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iPhone Paid vs. Free Debate

Lots of people in the blogosphere talking about Greg Yardley’s analysis that it doesn’t make sense to give your app away for free on the iPhone because the economics of paid are better.  Couple of points he didn’t make in the deck that I wanted to make sure people thought about as they read it:

  1. It appears that the new metaphor that Apple has propogated that people pay for iPhone apps has worked.  On the Internet, people expect everything to be free, but on the iPhone, people expect to pay for some portion of their apps.  We can suspect that this is true because Greg indicates that the difference between free vs paid is 6.6 to 1.  That is a lot different that the Penny Gap that most web developers build around, assuming that it is more like 100 to 1.  If it were 100 to 1, the economics change pretty quick.
  2. There are probably data normalization issues here.  How do you really compare apples to apples?
  3. Finally, Greg assumes that everyone is using ad networks to monetize all of their inventory.  If you look at the big guys on the Internet, they would tell you that no one but arbitrageurs can survive at those kind of CPMs.  Just like on the Internet, apps should try to figure out a way to charge premium CPMs.  If it was a $10 CPM, all of the sudden it is a more interesting question.

I love how Greg put together a nice data driven post.

One Response to “iPhone Paid vs. Free Debate”

  1. Greg Yardley Says:

    Right on all counts, although we do try to take care of the data normalization issues as best we can. There’s been a number of paid applications that have later become free that helps us there quite a bit.