Why apps cost the same as cars 📱 🚗 💰

How much does an app cost? This is a question I hear a lot.

When you think about it, the spectrum between software is so great! The cost of building an app for Uber would be extremely different from building a game like Crossy Road, and both of them would be really different from building a novelty emoji keyboard.

While they both transport people: airplanes and cars are not the same thing. They are two different modes of transportation and have extremely different abilities and capacities. Software is the same way.

An app is software, software enables a lot of things. So the million dollar question is…

Why do people tend to devalue software?

Software is confusing. People tend to overlook things that are confusing. Software is also intangible, which makes it harder to pinpoint whether or not it’s valuable. Here are some reasons why software confuses a lot of people:

1. It’s intangible:

There are no raw material costs, or factories, and it only appears on a screen. People already paid so much for the hardware — why should they have to pay for software, which technically costs nothing to distribute and is something that they can pirate so easily?!

2. They don’t value the intellectual capital:

Deliberation and thoughtfulness are not easy to measure. For each of our projects, we bring together cross-disciplinary design teams to sweat the tiny details. Our development team builds feature-worthy products that have earned millions of downloads, and have experience building products for Fortune 500 companies. But customers don’t see that process or that prior experience. It’s our job to show them. That’s why price tags on software vary so greatly — it’s similar to how there are designers who cost thousands of dollars an hour, and others who are active on 99designs. They’re at two completely different levels of work. Software development varies so much in scope and pricing that it’s confusing.

3. Non-obvious benefits or non-transactional benefits:

Software is about the experience. Some people will pay more for a smoother, more convenient, more elegant, more beautiful experience. Others won’t! They just care about more power, more speed, or more bang for their back. It’s the same reason why some non-Mac users will never understand Mac users. Mac computers are not overpriced. To the undiscerning eye they have the same hardware as other devices, but anyone who has owned a Mac (or an iPhone or iPad) knows that the experience is incomparable to any other rival device out there.

4. Hardware is expensive so software seems easier to cut costs from:

People don’t like feeling like they overpaid. They’ve probably already spent thousands of dollars on their hardware devices, so they’re often hesitant to spend money on software. It costs nothing for them to download it except for the bandwidth, and they don’t understand the difficulty of building robust software.

5. Hardware takes up physical space (out of sight, out of mind):

We noticed when we were doing our campaign on Kickstarter that hardware projects got way more funding than software projects. My team and I suspect one reason for this was because while hardware remains at the forefront of usage (e.g., you can’t use a computer without a keyboard or a monitor), software is often in the background or used in spurts. No matter how powerful it is, software is not always in the spotlight. It’s difficult for people to shell out coin for it when it doesn’t seem essential.

There is probably an endless list of reasons why people tend to undervalue software development, but these are the ones we’ve run into the most often.

Here’s an analogy we use to simplify thoughts on the cost of software development (based on this great post by Darwin Apps):

So… How much does a car cost?

Car prices range just as much as software does. You can pay less than $10,000 for a used car, or you could pay millions of dollars for a prestigious/vintage/sports car. Here are some factors that influence car prices, and their software equivalents:

1. Geographies

This is probably the most obvious one: Where is the car made? Different geographies have different base salaries and standards of living. Keep in mind that geographical differences also affect the outcome of the final product. Think of the reputation Asian cars had in the 80s. As their standards rose, so did their costs and their prices.

It sounds like a good idea to offshore your software development to a remote part of the world, until you realize you’ve shelled out tens of thousands of dollars for a final product that turns out nothing like you expected. When you’re developing a product, you pay for communication — which affects the development process significantly.

Trust me, my team has been hired by plenty of clients who have offshored an earlier version of their product to a different part of the world. They frequently do not have enough experience, process, or communication skills to match North American-based studios. We’re hired to fix it or to scrap the whole thing and rebuild it. You think hiring a professional is expensive? Try hiring an amateur.

2. Company reputation and longevity

There’s a reason why luxury brands are so prestigious. Brands like Rolls Royce have been around for over a century! They’ve got processes, but also history, experience, and a tried and true reputation. Similarly, a proven studio has already paid the cost to be the best and spent countless hours on overcoming the steep learning curve of software development. They’ve cut their teeth with many clients, products, and projects. They know exactly what they’re doing, and the development process will likely be smooth and stable.

In contrast, a younger shop could probably still churn out a good product — but might not be on time, require more management, or might not be able to offer the level of service and assurance that proven shops do.

3. Package and benefits

Manufacturers offer different benefits packages and features for the same model and make of a car. Prices for these packages vary significantly. You want the leather interior? You want the chrome rims or the push-to-start? The sunroof? A more powerful engine? It’s all going to cost you.

Similarly, a lot of apps can be expanded or shrunk based on the goal and features of the product.

4. Usage

Some cars are driven daily for long distances in extremely cold or hot climates. They have to be durable and weatherproof. Other cars are driven within mild cities for shorter trips, which require less rigorous planning and manufacturing.

Similarly, certain software products will be used by millions of people. These products require a lot of attention to infrastructure and diversity. Other products are pilot projects and will be used by no more than dozens or hundreds of people. These products target a very small niche of people, which requires a different type of planning and development.

5. Maintenance

Nice cars require Premium gas. Oftentimes, they also require maintenance in the form of regular servicing. Inevitably, cars break down and eventually require more extensive repairs.

Products similarly need this type of pruning and maintenance. Launching software is just the starting line. That’s when the real work begins — the regular updates, introduction of refined or new features, further product development based on feedback. Competent studios understand this and will include it in their initial meeting and project scope, and build with this type of maintenance in mind.

Reframing the impact of great software

Cars are valuable — but their value proposition varies depending on the person. Some of us just need cars to go from one place to another. For others, they are built-in with comprehensive safety mechanisms or collision prevention. Still for others, cars primarily signify prestige and success.

Software is also obviously valuable, but their value proposition and scope varies even morethan cars. Uber puts a car, and driver, in your pocket. Airbnb gives you a safe place to live in at prices lower than most hotels. Snapchat enables you to communicate with friends candidly. Apps like Lumosity and Elevate train your brain. Path keeps you in touch with your closest friends. Trello keeps track of your projects. Figure One connects doctors. I could go on forever…

Although a lot of the mentioned software are platforms, there are plenty of less complex apps that are equally valuable. They all fill different needs for different people.

Cars have hard costs. Building a factory costs millions, which makes sense. In contrast, investing hundreds of thousands into software seems ridiculous to people. But perhaps with the analogy of cars, now you’ll understand why investors put this much money into companies — because they’re investing it into products that can affect millions of people, and great products are not cheap. They take time, lots of effort, love and attention to create.