Thursday, August 21, 2008

James Middleton on Lessons to learn from Apple’s App Store and my response

James Middleton (which I believe does very good analysis about the Telco industry) just posted a comment about Lessons to learn from Apple’s App Store. I did also posted a response to this analysis

Lessons to learn from Apple’s App Store

James Middleton

The rest of the mobile industry could learn a valuable lesson from newcomer Apple, as the App Store takes the mobile content and apps market by storm.

Analysts at the Daiwa Institute of Research this week said that the introduction of the App Store in the iPhone 2.0 platform represents a compelling reason for high end mobile subscribers to sign up for the device.

European telecoms analyst and sector strategist at Daiwa, Michael Kovacocy, told the beauty of Apple’s App Store is that all apps are standardised for a specific operating environment. “Opening this up to 3rd party development allows for a potentially rich user experience (plenty of apps) - but with a “guaranteed” look and feel and download process. In my experience, nothing quite comes close,” he said.

Earlier this week, UK-based GetJar, which claims to be “the world’s biggest mobile applications portal,” said it had surpassed the 300 million downloads mark since its founding in 2004. The company claims over 12 million downloads per month, and while Apple’s App Store approached this figure in its first weekend of operation, the level of activity is likely to settle at something much lower.

While Apple’s offering targets a niche but ‘captive’ audience, GetJar is targeting the other billions of mobile users with Java, Symbian, Windows Mobile or Flash Lite-compatible handsets. Some premium brands such as Google, Yahoo! and Opera, already use the aggregator to shift their apps.

But the big difference is that GetJar is pitching its wares to a very fragmented market and Kovacocy notes that companies playing the game GetJar is playing will find it hard to compete with Apple.

“The difficulty with getting a good user experience (both from distribution to use) with applications across all these platforms is nearly insurmountable, in my opinion. And the cost of building to try to allow this good user experience across a myriad of Java handsets along with Symbian, MS Mobile, etc. is prohibitive - the business models just don’t make much sense,” Kovacocy said.

This is an issue that has long been discussed in the industry - the biggest problem developers encounter is how to get PC content onto mobile platforms X, Y, and Z. Because of the diverse nature of the handset environment, content providers and carriers have a real headache just getting services and applications into the hands of users.

The other bugbear is the users themselves - most normal users just don’t have the inclination or the ability to install apps, leaving no volume to pay back the development costs.

And this is where Apple comes up trumps. Although the company is treading on the sacrosanct territory of operators’ billing relationship with their customers, by imposing an alternative way of paying for content (there is speculation carriers get a kickback from Apple for this), none of its telecoms rivals have the head start that Apple has in digital content downloads and payments, in the shape of iTunes.

AS Daiwa’s Kovacocy notes, with the iPhone App Store Apple has delivered, “one operating system/device to build to, a market (granted currently niche) of ‘captive’ customers to sell to, and a user experience that encourages downloading and usage of applications. Apple has a winner, we believe,” he said.

My comment

One thing is the potential market and other very different is how many people is going to buy it. Beyond the 15 countries where the iPhone is present today the iphone niche segment gets smaller and smaller. And yes they have created a powerful hardware/software combination but this is “easy” for one device but will always be a niche market as long as it is a one device (the Ipod did create a market that did not really exist. Now Apple has entered a very nig market where there are very big fish like Nokia, Samsung and SonyEricsson to name a few)

There will always be 95% of customers that don’t have an iphone or apple product so how do you sell and optimize the user experience for those? That is the big question in my opinion? Some of the large mobile operators are playing with mobile clients which could be an answer although there is a high entry barrier which is getting the client being downloaded (because embedded mains higher costs and maintaining subsidies) by customers. And many more initiatives to come.

The jury is out

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