Nadyne Richmond: Software Costs Money

The Sparrow thread about selling to Google has been entertaining, because Sparrow’s community is complaining that they shouldn’t have sold out to Google. The deal was worth something like $25 million.

Good for Sparrow, I say.

If anyone was talking to me about selling my fledgling application, I’d take the money and run. Why? That community is a really nice group of people, but they aren’t paying the bills. And no amount of whining is worth more than $25 million.

The problem is that we have trained consumers to expect everything for free, regardless of the cost of building it.

Nadyne Richmond has a great post about it on her blog, Go Ahead, Mac My Day.

At some point, we as consumers stopped wanting to pay money for software.  Some of that is that our computers were bundled with a lot of software so that we didn’t have to pay for apps that we use every day, like mail apps and web browsers.  Some of that is that companies who don’t primarily make their money elsewhere (say, on selling you computers) started selling their software at a steep discount, which depressed the overall market.

Some of it is that some software is now supported by ads, which reduces the out-of-pocket expense for the consumer (although there’s obviously the cost of having to view ads all the time).  And some of it is just that we as consumers have become a lot of whiners who have come to think that software should just come to us magically, continue to work on any hardware that we buy, and get updated with new features regularly.

She points to another article called The Sparrow Problem, which outlines the economics of building mobile and other applications for sale. I have personal experience with this through my personal projects, Pick An Excuse and the UX Drinking Game.

About three years ago, I decided that I wanted to self publish a mobile application, so I designed Pick An Excuse. It’s basically a random content generator that allows users to sort through excuses written by category. Despite research that said it would cost roughly $30,000 to build an application, I pursued the idea anyways.

Here are the costs for Pick An Excuse:

  • $200 for the first offshore team that built a really poor version that delivered just enough of a demo that I could actually use it at job interviews to say, “Look, I’m building an iPhone app!”
  • $5,000 for the second offshore team to build out the first version.
  • $500 for a college intern to write a bunch of content, some of which is funny.
  • $1,000 or so to market it through sites like Fiverr.com.
  • $1,700 to release a second version that included integration with Facebook Connect and Twitter Connect. I cut integration to Messenger Connect even through I was consulting with Microsoft because I didn’t see the ROI.

What I had to do to make this happen:

  • Learn enough about JSON (I already knew PHP and MySQL well enough) to write all the code.
  • Write the documentation for the JSON calls.
  • Prepare pixel perfect Photoshop files to give to the developers.

In the end, that $30,000 number was about right if I was working with a client and marking up development costs. Only through careful vendor management did I keep costs down.

I designed the Pick An Excuse application as a platform — meaning I could use it for any idea — so the release of the UX Drinking Game cost me roughly $1,500, plus another $500 in marketing costs. I also released Startup Drinking Game for another $500, but that hasn’t gotten much traction.

The amount of money I’ve made from all of the mobile applications? $61 in CafePress sales.

My philosophy is I don’t work in software for “free,” even on my passion projects. For example, the UX Drinking Game might cost me money and time, but from a personal branding standpoint, it’s been huge. I’ve made a bunch of friends with really big titles, and it has increased my blog traffic. I’ll probably get a speaking gig at an IxDA conference because of it.

From an ROI perspective, it has more than paid for itself, but there’s no way I could have charged for it and I knew that going in.

I’ve been playing with the idea of creating more applications with a friend of mine. We looked at a couple of ideas that were travel related and we couldn’t figure out how to make money off of them because people are trained to pay so little for mobile applications. It blows my mind that people the same people that are willing to spend $15 for a Lonely Planet book hesitate to pay for a $6 travel application that has the same content.

Software should cost more.

Building applications is an investment in time and money. When someone complains that it should be free, I tell them nothing is free because someone is paying for it. Facebook is a really good example. People complain every day about how hard the site is to use or about the changes Facebook makes in their favor. Facebook is for the advertisers because they are the customers. Same with LinkedIn. Same with Twitter.

We are the product.

Instagram is another example. it wasn’t free because the investors were footing the bill. Now Facebook is paying for it, and we’ll be the product once again.

We all might be undervaluing the real costs of software, and our expectations of a free driven culture are unrealistic. It’s crazy that people are complaining about the cost of an application like Sparrow that they use every day to save time because of increased usability, especially when it’s less than three Starbucks lattes. Really? $10? That’s a pizza at Domino’s.