Instapaper: The Mathematics Behind “Free”April 28, 2011 5:52 pm
Marco has a post today explaining why he has pulled the free version of the Instapaper app from the App Store. The focus of the post seems to be this:
“In an Apple store, it’s nearly impossible to spend less than $30 on anything. Apple’s stance is clear: “This is how much our stuff costs. If you don’t like our prices, that’s fine. We don’t need everyone to buy our stuff.”
That’s roughly the stance I’ve chosen to take. My app costs $5. I understand that not everyone will like my price, and that’s fine. I don’t need every iOS-device owner to buy my app — I’d do quite well even if only 1% of them did.”
Marco has explained the Mathematics behind the move as well. At 4.99 USDs for the app, as an app developer, Marco makes 3.50 USDs per purchase. So the generic equation is below:
(For the free case to work)
((Number of Daily Impressions * App Lifetime In Days) / 1000) * CPM > (0.7)* App Price In App Store.
Marco bets that for most Apps, the equation will not hold and hence it makes sense to pull the free version.
Its interesting to compare this with the Mathematics Behind Amazon’s move on the Kindle where Amazon clearly scores on the impressions part (to be fair however, for iOS we should be comparing with the home screen, which would make us throw all calculations out of the window)