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Andy Brice
Successful Software

Doug Nebeker ("Doug")

Jonathan Matthews
Creator of DeepTrawl, CloudTrawl, and LeapDoc

Nicholas Hebb
BreezeTree Software

Bob Walsh
host, Startup Success Podcast author of The Web Startup Success Guide and Micro-ISV: From Vision To Reality

Patrick McKenzie
Bingo Card Creator

Changing business model of my iOS app from paid to freemium

Feb 2012, I created my first software product.

It's a HTML5 application for guitar players. Due to time constraints, I thought it would be a good idea to first launch it on the App Store for iOS. (I used Phonegap to accomplish this).

I tried a few different price points, but for the most part it made very little money. 2-3 sales per day at $5 each on average. (Apple keeps 30% of that)

After a while, I wanted to try some other business models. So I launched the app as a stand-alone web app. Linked to it from the Chrome Web Store, which sends it a bit of traffic.

So now I have a web version, which I sell for $3/mo or $25 year. It too makes very few sales - 4 in total for the last 3 weeks. Im not as bothered about that though, because the only traffic is from the Chrome Web Store. If I can work out how to do SEO or AdSense, that might pick up. The possibility for reoccurring income is appealing.

But the iOS version was annoying me, making only 2-3 sales per day, with no improvement in sight. So I decided to change the business model. I changed the app to free, and then added an InApp purchase, for "premium features".

The premium features at the moment are limited. Currently it syncs the users content to my server, and gives them access to the web version. I.e so they can create content from their PC, which is easier to do with a mouse anyway.

That change in business model from paid -> free, has seen downloads increase from 2-3 per day, to 80-160 per day.

But even with that large increase in downloads, the InApp purchase is not compelling enough, and only one person has bought it so far.

I guess I need to add more premium features to make it a more compelling purchase.

The problem is, adding features takes time - and I've already sunk a lot of time into this app for very little reward.

What I'm thinking is easier in the short term, is to limit how much content the free users can create with the app, and try and encourage them to buy the premium subscription.

Currently users can create unlimited content in the app. But I'm thinking it would be better if users could only create 1-3 pieces of content, and any more than that would require a premium subscription.

I'm pretty sure that would be allowed by Apple.

The downside would be that I would have to release it as a different app on the store. (And effectively make the old app unavailable for purchase on the store). Some customers who notice that may be annoyed, and post a negative review of the new app.

Further, I'll loose all my current reviews and perhaps my ranking in the store. Not sure how much that is worth anyway to be honest. I'm not in the top 100 of the music category, and I have no idea what keywords people find my app with in the store anyway.

Not sure... I don't want to stuff my app up, or piss people off. But I don't want to work on an app that only makes $8 a day either.

I'm pretty inclined to do it just to see what happens.

What do you think? Good idea or not?
MrShuffles Send private email
Sunday, August 18, 2013
Do people that download your "free" app use it? If the answer is no then it doesn't matter how you try and monetize it.  If you are not tracking this there are several analytic packages for iOS that will help you with it.

The free model is great at generating a large number of downloads. The problem is that a lot of those downloads will be from people that have no interest in your product.  A 1% conversion rate is about as good as you can hope for and with your download numbers that isn't going to work. The freemium model is really built on extracting a large amount of money from a few of your users.  You find the 1% of your users that are willing to pay and you get them to buy a dozen items at 1.99/pop
Foobar Send private email
Sunday, August 18, 2013
Going from 2-3 sales per day to a freemium model that yields one sale in a period of days or weeks is clearly a step in the wrong direction. I'd drop the freemium model  and reinstate your paid model, perhaps even raise the price a bit. If demand for your app is constant in terms of numbers of sales, this might yield more revenue.
Kevin Walzer Send private email
Sunday, August 18, 2013
@ Foobar:  Yeah, i'm doing some tracking in the app using Google Analytics. Many of the free people are actively using it.

Maybe "freemium" is the wrong word for what I'm thinking of - it's more like a trial version. If people like the app, they will want to create more than 2-3 pieces of content with it, and will hopefully become premium subscribers.

At the moment I don't have that limitation, so they don't have as much reason to become premium subscribers.  I suppose my main question is - is it "wrong" to limit my app like that?

If I release it as a new app, I won't be hurting existing customers. They just wont get any further updates.

@Kevin: True, it would currently have more revenue as a paid app. But I don't think I can grow that to something worthwhile because of the limitations with the App Store ecosystem. I'd rather give up on the app than go back to selling it for $5 a pop. I cant raise the price either - I tried that and just results in no one buying it.

I think if I can come up with ways to make the subscription purchase more compelling I might be able to make this app worthwhile.

At least with subscription, people register and I get their email address. From there I have a greater chance of keeping them as long-term customers.
MrShuffles Send private email
Sunday, August 18, 2013
Have you considered monetizing these 160 people in some other way?

Presuming you get their details when they download (??) could you market other music/guitar/lifestyle products and/or services to your growing database of loyal fans and users?

You'd have to sniff around for opportunities or option but as a general rule, those who have already purchased something from you - and yes, free downloads work too - are much more inclined to buy something else from you.

Heck, even if it's just those 2 or 3 buyers, that's gonna add up over time. By now you should have a fair size mailing list of people interested in guitar, willing to spend money and who already trust you.

There's value in that, so squeeze it.

Reluctantlyregistered Send private email
Monday, August 19, 2013
> So now I have a web version, which I sell for $3/mo or $25 year. It too makes very few sales - 4 in total for the last 3 weeks.

Personally, I believe any efforts to sell on iPhone market without a massive, massive marketing budget and an app appealing to tens of millions users, are futile.

But since you're already having a SaaS, you may make your iPhone app a client to your SaaS, and push for subscriptions.

That doesn't block you from up-selling and cross-selling as in-app purchases; in fact,  SaaS should be considered an up-sell. You just need to figure out what recurring value the users may get from the subscription.

The downside is that you need to support 2 (3 if you decide to tap for the biggest mobile market out there -- Android) apps, but you're already doing it.
Vladimir Dyuzhev Send private email
Monday, August 19, 2013
@Reluctantlyregistered - no, that's the issue with the App Stores - you don't know anything about users who download your app.

That's another reason why I wanted to add a subscription - so I could get some user information when they signed up / bought the In-App Purchase.

But as I say, that's my major issue at the moment - is getting iOS users to sign up at all. Website traffic converts to signups much easier.

I'm considering making free sign-up mandatory to use the app at all - I'm pretty sure I can get that past Apple. (normally they would not allow that, but since my app has a legitimate server component, I think it will be OK).
MrShuffles Send private email
Monday, August 19, 2013
@Vladimir Dyuzhev  Yes, that's how I'm seeing the app now. Just a client / companion to the SaaS product.

Having the app free (with limitations) on the App Store makes a good advertising tool / sales funnel. It's easy traffic to get, although seems  harder to convert them to paying users than say Google traffic.

The In-App purchase is a necessary evil, as you're not allowed to up-sell your own subscriptions in-app. You have to give Apple their 30% of any revenue via In-App Purchase.

I've been holding off on android due to it's poor performance for HTML5. It's catching up now though, so I might be able to release my app for Android soon. Beauty of HTML5 though is it's relatively easy to port to new platforms.
MrShuffles Send private email
Monday, August 19, 2013
I think at this stage I probably will look at releasing a new version of my iOS app, with limitations around user-content for free users and a mandatory sign-up.

I might cop some flack from existing users, but at least I will have more control over how I can monetize the app and a chance of growing it into something bigger.

I'll report back after I've done that to let people know whether it was successful ;-)
MrShuffles Send private email
Monday, August 19, 2013
MrShuffles -

Are you aware that Apple is about to release a NEW license receipt format that lets you know when a user bough the product. So you can offer older users the full features while offering new customers the iAP. All without making a new app.

Check this year's WWDC videos for details.
Nick Moore Send private email
Tuesday, August 20, 2013
Nick, that makes vastly more sense than leaving the seller in the dark.

I wasn't sure if you got their details but quite horrific if you don't...

Reluctantlyregistered Send private email
Wednesday, August 21, 2013
It's a good improvement for sure. However technically the seller still doesn't get any information. The app (installed locally on the user's machine) gets the information.
Nick Moore Send private email
Wednesday, August 21, 2013
Seller just gets aggregate sales info broken down by country of purchase.
e.g. today I have sold 14 units, of which USA 10, France 3, Russia 1

No other info about users at all. I actually respect Apple for this choice though. From the user's point of view this is good as they can buy as many apps as they like without their contact details being spread around to every two-bit developer on the app store.
Nick Moore Send private email
Wednesday, August 21, 2013
Well it's not just any 2 bit developer, it's the 2 bit developer they liked and trusted enough to give money in exchange for an app.

Reluctantlyregistered Send private email
Wednesday, August 21, 2013
I think if customers had to suss out whether they trust each developer, they would buy fewer apps. I think this works out well for us devs. Less friction to purchase.
Nick Moore Send private email
Friday, August 23, 2013
I think the the "traditional" indie software world, we like to think of having a relationship between the customer and the developer.

I think in the post-appstore world it's more like a relationship between the customer and the product. The less visible the developer, the better.

The app store is like a battlefield and your apps are your soldiers.
Nick Moore Send private email
Friday, August 23, 2013
If the developer is also the marketer, vendor and support department, a relationship between the developer and the end user isn't so strange. 

App stores result in lower quality products.  Vendors don't get enough information about users to differentiate themselves on suitability, users discount the value of products for sale to the lowest common denominator, and the end result is a market where the minimum acceptable product with the lowest price dominates.  It's a lose-lose for everyone.
Howard Ness Send private email
Friday, August 23, 2013
When your customer walks into Fry's and buys your software, what customer info do you get? If you want that info on the mobile app, get it from the app not the app store.
Foobar Send private email
Wednesday, August 28, 2013
> App stores result in lower quality products.

Can you give an example of that?
Nick Moore Send private email
Thursday, August 29, 2013
App stores are chock full of flashlight, notepad, daily inspiration, word puzzle, etc. apps that are broken to some degree.  There is no incentive to improve your app, if you don't strike it rich right away, you are yesterday's news, and there is no revenue stream to sustain product improvements.

Also, the best apps are free.  They represent such a high percentage of the apps downloaded, that there is no competition between paid apps, they just get discarded.  Oh well, another $1.99 wasted that I could have spent on a Big Gulp.  Now the good free apps have funding to make sure your Official NFL Headlines app works properly and bugs are fixed.  But Joe's $5.99 Sports Newsfeed app dies on the vine.

"When your customer walks into Fry's and buys your software, what customer info do you get?"
Good point, if you rely on retailers for marketing information, your product will suffer, and the retailer just moves onto the next product that fits on the shelf and offers a good profit margin.  Regardless of how much retailers and distributors like to talk about building their brand with superiour customer service, all they provide is access to customers and the logistics associated with purchasing.  This is an issue with big ticket items like commercial HVAC systems as well as $20 software, if you want to make sure your customers are happy, you have to have direct contact with your customers.
Howard Ness Send private email
Thursday, August 29, 2013

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