Marco.org

Last fall, I conducted an experiment: I quietly removed Instapaper Free from the App Store¹ for three days, leaving only the full, $4.99 Instapaper app. Not only did sales increase incrementally, but nobody seemed to notice.

On March 12, knowing I was heading into very strong sales from the iPad 2’s launch, I pulled Free again, this time for a month. Again, nobody noticed, and sales increased (although it’s hard to say which portion of the increase, if any, is attributable to Free’s absence, since most of it is from the iPad 2’s launch).

This break went so well that I pushed the return date back by another month. I may keep it out indefinitely, effectively discontinuing Instapaper Free.

Here’s why:

Background

• The paid app has never been “on sale”. It launched in the fall of 2008 at $9.99, and in June 2009, I dropped the price to $4.99, where it remains. I have no plans to drop it further.²
• When it was still available, Instapaper Free was downloaded about 3 times more often than the paid app. This is a very good ratio, especially given such an “expensive” paid app.
• The iPad represents about half of my business, but I’ve never offered a free iPad app, and almost nobody has ever asked for one. (Instapaper Free is iPhone-only. Like most iPhone apps, it will run in the iPad’s “2X” simulator, but it’s terrible.)

Bad economics

Maintaining a second configuration of the app incurs direct, significant costs in development and support. Furthermore, the Instapaper web service that powers the app costs a good amount of money and time to operate every month. So Free users have a direct cost to me.

On the website, this cost is defrayed by ads from The Deck, but people using the iOS app might never visit the website. So Instapaper Free has an ad from The Deck in its list screen. It’s unintrusive, its advertisers are respectable, and it pays well. It’s the best ad unit I could ask for.

But it still makes far less than paid-app sales — the increase in app sales with Free’s absence exceeds this many times over. The math to explain this is simple: most Free users won’t give me anywhere near $3.50 worth of ad impressions.³

Undesirable customers

Instapaper Free always had worse reviews in iTunes than the paid app. Part of this is that the paid app was better, of course, but a lot of the Free reviews were completely unreasonable.

Only people who buy the paid app — and therefore have no problem paying $5 for an app — can post reviews for it. That filters out a lot of the sorts of customers who will leave unreasonable, incomprehensible, or inflammatory reviews. (It also filters out many people likely to need a lot of support.)

I don’t need every customer. I’m primarily in the business of selling a product for money. How much effort do I really want to devote to satisfying people who are unable or extremely unlikely to pay for anything?

(This is also a major reason why I have no plans to enter the Android market.)

Low conversions

This is difficult to measure accurately, but from what I can infer from the server-side data and support emails, very few people ever upgraded from Free to the paid app. Nearly all paid-app customers went straight to it without stopping at Free along the way.

The most common reasoning I heard when I asked Free users why they hadn’t bought the paid app: Free was “good enough” for them. Some were “planning to upgrade” someday. (In practice, that day rarely comes.)

If I don’t have a free app for a long time, I’m certainly going to miss out on some potential long-term conversions. But how many, really, and what would it cost to chase them?

Image and product-design problems

If you have a free version of your app, that will be the only version many people will ever see. So, for the Free users, that app — that extremely limited app that lacks almost all of Instapaper’s best features — is what they think Instapaper is.

I was giving them a choice: Stick with this limited app, or upgrade to the paid version with all of these great features. But since they had never used those features, they didn’t know how much they wanted them.

So most Free users rationalized away the need because they didn’t want to spend the money: “I can put up with ads. I can only keep 10 articles. I don’t think I’ll need any of those other features.”

And choosing which features to put into Free has always been very difficult. If I give it too much, I risk wrecking sales of the paid app. If I give it too little, I further harm Instapaper’s image among all of these people.

I don’t think it’s a net positive for my mediocre free app to show up next to my great $4.99 app whenever anyone searches for Instapaper in the App Store.

Minimal demand

It’s important to reiterate how few people have noticed the Free app’s absence in the nearly two months that it’s been off the App Store. And almost nobody ever asked me for a free version on iPad, even though that’s half of my business.

When there’s no free option, and the only way to try an appealing app is to pay a small amount of money, people do. Not everyone will, but enough will.

I’m asking people who bought a $200-829 device (many of whom also pay monthly for data service) to take a $5 risk. People risk that much for a side-dish of mashed potatoes that might suck at a restaurant, or a tremendous milkshake at Starbucks that they’ll finish in 30 minutes, without much consideration. iPad and iPhone owners often risk $30-70 on a case that they might break, lose, or get bored with after a few months.

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.⁴

Disclaimer (“That’s fine for Merlin…”)

If you’re a developer, you’re probably talking yourself out of making a move like this because you think Instapaper is a special case.

Every app is a special case.

Maybe you think I can only do this because Instapaper is already popular. But it built its popularity while charging “a lot” for an iPhone app from the start.

Maybe you think I can only do this because my blog is moderately popular among geeks like me. If so, I assure you that my blog’s audience is smaller than you think,⁵ and is extremely insignificant relative to the size of the iOS app market.

Maybe you think there aren’t enough people willing to pay $5 for an app with no free version. I used to think that, too. But I was wrong.

I’ve made a lot of assumptions in the app market over the last three years that turned out to be wrong. Most frequently, I underestimate demand, both for my product and for others.

I don’t know if I’ll remove Instapaper Free forever, and I don’t know if it’s going to be a good long-term idea, and I don’t know if you can apply any of this to your product.

The only way to figure any of this out is to experiment, and the best way to benefit the community is to share the results of such experiments. So that’s what I’m doing, and if you do anything similar, I’d love to read about it.