By Guest Author Saad Fazil
Apple’s iPhone has triggered “apps store” wars (with the iPhone as the clear leader so far), with almost every major mobile platform vendor now launching its version of an apps store. It’s becoming increasingly difficult to even remember their names: Google’s “apps store” is called Android Marketplace, RIM’s is called BlackBerry App World, Palm’s is called Palm Pre App Catalog, and so on. For the purpose of this article, we will refer to all of them simply as “apps stores”.
It’s also clear that with the advent of apps stores, platform vendors such as Apple and Google are becoming much more influential. Never has a platform vendor been as powerful as Apple was against AT&T, a major force in cellular networks. Users are looking for phones that can provide them with a lot more than just a great calling experience (though this remains the most fundamental need, albeit being bypassed by applications such as Skype and Google Voice to some extent). It might not be obvious to many, but with the recent happenings in mobile apps, a strong force is now in play: network effects. A few years ago, cell phone platforms had little network effects. As an end user one does not benefit much (if at all) if other users use AT&T or a Symbian phone, thus implying very weak direct network effects. Indirect networks were also nothing like what they are in the software industry. Microsoft is one of the best-known examples of the power of indirect networks: more users use Windows because there are more applications written for it, and more developers write for Windows because there are more users. Now, with software and applications becoming a major part of a “phone”, the same strong network effects are in play.
It’s hard to say who will win out in the end. However, what is clear is that market conditions are such that fewer players will dominate than ever before: due to stronger network effects, there are probably going to be fewer software platforms. Despite its walled-garden approach, the iPhone seems to be an obvious potential victor because of its seemingly insurmountable lead in applications written for its OS. What’s even more impressive is how the iPhone has attracted a plethora of developers (and users) despite being written in a language (Objective C) that is much harder to learn than Java, whereas J2ME never got enough momentum despite its “write once run anywhere” approach and use of a language that is higher level and therefore easier to learn. The iPhone has other drawbacks in addition to its walled-garden approach and harder to learn platform: it doesn’t allow third party apps to run in the background; it has so far resisted Flash, a highly popular tool for game developers; and applications written for it are not very portable.
Android seems to be taking network effects seriously. Unlike iPhones, Android-based phones are (or will be) available from several vendors and will work with several carriers. Cellular companies and device manufacturers are also free to exercise various degrees of control over the Android platform. Despite the phone’s being offered through several vendors, application development is promised to have little dependency on the underlying hardware — something that Sun was never able to achieve with its J2ME platform (it is also important to note that while Android is an OS and application framework, J2ME is not an OS). Android Java libraries are open, thus allowing Google to leverage the developer community — again, something Sun never did effectively. The developers’ kit works seamlessly with Mac, Windows, and Linux. Android also supports Flash and allows third party apps to run in the background, thus overcoming two major weaknesses of the iPhone OS.
Another case both for and against the iPhone is that it has made downloading applications too easy. Now, while that might be very attractive to you as a user, it can be a nightmare for developers who work round the clock to launch a cool application, only to see it move down (if it ever got a chance to move up) the charts in a few days or weeks: the average shelf life of an iPhone app is only 30 days! On the other hand, if one downloads an application on the BlackBerry, he or she is more likely to use it more frequently.
All apps stores could benefit from better payment integration mechanisms. Payment options on non-iPhone platforms are generally wider than on the iPhone, which supports only its proprietary iTunes payment system. The iPhone as well as other platforms could benefit from offering easier ways for developers to use different business models, such as subscription-based and free trial to paid conversion models. Users are more likely to buy an application that charges $3 a month than download an app that requires an upfront payment of $10 even though they usually end up paying more than $10 in the former case. Similarly, users are more likely to convert from a free trial to a paid version rather than buying a free app and then downloading a paid version of the same app — this is the prevalent way on iPhone today. In-app purchases are also going to become popular, especially with the rise in social games.
While, as mentioned earlier, software or mobile OS vendors (Google, Microsoft, Apple, RIM, Palm) are poised to be dominant players in the apps store wars, don’t count handset manufacturers and wireless operators out yet. Cell phone makers such as Nokia and Sony Ericsson have both entered the apps store business. Wireless operator Vodafone has also announced the launch of its apps store. Though generally considered less likely to succeed, these manufacturers obviously have advantages in that they have access to a wide array of operating systems and devices as well as, in the case of operators, access to networks and the ability to more effectively target by geography. Nevertheless, they will face an uphill battle when competing against OS and software companies.
It would be handy to draw a matrix with factors for success or failure as columns and apps stores as rows, and come up with rankings based on total score. However, I feel this might be too facile an approach to predict in favor of one of the apps stores. I would, however, love to hear which apps store you think will win and why.