• by Steve Smith , Staff Writer @popeyesm, February 24, 2009

I was pleasantly surprised at the ease with which my first pay-to-play Android applications took my money. Last week the Android Marketplace finally allowed publishers a direct monetization path with provisions for paid apps and a buy button. One of the first premium apps out of the gate was QuickApps, a $7.99 viewer for Office Excel and Word docs. I was a little more impressed by the integration of the purchase experience than with the app itself. Unbeknownst to me, being signed into my Gmail account and other aspects of the Google services on this G1 phone also taps me into my Google Checkout account. As soon as I hit the buy button on Quickoffice, it engaged my existing account and gave me a purchase experience that was almost as smooth as purchasing an iPhone App. It even offered a drop-down menu with payment options.

A number of vendors have already rushed in to price their wares. The new Applications area of the Marketplace, in fact, had more paid apps than free when I checked over the weekend. The 99-cent price point is popular with many indie publishers. The games, even from recognizable brands like Digital Chocoloate and Gameloft, generally stay below the $3 price point. So far none of the paid games or apps seems to have cracked the most-popular rankings.

ABI has an interesting research note out this week on the popularity of paid apps. Its survey of an admittedly small sample (235 smartphone users in the U.S.) found that a surprising 16.5% of them had spent between $100 and $499 on mobile apps in 2008. That is a lot of app buying, even at the higher price points business users might pay for productivity applications on non-iPhone smartphones.

ABI researcher Jeff Orr says that iPhone App Store pricing is at once popularizing the idea of mobile content but also exerting downward pressure on price. In recent years, on-deck mobile game prices have been escalating -- for instance, to $9.99 to buy outrights and only slightly less for month-to-month subscription access. On the iPhone the game I play most often is a free and simple Boggle-like game that uses the very good in-game ad placements from Greystripe. Does it distract me from the branded, more involved offerings elsewhere in the store? Sure. I am not treating the iPhone yet quite like a portable PC or even a Nintendo DS. I am not looking for depth of functionality or experience yet. On the other hand, I would gladly pay $3 or $4 to continue the experience if this were a limited-use demo.

But if ABI's stats are in the ballpark, the mixed model of free and paid in the app stores seems to be raising all boats. The silly per-month fees carriers levied on users for years ($2.99/mo for mobile magazine content -- come on!) are deservedly cannibalized by flat-fee low pricing, to be sure. But good smart phone implementations are expanding the addressable audience for these apps so well, we may see a truly robust hybrid ecosystem emerge.

I am curious to hear from app developers who are active in the App Store or Android Market. How do they feel their paid offerings compete with or benefit from the free alternatives? Certainly it raises the bar on paid apps to prove their value, but at the same time the ecosystem seems to establish some vague but real bar between our expectations of free and fee.

I won't hazard a guess about where this model is really heading, and if we will see free ad-supported models overwhelm a pay-to-play model. Only two years ago no one seemed to put much faith in the ad-supported app or game idea, and now it makes perfect sense. My sense is that a successful hybrid ecosystem will serve both fee-based app developers and ad-supported models. Having credible, deeper applications you pay for on the deck helps confer a greater sense of value to the sponsorship of free apps. But there is no telling at this point whether a mixed model really will stand up against the Web's free-for-all precedent. Can some sort of equilibrium be maintained in this ecosystem when it hasn't elsewhere?

It was inevitable that the deep recession and media crisis would revive discussions about the pay model. Convincing users that media costs something to produce seems to echo off every conference stage lately, something like a ghost of dotcom busts past. But this time, the media mean it.

Missing from most of these discussions is how mobile may play a role in rethinking hybrid models. After all, both on carrier decks and in the new applications stores, this is one of the last places where we still acknowledge the value of content as a service, ponying up for a digital comic here, a short game there, a recipe program, or even daily crosswords.

I have to wonder if anyone at the branded media companies is taking a hard look at these models for guidance about how to convince readers of content's value and then packaging it appropriately. Sorry to beat the drum once again. But I remain convinced that in some cases mobile media models will not just extend brands but even teach old brands some new tricks.

But this experience in the Android market did give me a chance to revisit the platform and compare it more directly with the iPhone. More on that on Thursday.