The App Business Blog

The largest mobile operator in the United States, Verizon, is not participating in the Apple SIM program. As I wrote two weeks ago, the Apple SIM takes power away from the mobile operators and makes it easier for customers to select, and later switch between carriers. So I understand why Verizon does not like the Apple SIM. But it’s very unlikely that Apple will suddenly change their mind because Verizon is holding out. Apple historically takes the side of customers and customer experience, and plays hardball with the carriers.

iPads that you purchase anywhere, except for at an actual Verizon store, will come with the Apple SIM. Therefore in order to activate most iPads on the Verizon network you need to go to a Verizon store and get a Verizon SIM. I’m guessing that you could also call them and navigate through their phone tree in search of someone who knows what an Apple SIM is and why you want to replace it. Then you need to physically swap the SIM cards before you can finally activate the iPad on the Verizon network.

Why would you want to make it this difficult for customers to give you money? Yes, your diehard fans (or more realistically, customer without a real choice) will jump through these hoops. But these customers are yours anyway. If you were to advertise a competive data plan alongside the other operators that work with Apple SIM, then you just might gain new customers.

Another Apple innovation, Apple Pay, is also causing companies to refuse to take customers’ money. A “competing” mobile payment network has ordered their retailers to disable their existing NFC terminals just so that customers with an iPhone 6 cannot use it to pay at their stores. (I’m deliberately placing “competing” within quotes because to compete you actually have to be in operation. And from what we’ve seen of their plans, it looks like their launch will be a stillbirth.)

This is again about power and owning the customer; specifically owning the customer’s data. There is enough money in mining customer data and avoiding credit and debit card processing fees, that these retailers are willing to go to extreme measures to prevent a better payment method (for customers) to get a foothold in the market. Short-term that might work for them. When you get to the cash register are you going to walk away from your cart just because you can’t pay with your iPhone 6? Probably not. But if you have two competing pharmacies in town and one offers your preferred payment method and the other one doesn’t, which one are you going to pick?

Acquiring new customers is very expensive. Keeping existing customers by keeping them happy is a much better strategy. Don’t make it difficult for your customers to give you money. That is a very shortsighted strategy.

written by Nick

In 2013 the App Store top charts where dominated by free apps with in-app purchases. This was especially true in the games category. Recently I’ve seen indie developers experimenting with freemium and paymium models in non-game apps. This is good.

Sunlit

Sunlit by Manton Reece is a traditional free with in-app purchases style app. The idea of the app is to collect your best photos into stories along with geo check-ins. (Seems like several similar services just launched around the same time. Must be an idea who’s time has come.)

The App Store listing shows that there is a $4.99 in-app purchase available for “unlimited stories”. Thankfully the app doesn’t beat you over the head with messages to pay. An upgrade message is shown when you try to create your third story. This is unobtrusive and elegant. There is also a small link to upgrade when you create a new story. This is great for fans who may not run into the limits of the free app, but still want to give you money. Well done.

Photos+

Justin Williams released his Photos+ app in December and he explained his business model in a blog post where he likened it to the auto industry. The idea is to sell a base model of the app. In the case of Photos+ it’s priced at $2.99. Then you can purhcase add-ons, i.e. new features, with in-app purchases. I think this is a really interesting model to get around the fact that you can’t charge for app upgrades.

In the current version of the Photos+ app there is supposedly one in-app purchase to add more sharing capabilities. But I can’t actually find it… Maybe it was something that didn’t make the 1.0 cut but was still mentioned in the help screens. Anyway, I still like the idea of this business model.

Side note: The app name “Photos+” is impossible to search for in the App Store. Totally unrelated apps like “Yahoo Weather” and “Match the Dots” are listed way before Photos+. It’s just another reminder of how really bad search is in the App Store. But given that this is the reality, don’t name your apps after a generic category, and avoid giving it a name that is similar to hundreds of other apps.

Summary

I’m bullish on the idea of freemium and paymium for non-game apps. The two apps above are just two examples that recently came to my attention. What interesting app business models have you come across recently?

written by Nick

I have a small one-on-one coaching program for app entrepreneurs. I rarely publicize this program because I only have few slots available and most of the time the program is full, and has a waiting list.

In celebration of the new year, I’m making this program available to a few more applicants. This is the time to plan for your app business success in 2014, and I want to help you reach your goals.

Click here for more information on the coaching program and how to apply.

written by Nick \\ tags: app business, coaching

I’ve had the good fortune of working with many great consulting clients over the years, and I’ve helped many build successful app businesses.

Today I’m excited to announce the launch of my official one-on-one coaching program for app entrepreneurs.

I want to help even more people get started in the wonderful world of making a living from apps. And if you’re already making apps, maybe making some money too, then let’s take your business to the next level together.

More details here: App Entrepreneur Coaching by Nick Dalton

written by Nick

Less than two weeks ago Google’s Chief Legal Officer David Drummond wrote a blog post criticizing what he calls bogus patents. “Patents were meant to encourage innovation, but lately they are being used as a weapon to stop it.”

Yesterday Google announced that they are acquiring Motorola Mobility in order to “supercharge” Android. In the conference call with analysts they repeatedly emphasized the access to Motorola’s 17,000 patents. I’m assuming that these particular patents do not fall under the “bogus” category, and that their primary use will be to encourage innovation, and will not be used as weapons…

This transaction raises the software patent debacle to a whole new level of absurdity. Google is spending 12.5 billion dollars on something that will not create any new innovations. Not a single one. But what’s $12.5B for a rich company like Google? It’s actually the entire profit generated by Google over the past two years…

Some analysts say that Google had to do this to shore up their lagging “bogus” patent portfolio. But let’s leave the legal games to the lawyers and think about how $12.5B could be used to really supercharge innovation.

One criticism of the Android platform is that it lacks killer apps. So imagine if Google spent a billion or so on recreating the top 1,000 iPhone and iPad apps for Android. That might not make Android developers happy. So we’ll assume that they make all the code open source so that any developer can build upon the code and submit to the Android market. That will allow us to throw in the “open” buzzword into the mix too. Bonus!

But wait, copying existing iOS apps probably does not qualify as being innovative. Back to the drawing board…

Android tables are widely seen as lagging far behind the iPad in sales. So let’s seed the market with some subsidized Android tablets. That might “supercharge” the Android ecosystem. Say that a generic Android tablet costs $300 to manufacture and a consumer price of $99 will make them fly off the shelves. Spending $12.5B in subsidies would flood the market with 62,831,853 tablets. This move in itself is not very innovative, but it should definitely spur some activity and innovation among Android tablet developers.

Industrial design of Android devices and UI design of the Android OS could also use some refinement. How about hiring away some superstar talent? Jonathan Ive will probably not sell his soul for $12.5B, but how about one of the designers of the original iPhone UI? I bet that Facebook picked them up for a lot less. Create a separate company, just like Motorola Mobility is supposed to be run. Seed it with superstars and a few billion and see what innovations come out into the “open”.

So how will Googrola affect us iOS developers? My bet is: not at all. I can’t see how acquiring one of the larger, existing and money-losing Android licensees, will suddenly spur innovation, superchargers and wonderful user experiences. Besides, they are going to be very busy selling ads to pay for this acquisition.

written by Nick \\ tags: Android, patent

I came across this incredulous article in NY Times. After recovering from the shock that you can actually pay for legislation at such a detailed level, it struck me that this process would be a great way to deal with the patent trolls that we love to hate.

All we would have to do is to get our highly paid iOS developer lobbyists in Washington to write legislation that specifically invalidates Lodsys’ patents. Or while we’re at it, generally make the App Store a patent free zone.

Then, as it appears, it’s just a formality to get the legislation passed by Congress.

written by Nick \\ tags: humor, patent

After my previous posts on the Lodsys debacle, Sam Abadir contacted me. Sam is the Chairman and CTO of appMobi, and is a patent expert. Below are his comments on one of the patents in question. Please note that I’m not an attorney or a patent expert, so I cannot vouch for the legal accuracy of Sam’s text, and nothing here should be taken as legal advice. But I think he raises some interesting points that I have not seen covered elsewhere.

– – – – –

There are a lot of commentators that have provided analysis of the strategy Lodsys is taking in terms of going after small developers. Likewise, there’s been detailed analysis of what protection, if any, the Apple terms of service might provide. Those protections, if any, relate to issues around licensing. Currently Apple claims to have licensed the Lodsys technology. However, just because they licensed something from Lodsys doesn’t mean they, or their developers are actually using that technology. To that point, I haven’t seen any analysis of whether the underlying patent infringement claim has any real merit. That is, are the developers really using Lodsys’ invention? What is the invention anyway? While the license based defense has certain allure – it allows you to say “whether there is use of the patented technology makes no difference” – it doesn’t leave the satisfied feeling of a non-infringement argument where you can say “we’re not using your stinking technology.” So, as a retired IP attorney I figured it was worth reading the claims.

Claim 1 of patent 7,222,078 says the following (my emphasis included), my comments in []:

1. A system comprising:

units of a commodity [e.g. an iPhone] that can be used by respective users [owners of iPhones] in different locations,

a user interface, which is part of each of the units of the commodity [the iOS UI???], configured to provide a medium for twoway local interaction between one of the users and the corresponding unit of the commodity [e.g. touch input on the iPhone], and further con-figured to elicit, from a user, information about the user’s perception of the commodity [e.g. – they would claim this is constituted by the choice to purchase in-app],

a memory within each of the units of the commodity capable of storing results of the two-way local interaction, the results including elicited information about user perception of the commodity,

a communication element [e.g. 3G connection or internet connection] associated with each of the units of the commodity capable of carrying results of the two-way local interaction from each of the units of the commodity to a central location, and

a component capable of managing the interactions of the users in different locations and collecting the results of the interactions at the central location [e.g. iTunes In-App purchasing system in the Apple cloud].

To violate the patent claim, you must violate ALL aspects of the claim. So, you can now make the analysis yourself – does an app like PCalc qualify as a “user interface, which is part of each of the units of the commodity”. Is it reasonable to claim that PCalc is a user interface which ships with every iPhone? That patent is really concerned with the seller of devices (like Apple selling the iPhone) a means of improving the product [in the patent they talk about Fax machines] – not with improving thirdy party applications that are later installed on the product.

There are some torturous arguments that you can make that apps are part of the iPhone – but its a real stretch given that patent requires “each of the units of the commodity” to have the user interface.

Claims 2 through 59 are all essentially dependent claims – meaning that to violate them you have to violate claim 1. Claim  60, the next independent claim, uses the same “user interface, which is part of each of the units” language. Claim 69, the next independent claim says the following:

69. A method for gathering information from units of a commodity in different locations, each unit of the commodity being coupled to a remote database on a network, the method comprising:

eliciting user perceptions of respective units [e.g. what do you think of this iPhone’s 3G antenna] of the commodity through interactions at a user-interface of the respective unit;

generating perception information based on inputs of the users at the respective user-interfaces;

transmitting the perception information to the remote database;

receiving the transmitted perception information from

different units of the commodity; and collecting and storing the received information at the

remote database.

Again, this claim really is about a distributed way to survey and use the survey information to improve the product. It’s hard to claim that in-app purchasing is a form of surveying. Furthermore, is it fair to say that a 3rd party app is part of the product (the iPhone)? What would a jury decide – you’re probably the best judge!

– – – – –

Thank you Sam for this timely information!

written by Nick \\ tags: patent

Over the weekend the patent troll that made headlines on Friday created a blog to defend themselves.

Here are some of the more interesting revelations:

• Apple has already licensed the patent in question from Lodsys. I’m not a lawyer, but I’m pretty sure that means Apple cannot participate in any efforts to declare the overly broad patent to be invalid. So for us independent iOS developers, we should not expect Apple to be the knight in shining armor that rides to the rescue.
• The standard licensing fee requested by Lodsys is 0.575% of US revenue. It’s not clear if that wonderfully exact percentage is calculated on the gross sales or the net that we receive from Apple.
• They would like to be treated in a human matter and for us all to live by the golden rule.

Fair enough. Let’s apply some golden rule reciprocity to them. I suggest that every iOS developer with an app that uses In App Purchase, and which has revenues of less than say $1,000, contacts Lodsys to “engage in a licensing discussion”. It will be interesting to see how much time they will want to spend on each case to collect $5.75.

written by Nick \\ tags: In App Purchase, patent

Today the interwebs have been full of reports of small iOS developers receiving legal threats from a patent troll. Here are two good blog posts with analysis that go deeper than the breathless reporting of arriving FedEx packages.

• Small iOS Developers Targeted over In-App Purchase Patents
• What will Apple do? Second patent attack on app developers in only six weeks

This sucks on so many levels.

Many big corporations have multiple patent related lawsuits ongoing at any given time. See this spider-like diagram of some of the disputes that Apple is currently involved in related to Android (not all of them are software related). To these companies, it’s just a cost of doing business. To us small developers it could mean the end of business.

The patent system was created with the direct intent of providing a common good to society. An inventor enjoys protection for his invention for a limited time in exchange for a public, detailed description of the invention. The idea is that other inventors can build upon this and innovate further, faster. This is good for society.

I feel that software patents are one of the more perverted parts of the patent system. One of the few things that you cannot patent is a mathematical algorithm. In my opinion software is very often quite similar to mathematical algorithms. I would love to have the patent on basic addition. I would graciously charge a very nominal fee each time anyone makes use of addition. I think everyone agrees that this would be absurd (except the owner of the patent of course). But in the world of software patents someone actually succeeded in basically patenting XOR.

Back in the olden days, companies applied for copyright protection for their software. I think this is a perfectly reasonable way to protect software from theft. As long as software has existed there’s been public domain and open source software as an alternative to copyrights and patents. Now there’s a definite common good.

Today I have purchased apps from these independent developers as a small token of support from one developer to fellow developers who were directly affected by this legal travesty.

• Computer LogicX
• mobileAge
• TLA Systems

written by Nick \\ tags: patent

With tech companies amassing ever larger hordes of cash, there are increasing temptations to spend it. In the iOS market there have been several acquisitions lately. (Here’s a list of iOS related acquisitions that I’ve been compiling over time.) But the whopper of all transactions must be the $8.5 billion cash purchase of Skype that Microsoft announced yesterday.

You’ve got to admire the Skype founders deal prowess. First selling their company to eBay for $2.6B, a price that was generally criticized as being to high, leading eBay to later write down the assets by more than a billion. Then participating in a group of investors who bought a majority of the company back from eBay (at a substantially lower price). Again a deal that was roundly criticized as being risky. And now flipping the company to Microsoft for $8.5B. For all the criticism of eBay, they sure know a thing or two about buying and selling – they made two billion and change on the deals.

So what does this have to do with iOS development?

Let’s look at what Microsoft is planning to do with Skype. One idea that has been brought forth is to deeply integrate Skype into Windows Phone 7 to compete with Google Voice on Android and Apple’s Facetime on iOS. But Skype has to be anathema to the AT&Ts and Verizons of the world. I can’t think of any technology/company that has cost phone companies more in lost revenue than Skype. So when Microsoft and their OEMs come to a mobile operator and asks them to sell their fledgling Windows Phone 7 devices, will having Skype deeply integrated into the OS really help them? (It’s probably not a coincidence that Google Voice is not preinstalled on Android devices.) But I guess Microsoft still has plenty of cash available to grease the tracks for deals…

Microsoft has a history of providing lots of APIs to developers. So maybe they will create an OS level API for apps to access Skype. Imagine if your app could easily make VoIP and video calls via the vast Skype network as well as to regular phones. I have lots of ideas of how I would use that in our apps. That’s why I have been asking Apple to create an API for Facetime. Hopefully competitive pressure might entice Apple to do this sooner.

Finally, let’s hope that Apple uses their mountain of cash more wisely.

written by Nick \\ tags: acquisition