John Gruber over at Daring Fireball links to an intriguing piece by Paul Kafasis on the state of the App Store. The post compares Walmart’s strategy to sell disposable, cheap goods to those of App Store “ringtone” developers which are forcing down prices. My friend and business partner, Craig Hockenberry wrote about this very topic a few weeks ago in a piece that put him in the crosshairs of quite a few people.

After Craig’s piece was published, and indeed after reading the post by Kafasis, some are under the impression that more expensive “AAA” apps are doing just fine thank you very much. The theory goes that one only has to look at the App Store top 10 list to understand it’s not price that gets you into the top 10, but quality. This, plus marketing on the part of the developer are all that’s needed to boost your software into the top 10 of the App Store. Reading through the comment thread at Inside iPhone it all seems so simple. All a developer has to do is market their app and the rest will take care of itself! Why didn’t I think of that?

The part I love the most is that the people making the “just market your app!” comment have no real idea how much effective marketing costs. Oh sure, you can go far on viral and word-of-mouth marketing, but it all pales in comparison to even a small banner graphic in the App Store. The Iconfactory could spend tens of thousands of dollars buying up targeted advertising space to promote Frenzic, but it still wouldn’t be 1/10 as effective as the front page graphics that Dropship, Marley and Texas Hold’em are enjoying (for free) as I write this. Not only that, but I have no way to track metrics for advertising pointing at Frenzic in the App Store. I can’t gauge how effective a $75 blog ad versus a $2,600 DF sponsorship is because Apple doesn’t currently give me stats of people clicking through to my software. Anyone who says “Just market it!” doesn’t have a solid grasp on how the App Store works.

Another example is Rolando. People are holding this app up as the ultimate example of a quality, non ringtone app that is enjoying success in the store. It is true that Rolando is a fantastic game worthy of the top spot it once held. It is also true that Apple promoted Rolando from DAY ONE in the App Store with major graphics both in iTunes and on Apple.com. All that exposure helped to get Rolando into the top of the store when it launched. But its $9.99 price point is like an anchor. As I write this, Rolando sits at #30 in the top 100, and #10 in games. Let me repeat that. #10. In games.

So what is in the App Store top 10 right now? iFart Mobile is number one which is still riding high on a wave of PR thanks to being originally barred. Crash Bandicoot, which is featured in national Apple television spots is #2. Tetris, perhaps the most well-known video game in history, is #3. Three more ringtone apps come in as 4, 5 & 6 including the months old iBeer. Touchgrind, which also enjoyed prominent Apple billing, is #7. Bejeweled 2 is number 8, PocketGuitar ($.99) is #9 and SimCity rounds out the top 10. All of these apps either enjoyed uncommon press exposure, have a nationally known brand or are priced at $.99. Quality definitely plays a role in getting to the top, but price and “Apple love” play a larger part.

Does this all mean that developers like myself will abandon making quality iPhone applications like Twitterrific and Frenzic? Of course not. I just wish that people who think they know how the App Store works would admit that they really don’t. The App Store is still in flux and much is unknown. What I do know however is that there are key factors to getting to the top of the store, chief among them being price and exposure from Apple. No amount of 3rd party marketing, done on a small developer’s budget is going to change that simple fact. What’s worse (or better, depending on your point of view) is once you are in the top 10, even if you’re app is a “limited utility” ringtone app, because you’re in front of millions of eyeballs both on the device and in iTunes, you’re bound to stay there.

I don’t know exactly how to fix the App Store, but everyone I’ve spoken with agrees that it needs fixing. If not fixing, at least a change in how it favors certain apps while hindering others. The more we talk about this stuff, the better it will be for both developers and customers alike.