0:00:00Hello and welcome to Developing Perspective. Developing Perspective is a podcast discussing
0:00:04news of note and iOS development, Apple and the like. I'm your host, David Smith. I'm
0:00:08an independent iOS developer based in Herndon, Virginia. This is show number 181. And today
0:00:14is Friday, April 18th. Developing Perspective is never longer than 15 minutes. So let's
0:00:18get started. All right, first, I have a bit of a quick announcement. I will once again
0:00:23be doing t-shirts for the show. Of course, it's the fashionable thing to do this time
0:00:27of year as we get heading towards WWDC. But you know, I did one last fall, the campaign went well,
0:00:34heard from a lot of people who were kind of disappointed that they hadn't heard about it
0:00:37in time. So this year, I'm doing it again, and giving it a slightly longer run than I think I
0:00:41did last year, I think last year I did it for a week. This year I'm doing it for about 10 days,
0:00:45so it should be at least two episodes and two weekends. So hopefully you'll be able to
0:00:50take advantage of it if it's something that you'd like to do. This year is the same kind of blue,
0:00:56That's kind of my trademark color.
0:00:58And it's an underscore followed by an opening and closing
0:01:00square brackets in Menlo.
0:01:02So that's decidedly geeky and perfectly appropriate
0:01:05to walk around with in San Francisco,
0:01:08should you want to do that.
0:01:10It's 14.59, because of course, it's never longer than 15
0:01:12minutes.
0:01:13And you can get it at teespring.com/developing
0:01:15if you're so inclined.
0:01:17Next, a little random announcement.
0:01:19I just wanted to mention here, I posted a consolidated,
0:01:23summarized article of my Towards a Better App Store series over on my blog.
0:01:27There's a link in the show notes.
0:01:28So if you're kind of wanting to be able to reference back at all the different parts
0:01:31and kind of see it all in one place, it's probably a useful place to start.
0:01:35All right.
0:01:36So let's get into the actual topic I'm going to talk through today.
0:01:40And I'm starting another series, and we'll see how it goes.
0:01:44I'm not sure if it'll work, but I'm kind of hopeful, and I think it will be an interesting
0:01:47experiment nevertheless.
0:01:49So I like doing series on the show
0:01:52because it makes it a lot easier for me
0:01:53to work out what I'm going to talk about next,
0:01:55because it narrows the scope from everything I could ever
0:01:58possibly discuss to something a bit more specific.
0:02:00And so I was trying to think of something else that would work
0:02:03kind of well as an ongoing series.
0:02:05And so I came up with something based on a debate exercise.
0:02:09And I never did a lot of debate myself,
0:02:11but I'm familiar with it as a concept where
0:02:13you're forgiven topic or statement.
0:02:16You could be told to either take the pro
0:02:18or against position, and you have to defend it just as vigorously as you would whether
0:02:23or not you agree with it or not. And often that exercise of having to think about a topic
0:02:28from a perspective that you don't necessarily have, or isn't necessarily what you would
0:02:33have taken, you know, if you had choice, can often force you to think about things in more
0:02:38interesting ways, and to, you know, to as a result to be more thoughtful generally.
0:02:45And so what I thought it would be kind of interesting to do
0:02:47is I'm going to take intentionally contrarian
0:02:50positions against conventional wisdom in the software
0:02:54business.
0:02:55And when I say that intentionally contrarian,
0:02:57I'm going to intentionally always take the con.
0:02:59I'm going to try and attack something that is often
0:03:01presented as conventional wisdom,
0:03:03as something that is something that people should--
0:03:06everyone knows this is the best way to do it.
0:03:08I'm going to try and attack those as best I can.
0:03:11And the result-- and this is probably
0:03:13definitely worth pointing out.
0:03:14This is like the disclaimer part.
0:03:16The result isn't something that's 100% my actual position.
0:03:19Well, the things that I'm saying I think are true.
0:03:22They're not necessarily the things that comprise
0:03:25the actual position I take.
0:03:27Because often, a lot of these things are very nuanced.
0:03:30And there's a lot of just opinion
0:03:31that you have to apply for how you personally
0:03:33feel about things.
0:03:35But nevertheless, I'm going to be making sweeping,
0:03:37unnuanced statements.
0:03:38And a lot of that's just for the effect.
0:03:39I'm trying to convince you.
0:03:40I'm in a debate trying to convince you
0:03:43my contrarian position. And so I'm going to be taking that position and running it as hard as I
0:03:47can. Obviously, for you, you need to understand if, if I say something that you disagree with,
0:03:52the useful thing to do is to say, why do you disagree with that? Why was that not what you
0:03:57think? Because hopefully thinking about that more thoughtfully will help you to have a better opinion
0:04:03about your thing and people to more defend it to yourself and to others and to make better choices.
0:04:08So anyway, here we go.
0:04:09Hopefully it works.
0:04:11So the first thing I'm going to be attacking
0:04:13is the concept of paid software and pricing.
0:04:16So paid software is like the statement
0:04:18I'm going to be attacking is paid software
0:04:20is good for customers and developers.
0:04:22That's the general statement that I'm going to be attacking.
0:04:25When I first got into this business six years ago,
0:04:28the prevailing best practice, the way it had always been done,
0:04:30if you went to any kind of conference
0:04:32where people were talking about pricing and things,
0:04:34you would hear people talking about this
0:04:35is the great model of software development,
0:04:37where you work on something for a while, you put it out there for a pretty reasonable upfront
0:04:41price, and then you provide minor and bug fix updates for free for a period of time,
0:04:46and then at some point you get to a point where you say, "Okay, I'm going to do a major
0:04:49update," and you charge again, typically with some kind of upgrade pricing or something
0:04:53like that.
0:04:54And this is the model that had worked well for many, many years and had grown up in an
0:04:59era of box software, where you would physically shrink wrap your software into a CD and send
0:05:05it to somewhere on a diskette.
0:05:07And more importantly, the system had been widely accepted by customers as a reasonable
0:05:11and appropriate way to do things.
0:05:14And while obviously that model of software has increasingly been under attack by things
0:05:20like the advent of the App Store, I think even if it still worked, even if that was
0:05:25still what customers expected, I think it's a terrible way to sell software.
0:05:29And I think it's terrible for at least three reasons.
0:05:32And the first is it creates this unnatural barrier to entry.
0:05:36Because software-- you know, software is a funny thing.
0:05:40It has an incredibly low marginal cost.
0:05:43And marginal cost, if you're not familiar with it,
0:05:45is an economics term for essentially the cost
0:05:48to produce one more.
0:05:50You know, the actual bits-- you know,
0:05:51when I produce a binary out of Xcode,
0:05:54the cost of duplicating that multiple times
0:05:56is essentially free.
0:05:57You know, that's the wonder of digital duplication.
0:06:01And unless I'm actually hosting media for my customers
0:06:05or something, the actual cost per user
0:06:07is almost vanishingly small.
0:06:10Even on a service like Feed Wrangler
0:06:12that I have, which has a big server infrastructure,
0:06:14my server infrastructure is largely
0:06:17detached from the number of users I have.
0:06:20Each user I add to the system, at some point,
0:06:23I would need to upgrade my servers.
0:06:25But by and large, typically, I'm way under capacity
0:06:28at this point.
0:06:29I could continue to add more and more customers with almost no cost to me.
0:06:34And because of that, charging a large upfront price for my software doesn't really make
0:06:39sense.
0:06:40You know, it would only make sense and only be sustainable or maintainable in a completely
0:06:45uncompetitive marketplace.
0:06:47Because if I'm charging more for something than it costs for me to produce that next
0:06:53one of, necessarily someone's going to come across and is going to be able to undercut
0:06:58my pricing because they're able to, they're just going to say, well, look, once I've made
0:07:02this thing, I can, each copy is free.
0:07:05So if I charge, if I get anything for that, I'm making money.
0:07:09So that's the first part of that.
0:07:11And the second part, of course, is that you're scaring away potential customers by putting
0:07:14a big upfront price on your software.
0:07:17One of the hardest parts of selling something is to get it known by a potential customer.
0:07:21You know, you've put a lot of time, energy, and effort into marketing, into trying to
0:07:26put your product finally in front of someone's eyes at a position where they're able to consider
0:07:31purchasing it. And that's often long and drawn out and tricky. And the last thing that seems
0:07:37like you'd want to do once you finally got that person to that point where they're looking
0:07:40at your piece of software, this thing that if they if they decide they want to download
0:07:44will cost you almost nothing. The last thing you want to do is to put a huge barrier up
0:07:49and say make that a hard choice for them. If you finally got them to that point where
0:07:53where they're thinking about buying your software,
0:07:54give it to them.
0:07:55Let them have it.
0:07:56Download it.
0:07:57And then work out ways to get a return on that in ways
0:08:03other than putting up a big barrier
0:08:05in that initial purchase.
0:08:07You're necessarily reducing the reach of your software
0:08:12in a way that just doesn't make sense.
0:08:14If you have something whose marginal cost is essentially
0:08:16zero, your price, at least the upfront price,
0:08:20should be essentially zero as well.
0:08:23Secondly, it's also kind of a fundamentally unsustainable
0:08:27business model in the sense that you're getting money from people
0:08:35and making commitments to them, essentially,
0:08:38in either an explicit or an implicit way,
0:08:40that if you have that classic model of you
0:08:43buy a version of a piece of software
0:08:45and then they expect to receive free bug fix and minor updates
0:08:49to that software, you then have this very awfully
0:08:53unsustainable model where all the money you will ever
0:08:58have received from that customer,
0:09:00you've received all at once.
0:09:01And so all the work you're doing from then on,
0:09:04you are essentially doing on risk.
0:09:06You're doing in the hopes that you'll be able to recoup it
0:09:11in some ways.
0:09:13And so the simplest way to kind of imagine this
0:09:15is if you imagine a world where you've put out
0:09:17piece of software, its sales are going great, things are going great, you're building up
0:09:21this nice big customer base of people who really use your software a lot, it's going
0:09:26wonderfully, you're living the dream, and then suddenly your sales drop off.
0:09:32And say they drop off dramatically.
0:09:33And exactly why they drop off doesn't really matter so much as the situation you then find
0:09:38yourself in.
0:09:40Because you continue to have expenses and you've made tremendous number of commitments
0:09:45to those customers for all those bug fix updates,
0:09:47for all those minor updates.
0:09:49And suddenly you have no income to back them up.
0:09:52You have to either have scrolled enough away in your storehouse
0:09:56to be able to manage that, or you're
0:09:59going to need to go to your customers
0:10:00and start kind of squeezing them out more and more aggressively
0:10:04in terms of, oh, maybe I'll do my next major update sooner
0:10:07than I would have thought for whatever that means,
0:10:10creating this kind of arbitrary break that, oh, now it's
0:10:12a major update.
0:10:13Really, all you're doing is you're going back
0:10:14and shaking the tree a few times to see
0:10:16if you can squeeze a bit more money out of these customers.
0:10:19Or you're going to go out of business.
0:10:21The fundamental flaw of this model
0:10:23is that each purchase is kind of short-lived.
0:10:26There's no plan for a continuous income stream from that product.
0:10:31What you would want, in an ideal sense,
0:10:34is to have each customer have some type of ongoing income
0:10:38stream coming back to you.
0:10:40Because then you have this delightfully virtuous cycle.
0:10:43That if your software is doing well and your user base is growing, your usership is going
0:10:48up, that suddenly you have this great virtuous cycle that you have more and more money to
0:10:52support that development.
0:10:53And from the flip side, it goes down.
0:10:55If your usership starts to fall off dramatically, so then your income starts to drop as well,
0:11:01because you've connected those two things, then your commitments are also disappearing
0:11:06because people aren't using your software.
0:11:07So they don't really have an expectation or a commitment from you to support them going
0:11:12forward. You know, it makes sense, it seems if you want to build a sustainable business,
0:11:16a sustainable business in the sense that can have a lot of longevity, you want to be able
0:11:21to from day one have a plan to make money every day going forward. You know, again,
0:11:26getting in a way that isn't doesn't rely on finding more and more and more customers,
0:11:30a process that necessarily will get harder and harder to do. You're going to initially,
0:11:34you know, be able to capitalize on your that ripe, low hanging fruit customers, then where
0:11:40And where are you going to go from there?
0:11:41You're going to have to keep trying harder and harder to get new customers.
0:11:45So you're kind of unsustainable.
0:11:47It's not going to be a good, comfortable place to be.
0:11:50You're not having a constant income source.
0:11:52So approaching models like subscriptions or advertising or anything that has a reasonable
0:11:58expectation of an ongoing revenue stream is far better than just straight paid software.
0:12:03And lastly, it's horribly abrupt.
0:12:07The nature of paid software markets,
0:12:09if you spend any amount of time doing it yourself or talking
0:12:12to people who do, is that your sales are often
0:12:15come in these huge bundles.
0:12:17You'll launch a new piece of software
0:12:18and it'll have this huge spike in sales,
0:12:20and then you'll suddenly have this fairly abrupt drop off.
0:12:23And you suddenly have this big pile of money,
0:12:26hopefully, that you are then needing to essentially support
0:12:31all of your development efforts going forward.
0:12:34And the awkward thing about that-- and then this
0:12:37a question more of human nature than it is of actual, you know, economics where conceptually,
0:12:43as I can only speak for myself, it's much, much more stressful. If you have a big pile of money
0:12:49that you that someone says you need to live, you can, you know, this is all you're ever going to
0:12:52get for the next six months, you need to make sure it lasts. That's a lot more stressful than
0:12:58if they'd taken that same amount of thing, split it into six months into six increments, and then
0:13:02handed you one every month. That's just the way human nature works. It doesn't necessarily
0:13:06make sense, but I know from my own experience, it's a much, much more stressful in that first
0:13:11case than in that second case. And it doesn't even really, you know, whether that makes
0:13:14sense or not, from an economics perspective, it makes a big difference for you as a, as
0:13:18a, you know, as a businessman, as a developer, because you're going to be the one who has
0:13:22to live with that, who has to kind of understand, you know, every time you look to do an expense,
0:13:27you start looking at it and saying, Ooh, I don't know. I mean, it's going to take a chunk
0:13:31out of my storehouse here and then what am I going to do if I can't find a way to put
0:13:38money back into the storehouse? That's stressful. First is having a consistent dependable income
0:13:44stream from something more like advertising or subscriptions, something or anything that
0:13:49has an ongoing attribute to it is much better than having this kind of one-time sort of
0:13:55blow all your income all at once and then have to try and live and survive on that.
0:14:01All right, so that's sort of the exercise.
0:14:03Hopefully that was interesting.
0:14:04Hopefully it got you thinking.
0:14:05Like I said, I'm not 100% exactly what I--
0:14:08my personal beliefs and the way that I attach things.
0:14:11And if you've been listening to this show for any amount of time,
0:14:13you probably know the areas where that's not exactly true.
0:14:16But hopefully that was instructive.
0:14:18And I'll look-- really, I would appreciate some feedback on this
0:14:20if you think this is an interesting exercise for me
0:14:22to try and take contrarian positions
0:14:25and defend them as best I can in the hopes of making us all kind of be
0:14:29more thoughtful.
0:14:30So if that is the case and you have feedback, questions,
0:14:32comments, concerns, complaints, as always,
0:14:34you can find me on _DavidSmith on Twitter.
0:14:37You can email me, david@developingperspective.com.
0:14:40Otherwise, I hope you have a great week, weekend.
0:14:42Happy coding.
0:14:43And I'll talk to you next week.
0:14:45And a quick reminder, like I said,
0:14:47if you want to get a shirt, you've got about a week.
0:14:48I'm not going to push it too much more.
0:14:50I'll probably mention it in the next show.
0:14:51But just wanted to put that out there so you don't miss out.
0:14:54Bye.