Free Apps

Did Apple make a mistake with free apps?

Manton has an interesting post up where he theorizes that a lot of the problems we've seen in the App Store, from the across the board 30% revenue cut Apple requires for paid apps, to in-app purchases, to iAds, and now subscriptions can all be traced back to Apple's decision to host free apps for free. In other words, that the cost of approving, hosting, marketing, and delivering free apps is high enough that Apple is struggling and stumbling to make enough off paid apps and content to cover it.

When Steve Jobs said it, offering free apps for so little seemed almost foolish, like Apple was compensating for the high 30% by giving too good a deal to free apps. Why not charge some hosting fee? Or why not give up exclusive distribution and let free apps be installed directly by the user without forcing everything through the App Store? Unlimited bandwidth, promotion in the store, and everything else just for the $99 dev program fee was a pretty good deal. And now I wonder if Apple hasn't been backpedaling ever since, trying to make up for that mistake.

So in order to run the App Store at just over break-even -- as Apple reports they during their financial results -- they need to earn enough off paid apps to defray the cost of free apps. They also have to make sure they don't lose revenue -- they can't let developers offer free apps, shouldered by Apple, with ads that make money for Google or that use subscriptions or other forms of outside payments as a way to circumvent the revenue sharing. (Which is why we said from the beginning Apple couldn't charge less than 30% for subscriptions or every paid and in-app purchasing app that could would just switch to subscriptions in order to keep more of the revenue.)

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Updated: Apple Introduces In-App Purchase for Free App -- Buh-Bye Lite, Hello Demo!

Apple has just sent out a letter to developers introducing in-app purchasing for free apps.

UPDATE: Developers Erica Sadun on TUAW, and Marco Arment delve deeper into the subject, as does Techcrunch (twice).

ORIGINAL: Here's what Apple had to say:

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1 Level Free! Are "Lite" iPhone Games an App Store Deal or a Dud?

One of the highest profile iPhone games to state, EA's Spore, retails on the iTunes App Store for $9.99. Now, however, you can also get a "free" version, Spore Origins Lite Edition (iTunes link). The catch? It's teaser consisting of 1 level. Since Apple doesn't (yet?) have a model for demoing apps ("try" instead of "buy"), it's likely the only thing developers can do to give potential buyers a real preview. They hope, after one or a short number of levels, you'll be hooked enough to pony up the bucks for the full blown version.

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Facebook 2.0 Hits iPhone App Store

Last month, Dieter let us know that Facebook's popular, but feature-thin App Store application would be getting an update to (hopefully!) bring it up to par with the older WebApp version accessible via MobileSafari browsing. The due date was September, and boy did they just manage to sneak it in under the wire! Check out the iTunes App Store for Facebook 2.0 (still free!).

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