Apple prepares to reset the bar in the mobile app market
Apple's plan to allow developers to add in-app payments to applications sold through its iPhone App Store could be the next game-changing step the company takes as it charges ahead in the mobile market.
Apple announced the new feature at the iPhone OS 3.0 preview event in March. And next week at the Worldwide Developers Conference in San Francisco the company is expected to announce the release dates for the software upgrade.
While in-app commerce is only one of several new enhancements to Apple's iPhone operating system, it may be the most significant. The reason is very simple. By allowing transactions to be completed within applications, Apple is changing the economics of the mobile application market and providing developers more opportunity to make money from their applications.
And if executed well, Apple could leave its smartphone competitors in the dust.
"My sense is that this will lead to Apple increasing their lead in the market even more," said Bart Decrem, CEO of Tapulous, a small developer that creates applications and games exclusively for the iPhone. "It will be a tremendous challenge for Apple's competitors that are trying to build their own application stores to get traction with developers, because we're in no rush to work on other platforms."
There's no question that the App Store has been a huge success. Apple announced its billionth application download only nine months after the store launched. But for developers the financial rewards have been mixed. There have been some paid applications that have sold well and generated hundreds of thousands of dollars in revenue, but most developers have barely broken even.
Today most of the applications downloaded from the App Store are free. And of the ones that are actually sold, the majority sell for 99 cents a pop.
"The challenge is that it's hard to sell stuff for more than a dollar," Decrem said. "And it's really hard to make a lot of money that way, especially when the majority of the downloads from the App Store are offered for free."
The ability to add in-app purchasing should provide a greater opportunity for developers to generate some cash. As a result, developers may be likely to spend more time, money, and effort developing applications for the iPhone rather than other smartphones, such as the Android devices or Windows Mobile devices.
Electronic Arts, one of the biggest game publishers in the world, also sees big opportunities as result of the in-app commerce function. EA sells many of its games for the iPhone at premium prices around $9.99 and higher. And Adam Sussman, vice president of worldwide publishing for the game developer, said the company is already making plenty of money from the App Store. But the new in-app commerce capability could allow the company to lower the entry price of a game to expand its audience by allowing it to monetize more elements of the game.
For example, in the game Command & Conquer, EA could sell additional maps to play the game for 99 cents. Or it could offer character enhancements in role-playing games or a more sophisticated weapon to help players advance more quickly to the next level of the game. Another possibility is offering digital goods. For example, within the Sims game, players could pay 99 cents or more for clothing or other items to decorate their virtual home.
"Our belief is that the paid apps in the App Store will move away from a single download model," said Adam Sussman, vice president of worldwide publishing for EA. "The new model will involve these micro-transactions that can broaden the installed base of users and can extend the life of a particular game or application."
Software sells
One lesson that has been very clear as a result of the runaway success of the App Store is that software and applications matter just as much as sleek design and cool hardware.
Apple's smartphone competitors appear to have caught onto this lesson as evidenced by the copycat application storefronts from companies, such as Research In Motion, Nokia, Google, and Microsoft.
Apple was not the first company to offer downloadable applications for cell phones. But it was the first company to make discovering, downloading, and paying for applications easy for consumers. These were things that previous "storefronts" from mobile carriers or other third-party sources of applications were lacking.
As a result, the market for mobile applications never fully lived up to developers' expectations.
"Discoverability has always been really tough on traditional cell phones," Sussman said. "It hasn't been consumer friendly."
Apple has changed this. The App Store uses a well-established ecommerce platform, iTunes, to bill customers, which has helped make downloading and paying for applications as easy as purchasing and downloading a song. By contrast, Apple's competitors have had to build their own mechanism for discovering and paying for new applications from scratch. And as a result, virtual storefronts, such as Google's Android marketplace, have been slow to get off the ground.
"With the Android market, I think we are still waiting for the market to arrive," Sussman said. "While the platform has been released, there isn't a lot of momentum yet."
Newer smartphones, such as the one Palm is developing for the Pre, don't even have a real marketplace established yet. The Pre, which goes on sale on Sprint Nextel's network on Saturday, will launch with only about a dozen applications. Sprint CEO Dan Hesse said this is to be expected considering that the phone is just now launching. And he said he expects developers to ramp up work on new applications after the launch.
But given the established customer base of the iPhone, the fact that Apple will likely introduce new products into the iPhone family, and the added opportunities to make more money through the in-app commerce capability, it may be difficult to convince developers to spend resources on the platforms such as the Pre.
"We've told our investors that we are open to developing applications for other smartphones," Tapulous CEO Decrem said. "But right now I don't see any reason to move beyond developing for the App Store. In fact, I see us increasingly putting all our eggs in the App Store basket."
Marguerite Reardon has been a CNET News reporter since 2004, covering cell phone services, broadband, citywide Wi-Fi, the Net neutrality debate, as well as the ongoing consolidation of the phone companies. E-mail Maggie. 
It's amazing that people can't figure out that crApple's biggest announcemnt has always been that they have no announcement.
Now lets gear up and watch them go on stage and parade more obsololete, already-existing, over priced "gadgets" that "they invented".
[CNET editor's note: Personal attack deleted.]
"Thousands of developers care and millions of end users, too"
[CNET editors' note: Personal attack deleted.]
They are a nightmare! not to mention penny pinchers that think anything that touches their products, they deserve a percentage of!
It can do some great things, but only one application at once, so many are bubblegum applications that barely do anything, they seriously are worth the 1-10 dollars they are selling for. No more!
While the other mobile OSes are there have great SDKs that are not locked and they could care less if/when/how you put your app on any device.
So yes the appropriate question is who cares!
And appropriate answer is: not many (except some naive apple fans).
Copy & Paste after 2 years, no true multi-tasking.
Apple gouged the Market with a very impressive Market Changing Device 2 years ago.
The 3G update was a pathetic update. AT&T is horrible in my market
The Pre & Android are the FUTURE of the OS Market.
Steve, just incase you do come back (and that would be bad for Apple).
Lose the Turtle Neck. It's creepy and reminds me of Michael Jackson with his "TradeMark" Gloves.
You destroyed a historic building to get your dream home.
Name it Stevie Land like Michael. It's very fitting for another arrogant SOB that has passed his time.
Steve, this time "Don't think Different" Catch up with the rest of the MOBILE PLATFORM then do what Bill Gates did.
Give it up to the next Generation.
Donate your 2,000 black turtle necks to charity (that would be new).
"Copy & Paste after 2 years, no true multi-tasking."
Yeah just like the Newton that was around before Palm even copied it for their Pilot.
lol@slapppy "the newton" what a very very sad failure that was.
It was actually quite useful until Windows CE came on the scene and decimated them.
Newton was also written in C++ which allowed for tons of apps to be written to it loyalty free.
I think it's going to lead to a backlash of customers crying "Rip off!" if the developers are not very mindful of the existing expectations.
No one "forced" people to buy homes they couldn't afford.
People are free to choose and show restraint based on there own finances.
Take this situation. You buy a game and you reach a certain level. Then in order to move to the next level you have to purchase it. Now what if the developer doesn't tell you this when advertising the game? You invested in this game and you want to see it all the way through but you get stuck. More than likely you will pay for the extra level.
I found that line humorous. Apple already executed it's App store well and left it's competitors in the dust. At what point did they catch up? Sure, some nice App stores have come out, but nothing even close to the popularity and runaway success of the App Store for the iPhone and iPod Touch. I think the greatest reason for the success of the App store is the fact that you can download the Apps on an iPod Touch or iPhone which effectively triples their market value. Apple economics make it a powerhouse in that area. At any rate, doesn't the competition have some catching up to do before they can even be in Apple's dust?
Disclaimer: I am only referring to the App store in this statement, not Apple's numerous other products and competitors.
1) You're arguing semantics. Calling it a Smartphone or not calling it one doesn't change what it is. Just like if I call you a muffin doesn't make you one. ;)
2) You'll notice that in my comment I never once called the iPhone a smartphone. In fact, I didn't even use the word smartphone except when quoting the original article.
3) This wasn't about the iPhone; it was about the App store.
Security on the iPhone is orders of magnitude better than the security on Windows or Palm based systems. Code will not run on an iPhone unless it is signed with a key from Apple and a key from your own phone. Even if someone breaks Apples private key, they can't get malware to run on an iPhone unless they also have the private key of that phone. The iPhone also has very good sandboxing.
The only bad decision Apple has made for the iPhone is to start allowing blue tooth networking.
For security reasons I will not let any Windows devices or Palm/Blackberry phones to run on any of my networks.
You gotta feel sorry for Palm. They have done a brilliant catch up job but in a couple of weeks Apple will have done enough to make it hard for consumers to want to change to a Palm device as a new lot of iPhone and App Store mania overtakes buyers eyes and minds. Palm and others might try to emulate the App Store but none of them have 5+ years experience with iTunes that Apple and its customers now have and which makes Apple's job so much easier.
Most people who buy digital music files online are already using iTunes. There is nothing easier when already there browsing to nip over to the App section and check out the goodies. This includes many who are being tempted to buy their first smartphone. To look at competing App Stores requires the effort of Googling then exploring an unfamiliar site which far fewer will do. If I were a betting man I would put plenty on Apple to extend its lead here.
There is a lot of logic in Apple focussing on the Apps and the App experience.
For most people that arent retardedly herded sheep, Apple hasnt caught up at all except for interface.
Multitasking is built-in, it is a matter of allowing it. There is no design to "figure out". Apple made that choice to conserve battery power and likely, for security as well. For now, I think people will tolerate it. Eventually, hardware will catch up and the software can simply open the "multi-task" spigot.
As for the Pre's multi-tasking method, did you know that the OS actually warns you when there are too many processes running? This means a multi-tasking approach that requires end user involvement. Some people can live with this, some people cannot and we will see how this works.
When Steve tells you the rest of the phone market is multi-tasking and it's OK for you to get it on your phone with a piece of Fruit on it you'll say see... Steve says it's OK baaah, baaah, baaah.
Steve is calling the Sheep heard into the barn to get COPY & PASTE on Monday. Steve said it was OK after 2 years.
Can you say RAZR of the past...
It would be nice if you could choose to turn on iPhone wide multitasking and sacrifice battery life if you wanted to, but something tells me that if you chose to turn it off, many apps wouldn't work right anymore, and then what?
It's going to take faster processors consuming less power to make it work like Apple wants.
Battery is slightly usable now on the Pre.
Thats because there are no apps to load up. Just wait till you load 100+ apps on that thing once apps are created. If the SDK ever gets out.
You'll have to carry 5 batteries and each one will last about 30 minutes.
I suspect people who buy games will resent being nickeled and dimed for new features that should have shipped with the original. The real money may lie in selling new content for applications: books, movies, music, magazine subscriptions, corporate white papers and the like. A good iPhone ebook app that could be customized to buy from one or multiple stores of any size, could prevent the ebook market from being dominated by Amazon or Google.
And the clear link to a user and device could let ebook stores develop 'in the cloud" storage. Once I buy a book, it'll be nice to know it will always be there for me. I can install it on my iPhone, read it, erase it to leave room for another book, and later reload it on that iPhone, a new iPhone or even a laptop, all without hassling with DRM. Ebooks won't be solidly established until buying one is as real as buying a paper copy.
Why is Apple being applauded simply for showing up? Why are people accepting iPhone limitations? People would have been outraged if the first version of the Storm didn't offer copy and paste.
The Pre does everything an entry level smart phone should do, and that's offering the basic functionality current smart phones offer.
You lose a lot of credibility when you over-exaggerate. 3 hours? I couldn't get my iPhone to die that fast if I tried. I never turn off 3G, ever and I've talked on it for much longer than three hours and I'm constantly playing with the Apps. I haven't had any problems with AT&T's network. I'll admit that some people have and that's a regional thing, but that's more than you did. My biggest complaint about the battery is that it only lasts about a day and a half, where I would prefer if it lasted 1 day or 2 days even.
People WERE outraged when the first version of the iPhone and the second version didn't offer copy and paste. You could probably find billions of people ranting about it since the iPhone was announced.
The weirdest thing is, your comment had nothing to do with the OP. Were you just trying to get on page one and so replied to a random comment?
It's amazing that people can't figure out that crApple's biggest announcemnt has always been that they have no announcement.
Now lets gear up and watch them go on stage parade more obsololete, already-existing, over priced "gadgets" that "they invented".
Meanwhile, Dell sold 12 Billion $ in product last quarter, but only made 250 Million in profit (that's 2% profit in case you didn't know). Clearly, they are the leaders of the PC industry.
Restaurant owners get upset that the credit card companies get 4% of their transactions!
***?
I want to use a device that gives the device maker absolutely nothing if I use it to make a payment. That's what I have right now for my desktop PC. That's what I want for my handheld device, too.
Copy/paste of your earlier reply to @cb3431 ? Atleast change something to look original when you reply to some comment.
Apple runs the server, provides 24/7 back-up and support, handles the financial transactions, creates, updates, supports and maintains the store front (AppStore) and of course, tons of marketing prowess. For all that, Apple deserves nothing?
Is this ignorance? Or is this just meaningless hot air?
Apple runs the server, provides 24/7 back-up and support, handles the financial transactions, creates, updates, supports and maintains the store front (AppStore) and of course, tons of marketing prowess. For all that, Apple deserves nothing?
Is this ignorance? Or is this just meaningless hot air?
No, it's called trying to RAPE a good thing. It's already been proven "Apple Loses Money on the APP Store, Even after 1billion apps downloded
They are trying to now cash in on developers RAPING the end user to download XX widget for another 99 cents.
The price for an App on the App store is 99 cents or FREE. Both are a Rip Off for the 99.99999% of the crap in the app Store.
The should rename it "CRAPPLE STORE" I already have 9,000 flash lights and apps that fart.
Apple is gaming and crap Apps.
Give the users a FRICKING SECURE BUSINESS PHONE AND AN APP THAT I CAN USE FOR BUSINESS".
You have seen the small business ad, using the iphone to process credit cards. The next step will be to turn the iPhone into a credit card. With blue tooth, wireless, and phone, there are lots of ways to authenticate identity and communicate micropayments.
It already exists in Japan."
And South Korea as well.
If this were any other company, I think they wouldn't be considered "game-changing" but it would be looked at with a wary eyes. This could completely destroy the experience, especially now that Apple said it's going to relax its censorship.
I'm not saying its going to happen, but this "game-changing" and "innovative" feature has the potential to completely ruin it for the user. And unfortunately, there will be users that care and users that don't get it. I suspect it'll ruin the experience for the user, but no other phones will gain traction because it'll still be "ok."
::sigh:: Why does everybody love Apple so much? They're practices are on par with Microsoft (and worse in some cases). I wish the Palm Pre success as I hope to have that when it decides to go to Verizon (i'd drop my iphone 3g for a pre, but not on a sprint network... i desperately miss verizon. also to note, my service *did* degrade when i went from a simple at&t phone to the iphone 3g. guys... the phone isn't perfect).
Developers would not be allowed to charge for additional purchases within a free app, so the situation of downloading a free app that is useless without paying for upgrades would be no different than it is right now.
By the way I think micropayments will be great since they'll offer developers a reason to create new levels and new maps for already existing products. Imagine an RPG game that finishes up and for five bucks more you get another two days worth of dungeons?
Palm stock is tanking today. Down more than 10 percent. As a Palm investor, this is perfectly predictable and playing right into my hands. The Apple sheep will ramp up today because it's Apple Day. Palm's stock is tanking on news of Apple now ALLOWING (Oh thank you, great Steven) developers to cash in on their own software.
But look at the big picture. Palm is going to have Flash by end of year. Palm has multi-tasking and a replaceable battery. With Flash, Palm will get 1 million salivating Artist / Developers which no software community can rival in creativity and productivity when it comes to User Interfaces.
Game over - until the rest catch up.
Take EA. While a 99 cent game may entice me and 99 cents extra content might be nice, I don't want an EA account along with 200 other "micro" accounts to do this kind of thing with. I can't track my passwords as it is and the more accounts that slurp up my credit card info the more risk I run of identity theft.
For me, they need to improve it as a communication device. Most of my calls go straight to voice mail, most of the ones I make are dropped .....
Until that improves, who cares that they're allowing micro payments?
1. You are an iPhone user?
2. Most of your incoming calls go to voice mail.
3. Most of your outgoing calls get dropped.
So where do you live that you have such poor AT&T coverage, what city and state, or township/county as the case may be?
I say to each their own. I don't get why people feel the need to bash a product just because it's doing well. If you don't like it, don't get one.
So is this like the episodic content that you can already get through Nokia's N-Gage or what?
Americans, eh? Utterly clueless.
Oh no, yes, Nokia is losing market share! They have the Ovi, an AppStore imitation? Hmmmm... the Finns! Why would they want to imitate the Americans, eh?
As for Americans being totally clueless, while I agree with you for the average person, it clearly is not the case when it comes to business: http://en.wikipedia.org/wiki/Gross_domestic_product
why else would they launch a App store of their own ?
Look like you Europeans will always remain clueless about software !
- by contradel June 6, 2009 1:02 PM PDT
- The app-store is so filled with crap it's unbelievable, often there isn't a free version to try, and if there is, the functions you want to test out isn't even there. So in the end you bought some crap, with functions that doesn't work, maybe it suffers from instability or compatability issues and whatnot. Waist of money.
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- by Perry_Clease June 6, 2009 2:01 PM PDT
- "The app-store is so filled with crap it's unbelievable,"
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Showing 1 of 2 pages (83 Comments)Let the apps that doesn't get downloaded die out, DIE OUT, delete anything under and at the level as "bubblepop" (or what the..). Give (the real) developers the opportunity show their worth, not being overshadowed by useless apps. Make it a requirement, that the costumers would at least be able to tryout the app for 1 day, before buying it, the developers could add more days, if they found it necessary. I'm pretty sure this would also reduce the need to make a free version of everything, with limited functions, which in the end, will affect the innovative, creative and well designed apps, cause people would actually BUY THAT, instead of getting dissapointed so often when shopping in the store.
Also many ppl jailbreak their iPod/iPhone just to try out the apps, then they buy it if they like it and to get updates.
Seriously, in-app buys are in a way frightening, like you buy an app, but to use the functions within you have to buy those aswell. Sims 3 is a good example, iv'e alrdy spent my $$$ on that, why wouldn't i get new updates for free, instead of couches and stuff for extra dollars -.-
Projection