The app economy has officially arrived.
In 2009, app downloads worldwide totaled approximately 7 billion, and the outlook for 2010 is even better. Don’t break out the champagne just yet. The business models are unclear, the market is fragmented, and real success is linked inextricably to local and regional market conditions.
The hard truth: It’s not a single market, and one-size-fits-all app schemes won’t deliver. Will app stores be on-deck (operator-managed) or off-deck (direct-2-consumer)? Or will the prevailing model be paid apps or ad-supported apps? So many open questions and the answers are “all of the above” and everything in between.
Mobile application stores—destinations offering software and services across a range of handsets, portals, storefronts, and mobile websites—have been around since the late 1990s. However, the app frenzy that has accompanied the rise of the Apple Store marks an entirely new phase in the distribution and monetization of all things digital.
So far, Apple has been able to capture a large percentage of the mobile apps market from within its own walled garden. But “Sizing Up the Global Mobile Apps Market” (March 2010), a milestone report written by Chetan Sharma Consulting, points out that Apple’s success could be limited. The Apple App Store model, though popular in regions such as North America, does not dictate the direction this new market is headed.
In fact, the dynamics of the app market are shaping up to be quite different in different regions. As a rule, feature phones (not smartphones and iPhones) rule in Asia, and ad-funded content and apps are flourishing. In contrast, North America is not the region where people download the majority of apps, but it is the region where more apps are paid for.
Against this backdrop, app store providers and developers will need to develop much more than a me-too app storefront modeled on the Apple blueprint. To succeed, they will need to develop and embrace diverse business models and monetization approaches to reach and delight their target audience.
The good news: It’s well worth the effort. According to the report, overall mobile app downloads will increase from more than 7 billion in 2009 to almost 50 billion by 2012. The even better news: There’s a wealth of ways to market your app. The September 2010 “App Store Report,” a market overview published by the Wireless Industry Partnership (WIP), counts a whopping 94 app stores worldwide. From India’s SMS GupShup, which offers SMS-based apps, to AppCentral, where U.S.-based company Ondeego offers enterprise apps and services, it is clear that a “long tail” of app store offers and approaches is emerging.
Developers have lots of storefronts where they can sell their apps, but they also have to choose payment methods and mechanisms wisely. A singular focus on credit cards, for example, could exclude important customer segments such as digital youth, who may not have credit cards but who do have a huge appetite for apps.
Developers should also be aware of the increasing importance of in-app billing solutions that give them greater control over
the complete merchandizing experience. These solutions allow developers to sell content, virtual goods, add-ons, and updates from within the app using one-time payments or an ongoing subscription scheme.
However, it’s not just about clinching the first-time sale. App store providers and developers must think up new commercial models to encourage the all-important return purchase. Tego Interactive, a design and development company that advises brands and media companies on their long-term app strategies, tells me there are three rules to follow if companies want to be more than a one-hit wonder.
One, keep it fresh. It’s Content Publishing 101 again, but with a difference. News companies will likely not have a problem making that return sale since there is fresh content every day. However, companies that offergame apps and novelty content will have to think and try harder.
Two, think cross-platform. Since few developers have the resources to release an app for all the platforms, Brian Avery, Tego co-founder and business development director, advises developers to make their decision based on platform market penetration for their users and monetization models.
Three, focus on content discovery. The poor performance of search engines in indexing and exposing the abundance of mobile apps puts the burden of being found squarely on the shoulders
Finally, a rule that holds for all publishers everywhere: Harness in-app analytics and monitor discussions about your apps in social networks and feedback forums. You can only delight your customer if you know who they are and how they interact with your app.