App stores have been around for a while, and our company has been selling MobileNoter through all major ones: Apple Appstore, Google Android Market, and Amazon Android Market. We know a thing or two about app stores, and the most important thing we know is that they are totally unfriendly to the business software vendors. I will use “business software” in a loose sense here – basically, everything that is not entertainment and doesn’t cost a buck or two apiece is considered as a business software in this post.
1. App stores hide buyers from vendors. While staying anonymous is cool when one buys iFart app or perhaps another countless “3-in-a-row” clone, this is not the case for the business software. First and foremost, it is going to be harder to provide support to the customers. It is harder to identify whether they are your customers at all, what software they bought, what version they are using, and so on. It is also harder to do cross-selling and up-selling. You can’t send an email to the customers saying “You have our software for iPhone, we have a new version for iThing too”. What app stores should do: they should allow for opt-in email sharing by the customers. If a customer wants to share her email with the vendor, she should be able to just do that without any hassle.
2. App stores have terrible pricing structure. They don’t have discounts or coupons issued by the vendor, they don’t have volume discounts, they can’t sell upgrades to the applications, and they don’t allow packaging your goods and services, for example offering a premium support plan for extra money. All these things have been used by the business software vendors for a long time. One would wonder why major app stores can’t implement these things. The only thought that comes to mind is that they are only interested in selling entertainment stuff. What app stores should do: they should implement flexible pricing structures similar to those of Plimus and other eCommerce infrastructure providers.
3. App stores don’t let a free trial (with the exception for Google Android Market, where developers can use in-app purchases for that). Business software costs anything from $10 to 4-digit figures and few people are going to just cough up this kind of money without seeing what they are getting first. What app stores should do: pretty obvious.
4.The 30% cut is not justified. App stores shouldn’t be THAT greedy. It’s OK to take 30% off $0.99 purchases because the transaction costs are high and because the impulse buyers are the main drivers of sales. It is a totally different story for elaborate and expensive software. These apps require out-of-the-app-store marketing, because they are rarely going to be in the app store top lists and the app stores’ search capabilities are dismal. The 30% cut is a good deal when compared to the brick and mortar stores, when you sell software in a box with a disk and a printed manual, and it is sitting on a real shelf. Ain’t these times gone forever? What app stores should do: they should implement a straightforward structure where the cut is reduced the higher the price of the software is.
5. Lack of payment options. App stores only know the credit cards. The other 10 ways of paying are unknown for them. An enterprise buyer is likely to demand an invoice, to pay with a purchase order, and so on. Again, this is not going to be a problem for a cheap one-time-run app. What app stores should do: again, pretty obvious.
What the business software vendors should do: the only way currently available is to move your software into SaaS territory. If you claim that you provide a service, then you are free to sell it on your website, gather customers’ emails, provide flexible prices, offer a free trial and don’t give a leg and an arm to the greedy app stores. A lot of companies are doing this at the moment. However, it would be more convenient for the users if the vendors didn’t force them to their websites. Sometimes the app is not very suitable for the SaaS model, and strange things can happen along this route. Second, the app stores still can change the way they are treating SaaS. When the Apple Appstore introduced subscriptions a few months ago, it scared shit out of many SaaS providers, because for a moment they thought they would be forced to part with 30% of their money.
Is there any hope? Actually, I think there is, at least for Android. With the two major app stores and smaller (carrier operated) rising, it creates a place for competition and this will push the pressure on the app stores to improve. At least, that’s what the theory says.
