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Following the Leader Who Follows the Leaders

Written by: Andy Marken

Article Overview: It started out -- as most things do in the PC/CE/communications industry -- as a "little" idea...an application store on a corner of the virtual cloud world. Suddenly you can't make your way around the web without bumping into another one. No one at Apple will say but people speculate the company has racked up $45 million with their virtual store front. Now new smartphones are coming out, every app store offers something.

Following the Leader Who Follows the Leaders

Guess when you have $56 billion and change in the vault in today's economic environment you must be doing something right. Just wish our kids would quit contributing to the stash Apple is using to buy GPU (graphics processor unit) technology and game designer talent.

A few years ago Apple decided all smartphones sucked (they're not too hot on netbooks either).

So they announced the step up from the iPod (they didn't like those other MP3 players!)...the iPhone.

Changing the Game

Then they did something really dumb...gave AT&T a two-year exclusive on the phone.

They decided ecommerce was no longer cool and that iCommerce is so much better.

Goes well with:

- iTunes

- iPod

- iPhone

- iMovies

- iStore

- iApps

Instead of keeping a closed ecosystem as they did with the Mac, they encouraged others to make products they would sell in their store.

Sure it's Apple which means:

- works on their devices (iPhone and iPod Touch), their way

- works in their closed environment

- sold only in their store

It also means:

- you use their SDK (software development kit) but heck it only costs $99

- they determine which apps fly and which don't make the cut (sure fire rejection is something that competes with their stuff!)

- you agree to the 70/30 split (70% for you, 30% for them - seems retail fair)

Cripes it seems to works!

Mega Store

The iPhone apps store looks like a Wal-Mart mega store.

The store has been open less than a year, product is stacked to the rafters, people are mobbing the aisles.

They've got 30,000 (give or take a few thousand) apps to choose from.

Some free...some $1-$5...some $20-$30...some heftier ones for businesses.

In less than a year they recorded some kid making the billionth download.

That's:

- 3.5 million downloads a day

- Average of 33 apps per device

That's an attach rate any company would kill for!

Suddenly they don't look that stupid!

Carriers and other "interested" parties seem to agree.

Little apps stores are popping up all over the iNet.

Google, Microsoft, Nokia, RIM (Research in Motion - Blackberry), all the carriers.

Who did we miss?

Oh yeah...Palm will eventually introduce its Pre counterpunch with powerhouse Sprint.

While everyone else has their app store shelves well stocked visiting Palm's store is...depressing.

Looks a little like a grocery stores in St. Petersburg Russia in WWII...

We can see why OS folks want an app store.

The more apps on the shelves the more device manufacturers they attract, the better they look to carriers, the more app developers they attract and the popularity courting continues.

But carriers?

Dialing for Dollars

Selling apps won't really impact their bottomlines.

Lots of the apps are freebies, most sales are $1-$5, they only get 20 or 30% out of the sales.

The developers drink from the same cup.

They'll jump on the iTunes bullet train with their neat app.

The power of Apple will sell their music program, video games, direction/people finder, weather tracking, restaurant/store finding friends tracking (stalking), whatever app and they'll instantly get rich.

Assuming people can figure out how good your thingy is and how much he/she needs it - awful tough without good articles/reviews -- the apps dude/dudette will make a whole 70 percent on each of those $1-$5 sales.

But for carriers it's all about selling more connection time, more bandwidth.

Their bucks come from:

- your data communications over their pipes

- making sure you stream music, TV, video to your third screen.

- connecting you with other gamers, friends.

The carrier sells you airtime for days, weeks, months, years on end.

Someone needs to ask the carriers almost the same question Beth asked Derek, "She was naked in your hotel room?"

Then quickly add what Derek told Sharon, "You need help."

It's the money play folks!

Our kids are like the millions of other iPhone, iPod Touch users around the globe.

They love muddling through the Apple iTunes app store ...just to see what's new, what's hot, what's fun, what's available.

Too bad there aren't any aisle (category) signs or sampling stations along the way.

Since there isn't, they see something they think they'll like and BAM !!! easily download from iTunes (we get billed).

Then they suck up more minutes from AT&T!

Sure Google, MS, Nokia and Blackberry are adding apps as fast as they can but it's just way too easy for folks to buy from iTunes.

Our son - who has an "I can make it better" mind - was thinking about some apps that he knows people are eagerly waiting to buy.

He coughed up the $99 for Apple's SDK.

Next Round

He got real excited when Apple announced the iPhone OS 3.0 SDK...100 new visual features, 1,000 new APIs (Application Programmer Interface), the thinly veiled promise of doing stuff that would run beautifully on three screens - TV, computer, iPhone.

That got his mind racing.

All we saw with the new developer's kit was that Apple had raised the bar again with their closed environment. That means:

- people will develop more, richer, more intensive, more intrusive apps for Apple to sell so they dig their hooks even deeper into those poor Kool-Aid drinking folks

- more people will get excited about buying/using/playing with the iPhone and Apple might - just might - become the #1 smartphone producer (something they totally ****ed up with the all-inclusive Mac)

- AT&T will sell more 2-year contracts, more on-air minutes

Sure Apple may do an iPhone Lite for Verizon (huge whisper campaign going on) but who wants lite when you can have a real iPhone?

And an overly stuffed/easy to use iTunes store.

Lite just doesn't seem to have the panache!

Suddenly a smartphone is so much more than an e-wallet (iWallet).

Really smart kids, doodling program developers and idea folks see their road to riches!

First they'll supplement their income making fun, neat, useful, relaxing, whatever apps.

Then they'll rent Steve's grounded jet.

The mobile apps market may reach $214 billion by 2014 but it's a market made up of tens of thousands of inexpensive apps developed by thousands of people.

Herding Cats

It doesn't have the formula to appeal to VCs.

It's tough for them to sell these "businesses" to the public or some other company so they can rack up a huge return.

It's too much like herding cats.

But that's ok.

Can't wait for the kid to release his iPhone apps and starts collecting the dimes and quarters.

Then he plans to modify them for Android, Windows Mobile...maybe even BlackBerry.

If we're lucky he may be able to replenish our devastated 401K.

Apple may have gotten it right this time.

Key question is how quickly, how comprehensively, how successfully will the other players - Google, MS, RIM, Nokia/Symbian -- get their acts together.

A lot of bosses are probably hollering at their teams saying exactly what Beth said to Derek..."You better do something about this woman, or I will!"

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Article Tags: aisles, billionth, br 3, economic environment, ecosystem, game designer, graphics processor, icommerce, imovies, iphone, iphone apps, mega store, netbooks, processor unit, rafters, sdk software, smartphones, software development kit, unit technology, wal mart



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