My question for you after your pitch was whether you’d thought through your pricing relative to a 99 cent app. Your answer told me that you’d designed your pricing from a different perspective - which was based on the cost of a developer doing it themselves. Until you have serious competition, I think that’s a perfectly fair approach. As you learned, this is a hard and expensive problem to solve and you’re making it easy and much more affordable.

The point I make above isn’t necessarily that your pricing has to change, rather that the 99 cent price point may not work for sophisticated location-based apps that need the kind of capabilities that you’re providing. I keep sneaking in weasel words like “I’m not sure…” and “may not…” because, as you say above, there’s more than one way to monetize (especially for location-based apps) and because I picked the worst-case threshold for my math (an app with less success can use your service for free, and an app with much more success gets to spread your price across more users).

The real questions for you are:
1. What level of adoption will you see with your current pricing? With lower (or different) pricing, could you see a tidal wave of new projects leveraging your infrastructure (probably not what you want right now anyway)?
2. Does your current pricing create a ceiling under which someone else may be tempted to launch a similar service?

As far as our pricing model goes, we’re definitely still tweaking it, as well as really trying to understand how everything is going to play out. You definitely bring up some very important points…

One thing that I think you brought up that needs discussion is the various apps that might get released that need to have some sort of web backbone. Currently, we’re already seeing solutions like Urban Airship and Push.io for push notifications, other web infrastructure plays like Ads, and of course, our location-aware platform. These services cost money most of the time, and it’s likely that the bill needs to be picked up somewhere down the line.

It’s doubtful to me that the apps themselves can be easily monetized by just selling it for $0.99. Knowing that the app war is just a race to the bottom right now, most apps will likely be around $0.99 or less, so we’re going to have to get creative with our pricing model. I think that what we’ll find is that location can improve the quality of in-app advertising, potentially even coupons. That, to me, is a much more viable business model.