#190: Everything but a Business Model

I will be on vacation for the next two weeks, so unless something monumental happens in between now and late July there won’t be any episodes of Developing Perspective. Back at WWDC, basking in the glow of the river of great new announcements I had quipped “Wow, they gave us everything but a business model.” That comment is clearly absurd but it does drive towards a more honest and worthwhile point. In many ways the situation iOS developers find themselves in heading into the Autumn of 2014 isn’t about technology or tools, it is about business. As the market has matured the natural consequence is that older inefficiencies that may have propped up unsustainable models have fallen away. The App Store and related ecosystems are now extremely efficient. If there is an opportunity to be exploited we can expect it to be found and exploited. If you come up with a great new idea it will be analyzed, dissected and the interesting parts copied with often head-turning pace. As I have navigated this transition myself I have started to see many issues with the approach I had been taking to my business. Some of which I have been able to address but many of which I’m still working through. For the purpose of today’s episode I thought it might be constructive to take a quick tour of the various models and their various strengths and weaknesses. I’m going to be working in rough order of which I think they are desirable in the current ecosystem. Subscriptions tl;dr - People pay you on an ongoing basis for providing software and software related services. Pros - So long as your subscription base is enough for your expenses and your renewal/signup rate exceeds your cancellations you are golden. Cons - Often tricker to get someone to make a long term commitment. Managing credit cards, expirations, etc. Typically smaller user base needed (yay!), each requiring and feeling owed more (not so yay). Advertising tl;dr - People use your software and are presented a message from someone else you pays you. Pros - Strong possibility for ongoing revenue. Can make your software free. Cons - You need to show other people’s messages in your apps. Requires large customerbases for reasonable revenue. Consumable In-App Purchases tl;dr - People make (typically) small, repeated payments to continue to gain access to aspects of your software. Gratuity based models also fall into this category. Pros - Strong possibility for ongoing revenue. Lets you segment your customer base by how much they are willing to spend. Cons - Can quickly get very dodgy. One Time In-App Purchases tl;dr - People make payments to gain access to specific parts of the application or content therein. Pros - Gives users a clear trial of the experience before needing to make a commitment. Cons - Often very tricky to work out what part of the application can be segmented off. If you are too generous nobody will buy, too stingy and nobody will buy. Up Front One Time Purchase tl;dr - People pay money to be able to use your software. Pros - Simple and straightforward. Cons - Trickier to make sustainable since your effectively cap your income per user. Single Price. Long term support gets hard to justify. Free tl;dr - You create software, everyone uses it without charge. Pros - Wide adoption potential. Cons - Often hard to sustain long term. Most often seen in either altruistic or venture based software. What is best? It is going to vary for each business. What I have found over the last 6 years is that models that have more of a focus on ongoing revenue are more sustainable than things that are more one-time oriented. Mixing as many as you can often is important too. It is also absolutely imperative that you have a good working definition of what success looks like for yourself before you can make a thoughtful choice.