The App Store Bubble

In case you haven’t heard, Supertop’s podcast client, Castro, is following in Overcast’s footsteps by adopting a patronage model. The application is now free to use, but the developers are asking for $1 a month contribution to help support the app’s development. Given my vocal support of the ideas behind Samantha Bielefeld’s Elephant in the Room, I thought it was important for me to address the topic and offer my take on where I believe the application market is heading.

The major problem I have with Castro and Overcast’s move to a patronage-based model is in the long-term perceived value of applications. There’s still plenty of users like me who remember paying $20 for a good Mac app and are more than willing to chip in a few bucks periodically to help support our favorite app developers. But what happens when we get even further away from the days when we paid for apps and get accustomed to a world where high-quality, best-in-class applications are free. How long will users continue paying? My guess is not very long.

I hate to say it, but I think we’re in the midst of an App Store bubble. There’s far more developers building apps than there is money in the ecosystem to support them. And the sad truth is that if Overcast didn’t do it, somebody else was going to. That’s just the way markets evolve when there’s seemingly infinite supply.

I do think Supertop did a better job with their transition than Marco did — they haven’t yet encouraged their competitors to follow them down a business path that might not actually work. I suppose I’ve reached the point where it’s hard for me to blame either of them for making this decision. It’s bad for users long-term and is borderline monopolistic towards competitors, but what else are they going to do? Wait for someone else to swoop in with a free app that eventually forces them to shutter as they cling to their old business model? That would be even more foolish than what they’re doing now — nobody wants to be BlackBerry.

At some point the bubble will inevitably burst as developers who had previously made a living developing apps realize that the entire market backed itself into an unsustainable corner. Independent developers and small shops will find themselves forced to get “real jobs” — probably working for a larger software company. It’ll be a painful transition for some, as consolidation takes place. But with any luck there will be a few indies that manage to make it out unscathed. As for the rest of the market, it’ll be filled with familiar faces — Apple, Google, Facebook, Microsoft, etc.

We’ll go through a bit of a lull, but once we get past those hard times, growth will begin again. New independent developers will start cropping up with brilliant ideas and we’ll start seeing the type of innovation that came about during the early days of the App Store. But alas, that will also mark the beginning of a new race to the bottom with the cycle repeating itself.

I hope I’m wrong in all this. I would love for this patronage trend to be the saving grace for software developers. But my hunch is that this is just more of the same with the next step being a move to entirely ad-supported, premium applications by independent developers. Much to Marco’s chagrin, we haven’t hit the bottom yet.