Sparrow Acquisition and Mobile App Pricing Models

Sparrow

Sparrow, the much loved email client for iOS has been acquihired by Google. Congrats to the Sparrow team. Bad news is there will be no enhancements to the Sparrow app itself. The team will work on other projects at Google.

Sparrow Acquihire Reactions

Reactions from the internet ranged from how Google might have wanted to get Sparrow’s design skill to lend a hand on a Gmail client perhaps, or wanted Sparrow like app for Android and so on.

The reaction that I liked was from Nilay Patel, he talks about how Apple should support In-App subscription pricing models for apps.

An app developer can only charge a one time price BEFORE the user has experienced the app. This price must be low enough not to scare away users, yet high enough to pay for the operations of the business. In the productivity app space, we are seeing more of the former, not the later. (a) I only paid $9.99 for Sparrow years ago and yet it has added a lot of value to my life.

Subscription pricing for apps is an important point and am surprised its not getting much support from iOS developer community.

Popular Mobile App Pricing Models

One-time payment is the second most popular mobile app pricing model. Free is obviously the first approach. The monetization strategy for free apps are i)in-app purchases for additional features ii) Advertisement supported iii) Monetize through a primary app, on say PC or elsewhere, and subsidize mobile app.

Of course am not accounting for apps that are supported by factors other than revenue. Social media apps fall under this bucket, they use our collective attention to determine our interests and use these signals to serve advertisements etc.

Why subscription pricing for mobile apps?

Most pre-iOS mobile platforms were quite lame to build professional apps on. The iOS platform and then Android, and perhaps Windows Phone, changed all that. It is possible to write games on these platforms, leave alone business apps. Most functionality like email clients, games or simple productivity tools, requires minimal server infrastructure to keep running. So its possible to build a decent mobile product by adopting an one-time pricing model for these apps. Start with 0.99 cents to whatever $$ you can charge and be done with it. Assuming the app did sufficient numbers, developers can sustain themselves and perhaps even be profitable.

Some Problems Need Processing Power!

But the one-time pricing model does not always work. Especially if there is a server component that supports the mobile app functionality, and server components are not cheap to build, monitor and maintain. Why bother with a server at all? Well, if you are doing any significant feature that involves large data processing, it has to be done on the server rather than a mobile client. Without a server component you are limited by the kind of problems you can solve. Let me reiterate

This is not about pricing models but about the class of problems you can go after sustainably.

This would be no big deal if the iPad and its Android clones had not been around. With tablets you could do much more but the pricing model constraints are a serious roadblock. AppStore pricing restrictions are artificial constraints on the tablet ecosystem.

Options for Subscription Pricing

And if you want to focus on a purely mobile app then you have few options i) Charge heavily one time, and hope you do enough volumes ii) Adopt in-app purchases for new features, might not fly because of first point, which Nilay has pointed out too iii) iii) Adopt in-app advertising, might not work for non-consumer apps because of volumes iv) Or hope you get VC funding to subsidize the whole thing and look for exit via an acquisition!

Obviously none of the above options are desirable.

Web + Mobile Combo

Before you say anything, I know a web + mobile app combination will let you out of this conundrum, since pricing model on the web-end of the equation can be controlled. Issue here is your development costs just shot up. There are two apps to design, build, test, deploy and maintain for! Let us not even get into whether the product would be relevant on a non-mobile scenario.

With subscription pricing enabled for apps, Apple can truly realize its vision of a post-PC world. Right now, developers need to straddle PC and Post-PC worlds!

Why do I care?

Why am I getting all worked up about Sparrow and in-app pricing models? Well, for CollabLayer, the first product being developed by my startup Tataatsu, we have struggled with this question a lot. While CollabLayer will be on all platforms eventually, we could have gone to market with an iPad app first. But pricing model restrictions force us to build the web-app too, which of course delays everything.

Apple, help us realize your, and our, vision of  a Post-PC world, enable in-app subscription pricing!

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The Organizations are Merged, On Paper. How About Your People?

Over the last handful of organizational mergers and takeovers, I have been through, have noticed a specific pattern. It involves people from one part of the merged entity passing opinions or making general assertions about the teams from the other entity. Of late I have been thinking about it a little.

Most M&As are complex activities requiring many man years of planning and execution. However the people side of the story, to get individuals from both companies thinking as one, is a more elusive goal.

Some causes as I see it, in no particular order are: 

i) Distrust of the unknown

Trust is the result of interactions that reinforce positive assumptions. Without any interactions it becomes impossible to trust anything.

ii) Changing Power Alignments

Every organizational change comes with associated changes to power structures. Like it or not, these are a very big and critical aspect of any functioning large organization. Any impending change makes the existing set of people go into a sort of hibernation, waiting and watching before they do anything significant.

iii) Unclear Role in Future

At a personal level, people are not comfortable with functioning in a situation filled with ambiguity. This lack of role clarity in near future, makes people freeze up in the present.

iv) Gossip as social bonding

Gossip is key communication channel for a lot of unspoken concerns. This inane communication, like teens hanging around at street corners, serves a social function by helping people bond together.

This could be a very common occurrence but I thought it best to share my thoughts and learn from your experiences.

The way I have dealt with these factors in the past is to focus on doing what I do and to do it well.

I have noticed that events around us remain mostly favorable if one is competent and dedicated to the task on hand.

The 7 Signs of Organizational Inertia

There is plenty of action in the economy to keep even the most disinterested engaged with the fireworks and the scuttling.

While organizations and individuals tighten their cost belts and strengthen the execution of their strategy, one factor can escape even the most keen observer. And that is the current state of affairs within the organization.

This internal state is an amalgam of the hard and soft factors that make up the existence and functioning of an organization. The greatest strategy and analysis can all be sucked into the quicksand of ‘Organizational inertia’.

Hence leaders who are keen to get things done would do well to check if their organizations are afflicted with this inertia factor.

Organizational Inertia, revealed by the following 7 signs-

1) The product ‘strategy’ consists of PR statements only

After a whole load of analysis, the decision is an incremental juggling of feature sets and reprioritization. All this delivered with a significant PR buzz. Speak to a cross section of people on the ground to see if they are enthused by the direction the products are to take. If all this sounds luke warm or downright cold you know something is not right or has been lost while making the distance between strategy and execution.

2) The Grand Technology Platform will solve all problems

Watch out for the grand daddy technology platform syndrome. And steer clear away from it. Unless you want to while away your time and not actually work on anything. Every time I have heard about such all encompassing platforms I cringe at the train wreck that is coming close. Every time such projects have failed to accomplish their original goals.

3) Teams spend their lives propping up the old systems, processes

What proportion of effort does the team spend in activities that would prop up the organization’s future? If the answer is none to minimal, then be assured you are looking at a unmotivated, or at least soon to be unmotivated, workforce. It is not enough if the board room thinks about the future of the organization, you need the rank and file to dream up ideas deal with challenges. Need to have systems and processes in place to harness these ideas.

4) Each organizational unit views the strategy elephant in its own way.

It is not enough to have a strategy and send mails and print posters about it. Once its propagated to the entire org, follow up to see if all the details have been understood and perceived in the same way the strategists had seen it. Of course not every function should understand the idea in all its complexity, in some cases it might not even be feasible. But there should be no discordant perception. Ensure this is not the case by talking to a cross section of people and having middle management do the same.

5) Your teams talk and gossip about internal factors more than about the competition and the marketplace.

This is tricky to verify. But the surest way to ruin is this. With the pace of technology and lowering of threshold for established organizations to be questioned, it would be fatal for people to indulge in this mind set. If you see this behaviour, then switch on your warning signs and begin engaging your teams to understand causes and work upon addressing those

6) Skill in execution is to undergo another re-organization.

Some organizations do re-orgs as a spectator sport. Every change in leadership goes about performing this circus. The endless mails about faith in team, amount of skill available, phenomenal opportunities must be a common occurrence in most organizations. Instead of focusing on getting things right or even understanding what is there already, its perhaps a ritual for leaders to go about shuffling things. I understand this is an oversimplification but wanted raise this point as it can easily seem indispensable. 

7) Plenty of naked emperors ambling around.

These are the white elephants in the room. Sucking out precious resources and sapping out the enthusiasm. No one dare touch them. They are just there, until forced out. Frankly, I have no clue how to handle these. It amazing how people above them can tolerate these even for a second.

Now, a question. Do you think these signs are enough to recognize inertia? What other factors would you add to it?

[update: @polycontextual adds “discordance between organizational identity (internal) and organizational image (external)”. Once I have more feedback shall update this post with the ideas that have come up.]