The Software industry is in the midst of a huge paradigm change. The way we buy and sell software is changing with the advent of the new mobile devices. Yes, I know it’s the app store but it is more than that.
With the launch of the app stores software writers build their apps and sell them through the devices app store. The store takes a piece of the sale – usually 30% of the total sale for the app store. After understanding this new world a little better, developers have learned how to maximize their revenue.
There are two main ways to maximize revenue in this new app store marketplace. One is to use in app purchases. While some app stores still require that they still get their 30% cut some do not. Further most people won’t spend a large amount of money on phone a game especially when there are free games. Free like a puppy is the new method to maximize revenue in games. The trick is to create a compelling game where the player gets hooked. Then you have levels where it is almost impossible to pass to the next level without some in app purchase of some new tool or feature. I have seen games where they are able to get $20 out of a player. For a free phone game. Pretty smart and the customers don’t seem to mind as long as they enjoy the game. I doubt they could get them to spend the money upfront in the old way of selling software.
In app purchases may work great for games but it is not so attractive for business software. Here what software developers are doing is making the program available for free but requiring some cloud service on the back end. This is where they will charge and avoid the 30% app store fee. Dropbox is a good example of this. They have a free client everywhere and it syncs files to your devices, but if you need more space than than their free offer has then you have to purchase more space.
Microsoft seems to be moving in this direction also. This past Friday Microsoft released Office Mobile for the iPhone. The app is free on Apple’s app store but it does require an Office 365 subscription.
For the official Office Team announcement here is their blog post:
Office Mobile for iPhone now available for Office 365 subscribershttp://blogs.office.com/b/office-news/archive/2013/06/12/office-mobile-for-the-iphone-is-now-available-for-office-365-subscribers.aspx
It is my belief that is is the new world of software and we will be seeing more of this from all software vendors. That is, free downloads with charges on the back end probably from some cloud service. What do you think?