The App Store Dream
With all the buzz these last few weeks about the Mac App store and the Android Market Store, software developers are having nightmares about these new channels and the impact they could have on your business. Many so-called “experts” are working themselves into a frenzy over the alleged “coolness” of these stores and their power to exponentially increase sales.
As someone with their finger on the pulse of the software business, I take a long yawn then stretch my arms, legs and fingers like a recently woken cat at this recent development. In spite of all the hype in the media, your chances of seeing any meaningful benefit from these stores is similar to winning the lottery. Don’t quit your day job!
Why am I so pessimistic? Charity is a beautiful thing, and it happens in some corners of the world. But the digital world still depends on the survival of the fittest – and app store owners didn’t create these stores to be generous.
I will admit, however, that app stores do a few things well. I see two ways that these stores help you, the software developer:
- Lower barriers to installing software. The Mac App Store promotes one-step downloads on their home page, which makes it very easy for anyone to install their software. I expect that others will soon follow suit on tablets and PCS, not just mobile phones. It’s nice to see the end of the days where hunting for downloaded files was a sport. Other companies (Windows and more) will follow suit.
- Open potential new markets for your product. If you’ve been in the business for more than a few years, these app stores offer access to a new type of user who may not have bought your product on a computer. You can potentially reach this new market of mobile phone and tablet users if you have the right product. The tablet market is poised to explode with the pending release of the Honeycomb OS devices. This open Honeycomb OS environment provides the opportunity for third-party software developers to bring new and better products to the masses.
On the surface, it seems that this trend is in your favor… I don’t want to rain on the parade, but there are a few reasons that these app stores won’t benefit existing software developers:
- Featured products are often made by the store owner or their partners. When looking at the Mac App Store, half of the apps shown are Apple’s own, such as Keynote, iMovie, iPhoto and GarageBand. What if you have a competing product? Good luck finding much of an audience. The Android App Store isn’t much better. Featuring products like Google Sky Map (huh?) and Glympse (requires Google Maps) in the rotating feature section, do you really think that these are the most universally useful apps or is Google trying to capitalize on their position?
High cost of doing business in these stores. As you may have seen, Apple is flexing their muscle and requiring that Sony include the (Apple) in-app payment mechanism before Apple will accept the Sony app because Sony wanted to allow customers to buy outside the app. Sony has to give Apple 30 percent of all revenue generated through the in-app process, while Sony only pays their own costs (2 percent – 10 percent) when orders go direct through Sony. Starting July 1, Facebook is similarly requiring that Facebook credits are included in all games sold through Facebook. Reports are that Facebook will also retain 30 percent of all revenue when customers pay with Facebook credits. It’s unlikely that as these stores proliferate, the store owners will become more generous by lowering their fees!
Low price products dominate. Perhaps this is a function of the types of devices targeted by app stores, i.e. mainstream users who aren’t technically proficient, but the typical apps that are selling well are primarily games or free. On the Android market, there’s only one app over $6 in the top 12 paid apps, and it costs $14.99.
In the Top 12 Free category, a lot of big players (and quite a few Google products)
Most of the successes seen so far have been games like Angry Birds. Evernote claims a great success, but all that they have actually received is about 1,000 additional new registered users per day. An impressive number if your previous average was 800 per day. What do you think that a venture funded company like Evernote, with $45.5 million in funding, pays for these 1,000 registered users per day? I doubt that this is free.
Now that I’ve taken you down a boulevard of broken dreams, I’ll give you a few tips on what you can do now that the app stores are here:
- Continue with your product’s strategy. Games like Angry Birds usually are created by kids in a basement or new startups because they have no legacy customers to deal with. You have existing customers. Take care of them and build your base.
- Think about the devices software is implemented on and how your software may be adopted for those tools, rather than focusing on simply “being in the app store.”
- Keep an eye on app stores. What may be a dead end today could turn up roses for you in the future. Maybe you will find a way to tailor your product or create a new product for mobile or tablet devices.
I’ve had my say. What has your experience been as a user of these stores? I look forward to your comments and criticism!
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