iPhone/iPad App Development Learnings: Paid Apps versus Free Apps with In-App Purchase

In developing our platform for creating video apps recently, we’ve been lucky enough to experiment with some of our content partners using different monetization models. In discussions with other video content partners that are looking to build paid (non ad-supported) video-based iOS (iPhone/iPad/iTouch) applications, one of the questions we hear often centers around the building a free app with content available via in-app purchase versus building a paid app.

Our initial foray into the iPad and iPhone app space revolved around a few free apps that were downloadable and came with access to a considerable amount of free video content. Within the app, users could also preview any of the premium videos that were available through in-app purchase in the app.

Our thinking in pursuing this sort of path was that we guessed that users might want to see what they were getting before they shelled out any cash (which they could do with access to a fair amount of free content as well as preview access to all premium content). Further, since we were dealing with videos organized into full courses (which involved 30-50 hours of video content), price points were tricky for us. Normal price points online for accessing the content are above $150, but this is pretty unheard of in the app store. Thus, where the online product comes with a year of access (or forever access for $200), we opted to go with an in-app purchase approach where we could charge ‘iphone/ipad-esque’ prices for short timeframes of access. Thus, we’d charge $0.99 for 24-hour access, $2.99 for 7-day access, etc.

This play was slightly thwarted by Apple, which has some interesting rules about accessing content this way. First, they’re open to a semi-subscription model, but they don’t like the idea of simply renting video content as this too closely parallels offerings in the iTunes store. Second, they don’t like short timeframes on access periods. They pushed back on our model by insisting that the shortest duration of access we offered be 30 days. Additionally, Apple isn’t terribly fond of subscription-based access to static content (with an automatically charged/recurring monthly payment). Thus, while they’re open to it for WSJ or NYT or others that have new content with every new month of access, they’re not as keen on it for offering access to content that will be the same in month 1, month 2, etc. In those cases, you’ll need to get your customer to opt-in (and re-purchase) each month.

Ultimately, we released our first round of iPad and iPhone apps with 30, 90, 180 and 360-day access options available through in-app purchase. The apps were free to download and came with a considerable amount of free content (~2+ hours), but premium content was only previewable unless access was purchased via in-app purchase. From a logistical standpoint, this worked pretty well. Aside from obvious but unavoidable downsides (like sharing 30% with Apple), the model was perfectly workable. Only a month in did we start realizing the more poignant issue with this type of model. The downside for it was that anyone could download the free app and thus anyone could review it. Thus, we got very favorable reviews from people who purchased access to the premium content in the app - but very unfavorable reviews from folks that just downloaded the app and live in a world where they’re pretty adamantly opposed to paying for anything. Unfortunately, ratings/reviews matter a tremendous amount for apps in the app store.

So, after our first round learnings, we took a different approach to building out the next few dozen apps we’ve released with/for various content partners. While these partners often had content that was neatly organized in broad courses, we’ve opted to take a multi-app (or perhaps more accurately a multi-paid-app approach) to making their content available through the App store. Thus, instead of offering one free app with in-app purchase that enables access to 400 included videos (50-60 hours of content), we’d decided that it was better to push out 10-30 paid apps for a 400-video course. This allowed us to offer price points in the ‘App Store Range’ and also gives users the ability to see how they like the content/approach by buying a single app. Further, we’ve seen some search and findability benefits that we believe to be there (but have difficulty quantifying). With more niche content in each app (e.g. Derivative Rules versus Calculus), we have more specific keywords for each app and a higher likelihood that a student looking for information on the broader subject area will find one or more of the apps - and then get hopelessly hooked on them such that he must have them all! Unfortunately, Apple has recently started working on cracking down on companies releasing multiple apps that are similar in form/function (even if they have different content). They’d like for you to utilize in-app purchase functionality instead of pushing out a whole of apps and “spamming the app store.” There’s rumored to be a sweet spot - a point at which you’ll attract Apple’s attention in a way that you don’t want it. Putting out 5 similar apps (with similar features but different content) will probably be fine but putting out 500 similar apps will not fly - finding that point isn’t easy, though. Thus, increasingly, in-app purchase is going to become more and more common as Apple pushes developers to use that feature.

Thinking about building your own iPhone/iPad video-based paid app? We can probably help you out with it. Contact us if you’d like to talk through what you’re thinking!

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