Jul 18, 2022
In Welcome to the Food Forum
In 2010, Apple registered a slogan: "there's an app for that." And, indeed, apps seem to take over the world. Billion-dollar companies like Uber (founded in 2008), Airbnb (also founded in 2008), and Snapchat (founded in 2011) are all built on apps. The total "app economy" is estimated to be around $100 billion. So how do these little images on your phone end up being a multi-billion dollar economic activity? The rules of this "app economy" are quite different from the "traditional economy" of walking into a store and buying something off the shelf. Let's explore this strange new world. Why is almost every app downloaded banner design for free? A medium-sized pizza might cost $9.99, a car wash would cost about fifteen dollars, and you'd be paying about $45 a month in phone bills. But almost every app on your phone is free. Instagram, Snapchat, Dropbox, Venmo, and Google Maps—all for free. In fact, only one of the top 100 most profitable apps on Android and iOS is a paid app, the game app Minecraft (while, despite the mobile game Fortress) Heroes" [Fortnite] is a free-to-download game, but earns over a billion dollars). However, many companies that launch free-to-download apps make millions of dollars in profits. For example, Snapchat is completely free, but Snapchat's parent company (Snap, Inc.) was worth $33 billion when it went public in 2017. It shows how different the app economy is from the "normal" economy: if Pizza Hut said they wanted to make a profit by offering free pizza, you might think they were crazy. So how do app developers make money by selling apps differently? They have some very clever business models, also known as "monetization" strategies. Let's take a look at one of the most popular methods, known as "freemium". Freemium: Want more features, pay for it If you've played Candy Crush, you'll notice that the app itself is free, but when you start playing, you're constantly being asked to pay to buy more lives to unlock the next level. Likewise, the dating app Tinder lets you "swipe" into potential romantic partners—but only a few times a day. If you want to "slide in more," you have to pay for Tinder Plus, a monthly subscription service.