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The iPhone App Store has received flak from developers for promoting “ringtone applications“, forcing app prices to 99 cents, the lowest common denominator before the application is actually free. This downward price trend can be attributed to the top application charts which many believe don’t fairly measure the best applications. This article will discuss why the App Store’s current structure forces applications to become “Ringtone Apps” and why the pay first business model doesn’t pay.

Visibility is King

For a minute, take all the external factors that might lead a person to purchase an application off the table. Features on the App Store homepage, appearing in commercials or any other form of external advertising or publicity don’t exist. Essentially what your left with is that future sales directly correlate to an applications position on the download charts. (In reality, this isn’t too much different from how the app store is now. The charts dictate, for the most part, which applications are sold and which aren’t. ) Developers are competing with other developers for visibility on these charts because visibility leads to sales. If the app store is all about visibility, then developers play the game of getting the most people to hit the “Buy App” button. You’re left with the fact that not only does the price of an app affect the consumers choice to purchase the application, the consumer has an affect on the future consumer because their choice affects visibility. The App Store market place is unlike any other market place because simply purchasing an item hasn’t ever had such a large effect on future sales. In most market places like desktop applications, the media, advertising and reviews serve as the chief credible filter, and sales have less of a direct impact on future potential buyers.

Pay Up Front vs. Free

After reading Chris Anderson’s “Free” book, its clear that the App Store is a lot like the web. Applications which are closer to free gain more traction, and any business model must be intertwined into free services or free content. Another side of me wants to say the App Store, because Apple locks it down so much, is a return to pay-for model though. You pay an application like you pay for something in a grocery store. In reality, the only real way to get attention is by choosing a lower price because their isn’t a lot of ways to get sales through traditional means. A desktop application might rely on a magazine like Macworld to review the application, but the massive amounts of apps leave review sites struggling to review even a a decent amount of applications that are approved. Instead these review site just re-hash iTunes descriptions. Like application approvals, the media have trouble handling the massive amount of applications.

At this point I wish I could offer some solution to this problem. I think that basing the charts solely off application downloads, and not at least factoring ratings and price into the equations leads to pressure to lower prices. Then again, quality of music, movies and TV shows on the iTunes Store isn’t factored into those charts either and everything seems fine. Those pieces of content are, for the most part, locked into only a few certain price points that the industry as a whole can at least agree on. Applications, by nature, are more varied in price but maybe developers might benefit from a more uniform price like music. All I have to say is… time will tell where the App Store economics go…

After confirming with colleagues also trying to get their applications that utilize the Music API, included in the iPhone OS 3, it appears applications that utilize this API will be ushered aside in an app approval waiting cell. Speaking from experience, I currently have an application up in holding which is not only a bummer for me, but also everyone who might want to download it (for free). Some developers have received notices from Apple that the review time will take longer, but any and all details including a time table for approval thereafter are not stated in their emails. Any attempts to contact them through email are met with canned useless answers.

My suggestion to developers is to stay away from this cool and enticing API until we have some answers to why Apple doesn’t want to approve them. If you don’t heed my advice, beware , your efforts may get trapped in this app approval cell and not get out.

Apple recently announced it will unveil the new iPhone OS 3.0 on March 17th, just over a year to the day that Apple made its iPhone roadmap presentation where Steve and company presented how the iPhone was moving into the enterprise arena and how developers where going to create third party applications. And although the Apple likes to release news on Tuesdays, they apparently forgot the 17th is St. Patrick’s Day (or don’t care). Of course speculation is already formulating on various rumor sites. This release must be pretty special to garner the sole attention of an Apple keynote considering this keynote comes off the heels of the new iPod Shuffle.

Here is a list of things I’m looking to see at the keynote:

1. Turn-by-turn GPS directions
2. Push Notifications for 3rd Party Applications
3. A mention of iTunes DJ (formally Party Shuffle)
4. Safari 4.0 for the mobile device
5. Voice Commands (Speed dial)