[revorad]

"It makes me sick to my stomach as it so transparently preys on the weaknesses like addiction and compulsion."

You know what makes me sick to the stomach? Developers starving themselves to death because of a complete disregard to basic business sense and a misguided sense of righteousness.

5 easy steps to homelessness:

1. Spend years building products for a platform, where $1.99 is a high price.

2. Avoid doing even the most basic mental arithmetic to figure out how many units you need to sell at $1.99 to be able to pay rent.

3. Then set the price to zero, because you're a nice guy.

4. Sell in-app purchases for the super duper high price of $2.99, thus raising your customer's LTV to a magnificent $2.99. But, don't be an asshole. Ask for the upgrade politely and quietly, in the third screen of the settings. Remember, you don't work for $ZNGA!

5. Make it up in volume

"We really want to stick to the ‘free and pay 2.99 to unlock’ model, but if only .5% of users buy our game, we’re going to have to figure something else out. It’s very malleable at this point. Perhaps we’re giving too much away for free, it’s really hard to say until we see more data.”

6. Look a bonus step no.6! If after following steps 1-5 you're still not quite homeless, then it's time for some more data collection. Spend another year or so A/B testing the gradients of your upgrade button. And oh maybe, your upgrade price is too high? Yeah, test that.

Excuse me while I relieve myself of the agony of watching people do this over and over again.

AAAAAAAAAARGHH!!! FOR FUCK'S SAKE, STOP IT!!!!!

Why do developers worship Apple, but absolutely refuse to take the slightest hint from them on how to do business?

Read this - http://www.joelonsoftware.com/articles/StrategyLetterV.html

And repeat after me:

"Commoditize your complements."

"Commoditize your complements."

The app store is the most brilliant and brutal execution of this strategy. Apple is selling $500 phones - the most expensive phones - while simultaneously making developers fall over each other and well, go homeless, to make software for their platform to give away for free.

As if that's not tragic enough, the celebration of the lottery winners has the public and developers believe that making apps is a great business to be in!

patio11 has been trying to drill these things into people's heads for ages. But, all he seems to get is upvotes and not enough people getting his point.

You don't have to suddenly go all Zynga on your users. There's a vast chasm between selling virtual sheep to addicted grandmas and giving away the farm for less than the price of a toilet roll. You can charge a good price, which does not depend on huge scale to pay the rent.

Edited to add: Lest I sound like some smug business know-it-all on a high horse, I've made the same mistakes. Most of us are like this. We need to make a conscious effort to be good at business.

[larrys]

"because you're a nice guy"

"We need to make a conscious effort to be good at business."

Part of being good at business is resisting the temptation to listen to some of the things that are written on HN which highlight how wonderful sharing and giving away things are for free, and scorning anything that looks like profiteering at the expense of the poor users, developers or Aunt Jane.

There is what appears to be a consistent "don't be evil" meme where "don't be evil" takes on whatever the group think is jealous of that they can't do but perhaps makes money for companies and developers.

I've run several businesses and make money in many different ways. All above board. But I'm sure if I highlighted some of the things that I do I would be roundly criticized and downvoted on HN for, in the opinion of the group, taking advantage of people, developers, programmers who expect perhaps that everyone dedicates countless hours to helping others for the good of society. One example might be anytime I attempt to highlight how I've sold or help sell domain names for people. The hate comes out in droves from HN'ers who don't believe there is absolutely any justification at all for someone being able to sell a domain name. Of course if I tell the same story to regular business people I get looks of envy - consistently. While it is true that they don't have a horse in the race, they also appreciate the point of business is to make money.

[rganguly]

"the point of business is to make money" - YES YES YES. Couldn't agree more on this. In the midst of all the noise about how focusing on revenues and profits is besides the point because you need to get tons of user adoption, it's nice use the word BUSINESS over and over and over. We're independent BUSINESS owners, creating BUSINESSES in order to remain independent, to work on what we love and believe in with people we respect and adore. Ignoring that we have to make money, that the math needs to work out favorably and that we owe it to our teammates and employees is not going to end well. Take responsibility for building a BUSINESS not a feel-good hobby.

[FuzzyDunlop]

I honestly can't fathom the thought process behind burying the link to your sole source of income. And why aren't they considering fixing that, and reducing the amount of free content, to solve this?

In fact, they say normal IAP is exploitative, but the fact is, they can still learn from the technique to make money without violating their ethics. The question they should have asked is "at what point are we crossing the line?"

The accurate title should be 'developers bankrupted by their own incompetence'.

[franzus]

Those guys are the typical case of the "free" brainwashing. They see taking money as something filthy and immoral to do.

It's how you start thinking if you grow up with everybody giving away their $product for free on the one side and the opensource/libre software hippies who give you a hard time if you try to make a living with software products on the other side.

Now if the results were just some homeless developers that wouldn't be a big problem. But it's far worse because the customer base has been miseducated and now awaits almost everything for free or for $.99.

/rant

[jonhendry]

"Those guys are the typical case of the "free" brainwashing. They see taking money as something filthy and immoral to do."

I don't think that's quite the case.

They went free because they saw a lot of profitable apps using the free + In-App-Purchase model.

The problem is they didn't think through what their own IAP model should be. They just focused on not being exploitative (the part that makes many of those free apps so profitable), when they should have been thinking about how much they needed to charge to be profitable, given the single IAP they had to work with.

They also might have gimped the free version a bit more to encourage people to buy the IAP.

[dirtyaura]

And the thing that they also missed is that most of the Top Grossing free IAP games don't have a ceiling for IAP spending. This is very important, as spending follows power law curve, which is very well known fact among free-to-play game developers ("rich oil sheiks subsidizing the game for poor kids")

It's requires a bit of a game design ingenuity to make it work so that you can't just buy your way to victory, especially in multiplayer setting, but is doable.

[larrys]

"They went free because they saw a lot of profitable apps using the free + In-App-Purchase model."

I think it would be more accurate to say that they saw several well publicized stories about where that model worked. They certainly didn't read any analysis highlighting that strategy and how it worked for all that tried it that way.

[SoftwareMaven]

This is so true. I've been working on an app for a while now (very part time, mostly scratching my own itch). A few months ago, I decided to do some thinking about what it would take to make a business out of it.

The very first thing I concluded is that, to make a sustainable business, the app has to be seen as a marketing expense and the actual business needs to be somewhere else. Trying to make it with an app alone, especially in a niche market, is not going to happen.

Games are even worse, because, by their very nature, they are a boom/bust industry. You survive in one of two ways as an indie: making incredible games and marketing the crap out of them or making a lot of OK games to flatten the boom/bust curves. It sounds like these guys want to do the former, which is awesome, but they've fallen for what I call "arrogant developer syndrome", which is simply that they believe "If you build it great, they will come and throw money at you." Marketing is as important to product development as writing software. You can build software without marketing, but you won't build a product.

(As a side note related to said app/business, if you are in any way involved in startups [including wanting to start one someday], I'm trying find that actual business. I've got a very short survey that I could use feedback on: http://www.surveymonkey.com/s/F7W9P5P )

[revorad]

Well, I wish these guys only suffered from "If you build it great, they will come and throw money at you.".

No!

They suffer from an advanced mutation.

"If you build it great, those guys over there will come and throw money at you. Ewwwwwwww. Green stuff. Let's move over here to these guys. They will come and throw 1-star reviews at us. It's the only thing that can push our limits and make us even greater."

[csallen]

I used to work with a group of developers in the MIT Media Lab who, honestly, were some of the most moral and upstanding individuals I've ever met. They spent a lot of time trying building software to help people in need.

But the one thing that I could never wrap my head around was the fact that they saw money as inherently evil. They went so far as to actively avoid using or accepting money, to the point that it actually hindered their Samaritan efforts.

The more "good" people who see money as evil, the fewer good people who will use it. Which means that a higher proportion of it will go to "evil" people and deeds. Which, in turn, feeds back into the loop to power the false perception that money itself is a bad thing.

[Spooky23]

People are motivated by different things, and that is neither good or bad. It is.

The upside of people wanting to give their labors away in exchange for recognition or a university paycheck is that it has pushed the rest of us up the value chain. Big companies want to be like IBM in 1970 -- owners of the marketplace, who stick you with whatever makes sense to them. That's why greybeard mainframe types call everything that isn't a mainframe "open systems". IBM, Control Data, etc were (and in some cases are) so restrictive that you literally had to provide their on-site engineers with a private office suite in your facility that your employees were not allowed to enter. (Where the manuals, etc were kept.)

All of this "giving away" of stuff has stopped our society from reinventing the wheel. I can provide motivated people with marginal education and they can produce useful things without a deep understanding of how computers and compiler work. That's powerful stuff.

True believers always come with associated baggage. Whether they want your money, your soul, or something in between, there's always ups and downs.

[danweber]

All of this "giving away" of stuff has stopped our society from reinventing the wheel.

Unfortunately, the people "giving away" spend a lot of time reinventing fantastically-different but only-very-marginally-better wheels. Every week I see on HN about some new language or framework someone has invented that fragments the market even more. If you aren't being compensated in dollars, being compensated with being "the inventor of X" can come close, so there's a big supply of this.

[forensic]

It's a Jesus complex and a mental illness. Pity them. They are sick.

[ljd]

Google Fiber is a very recent example of a company commoditizing a complement. The more people on the internet (their free tier) the more people that can use their ad generating products. The more people on high-bandwidth connections mean the more they can lean on YouTube for ad generation. Larry Page recently told Charlie Rose in an interview that he feels ad revenue from YouTube will surpass search ad revenue.

As internet access is commoditized the price of internet ad space will climb.

[Geee]

Apps on App Store are not commodities, and never will be. Commodity is something that isn't innovative and the only way to compete is with price. Like lightbulbs. And Android phones. That's why software matters, that's where the innovation is. If you create an innovative app with real value, you make money. If not, you end up as a homeless developer.

As a sidenote: 'developers become homeless' is a story guaranteed to go viral. Brilliant marketing.

[pjbeardsley]

I'm in no way saying that Apple's business practices are above scrutiny, but I think it's unfair to claim they are "making developers fall over each other". When the App Store debuted, prices started out in the $5-$20 range, but the market has settled around the $1.99 price point because that's where it ended up. They're not going around telling developers how to price their apps.

It may be Apple's petri dish, but this is the culture that's evolved in it, for better or worse.

[revorad]

Exactly! $5-$20 was the peak! And the market hasn't settled at $1.99. The market has settled at $ZERO.

I quote from http://www.apple.com/iphone/from-the-app-store/ :

Over 500,000 apps.

For work, play, and everything in between.

The apps that come with your iPhone are just the beginning. Browse the App Store to find hundreds of thousands more. The more apps you download, the more you realize there’s almost no limit to what your iPhone can do.

There's no limit to what the iPhone can do because we don't even need to tell developers how to price their apps.

There are hordes of 20-somethings subsidised by VCs to extend our platform for free forever. No wait. They pay us 100 bucks a head for the privilege. Every year. And there are thousands others who follow suit, even without funding, because they have selectively read all the chapters of Steve's biography talking about the importance of beautiful typography and minimal furniture.

There's no limit to what the iPhone can do because we don't even need to tell developers how to price their apps.

I'm going to stop now. This is too painful to write about.

[awolf]

>The market has settled at $ZERO.

You're wrong. There are plenty of paid applications sold on the App Store that make decent money. One of my paid applications is bringing in enough to live on, with little maintenance, and without being on any of the App Store charts.

Aside from blind Apple hate, what exactly are basing your argument that the App Store is filled with hopeless developers and un-sustainable business? Do you have any evidence that the ratio of unsuccessful business ventures is any higher on the App Store than in any other walk of life?

[revorad]

awolf, thanks for chiming in based on your experience. I'm really pleased to hear you've had success with your apps.

I'm sorry about my hyperbolic tones earlier. It's just that there's so much blind hype about the app stores, that it upsets me to see indie devs getting lured in and going bust. I don't hate Apple. I think they are brilliant.

I haven't done huge amounts of research on the distribution of outcomes for developers in the app store, but the typical prices are so low that you'd have to sell to a hell of a lot of people to make any decent money. Moreover, most devs only charge a small one-time upfront fee or IAP, which means you need to keep finding more customers or churning out apps.

I know how hard it is to make a good business even with a SaaS recurring revenue product. A life-time value of $2 sounds horrifying.

There is no doubt in my mind that some people are making good money on the app store. My point is that they could be doing a lot better in another market, with lower risks.

You mention one of your apps is making you enough money to live on. Do you expect that to carry on for a while? Or will you need to make more products? If you're willing to share, I'm curious to know more about your business, but I'll understand if you don't want to share too much.

[awolf]

>you'd have to sell to a hell of a lot of people to make any decent money

No. This right here is where you're way off.

Some hypothetical math: $3.99 app, $2.79 after Apple's cut.

$2.79 X 50 sales/day = $139.5 revune/day = $50,917 per year.

Enough to live and quite conservative if you make a quality product.

[revorad]

Isn't $3.99 on the high end of app pricing? Instapaper sells for $4.99 and is considered a premium product.

How long does it take to make a $3.99 app? Do you factor in those development costs?

If it's just one person and you make $50K, that's fine. But what if there's two of you?

What's the probability of getting 50 sales/day and for how long? In the event that you get, let's say 25 sales/day, what's your fallback strategy?

awolf, you may very well be selling hundreds of copies a day of your apps at 10 bucks a piece, but the point is that the vast majority don't.

[brazzy]

> The market has settled at $ZERO.

No. It is in the process of settling at $WHATEVER_WE_CAN_MAKE_YOU_PAY

These guys correctly observed that free apps + IAP are getting the most REVENUE. Not installs, revenue. What they failed to understand is that this only happens when you do exactly the one thing they absolutely did not want to do: milking each customer for what he/she is worth aka "capturing the consumer surplus".

[pacifi30]

Thanks for Joel on Software article, it made me think hard on focussing on economics as well rather then just coding 24*7 when starting a company or building a product.

Yes I repeat "Commoditize my complements"

[MrMcDowall]

I wish I could upvote this 10,000 times.

[ijobs-ly]

Well said.

Developers are severly exploited. Even the ones who become millionaires. Hello VC.

The way out of this situation is quite simple but not obvious to many. And of those who recognise it, they get it wrong.

I'm talking about platform development.

Platforms, the kind that let everyone benefit, need to be simple, low level (ultra reliable) and flexible.

Few people can get this right. Because the lure of complexity (features) and lock-in (greed) is so great.

An OS is not such a platform.

A website is not such a platform.

A protocol, that anyone can implement just by reading the spec, is a platform.

IP (Internet Protocol) is a platform.

It's dead simple. It's free. It's old! And you are all using it.

What can you subtract from IP? Not much.

What features does it have? Not many.

And that's the beauty of it.

True platforms in this sense do not require you to jump through hoops.

[rscale]

It's awesome that they didn't want to engage in predatory behavior, but what they did was self-predatory, which is no better! The opposite of exploitative game design isn't a life of asceticism; it's value for money.

I'm not a big gamer, but on the first page of my phone's springboard I count $300+ of apps, some of which have ongoing subscription costs. That's money that I paid because I got value. I'm happy with every one of those purchases, no developer starvation required!

One objection I take to your post is that I don't believe the narrative that the App Store is just a lottery. As an example, Tripit raised $7m, built an app that makes my life better, charges me $40/yr, and sold to a corporate buyer for $120m. That's a fantastic, real business.

On the flip side, these guys built an app with ARPU of $0.013.

Tripit didn't win a lottery; they provided big value and got paid because of it.

[revorad]

Ah yes, I wrote about that yesterday - http://news.ycombinator.com/item?id=4378546

Tripit and every other VC-backed company is in a completely different business than indie devs making apps. The product that companies like Tripit are selling, right from the beginning, is the company itself, not some free or cheap app. The app is just a marketing vehicle to increase the price of the company.

The amazing thing is that PG himself has been clearly saying this for years. And we still refuse to accept it!

Blindly copying VC-funded startups' surface tactics is the second leading cause of indie developer homelessness.

If you are in the business of business, you've got to sell. Successful entrepreneurs, whether VC-funded or bootstrapped, know how to sell.

If you are funded, it would be stupid to try and do anything that doesn't increase the valuation of your company. The best founders know how to weave a compelling story, and are always selling their company. Always.

The most successful bootstrapped entrepreneurs are always selling their product. Notice how patio11 does not miss an opportunity to somehow weave in a mention of one of his products, while still coming across as the most helpful guy ever (because he is). And when he's blogging about SEO and other useful stuff for other entrepreneurs? He's selling his consultancy services.

If you're not selling, it's not a business. It's a hobby.

ABC: Always be closing.

[patio11]

For what it is worth, I have historically taken pains to avoid selling on HN.

[trhtrsh]

You don't sell, but you promote your expertise and your personal brand for consulting, and offhandedly refer to how successful you are, with a indirect touch that is less off-putting and generates a bit of subtle mystique about "how does he do it? what is he talking about?"

A famous patio11-esque statement is a comment like "If you think that's a good sales technique, you don't understand the mindset of middle-aged schoolteachers" (while not repeating the fact that you market a product to that specific demographic.)

Can't fault that much. It would be extremely sacrificial to complete avoid saying "BCC" at all or ever mentioning that you generate X-figure returns for your consulting gigs, and spammily redundant to re-explain the whole Bingo Card business in every post.

You give away far more honest value (good, detailed advice) than you take away in "promotional references", contrasted against link-litter posts like this:

Headline: How X can help your business

Poster: Yeah, at http://mycompany.example.io, we use X.

You are like a human Google, giving away good, in-depth information, with a side of context-relevant promotion for your consulting business, but the information is valuable even without "clicking to learn the secret" or "buying the book". If all advertising were like that, the Internet would be a much nicer place.

[skyhook_mockups]

At this point you are the product Patrick. The second you decide to monetize the patio11 brand (maybe by writing a book?) you're going to print money.

PS: write a book.

[richardw]

He's already written why that'll never happen, but I'm on his mailing list and I suspect him of building up the steam to leverage that financially. It'll likely be repeat-sales oriented and have a greater-than-$10 customer lifetime value. I can't wait to be fleeced, because at least we know he'll be focused on providing me with value.

[revorad]

Hey, there're some bingo lovers among us :-)

[osxwm]

Keep telling yourself that. Just because we're not the audience of BCC or AR doesn't mean you're not selling something to us.

[solutionyogi]

Wow. I don't like this comment at all. I have been following Patrick's online participation when there was no Hacker News and all geeks (including Patrick) used to hang out at Business of Software forum (at JOS). I can definitely say that he genuinely likes to share his knowledge and help others out. I really don't think he is getting any BCC or AR customers through his participation in these forums.

[AznHisoka]

patio11 always has some of the best advice -- sometimes I think he's a black hat SEO disguises as a helpful expert :)

[franzus]

> and sold to a corporate buyer for $120m.

That's a great business plan and not lottery at all!

[qq66]

If they had not sold the company they could have just kept running on the revenues and distributing dividends back to the owners. That's a lot different than a business that needs to "sell or die."