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The App Economy

Jan 31, 2012

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On today's show, we hear how a hobby turns into a lucrative one-man business — and how Apple's App Store is transforming the Internet economy.

The gist is super simple. In fact, it's something that's been going on in the physical world for thousands of years: Giving people a convenient way to buy cheap products.

Our guest on the show is Marco Arment, one of the founders of the blogging platform Tumblr. A few years back, Marco launched a little side project called Instapaper.

Instapaper was a Web-based service that solved a small problem Marco had: He would come across long articles on the Web, but wouldn't have time to read them during the day. He wanted a way to save articles to read later on his phone. Instapaper let him do that.

Marco told his friends about Instapaper, it got a few write-ups in the tech press, and pretty soon thousands of people were using it. Marco started running an ad on the Instapaper Web site. The ad generated a few hundred bucks a month.

Then Apple launched its App Store, where developers could sell (and give away) applications for the iPhone and, later, the iPad. Marco started selling an Instapaper app, and his business took off. Marco explains why:

Apple already had everyone's billing information from iTunes ... you could buy things just by typing in your password ... That, for the first time, brought very, very easy payment to the modern software world. That, more than anything, is why there is a business for paid apps... .

By late 2010, sales of the Instapaper app were doing so well that Marco quit his day job. Now he makes a nice living — comfortably into the six figures — just from sales of the app.

...you charge a small amount of money ... and that's it, you're done. You don't need to go seek venture capital money, you don't need to sell out your users' privacy. They're not even your users, they're your customers — for the first time in a decade. It's great.

This super simple-business model — sell a product for a few bucks to ordinary people — allows Marco to run Instapaper as a small business. He's still the only employee. He hasn't taken any outside funding for the company. And he likes it that way.

"My goal has never been to dominate the market," he says. "My goal has always just been to just make a living."

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