What a Startup Can Learn from the Papaya Market

Before you wonder, the title isn’t about the delicious fruit but Papaya Mobile, the e-gaming company. I had a chat with Oscar Clark – Evangelist for Papaya Mobile – during the Digital Shoreditch London. Oscar is a brilliant speaker and he has developed a complete explanation, including graphs, about how apps have revolutionized the pricing war. Definitely worth sharing.

Update 10 Oct 2012: Oscar now is evangelist at Everyplay, a mobile gaming project. That’s a prove that the concept of the post is still very much alive!

App killed the economic stars.

If you have attended any economic course, this is what they have taught you about pricing.

Apponomics1

The graph shows one of the oldest economic principle: “The higher the price, the less clients you have”. For many years companies have used this principle to generate the biggest area of income. In the example, a traditional company will alway choose a high price (A) than a low price (B). They get less customers but a bigger total revenue.

The era of the apponomics.

Forget the traditional economic theories, apps have changed it all. And it’s not affecting just the e-gaming (besides, with a market valued $23.66 billions in 2011, the phrase “just e-gaming” doesn’t sound appropriate either), the principles of apponomics are expanding to traditional markets as well.

Apponomics2

If you have never played Papaya Farm, do it now. Playing is free. However, you can spend some money to buy extra features, and improve your chance of success. Or you can spend a lot of money to buy more features, and so on.
This flexible pricing system is obvious for many of us – online junkies – but we don’t use its full potential. And I haven’t heard of any academic course teaching it.

Nothing new under the sun … maybe.

Is this really “new”? Indeed the traditional pricing system is still valid in many markets. For instance, you can’t sell at different prices a life-saving prescription: either you need it or you don’t.

Indeed companies have used different prices for a while. Last time I tried to buy a Mac Air, I had to choose between 4 models from $999 to $1499. However – and this is the difference of traditional economics from apponomics – I can pick only one Mac Air, I can’t buy the cheapest one and upgrade it home after a few weeks. On the contrary I can subscribe to a free e-game and spend extra money (or not) every time I am in the right mood.

Indeed it’s not completely new, however I bet that many top managers out there have still no idea that the market have changed. Nor many universities. So it’s fascinating to see these concepts improved into a very official looking theory with graphs. Maybe soon traditional economists like Keynes and Pareto will share the pages of the school books with Farmville and Railroad Kingdom. Sounds fun to me!

P.s. That’s me and Oscar, you should follow his webinars. He’s brilliant. Besides I have noticed that some of the most innovative conversation come after a few beers, or an aged Scottish whiskey (the latest being the main musa of another post). Cheers to that!

Credits: the fruit market is a photo by Rinaldo W on Flickr.com

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