been resolved, that something got improved or that there’s some new feature. Updates, by all means, don’t have to only contain new features that are given out for free. Apps like Evernote and many games quite successfully have integrated this philosophy of ‘freemium upgrades’ to their product development cycle. Apps can get new features reserved to services Premium subscribers or available through In-App Purchase (either as a one-time purchase or as a subscription) and Games can get new levels available as achievements or as a purchase.

What’s the advantage of using in-app purchases over payed upgrades? - you may ask. First of all purchasable features would allow to keep the cost of your app low, if not free in the first place, potentially making your app be downloaded by more people. At that point only those interested in the paid features will buy them. It’s your responsibility then to promote those features to your users and make them want them. You can choose to sell the ‘premium’ feature individually or/and in bundles. This would also allow to get some extra analytics on how popular a feature is and will make it easier for you to decide whether it’s worth to keep it or not. Moreover, if you decide to pursue this model, an in-app trial of those premium features would move the control of what many have been asking for to you, and will let the users try your full app before having to choose whether to buy extras or not. Of course some of the paid features could be sold as an upgrade bundle within the app.

Still, as Apple or Tweettie 2 did, at some point releasing a new version of your app or game as a separate entity on the App Store might make sense. This, though, shouldn’t become a rule for all updates, but only for some major versions of your software, when it really makes sense to do so. If you ‘over-release’ updates as separate apps you might get the side effect of loosing visibility and customer trust, not to mention that Apple might prevent you from releasing yet another app with same/similar features than other software you sell on their stores.

How are you dealing with new features for you apps’ updates?