Apple's App store and beyond
With the launch of the iPhone and its Application Store, Apple has created a fantastic user-friendly solution that makes it easy for customers to download applications to their iPhone. What Apple has proved is that usability is one of the areas they fully master. But is all the hype justified? And what comes after the Apple Apps?
The Apple Apps success story
The Apple App Store has reached more than 100.000 applications and has handled more than 3 billion application downloads. This is a highly impressive result taken into consideration that Apple is not a first mover on this market – something many still believe they are.
One of the main advantages of the App Store, from Apple’s perspective, is that it has assisted the sales of both the iPhone and iPod Touch. The App Store has helped drive incremental hardware sales, and it seems to be a strategic differentiator within the consumer product download industry.
Another advantage Apple has had is their success with iTunes, where millions of customers have been used to using Apple's shop to purchase and pay for music. As many of the iPhone customers are also iPod customers, they are already familiar with this type of store and with the provider that is offering applications for their iPhone. This is an advantage other phone manufacturers do not have.
The App Store hype
Apple is by no means the first handset manufacturer to launch an application store. Handango has been on the market for years, and have in fact been offering mobile software for more than eight years. However, Apple seems to have been able to create an unprecedented hype surrounding the App Store, mainly by creating a more modern design and user-friendly interface.
People are talking about Apple's App Store for the iPhone – but is it really such a huge success as the media write, or is it simply one of the many solutions that are being over-hyped?
The media are giving App Stores a lot of coverage, and most phone manufacturers and mobile operators are in the process of launching their own App Stores, with the dream of thereby being able to create a commercial success.
The limits of the free apps model
When you read the many articles that are being published about this subject, there is no limit to the optimism and how impressed people are about the many free downloads offered on Apple's App Store.
However, in the world that Strand Consult does business in, we do not have many customers that can make a living from giving customers free applications for their mobile phones. We are, for example, more focused on the 8,6 billion dollar market (2008 figures according to the Mobile Entertainment Forum) for premium value added services, of which 10 billion services were services being sold off-portal through third-party providers.
Taking a closer look at the market for various types of services, the mobile phone games market generates around 44% of the total premium mobile services market, corresponding to sales of $3.75 billion USD.
With more than 2.5 billion phones that support Java on the market, there is no doubt that many application developers prefer to develop Java applications that can be potentially used on 2.5 billion phones, thereby targeting the mass market and a market that already has an enormous turnover, rather than developing for the narrow iPhone segment - a market with few customers and very little cash flow.
An App Store can be compared to a bookshop. The mobile industry does not lack booksellers, it lacks the people that can educate users and teach them how to use mobile phones for other things than just voice and SMS. We need to educate the many billions of ‘illiterate’ mobile users, rather than focusing on building bookshops.
The future of mobile services
We believe that the premium VAS market will explode from the 8,6 billion USD of 2008, as an increasing number of new services for the more advanced mobile phones enter the market and as mobile operators launch micro-billing on the mobile broadband connections they are selling. We know that many operators will copy their mobile phone strategy, by implementing premium billing on mobile broadband connections. The big question is not whether there will be a market, or whether it will be huge, but rather who will dominate the market? We do not believe it will be App Stores or other similar solutions you read about in the media.
There is no doubt that an app store makes it easy for customers to purchase applications for a certain type of handset, but it doesn't help teach customers how to use the applications or understand the potential value of the applications. If a bookshop doubles the number of books in their store, or give the books away for free that will not increase the share of population that are able and willing to purchase and read books.
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