Leaders and followers - How everyone is following Apple's lead (?!)

In the last few months I've posted some rants about the shortcomings of the iPhone AppStore before, for instance under " . In doing so I've echoed the voices of many other industry players, including AppCubby, Mobile Tech Today and others. The general assumption in the market was that when introducing the AppStore Apple wanted to start simple, learn, and upgrade later. An example for such an upgrade are the "Top Paid" and "Top Free" apps tables.

One thing I certainly did not expect is for everyone else in the industry who's been distributing mobile apps for years, to look at Apple's success and draw the conclusion that they need to "go primitive" in order to be competitive. Take a look at handango.com for instance. They've been leading the mobile applications downloads market for years, and were the Mecca for early-adopter smartphone users. Over the early years, they've evolved their merchandising practices. For instance, they moved from a "Top 50 downloads" table counting downloads, to a "Best sellers" counting unit sales (just like iTunes), to a best sellers list measuring revenue generated by the different titles. And it worked for years.

Over the last few years, growth has stagnated. While I can't put my finger on it exactly, I can say from our ISV partner point-of-view that it seemed like things have slowed to a crawl there. Initiatives like subscription billing, free applications distribution with pay-per-download for the vendor and others took years to evolve for "IT reasons". And the iPhone has dealt them a blow - with their core audience switching in droves from Windows Mobile and Palm to iPhone, and then being forced to download only through the App Store.

How does a company respond to such market conditions? Well, in their case it looks like they've picked a very naive version of "if you can't beat them, join them". A couple of weeks ago they've switched their best-seller lists to be run by "most units sold" instead of "most revenue generated". So long $99 eOffice and WorldMate Live. Long live $0.99 iFart and iMaid.

Does this strategy make sense? Let's assume for one second that this strategy is indeed the right one for the App Store (I don't). Is it the right one for Handango? Are Apple and Hadango equivalent? let's see. Apple's targeting un-informed consumers who purchased the "coolest phone out there" and is trying to educate them to download apps. It has an existing billing relationship with them which means that it can easily power a good user experience for a $0.99 impulse purchase. The focus is on mass market "goods" and the strategy is focused on the lowest-common-denominator.

Handango's audience reached it after looking for a place to buy applications for their (non-iPhone) smartphones. They put their credit card numbers in to pay for their purchase. They have opted for BlackBerries and Windows Mobile devices. Are they the same psychographic as iPhone users? Will the lowest-common-denominator strategy work?

An even bigger concern are Apple's competitors. The AppStore's success is of course something they cannot ignore, and the rush to issue such stores of their own is justified. Advertising their phones as application platforms is something they should have started doing years ago (and believe me, I personally pitched such campaigns to them in the past). But are you going to be a leader or a follower?

One of the giants of this industry, a company who's been defining the mobile market for years, has recently announced its upcoming application store. This company has built various application and content distribution channels over the last 10 years, and has tested every model you can think of - from internet to on-device to retail-point-of-sale. They've done everything except one thing, which is to actually promote application use to consumers when they advertise their phones. Wait, isn't that a key part of Apple's marketing strategy?

Anyway, they're working with their developer community on the upcoming launch of their app store, and initially stated they will support a variety of business models - subscriptions as well as one-times, trial apps, freemium, etc. Then all of a sudden they have a change of heart. You see, now they are looking for a "consistent download experience", so why don't everyone go back to pay-before-you-download applications with a one-time fee and that's all?

What's going on here? Have Q4 reports been so bad that a market leader has lost any ability to think on its own and is blindly following Apple's example? What will they do in a few months when Apple will come out with subscriptions, trial apps etc.? Implement them then because then it is good practice in line with consumer expectations? Incidentally - is this also the strategy with your phones? To just clone Apple? Is this scalable? sustainable?

The latest news is on RIM's BlackBerry App World. The good news: an App Store for BlackBerry, with some more flexibility allowed to developers, and RIM heavily promoting application use. The bad news: RIM seems to be assuming BlackBerry users and iPhone users are the same demographic / psychographic. Therefore it taks the $0.99 - $9.99 pricing levels that are the norm on the iPhone App Store (but not imposed by Apple) and setting them as the established price level for the BlackBerry App World. Is your tool worth $50? Is your service going to generate / serve the business user $500 in value? Sorry, this is a Dollar Store.

Where is it all going? How much innovation is going to go down the drain because of this infatuation with $0.99 gimmicks? Frankly I don't know. I can only take solace in comments posted by our users on my previous posts about this, for instance:

"If people are willing to pay $.99 for crappy apps and odd sounds, imagine what they would pay for an app that is actually useful and works wonderfully like WorldMate Live."

Let me know what YOU think...

iPhone, iTunes, iFart - A case of the tail wagging the dog? Or is this a cat?

First, we heard of the dozens of millions of applications downloads on the iPhone - as soon as the AppStore was available. Then, it was "100 Million Apps in 60 days". Then, comes what happens when you have such a big pool of active and dynamic primordial soup - the creation of life, and continued evolution. Culminating in the gem of creation itself, the most lucrative, top-ranked download for iPhone - iFart.


So is iFart a unique phenomenon, or is this the norm?

As of today, the top Free apps on the AppStore are 5 games, 2 gimmicks (Lightsabre and Flashlight), and the Facebook client. Top paid apps? 6 games, gimmicks (PocketGuitar, Koi Pond, Face Melter) and an online radio client.

Merriam-Webster defines an application as "a program (as a word processor or a spreadsheet) that performs one of the major tasks for which a computer is used".

Games, gimmicks, iFart, "... the major tasks for which a computer is used." Is this what Apple had in mind?

If I was an iPhone cynic, I could have said "QED" and be done with it. But I guess I'm not. So what is going on here? How does this reflect the iPhone market? What does this mean for iPhone application developers?

First, there is nothing new here. Back in the late 90's, Palm software websites like palmgear.com and palmcentral.com (later renamed Handango) were initially dominated by similar applications - gimmicks (remember Mirror? or our own FanMate?) and games - including some great ones like Bejeweled and Vexed!.

Those sites were managed very similarly to the current AppStore - Top 50 Downloads. What this meant was that something that a gimmick that appeals to a lot of people and is viral, is free, and happens to come to the market early on - will rise to the top and remain there. Later, because the Top 50 Downloads chart prefers applications with a long history - it gets extremely hard to stand out, no matter how good your new application is. The "Top 50 Monthly" was a slight improvement, because if your widget was very good, it could outshine those "older" widgets.

But is this a good business eco-system? It's a system that prefers small, easy-to-understand gimmicks, that are priced at 0 or something close to it, over anything that is more complex or pricey - but has lasting value. Guess why all the top-seller iPhone apps are $0.99? What makes a Best-Selling iPhone App? - according to TIME , a best-selling iPhone app - is a $0.99 gimmick.

Is this good for the iPhone? Initially, probably it is. But over the longer term? I don't think many Light-sabre or iFart users are very excited about those apps a week or a month after they've downloaded them. And this type of experience wears off pretty quick - unless you're a teenager. Remember Facebook apps, not so long ago - the next big thing?

And in a parallel universe - we have WorldMate users who've been with us since 2000...

This goes back to the dilemma facing serious application developers when faced with the iPhone. On the one hand, it's obviously an extremely popular smartphone platform, whose users are indeed focused on downloading stuff to. On the other hand - it seems like the vast majority of them are downloading entertainment / personalization stuff, not "real" applications - Personal Productivity, Utilities, Business Apps etc. Furthermore the AppStore has a built-in preference for tiny little snippets of value (entertainment or otherwise) that will be consumed and forgotten, over more complex products that may cost more and appeal to less people, but will provide significant value over a long time. The App Store is a one-size-fit-all - comparing downloads, not volume of use, and units, not revenue.

So do we want to be a gourmet restaurant in a fast-food court? How do we market in such a marketplace?

I'd love to hear your suggestions!

- Nadav

Late addition:

Many interesting articles sprouting up. One of them - Financial Realities of the App Store