The Joys of Bundling
There has been a recent flurry of activity in the Mac community regarding the bundling of applications. MacHeist has just recently concluded its second bundling attempt in which they offered 14 products normally priced almost $500 for only $49. In addition to the bundle, 25% of their sales are being donated to charity. The first year the bundle was offered, they sold approximately 16,000 bundles in one week. This year they sold approximately 44,000 bundles over a two week period.
Most of the opposers to this particular bundle have focused their criticisms from the viewpoint of a developer who offers his application in the bundle. We hope to dispel such negativities in this article.
End-Users’ Perspective
From the end-users standpoint, this bundle was a no-brainer. If there was even one application in the bundle that you desired, this bundle was the way to go. Most of the applications offered are normally sold at or above the bundle price. There has been some criticism that some of the apps offered were “special” promo versions. These special versions are equivalent to the current shipping version but could potentially charge customers in the future for major upgrades. In my mind, this would not be a show-stopper for an end-user purchasing this software. I, as an end-user, get the current fully functioning version and, in the world I live in, I have already been conditioned to paying for upgrades. This did not even effect all of the applications in the bundle. From what I saw, only 3 of the applications had these special promo versions and nothing was explicitly mentioned that I’d have to pay for upgrades.
The bundle has also exposed end-users to apps that they might not have explored had they not been included. For example, I brought the bundle just because Pixelmator was included. When I bought the bundle, I downloaded add installed all of the apps. Once I started using some of the other apps, I became hooked. On paper, the app 1Password didn’t seem like something that I’d need. Now that I have used it, it is indispensable. I would have never known this without trying and I would have never tried it because it doesn’t sound that exciting.
The charity donation was also a nice touch. The bundle was set up such that the buyer could specify which charity out they would support. The amount of money raised was prominently displayed on the front and was updated in real-time. I enjoyed going back to the site just to see how much was raised.
Bundle Operators’ Perspective
While the specific numbers related to division of the profits is not known, we can project some numbers to see if the bundle operator benefited. For each $1/bundle of profit alloted to them they have generated $44,000 for their efforts. From my understanding the operators consisted of 3 people. They had to put in the effort to build the website, market the bundle, and get the developers signed up. This would not be an inconsiderable effort on their part and as such they probably had a bigger share of the bundle than $1/bundle.
They executed the bundle excellently. They designed it so that certain top-tier apps were only unlocked when certain levels were achieved. Pixelmator was not unlocked until approximately 10,000 bundles were sold. The final app, VectorDesigner, was not unlocked until $300,000 was raised for charity. As each item was unlocked, orders jumped. They kept certain apps hidden until later in the weeks. Wingnuts 2
Additionality, they offered referral bonuses. If you referred one person, you received another app. If you referred two people, you received 2 apps. As they added more apps to the bundle it became easier and easier for someone to recommend it to friends.
The apps they did offer were from a wide range of types. They offered games, image editors, money managers, utility programs, GTD programs, and others. This broadens the range of potential market for the bundle. People interested in GTD programs might not normally use games.
Most of criticism leveled at the bundle operator is related to the share of the profits they received. Unfortunately since they were smart enough to get the developers to sign non-disclosure agreements, no one really knows how much they made.
Participating Developers Perspective
The vast majority of the argument against the bundle is leveled at the developer level. Since there were 13 developers participating in the bundle and 25% of the original prices go to charity, this leaves approximately $37.50/bundle for the bundle operators and the developers. If the bundle operator takes $2.50 of that we are down to $35 for the developers. That equates to under $3 if it is equally divided. $3 for an app is definitely a drop for the normal prices ($50+) these apps generate.
If you were a developer how could you sell your app for $3? Since the development is already a sunk cost, the cost to make another copy of the software is just limited to the cost of downloading the program. This is pennies given the costs of bandwidth today. A major cost could be tech support. If the developer is wise, he could setup forums and FAQ to help reduce time he spends attending to support email. If we stopped the analysis right here, we can see why prominent members of the Mac community are up in arms about the issue.
But there are additional intangible benefits to be had by the developers. For one thing, they have now just greatly increased their user-base. It is much easier to sell something to an existing customer that it is to acquire a new customer. Not only can they sell upgrades to the existing product, they can sell add-ons to it and they can sell other products. They can also get the permission of the customer to send future marketing materials. This can be very powerful and should not be overlooked by the critics.
The last criticism I would like to address has to do with the perception that offering these discount prices “cheapens” the software. One analogy I read on the web equated bundling to selling a BMW for $5K. They are argue that the reason people buy a BMW is for the elitest status it conveys. However, this is like comparing apples to oranges. For it to be a proper analogy, either the apps would need to be luxury/top-of-the-line apps or the car would need to less exclusive. The apps presented in this bundle, while impressive, are not of the luxury variety. A better analogy would be to compare the apps to milk in a supermarket. The supermarkets will sell the milk at a loss just to get customers into their store. They then up-sell them to other products. This bundle is meant to get customer in the door. Period.
Overall, I’m very happy with the bundle. As an end-user, it is unbeatable. Heck, I would have happily paid 3 times as much for it. The bundle operators provided value to end-users and to the developers. They deserve whatever profit they received. When I have finished the development of multiple apps, I would love to be able to participate in such a bundle.
