Selling Mobile Apps: Friction

Giving away free stuff on the internet is easy. Persuading people to pay is difficult; much more difficult. What's a mobile app developer to do? Everyone eventually needs to get paid since, after all, that's how we all make a living. If app development is a hobby, it only means that the developer has an unrelated source of income.

Let's look at sales friction a little more closely in the context of Android, Google's open source OS for mobile and other devices. Further, let's assume we've gotten past the willingness-to-buy challenge for a particular user. Now all we need to do is make the money flow from the user to the developer, via one or more intermediaries such as payment processors. As you can see, I am focusing on one small aspect of a large problem, but one that I believe is worthy of attention.

For the user, the first step is to decide from which account the monies will be paid. The obvious choices for the majority of users would be:

• Credit card
• Debit card
• Mobile service provider account
• PayPal, Google Checkout, iTunes or other 3rd party payment processor account

If we put aside the trustworthiness, security and other non-payment associated attributes, we can focus on payment friction: the degree of difficulty for the user (who wants to pay) to make payment. This applies to both the physical process and to any mental barriers that may exist. The idea of friction is well understood by large corporations that serve the consumer market, and they do all they can to make is as easy as possible for the user to pay. Amazon does it with their one-click purchase-and-ship button, and carriers place product and service purchases on the user's billing account. It works well: carriers sell billions of dollars worth of vertical services (voice mail, caller id, etc.) to wireline and wireless users with simple sign-up and recurring charges (subscription model).

If you are a mobile app developer, you most often use the device or OS provider's own market to sell those apps. This is often not necessary, as Android has shown, although it is the norm; most device vendors make it very difficult to sell apps (even free ones) any other way. Let's look at a couple of cases of mobile app store payment processes.

Apple's iTunes store was established long before the iPhone came onto the market. Users signed up to iTunes by the millions so they could purchase music for their iPods. The draw of the iPod and digital song downloading was so strong that friction in the account creation process was easily overcome. Had Apple messed this up, iTunes would not have had the same degree of success. When apps became available for the iPhone and more recent iPod devices, most users already had an iTunes payment account. The friction to purchase mobile apps was low, leading to stunning success for Apple and many app developers.

Google set up the Android Market with Google Checkout as the sole payment processor. Google Checkout has a small market share and suffers from a variety of problems, including many that are unrelated to Android Market. Few Android phone users were therefore likely to have had a pre-existing Google Checkout account. The friction when a user attempts to purchase their first Android app is high: sign up with a new payment processor, one that they may have heard bad things about, reading and agreeing to a long list of terms and conditions, handing over a credit card (but not a debit card), and then (at long last!) make the purchase. At this point you may be wondering just where the friction is; the extra steps involved may not seem all that big, or at least you want to believe they're not big if you're an app developer.

Unfortunately, these are big steps. There is a reason the carriers, Amazon and other mass market merchandisers work so hard to simplify the payment process: every bit of friction has a large impact on revenue -- this is not only true for payment, it is also true for operation of a product or service. This is one reason why so many large companies invest a lot on marketing and sales, and less (sometimes much less) on post-sales customer service: they know where to invest to maximize their return on capital.

Talking to some of these large corporations -- as I have throughout my career -- helps to understand what they have learned through hard experience. A common refrain is that for every button press or mouse click you lose a percentage of the market. Sometimes it is a small percentage, but more often it is surprisingly large. Add these things up and the potential market penetration of a service (or app) can become very poor. This is the crucible they throw product ideas into to determine if they have a chance for mass market appeal. If not, it gets categorized as a niche product, and their interest in pursuing the idea drops dramatically. That is the impact of friction.

On this basis, the friction to sell apps on the Android Market is moderately high, as many app developers have unhappily discovered. Unfortunately the currently-available alternatives have even higher friction. Other app stores like AndAppStore and SlideMe have the added friction of requiring user awareness and willingness to set up an account at stores with an unknown brand. It doesn't have to be that way, but that is the present situation. The friction can be even higher for a developer-operated payment system, with even lower awareness, lower trust, and the need to pull out a credit card for every app purchase. Again, there are ways to reduce the friction, but it can never equal that of a major brand app store that comes packaged with the consumer device.

With what I know of the situation with Google Checkout, I do not expect that its current problems will be resolved anytime soon. For app developers, the better bet may be carrier-operated app stores. My ideal scenario would be a carrier market application bundled with the phone to connect with the carrier-operated app store, with an ability to "see through" to other app store partners, including Android Market, and integrated with the carrier's own billing system. That should sufficiently lower the sales friction to a level comparable to iTunes, which should give priced Android apps a real shot at commercial success. At that point Google could pretty much stop investing in its own app store -- in which it is showing a great reluctance to improve. Google could then solely focus on the Android core platform, where their talents can be better applied.