Race to the bottom of the App Store

There’s been a flurry of articles discussing the demise of Sparrow and what may have caused it.

Many blame Google for snapping up good talent and then letting their original projects die. There is definitely truth to that as the guys behind Sparrow knew what they were doing from a Usability and Technology perspective. Sparrow was both elegant and performed well. It was so good that it has become my primary mail client on the Mac. So I can see why Google wanted them.

But today AppCubby points the blame squarely at the economics of the app store:

From our experience, a $2.99 app in the App Store needs to hover around #250 in the top paid list to sustain two people working full-time on the app….And that’s the Sparrow problem, break-even was not sustainable. They had to find a way to turn a profit — lot’s of profit — to provide their investors a decent return.

So he concludes with:

Given the incredible progress and innovation we’ve seen in mobile apps over the past few years, I’m not sure we’re any worse off at a macro-economic level, but things have definitely changed and Sparrow is the proverbial canary in the coal mine. The age of selling software to users at a fixed, one-time price is coming to an end. It’s just not sustainable at the absurdly low prices users have come to expect. Sure, independent developers may scrap it out one app at a time, and some may even do quite well and be the exception to the rule, but I don’t think Sparrow would have sold-out if the team — and their investors — believed they could build a substantially profitable company on their own. The gold rush is well and truly over.

This has been my experience as well. For that apps that I’ve released in the app store, you really can’t make much of a living off them, let along build a business around them, unless you can consistently hover near the top. And most of the revenue is short-lived with a big spike in the beginning.

Maybe it’s time for developers to return to the world of web-based SaaS and subscriptions and give up on the app store goldmine?

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