RunKeeper and the problem of free

RunKeeper is one of my favorite iPhone applications. It basically creates a little map of your last run and stores it for later uploading. It also keeps track of your pace and distance. It works well and was one of the first really useful work-out apps on the iPhone.

The folks at RunKeeper, namely Jason Jacobs, served about 140,000 copies of the program and now wants to change things up a little by selling a $9.99 “pro” version and a free ad-supported version. But here’s the rub: he’s stuck and has to give the application away for free today so that he can sell it tomorrow.

While this sounds a lot like a Crazy Eddie scam (“EVERYTHING MUST GO!”), Jacobs explains things fairly decently on his blog. When he started, he was the only game in town. Now lots of competition has essentially forced him to offer the software for free, thereby destroying his revenue stream. Now, faced with extinction, Jacobs has to change his license and offer two version – a free version and a paid version – under a different license. So now, in order to upgrade current users, Jacobs has to give away the application on the first day for free and hope that tomorrow latecomers will pay:

So, how could we fix it? Well, the only way I could think of is to make the premium app free for the first 24 hours once it goes live. We could send out emails to all of the initial paid users letting them know the app is live to make sure they can download it without paying again. This isn’t the ideal solution by any means, but we needed to make sure that the initial paying customers were taken care of. Yes, the app will be free to the masses for a day, and yes, we’ll lose out on a bunch of new download revenue because of it, but this isn’t nearly as costly as if we had alienated our early adopters, many of which are a primary part our core userbase. Plus, it is just the right thing to do.

Now perhaps this case isn’t typical, but it’s interesting. In order to compete on the App Store, Jacobs had to do a few things. First, he had to start giving away his product then he had to create two revenue streams. In an open platform he could do anything he wanted – offer shareware, create a different payment system, offer multiple version. But the App Store hobbled him enough that he has to lose a day’s revenue just to keep his customers happy. Perhaps Jacobs could have done this differently, but as it stands he’s being punished by the App Store for being a good guy. I don’t want to make this into a David v. Goliath but it seems like a convoluted way to do business.

Anyway, free RunKeeper today, which is good enough for me.