Isaac Moore

I’m going to briefly walk you through this common misunderstanding. The truth behind the matter is, Installous (and piracy) doesn’t harm developers at all. Let us begin. Here’s a rough estimate of the user base of Installous:

As you can see, roughly 85% of these users weren’t going to pay for the application to begin with. This causes no loss to the developer (If someone uses something he had no intentions of paying for from the get-go, why it a loss?). If anything, it is beneficial to the developer of the application. Do you know what the most powerful form of marketing is? Word-of-mouth advertisement. If you can get a good thing going, and users have a good experience, they will tell people. Guaranteed. Now, do you think that just because they didn’t pay for their experience, they’re going to keep quiet about it? Absolutely not. If you have a good product, they will tell their friends. And chances are, they’re not going to pirate it. Only about 10% of all iPhone users jailbreak their devices. And only a portion of those users use Installous to pirate applications. So, 9 out of the 10 people that the pirate tells about the application are going to purchase that application, because their friend, who they trust, vouched for the application. They can safely buy it knowing that it’s a satisfactory experience. This drives sales. For the one unpaid user, the developer gained eight paid users. And the great things about word-of-mouth are these:

1. It grows exponentially. There’s no limit to the amount of new users that will be introduced to your application because of one pirate. Of those 10 people he told, 10 of them will tell their friends about the application. So on, so forth. Exponential growth.
2. It goes both ways. If your application really freaking sucks, then that word of mouth will still carry on, but instead of having 10 people learning of your application in a positive light, you will have 10 people learning that your application is crap. And it’s not just some random stranger telling them this; it’s their friend, their family member, someone they trust. They know to watch out for your application with double the emphasis, because someone close to them warned them that they would get burned.

So, that’s the 85% that don’t cause any losses. Now, the 14% that do cause losses. These people were going to purchase your application, but they didn’t, because they could get it for free. Do not get me wrong. These people are petty thieves. I am in no way endorsing piracy. I feel that developers should be rewarded for their work. I’m just stating the facts, which say that piracy doesn’t hurt developers. Now, what we’re dealing with here isn’t real loss, it’s called potential loss. This means that you had a potential buyer, but they decided not to buy your application only because they could get it without paying for it. The developer doesn’t actually lose money (it costs nothing to reproduce digital items, unlike physical items), but they lost money they had coming to them. Now, the reason why this doesn’t actually hurt them is because what I said above still applies. Word of mouth. Let’s say that ‘Bob’ developed an iPhone app. It costs $9.99. ‘Johnny’ was going to purchase it, but didn’t, because he could get it for free. So, ‘Bob’ lost $9.99 

. But wait! Johnny likes Bob’s app. It’s really cool. So, Johnny tells all 10 of his friends. Of the 7 of them that decide to check it out, 6 of them purchase it, and one pirates it. So, let’s do the math. By now, Bob has lost $13.99 (Apple takes a 30% cut of all App Store revenue), and has gained $41.96.

$41.96 - $13.99 = $27.97.

Now, I know what you’re thinking. What about the $13.99?! They stole that money from him! No, that’s not actually what happened. You see, although they did prevent him from taking in that money, if Johnny hadn’t pirated the application and shared it with his friends, none of that $41.96 would have been made. This is called a profit. This is why the developer benefits.

And we’re not even done there. You have to include the exponential growth of word of mouth, as well as the additional publicity offered by Installous and Apptrackr.

$27.97 + publicity = $∞

I’d call that a pretty awesome gain. Now, we’re left with 1% of Installous users who use the service legitimately. Of course, they don’t cause any loss at all. So, nowhere in this graph can I see where a developer loses money. Can you?