The great iPhone app Shakeout.

Here we sit in week two of our wait for Apple to approve our initial application and I am reading in fascination the article written by Craig Hockenberry’s “Ringtone Apps” and “Financial Realities of the App Store” by David Barnard.  This goes straight to my argument about having 1,000 customers paying $1,000 or 100,000 paying $10. You get to the same place except the marketing strategy is different.

This has all happened before. Nothing new here. When the first personal computers were released thousands of programs were written by thousands of developers. We are just hitting an inflection point much more quickly. How much is AutoCAD? >$2,000 per seat plus. How about Photoshop? >$800. The point is the only real way to make money is to create applications which sell at or above $300-$500 per year per application. And then figure out how to make a maintenance charge and then an upgrade fee every 18 months. All traditional stuff. Real businesses will either build apps to be on the top 10 list like Pangea and sell them for between $9.99 to $1.99 to make real money or developers will have to get revenue other ways.

Most of the other apps are being built by hobbyists, not businesses. Lots of brilliant ideas and talent, but no money. If an app makes $300,000 a real software company will not invest in the app store. It is just not enough money.  But if the app helps drive adoption of a larger app, (which is our business plan) then it does not matter what the cost is. If I were to sell my app for $99, most if not all of our customers would buy it.  $99 is just not that much money for a 1000 person company.   But we priced it at $5.99, why? Because if we are able to get 4 corporate customers over a year who will spend $1,000 to $2,000 a month with us because they tried our simple app and then we were able to upsell them, then the iPhone app is just a marketing expense for us.  Anything else we sell is gravy.  So 6 months of development, with a team of three developers, server infrastructure and other costs are an investment in marketing.