Sunday, December 14, 2008

iPhone App Pyramid Scheme Plan

Where is the next fertile soil for a pyramid scheme? Why, the iPhone Application store, of course! Following these few easy directions, you can scam millions of yuppies for fun and profit.

How: First, create an iPhone Application with some kind of cheesy social-networking appeal (e.g. 'How many friends do you REALLY have?'). It doesn't really matter what the functionality of the app is as long as each install of the app is assigned a unique identifier. The buyer will enter the id of the person who referred them to the app. In this way, an n-ary tree can be constructed (with you at the root) of subsequent referrals and installs of the app. Motivate the spread of the app by promising some amount of money to a user every time someone else buys the app and enters the his or her 'promo code.' Price the app such that you net the difference of the cost of the app and the amount you are paying out on each install.

Why it will work: People who purchase iPhones have a proven record of buying a lot of iPhone applications with their disposable income. It is perfectly reasonable to believe that many of them would not mind spending a few bucks more to purchase another novelty application (indeed, some have proven that they will spend a great deal for a novelty application / status symbol). Second, sites like Facebook have proven users' insatialbe thirst for social applications that connect them to their friends/coworkers/strangers/etc. Many of these applications exploit some kind of emotional dynamic (for instance, who are your 'Top Friends'?) to appeal to users. The sucess of these applications leaves no doubt that other appeals of the same kind would find an audience. Third, the iPhone App store provides a quick and easy means of distribution and, presumably, payment. Finally, every pyramid scheme exploits people's motivation for profit, a powerful motive indeed.

Variables: The setting of a reasonable price and payout is critical. Ask too much and nobody will buy the app; ask too little and you won't make much money. Promise too much as a payout and you won't make much money, promise too little and the app will not virally spread. Another important decision is the appeal of the application -- how are you going to convince uses to buy the application in the first place? What is the most compelling social/emotional/psychological/whatever message that you can send to them that makes them want to buy? Going hand in hand with that, what does the application actually do? Does it simply redirect to a web page showing some statistics of who has recruited the most people to the scheme, or does it have something more sophisticated?

Unknowns: Apps need to be approved by Apple and can be yanked by Apple at any time, with or without explanation. The app needs to be written in such a way that it does not appear to be something that Apple would find questionable. The legality of these practices is another issue. Depending on what the function of the application is, you might be able to make a case that you are actually delivering a product to the user. Another unknown is the most effective way to move many small payments of money between people, and what kind of cost is incurred for those services.