The Critical Path #138: The Critical MBA

Horace and Anders discuss this years CES, Apples record $25B in payments to developers as well as the initial installment of the Critical Path MBA. How is business taught in schools? What is a business school graduate optimized to do? Horace explains what one might need to know when considering a business degree.

via 5by5 | The Critical Path #138: The Critical MBA.

  • Jacob Williams

    It’s not the apps that make the big money. It’s the games. Better to think about the app store as an arcade, than a toolbelt.

    • stefnagel

      Does Apple care what sells on the App Store? It’s all cheap fuel for iOS devices. Like gas to cars.

      • Jacob Williams

        Well, yes. They don’t sell porn in the App Store. Which is dumb because they offer web browsers.

        Porn is a fascinating mulit billion dollar industry that nobody want to analyse.

        Have you ever been to a porn site to study it?

        “How do they monetize this?”
        “Where are the ads placed?”
        “Why am I being redirected?”
        “Who is this person? What else is she in?”
        “How much is she making per scene?”
        “How much was she making five years ago?”
        “What about him? What’s he hauling?”
        “Who owns the rights to this?”
        “Could/would they win a copyright claim in court?”
        “Do any of these “actors” have their own platform? Why not?”
        “Why did this video get 250 million views?”

        I could talk about the porn industry for hours. It’s a breeding ground for innovation. The “pay to play” model was first introduced through the concept of “happy endings”. Once they got you in the room and turned on, that’s when they offered something a little extra if you’re willing to pay for it.

        True story.

      • stefnagel

        You misunderstand my question; you made a distinction between games and apps that is irrelevant to Apple’s purposes.

        Apple can no more place limits on browser content than can governments or phone books. That’s hardly subscribing to the content. But work dirty? Approve apps for an industry that objectifies and sells people? That defines a cold day in hell.

      • Jacob Williams

        There’s a difference between what we think of as apps and what we call games. Yes, a game is a subcategory of apps.

        There is nothing wrong with games. I get the vibe some people don’t like the fact that Apple’s biggest job to be done is trivial and juvenile. And therefore, attempt to rebrand them as “apps”. That feels apologetic to me. Why not call a spade a spade? We should be talking about Apple devices being the number one gaming platform in the world. Why aren’t we?

    • differ

      What do you think the difference is between “apps” and “games”?

      • Jacob Williams

        The spelling.

  • stefnagel

    A philosophical perspective might benefit discussion of causality. Understanding that there cannot be one cause moves the ball straight off.

  • Fran_Kostella

    Although Horace rightly points out that apps have to make efforts to find customers as would any other product, Apple’s AppStore presents a few problems to developers that change the typical selling dynamics. If this were a free market, then I’d be able to accept the claim, but I feel that there are mitigating factors that change the game in significant ways.

    First, discoverability is a major problem for 99.99% of apps, if you don’t get featured you are much, much less likely to sell. Search terms don’t return the kinds of results one might expect and the very shallow categorization for so many millions of apps means that each partition is massive. Each search for specific types of app or solutions usually return many thousands of results and no way to refine search results or use other methods of reducing a thousand results to a list of good candidates. So users pick what is popular instead of exhausing themselves searching. In many ways we are at about the 1995 Yahoo level of search.

    Secondly, the structure of the store seems to have the effect of driving prices toward zero. Since the early days every category has a free and a paid section, so consumers are encouraged to look for free software first. Also, a noticeable number of users believe that Apple pays developers to write all apps and don’t see that developers only get paid when an app or IAP is purchased. Next, there is no option to preview an app or have a short trial period, so developers are required to make a free or lite versions or go the freemium route. A trial period would at least allow developers the opportunity to present the full capability of an app instead of spending so much effort tuning the dividing line between the free and full feature set.

    There is no clean and “natural” way to do upgrades and users now expect an app to be supported forever after one initial payment. Developers get a lot of flack from users if they charge for upgraded features. Just look at the Monument Valley brouhaha.

    The store pages are a problem for developers. Anyone can post negative or incorrect reviews and there is no way for developers to respond or correct mistaken claims. For a freemium app there is no way to give out review copies or coupons for IAPs. The store may or may not give a refund depending on what the customer does, it has nothing to do with the developer. There is no way to interact directly with customers through the store. And the mapping of device to capabilities is rather rough, some older devices are marked as able to run any app that is compiled for a specific OS version, leading to potential failing apps that cannot be coded around because the devices cannot be blocked from sale.

    Developer only have the option of selling through the store or trying to sell to the jailbreak crowd, and there is no protection for apps down that road.

    On the show it is reported that Apple made a tidy sum of over 4 billion from selling apps, but the store certainly has not seen many of those dollars used to improve things. That’s fine, Apple can husband these third party apps in any manner they see fit, but I see lots of indie developers shifting to do commercial work or working for consultancies instead of doing indie apps. The proportion of low quality apps does not seem to be decreasing, which makes me concerned about the long term viability of indie developers as the system is structured in such a way to make it hard for them to thrive. I think I speak for most indie developers who want to do good quality work in niche areas, that the system isn’t helping us very much. I believe it is eventually going to be left to only people who don’t need to make a living to fill the store with cheap apps.

    Finally, I also note that I’m seeing indie developers who moved to the Mac App Store seem to be leaving for some of the same or similar reasons. I love the idea of an app store, but we need to see some evolution before I can think of it as a level playing field.

    • Jacob Williams

      I thought the makers of Monument Valley were being praised for the approach they’re taking. Am I wrong? The first installment is worth the price. It also is complete as a standalone.

      Their method is akin to a book series. It’s been very effective for kindle book sales.

      • Fran_Kostella

        My sense from reading blogs, forums and tweets when it happened is that developers have praised them, as have some users. There were a sizable percentage of users who complained bitterly. I generally support them, they did a lovely app and should charge what they feel is appropriate.

        There was also a lot of complaining about the recent post they made about the high percentage of “pirated” copies of their game. I guess it boils down to mobile users expecting apps to be free or super inexpensive. That just isn’t sustainable. I’d like to see Apple make a lot of positive strides to move away from the all-apps-must-be-free model.

        I’ve already essentially left the indie development scene for consulting for companies that need a mobile presence. I have a couple of apps in support only mode, and one being adapted for a new data set and skin, but have no plans to do any more indie apps for 2015.

      • Jacob Williams

        Can you link to your apps?

      • Fran_Kostella

        I’d prefer not to, I’d rather people judge my statements at face value. Someone is likely to counter my general claims with specifics about my apps and my marketing, which isn’t the point.

      • Space Gorilla

        “There were a sizable percentage of users who complained bitterly. I generally support them, they did a lovely app and should charge what they feel is appropriate.”

        I’m confident it was a vocal minority pissing and moaning about paying for the new levels. I don’t know anyone personally that complained about paying for the new levels in Monument Valley. But of course a few nerds in forums yelled loudly, but does that mean much? Do we have any data from the Monument Valley folks about how well they’re doing financially? How many people paid for the new levels, and so on?

    • money

      There’s no research stating that trials result in more money, that’s just a hand-waving intuition by many people. The only evidence I’ve ever seen pointed in the exact opposite direction, see for example

      Similarly for paid upgrade pricing vs selling a new version at full price. No useful data there about whether it results in more money. Not sure why everyone is so sure that giving your most loyal customers, who are most likely to purchase the new version, a heavy discount was definitely good for business.

      Most (all?) of the high profile moves away from the Mac App Store that I’ve seen were because of sandboxing, so not the “same or similar reasons” at all.

      • Fran_Kostella

        I didn’t actually use the word “money” at all in my post, and I wasn’t talking about making money, but the structure of the store and the difficulties trying to have even a level playing field because of that structure. I believe that a majority of indie developers would say something similar. None of what I wrote is based on objective research, just opinion, observation, and from talking to other developers and entrepreneurs I work with.

      • money

        Is there something indie developers need to sustain their businesses that isn’t money? Perhaps I don’t understand your post at all.

      • Fran_Kostella

        I fear I will just start repeating myself, but I’ll try to be a bit more specific. The complaint is NOT that Apple isn’t shoveling free money into indie coffers, but that the store is more of a problem than a solution and I feel like it could be helping us all by innovating and improving the technology they use. Right now the store feels like it is scaled for tens of thousands of apps, not millions and millions. It feels like nothing has changed there since 2009.

        For example, I have an app in a very particular and narrow niche that I’m quite proud of. I know my market and there are about twenty real competitors. We all use the freemium model and nearly all of the full price apps are gone because users don’t want to pay without looking at a working app first. I think my app is in the top three apps in our niche. The other two have real marketing budgets, but mine has great word of mouth because of the great aesthetics and superior UI. I prefer to compete in those terms and don’t mind the competition at all. My analytics show that most of my sales come from getting the word out via blogs and special interest group newsletters. Advertising on the scale I can afford doesn’t help much.

        However, our niche of dozens is “polluted” with a few thousand junk apps. They are essentially advertising or product placement apps of very low utility that seem to be mass produced as a kind of mobile SEO effort. Users seeking a top app in our niche who aren’t familiar with the good apps in the field might try searching. But they will be presented with over a thousand matches and no way to distinguish the SEO apps from the “real” apps. Search on the store is so terrible that the likelihood of filtering out the junk apps is near zero. So, you can’t rely on search, it is useless.

        Nobody would pay $30 for any of those junk apps, but hardly anyone will “bet” $30 on a top app without trying it first. If we had app trials users could try them with full features and that would probably help focus pricing, too. I’d be delighted to allow a month trial period, for decades a common indie tactic outside the store, in the hopes that they would see the real value and spend the money. For now, all I can do is make a freemium app and hope that I’ve drawn the line between freemium and paid features correctly. Apple could reduce our work load a great deal by just offering this feature. Really, how hard would it be to add a feature like this? I also believe, without proof, that it would lead to more quality app sales.

        This is not to say that app trials is a silver bullet that will solve all problems and bring world peace, but that this is one of many possible changes that could be made to help app developers. As it is, we are _forced_ to sell through the store, but the store doesn’t adapt to changes in markets. If you look at the way that Amazon enables third party sellers you can see how many possibilites there are that we don’t see in the store. Given the massive profits you’d hope that somebody would be concerned with the long term health of the development community, an important aspect of any tech ecosystem, and indie developers are an important part of any tech ecosystem.

        There is plenty more to say on these topic and I could easily write 50 times as much, but I’ve gone on quite enough!

      • money

        Okay, well it sounds like you are talking about money. Not sure why you objected to that above.