business models for really small apps?
November 05, 2006 10:39 AM
Hello,
As some of you might know I released ThumbView almost two years ago. It's a really small app and I like making those. I'm positive there is a way to make a nice buck from really small and usefull apps. But how?
[ ThumbView: Adds thumbnail support for DDS, PCX, TGA and 16 other imagetypes for Windows XP Explorer. ] [ Chocolate peanuts: Brazilian recipe for home made chocolate covered peanuts. Pure coding pleasure. ]
November 05, 2006 11:44 PM
What exactly are you asking?
You might be looking for a resource like this one, but I'm not sure.
Please clarify your question.
You might be looking for a resource like this one, but I'm not sure.
Please clarify your question.
1,851
November 06, 2006 12:42 AM
I have a goal to release small products at a light price as well, but I have yet to actually finish such a product myself except for the apps I have developed under contract to other companies, therefore take my ideas here with a grain of salt.
I personally do not believe in helping to create an ad based world in which the value of small or niche products is completely indeterminate because most products are subsidized by mass-market ad revenue. That's just personal bias, but I figured I should inform you of that detail before posting my plan.
I personally feel that it is the unique situation with information technology that due to the nearly free duplication and distrobution but nowhere near free development, that the for pay software landscape can be seen as the constantly moving leading edge between the high-price special technology and the 100% commoditized (free) technology. With the goal that every year more and more technology is moving toward commoditization (almost like giving wealth to the less advantaged or economically developed).
You can see this effect in things like the "greatest hits" line of PS2 games that are always $20, instead of the $40-$50 they sold for just 1 year earlier. Or in things like Open Source in which many technologies that a decade earlier we're advanced technology (secure web servers and application hosting, windowing systems, clustered transactional databases) become available free to the masses in time.
You can see this effect being resisted heavily (with varying degrees of success) by all companies with significant revenue tied to a technology that is becomming commonplace. Programmer's editors and image manipulation are 2 such areas. Perhaps the most notable though is CD / DVD burning tools. The fundamental ability to burn has become a commodity, but these software vendors just continue to package more and more "features" into their products in an attempt to maintain the same exact unit price year after year.
Personally, my plan is in between these places. My plan is your Method 2, but with a certain realization - that as software becomes older its value decreases, and left to iself, it will/should loose its abilty to create revenue.
My plan is to initially have an inexpensive simple / standard version - available for anywhere between $5 and $50 depending on the product's market and relative value (something I make myself in 1 month will be $10 or less, something my team makes in 6 months will likely be $15-$40). This product, being a version 1, will not really have "pro" worthy features at this point - and may not command very many sales. If the product warrants additional feature development at this point, we will do so ... creating the "pro" or "2.0" release depending on if these features are ones most customers would not need (pro) or a polishing of the product that we wish could have made it into the first version (2.0). In the case of the "pro" situation, the pro version will likely come out at a higher price point (for instance $40, while the standard version is $20). In the 2.0 case, the pro version will suplant the 1.0 version, driving the 1.0 version price down, likely to $0 (if 1.0 was $40, 2.0 might be $35-$50 while 1.0 might stay $10).
The end goal for me is that any product which has not seen active development in 1-3 years (depending on investment and revenue stream) will become 100% free to download, including old version of for sale products (although only truely high-quality stable release will continue to be hosted by me, if any release generate support complaints they will likely be completely replaced by newer improved releases, rather than becomming free - but that is not a goal).
If during this any product lines are created which offer continuing development opportunities, my goal is to have a version that is 2-3 years old be completely free and only continue to profit from the development that has been done in the past few years. I have set a hard limit for myself at 5 years ... whereby any development done more than 5 years ago will be offered in a free, and most likely open source package (BSD / MIT style).
This way, we as developers can plan to make money, while not attempting to force the unique situation of intellectual property ownership into the mold set by other (production / distrobution heavy) industries)
I personally do not believe in helping to create an ad based world in which the value of small or niche products is completely indeterminate because most products are subsidized by mass-market ad revenue. That's just personal bias, but I figured I should inform you of that detail before posting my plan.
I personally feel that it is the unique situation with information technology that due to the nearly free duplication and distrobution but nowhere near free development, that the for pay software landscape can be seen as the constantly moving leading edge between the high-price special technology and the 100% commoditized (free) technology. With the goal that every year more and more technology is moving toward commoditization (almost like giving wealth to the less advantaged or economically developed).
You can see this effect in things like the "greatest hits" line of PS2 games that are always $20, instead of the $40-$50 they sold for just 1 year earlier. Or in things like Open Source in which many technologies that a decade earlier we're advanced technology (secure web servers and application hosting, windowing systems, clustered transactional databases) become available free to the masses in time.
You can see this effect being resisted heavily (with varying degrees of success) by all companies with significant revenue tied to a technology that is becomming commonplace. Programmer's editors and image manipulation are 2 such areas. Perhaps the most notable though is CD / DVD burning tools. The fundamental ability to burn has become a commodity, but these software vendors just continue to package more and more "features" into their products in an attempt to maintain the same exact unit price year after year.
Personally, my plan is in between these places. My plan is your Method 2, but with a certain realization - that as software becomes older its value decreases, and left to iself, it will/should loose its abilty to create revenue.
My plan is to initially have an inexpensive simple / standard version - available for anywhere between $5 and $50 depending on the product's market and relative value (something I make myself in 1 month will be $10 or less, something my team makes in 6 months will likely be $15-$40). This product, being a version 1, will not really have "pro" worthy features at this point - and may not command very many sales. If the product warrants additional feature development at this point, we will do so ... creating the "pro" or "2.0" release depending on if these features are ones most customers would not need (pro) or a polishing of the product that we wish could have made it into the first version (2.0). In the case of the "pro" situation, the pro version will likely come out at a higher price point (for instance $40, while the standard version is $20). In the 2.0 case, the pro version will suplant the 1.0 version, driving the 1.0 version price down, likely to $0 (if 1.0 was $40, 2.0 might be $35-$50 while 1.0 might stay $10).
The end goal for me is that any product which has not seen active development in 1-3 years (depending on investment and revenue stream) will become 100% free to download, including old version of for sale products (although only truely high-quality stable release will continue to be hosted by me, if any release generate support complaints they will likely be completely replaced by newer improved releases, rather than becomming free - but that is not a goal).
If during this any product lines are created which offer continuing development opportunities, my goal is to have a version that is 2-3 years old be completely free and only continue to profit from the development that has been done in the past few years. I have set a hard limit for myself at 5 years ... whereby any development done more than 5 years ago will be offered in a free, and most likely open source package (BSD / MIT style).
This way, we as developers can plan to make money, while not attempting to force the unique situation of intellectual property ownership into the mold set by other (production / distrobution heavy) industries)
November 06, 2006 06:05 PM
frob:
My 3rd and 4th sentence was my question: "I'm positive there is a way to make a nice buck from really small and usefull apps. But how?" But I'm aiming for discussions and experiences from different people rather than a "here's the answer".
That article you linked was great, I really recognized myself - both as an amature and a professional. I'm a bit of a coward/amature that wants to make small apps and move on, but I always try to seek out what I'm been doing wrong instead of blaming stuff - which is the point of this post, to share with others and maybe reach some conclusion. Although I have to disagree a wee bit with the marketing research. Markets like cell phones were created by the products, someone (well several..) had a vision and went for it. Or even better; SMS. It was just a technical feature Nokia were able to do, they didn't think it was worth anything but their phones could do it so they let it be there. You have to be a bit of a dreamer/visionary if you really want to be ahead, so marketing research too much will limit you - not saying that you shouldn't do anything at all though.
Xai:
I agree to some degree. I do not however agree that ads are "evil". Those that advertise has more money than me, bigger products and bigger teams. And by that, I think we can live together with different business models. If our products are complementary (most likely in my case) my visitors/customers might become their customers, and that would give me more money - as well as giving them more money. Win-win-win for all three parties according to me; the customer, me and the other company.
Your pricing seemed a bit odd though.
you in 1 month = $10 or less
your team in 6 months = $15-$40
Thinking man months, and say your team is 3 persons including you, that's 18 months. Picking the lowest price, $15, you'd have to sell 2 copies so you'll get $10 - equal to your small app. From another angle: living costs at 1000usd/month (cheap? depends on the country) the small app you'd pay your expenses for your 1 development month after 100 copies - not that hard to sell? But for your big app you'd have to sell 1200 copies to cover *your* 6 months. Or for the highest price, $40, selling 450 copies.
My initial thought would be to stick with small apps made in one month, and make several of them. But after reading that article frob posted, maybe that bigger app has more potential and can make a lot more money in the longer run. And my initial thought might be completely typical to beginners.
If you have a nice image management app niched at some market, like scrap books, you could advertise on my little thumbnail-in-explorer-app-page and reach people that have a lot of images - your target group? You'd only pay for the people that actually click the link so that's great marketing for you. Hopefully you'll get your $40, while I get $0.10 for the referal. That's a small cost for you, and if I generate much traffic for several image sites (heh maybe even your competitors) it might even work out for me too.
I really liked your thoughts on different versions. I read something about that on Joel on Software (can't find it!). He talked about how sales and marketing didn't pick up until 2.0, as 1.0 was more a way to see what customers wanted; to only make what customers want and not what you think they want.
I feel that the way I could be headed looks good:
I released ThumbView 1.0 completely free. It didn't take long until I got several feature requests, some repeated among different requesters. I never made them because I was stuck in the Open Source dream, that someone nice would do it and help ThumbView grow - that never happened, ever, in ANY way.
So now I have a nice list of features I know that ThumbView users want. This is great for a version I can sell. To generate interest I'll need some free version, like a trial or:
* refering to 1.0, like your idea on "old software" (more on this later)
* make a 2.0 Lite, which is better than 1.0 (more features?)
* 2.0, not updating it with new features, only security and bug fixes
* 2.0, not update it at all (se below)
If they like it, want continued support (2.1, 2.2, etc) and added features, they'll have to pay for it. At a cheap price, of course.
Your idea of releasing software when it gets "old" is nice, I like that Id Software does that with their engines. But having the 1.0 free did in my case yield two things:
* Proved to me that there's a market of users. Note: This doesn't say how much they're willing to spend, if any.
* Since it was free a lot of people tried it out, and came with requests.
My main idea was to do something like this. Make a 1.0 that really defines the core of your app/idea, and release it for free. Then use the experience, etc, to make a 2.0 that you sell. An added bonus is that a lot more people are willing to advertise for free a free app, like in forums and websites. A lot of people linking to your site will boost your pagerank, which you'll benefit from on 2.0.
Does anyone know how much Method 4 sites like those mentioned earn? I'm thinking; a lot. Is it more than they would've made with Method 2? I'm suspecting so, and this is where my doubts for selling 2.0 comes in.
(Either I write too little, or way way too much. heh sorry)
My 3rd and 4th sentence was my question: "I'm positive there is a way to make a nice buck from really small and usefull apps. But how?" But I'm aiming for discussions and experiences from different people rather than a "here's the answer".
That article you linked was great, I really recognized myself - both as an amature and a professional. I'm a bit of a coward/amature that wants to make small apps and move on, but I always try to seek out what I'm been doing wrong instead of blaming stuff - which is the point of this post, to share with others and maybe reach some conclusion. Although I have to disagree a wee bit with the marketing research. Markets like cell phones were created by the products, someone (well several..) had a vision and went for it. Or even better; SMS. It was just a technical feature Nokia were able to do, they didn't think it was worth anything but their phones could do it so they let it be there. You have to be a bit of a dreamer/visionary if you really want to be ahead, so marketing research too much will limit you - not saying that you shouldn't do anything at all though.
Xai:
I agree to some degree. I do not however agree that ads are "evil". Those that advertise has more money than me, bigger products and bigger teams. And by that, I think we can live together with different business models. If our products are complementary (most likely in my case) my visitors/customers might become their customers, and that would give me more money - as well as giving them more money. Win-win-win for all three parties according to me; the customer, me and the other company.
Your pricing seemed a bit odd though.
you in 1 month = $10 or less
your team in 6 months = $15-$40
Thinking man months, and say your team is 3 persons including you, that's 18 months. Picking the lowest price, $15, you'd have to sell 2 copies so you'll get $10 - equal to your small app. From another angle: living costs at 1000usd/month (cheap? depends on the country) the small app you'd pay your expenses for your 1 development month after 100 copies - not that hard to sell? But for your big app you'd have to sell 1200 copies to cover *your* 6 months. Or for the highest price, $40, selling 450 copies.
My initial thought would be to stick with small apps made in one month, and make several of them. But after reading that article frob posted, maybe that bigger app has more potential and can make a lot more money in the longer run. And my initial thought might be completely typical to beginners.
If you have a nice image management app niched at some market, like scrap books, you could advertise on my little thumbnail-in-explorer-app-page and reach people that have a lot of images - your target group? You'd only pay for the people that actually click the link so that's great marketing for you. Hopefully you'll get your $40, while I get $0.10 for the referal. That's a small cost for you, and if I generate much traffic for several image sites (heh maybe even your competitors) it might even work out for me too.
I really liked your thoughts on different versions. I read something about that on Joel on Software (can't find it!). He talked about how sales and marketing didn't pick up until 2.0, as 1.0 was more a way to see what customers wanted; to only make what customers want and not what you think they want.
I feel that the way I could be headed looks good:
I released ThumbView 1.0 completely free. It didn't take long until I got several feature requests, some repeated among different requesters. I never made them because I was stuck in the Open Source dream, that someone nice would do it and help ThumbView grow - that never happened, ever, in ANY way.
So now I have a nice list of features I know that ThumbView users want. This is great for a version I can sell. To generate interest I'll need some free version, like a trial or:
* refering to 1.0, like your idea on "old software" (more on this later)
* make a 2.0 Lite, which is better than 1.0 (more features?)
* 2.0, not updating it with new features, only security and bug fixes
* 2.0, not update it at all (se below)
If they like it, want continued support (2.1, 2.2, etc) and added features, they'll have to pay for it. At a cheap price, of course.
Your idea of releasing software when it gets "old" is nice, I like that Id Software does that with their engines. But having the 1.0 free did in my case yield two things:
* Proved to me that there's a market of users. Note: This doesn't say how much they're willing to spend, if any.
* Since it was free a lot of people tried it out, and came with requests.
My main idea was to do something like this. Make a 1.0 that really defines the core of your app/idea, and release it for free. Then use the experience, etc, to make a 2.0 that you sell. An added bonus is that a lot more people are willing to advertise for free a free app, like in forums and websites. A lot of people linking to your site will boost your pagerank, which you'll benefit from on 2.0.
Does anyone know how much Method 4 sites like those mentioned earn? I'm thinking; a lot. Is it more than they would've made with Method 2? I'm suspecting so, and this is where my doubts for selling 2.0 comes in.
(Either I write too little, or way way too much. heh sorry)
[ ThumbView: Adds thumbnail support for DDS, PCX, TGA and 16 other imagetypes for Windows XP Explorer. ] [ Chocolate peanuts: Brazilian recipe for home made chocolate covered peanuts. Pure coding pleasure. ]
1,851
November 09, 2006 12:41 AM
The idea for my pricing is ... to justify longer development, the app should be "bigger" and therefore needs to be more desirable to be worth doing in the first place ... so the lower unit-price profits are because of the significantly increased likelyhood of seeing revenue at all - and hopefully a much higher volume ... in other words, a 1 month app is not very likely to be bought by many people (because they can just develop it themselves) ... the bigger the product, the more value you offer the customer, therefore the more likely you have customer(s). In this way, a tool like Visual Studio only costs $800 even though that doesn't even pay for 1 man-week of the multi-million dollor development costs. Or a game like Oblivion still sells for $50-$60 because they make money on volume.
There is some definate truth to the idea of pricing certain types of products to be "impulse" buys, where the custom doesn't even bother going through the normal evaluate / approve channels because it wouldn't be worth it (for instance at work I would buy a $10-$50 product I thought was usefull without getting manager approval first, and then I'd submit the receipt and be happy either way - but a $200 tool isn't getting bought no matter what until I can convince the manager to cover it).
There is some definate truth to the idea of pricing certain types of products to be "impulse" buys, where the custom doesn't even bother going through the normal evaluate / approve channels because it wouldn't be worth it (for instance at work I would buy a $10-$50 product I thought was usefull without getting manager approval first, and then I'd submit the receipt and be happy either way - but a $200 tool isn't getting bought no matter what until I can convince the manager to cover it).
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