Ilium Software Responds: Why We Changed ListPro from a Free iPhone App to a Paid One – The Economics of Apps

A few days ago I wrote:

Ilium Software Bucks the Trend: ListPro for iOS Switches from Free to Paid

I ended this blog entry by asking: But, why change now?

Ilium Software has long been noted to be very open and transparent with its customers. They have, I am happy to say, not changed in this regard. Ilium’s Marc Tassin took the time to respond to my simple minded question with a detailed and thoughtful response. He gave me permission to publish it in its entirely on ThinkMobile. I consider his response strongly recommended reading for anyone interested in the economy of iPhone apps (whether end users or developers). Here’s Marc’s response it ins entirety.

Marc Tassin, Ilium Software
When we created ListPro for iPhone, we gave a lot of thought to how we wanted to sell it. Traditionally, we create an application, set a price, and provide it for sale through the appropriate reseller. This is the method we use for eWallet, and it’s worked well for over 13 years.

For ListPro, we decided to try something new. Instead of charging for the mobile app, we gave it away for free. The idea was that instead of covering our costs through direct sales of the app, we’d find other places to generate the revenue necessary to support it.

We really loved the idea. Our customers get our product for free, and we still earn enough to support its development and maintenance. A win-win for everyone!

So, where would the money come from?

1. eWallet Sales
By giving away ListPro for iPhone, we’d encourage customers to check out (and hopefully buy) eWallet.

2. Desktop Sales
If we could generate strong download numbers for ListPro on iPhone, a bunch of those customers would purchase the desktop version of ListPro.

3. iAd Revenue
If we could get enough downloads, the revenue from ads would support ListPro on iPhone.

We didn’t know if it would work, but it seemed worth trying. So, we put the plan in motion!

In the end, we learned a lot! Unfortunately, one of the things we learned was that, at least for ListPro, our plan didn’t work. Here is what we saw:

1. eWallet Sales Results
Even with thousands of new ListPro for iPhone customers, sales of eWallet for iPhone remained unchanged.

2. Desktop Sales Results
We saw a very slight increase in desktop ListPro sales (ListPro for desktop has been out for years as some folks might know), but even after lowering the price to $4.99, only a tiny percentage of customers that downloaded ListPro for iPhone purchased the desktop version.

3. iAd Revenue
Even with over 1000 downloads of ListPro for iPhone every day (which is a number we were pretty happy with), the iAd revenue was in the “coffee money” range.

At the end of the day, we weren’t even covering the costs to maintain the application and provide support for it, much less have a hope of paying off the initial investment to develop it. We hated to do it, but in the end we decided to go back to the tried-and-true model of charging for the app.

So what did we learn from all this?

Lesson 1: iAds Can Generate Revenue
We did see a very small amount of revenue from iAds. To make iAds work as a core revenue stream, however, I think you need a couple things. First, you need a LOT more downloads than we were getting. Like 10,000 per day or more. Second, you need the ad in a lot more places in the app. We didn’t feel we could do this for ListPro since the ads would interfere with the basic function of the app.

Lesson 2: iAd Revenue = “Downloads Today”
At least for us, iAds revenue was based on how many people downloaded ListPro today – not how many total users we had. I’m not sure if that means people click the ads out of novelty on day one and ignore them after that, or if there is some other factor at work. We expected to see growth of our iAd income with the growth of the total user base – that didn’t happen.

Lesson 3: Lots of People are Mobile Only
We sort of knew this already, but we really are reaching the point where mobile devices are primary computers, and desktop computers are secondary – or not even part of the picture! This means that desktop version sales aren’t going to be a big piece of the revenue stream for some mobile applications.

Lesson 4: Sometimes the Old Ways Are Best
Despite the push to change the way software is sold, at the end of the day sometimes the old ways are best. Since we started charging for ListPro we’ve seen strong sales of the mobile version and no change in the desktop version sales (which is a good thing). We’re still getting great reviews, and if sales continue as they are we’ll be able to keep supporting ListPro into the future!

So there you go, the inside scoop on ListPro for iPhone and a bit of insight into the workings of the mobile software market!