Expensive Apps Will Ruin Microsoft's Windows Marketplace

By Don Reisinger  |  Posted 2009-08-21

Expensive Apps Will Ruin Microsoft's Windows Marketplace

Microsoft's mobile app store, Windows Marketplace for Mobile, hasn't even offered a single application for mobile phones and already it's causing a stir. Even worse, it's making Microsoft look foolish.

At a conference with developers this week, Microsoft told those on-hand that the 99-cent application shouldn't find its way to its store. The software giant believes that developers are selling their apps too cheaply simply because some other stores (yes, that means Apple's App Store) have created a culture that dictates low prices.

"We would definitely want to promote that you make more money selling applications than selling your application in a dollar store," Loke Uei, senior technical product manager for Microsoft's Mobile Developer Experience Team, told mobile application developers earlier this week. "I know, 99 cents is interesting-yes, consumers like to pay 99 cents for applications.

"But 99 cents, come on, I think your app is worth more than that."

I hate to sound cynical, but I have a newsflash for you, Uei: no, they're not.

The app price debate

I find it extremely ironic that a company like Microsoft, with so much cash in its coffers, is encouraging developers to charge as much as possible for its applications. You would think that a company that has been that successful would understand that application pricing matters to both the developer's bottom line and Microsoft's.

Regardless, app pricing needs to be as cheap as possible. We're not buying applications for the desktop that we will use often. We're not buying Photoshop. We're buying simple applications that can be loaded onto a mobile phone to provide a limited amount of usability.

For the most part, those apps are designed to satisfy a desire in a moment. Do you want to find a local restaurant? Use Yelp to help you out. Are you looking for some contact information for a couple friends? The Facebook app is for you. Are you interested in updating your Twitter stream? Use TweetDeck. Each of those apps can be downloaded from Apple's App Store at no charge. Would anyone really be willing to pay $10, $5, or even $1 for those programs? Of course not.

The same is true for all those paid apps, currently offered at 99 cents, that Microsoft hates. Market pricing is decided by the demand for the product. What will end users be willing to pay to have a particular app?

Making More Equal Less


If demand in Apple's store has dictated a price of 99 cents, I simply don't see how Microsoft would be successful working with developers to get them to raise the price in its own store to $10. It doesn't make any sense.

The only way Microsoft's plan might work is with enterprise applications. Those programs that are either not available in Apple's store or are already expensive because they provide a real service to enterprise users, possibly making them worth a higher price. But Microsoft doesn't want it to end there. The company wants to make it clear that all of the applications in its store should be priced higher than they are in any other store on the market.

A numbers game

Microsoft's contention that apps should be priced higher sounds like a simple numbers game. It takes 30 percent of the revenue generated from the sale of each paid application. When an app is priced at 99 cents, Microsoft is taking about 30 cents. But if that same app is priced at $5, Microsoft will generate $1.50 per download. That's a big difference. And it could mean far more revenue.

Or it might not.

All these estimates presume that Microsoft and the developer will actually be successful in getting users to download the application. At a higher price, that's a tall order. Just because end users are willing to pay 99 cents for a particular app, it doesn't mean that they will be willing to pay $2. Maybe 99 cents is their limit. Microsoft doesn't know. And neither do developers.

There's something else to consider: at some point, the sheer quantity of apps a developer sells at the lower price could so easily eclipse the number of apps it sells at the higher price that Microsoft could actually generate more revenue off the lower-priced app. Evidently, it wants to squeeze every last dime out of each app developers sell with no worry about that simple economic fact.

Under the guise of making developers think their apps are worth more than users are willing to pay, Microsoft seems to be sabotaging its Skymarket mobile store. Apple has set the price (whether Microsoft likes it or not). To stray from that and ask developers to charge more in Microsoft's store for the same application is asking a bit too much. It might not realize it now, but as Apple's success in the space has shown, affordability brings users, which makes the app store more successful, which leads to more revenue for everyone.

Wake up, Microsoft. A higher price isn't best.


Rocket Fuel