Friday, May 15, 2009

Bait and Switch Marketing Comes to iPhone Apps

The other day I happened to be flipping through TechCrunch and I came across a post talking about reMail, an application that had just been release that would provided full text search of your email from your iPhone. The post also noted that the app was in it's Beta period and that it was free during that time. So I downloaded it.

Since TechCrunch draws some serious traffic, I sort of expected that the app might not be free when I got there, but the iTunes store listed it as free and everything looked good. So I load the app onto my phone, fire it up, and it takes me to a screen that says, "I'm sorry, our server is full. Do you mind taking a survey? And if you give us your email, we'll notify you when we have space." So I go through the survey, and the questions include a couple that you would expect like "about how many emails do you have in your mailbox", etc. Then they get to the big question, "would you be willing to pay $3.99 a month for this service?"

The Curious Case of Free iPhone Apps That Cost Money
I have several apps on my phone that I got for free. Airshare is a great example. It allows you to use your iPhone as a web server to share and view files over a wifi network. I picked it up for free during it's two week initial release period. It costs money now, but I've recommended it to several people who have since purchased it. Contrast that with Jott, a cool app that recorded your notes, then transcribed them to written notes that showed up on your iPhone. It used to be free, but then they moved to a pay model. While it got some periodic use as a free service, once it became clear to me that I would need to pay a fee, I removed it.

Don't get me wrong -- I have an appreciation for the challenges facing software producers, particularly within the iPhone application landscape. Few people embark on the journey to develop and build an application as a pro bono exercise. People need to eat. People need to get paid. I've also paid for applications and functionality that I use regularly (e.g. the one time charge for the full version of the crossword puzzle software '2 Across').

I also paid for the camera ruler app, expecting to gain more utility from it that I have actually received -- nine times out of ten, it's easier to find a tape measure than go through all of the steps required to measure something. Am I unhappy about the five bucks that I paid for the camera ruler? Not really -- I expected it to be of greater value on that one time out of ten when I didn't have a ruler or a tape measure handy, and the small outlay of cash wasn't a bad gamble for that moment in time when something like that would come in handy.

A third comparison that I would make is with the tip calculation software that I've installed. Early on, I saw several apps designed around this problem, but most wanted a couple of dollars for the app. Eventually, somebody created a free tool to address the problem, and I have that one. I think that its revenue model is advertising plus the potential to link / register users for a centralized platform for tracking some of that data, but I haven't followed that through. I mention that because I think that Airshare faces a similar challenge from competitive apps. I haven't done a detailed comparison of the apps in that category. Assuming that there's a free product out there, I can't say whether Airshare outperforms the free version, but it certainly presents a challenge for the App Developers. Like the web, a good idea is no guarantee of exclusivity within a segment. Does Airshare win because they were first to market? While being first to market means that they probably get a larger initial adoption base and are able to better understand the challenges that mass deployment exposes, many of these applications are still essentially lightweight dashboards so the scope of the technical problem that they solve is typically not a barrier to competition.

Finally, one last app example goes back to my days of living on the Blackberry. One of the challenges that Blackberry users face using the default version of the phone is viewing emails with foreign language characters like Japanese or Chinese. Fortunately, there was also an active community of app developers for the Blackberry, and there was an application that you could download and install that provided support for international characters. However, the pricing model for the software that I'm thinking of was an initial charge plus a monthly subscription of about ten dollars. Now, this functionality -- basically an essential capability if you want to communicate in Japanese -- is supported by default on the iPhone. Also, it turns out that there are some ways that Blackberry users can add this functionality without paying for the subscription service. Meanwhile, one subscriber that I know feels like he's being charged for something that is available for free -- which doesn't help with any branding or Word of Mouth equity. In that way, the subscription model tends to suggest a relationship in which the value of the service provided will competitively outperform the free version. This also suggests that over time, service and offerings either need to improve, or price needs to go down -- if your business is in it for any sort of longer term relationship with the customer. To use the accounting term, there should be some sort of "mark it to market" calculation in your pricing.

So, what apps are you willing to pay for?

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