How the iPhone App Store grows
As part of its iPhone 3.0 presentation Tuesday, Apple (AAPL) offered some new statistics on how the iPhone App Store is growing — including its first update since Jan. 16 of the number of App Store downloads.
It also introduced some features that could change the nature of the store — and not necessarily for the better.
According to Greg Joswiak, VP of iPhone marketing, users have now downloaded more than 800 million applications from the store — a 60% increase in two months. He also said that the number of apps available for download has passed 25,000, but we have no reason to disbelieve 148Apps, which keeps a running total and puts the count as of mid-day Wednesday at 28,408.
The two data points give us a chance to update the fever charts we first ran two months ago (see here). As you can see from the slope of the two curves, downloads are growing steadily and the number of apps is still accelerating.
At this point, the developers writing for the App Store — drawn to an installed base of 30 million iPhones and iPod touches — may be Apple's greatest competitive advantage over smartphones running Research in Motion's (RIMM) BlackBerry OS, Microsoft's (MSFT) Windows Mobile, Google's (GOOG) Android, Nokia's (NOK) Symbian or the new Palm (PALM) Pre OS, due out this summer.
Which may be why Apple gave the developers so much in the new SDK released on Tuesday. In addition to the sheer number of improvements — more than 1,000 new API (application programming interfaces) for them to play with — the developers were offered several modifications in the basic App Store business model that may be good for them but not necessarily good for Apple's customers.
The one that's getting the most attention is something Apple calls the "in-app transaction" — the ability to sell things to users within an application that has already been paid for. As Gizmodo's Adam Frucci writes in a post entitled Why iPhone In-App Transactions Could Be a Disaster: "It's great news if you're a developer looking to make more scratch, but it's potentially terrible news for users."
"Basically, this is opening the flood gates for nickel-and-diming microtransactions from the App Store," he writes. "Before, when you spent $5 on a game, you knew you were getting the whole game—with free upgrades. Now, you'll spend $5 on a game and you'll need to spend another $5 to unlock all the levels and weapons." (link)
Two examples of in-app transactions demoed by the game company ngmoco:) at the special event Tuesday did nothing to reassure us. In the first, children setting up puppy play dates are invited to buy stuff for their pets (cute hats, shiny collars) at $0.99 a pop. In the second, a player pinned down in a bloody first-person shooter can tilt the odds his way — and blow an opponent to smithereens — with a $0.99 rocket launcher.
"The worst part of it," writes Frucci, "is there will be enough people willing to pay a little here and a little there to support this kind of behavior. But I, for one, am out. Do not want."
This article is nuts. There is absolutely NO MONEY in iPhone app development for developers. NONE. Unless you live somewhere where making $10/hr is considered high living, this platform is a non-starter economically. Complaining that a new feature makes it easier for developers to suck more money out of users is completely off-base.
The App Store is an unequivocal win for iPhone users. Not (directly) for Apple, and certainly not for third-party developers.
To me as a developer, the incremental option solves a problem in how to present information to users. Rather than having 10 little icons floating around their iPhone, each representing a semi independent app, they can CHOOSE to add the information into ONE app, conveniently accessed. The fact that they pay for it at point of use rather than at point of "thinking about" using it at some point in the future, is a disadvantage to me as a developer since it defers income. But it simplifies life considerably for us both, from the standpoint of information presentation.
Once again you've focused on the negative in your article. How about something more balanced like, "While some reviewers question what might happen with in-app transactions, others were very enthusiastic about its potential (with a quote from someone on that side as well)." By the way, when I go to Fortune's site, there are always annoying ads for other products and services that I can click on. Guess what…I might even have to pay for some of them…if I so chose. Duh!!!
The chattering class has a fetishistic indulgence with smartphones bordering on techno-porn.
[...]
While analysts and competitors were busy making feature-level comparisons (of mostly hardware), Apple consolidated its platform lead and laid the foundations of a new growth engine the likes of which the mobile industry has neither yet seen nor fully comprehends.
[...]
While [the iPhone OS 3.0] garnered a collective yawn from the features-fetishists, barring a product introduction disaster, the iPhone OS 3.0 will do to iPhone-killers what it did do to iPod-killers half a decade ago. Apple consolidated its gains, marked its territory of 30M users+25K apps+800M downloads and built a very deep and wide moat around it. A moat so formidable that there’s not a single smartphone player capable of overcoming it.
[...]
By the end of 2009, we expect the virtuous cycle to kick in and the moat strategy to reveal just how difficult it will be to compete with Apple’s touch platform, thereby ushering in consolidation in the rest of the smartphone industry.
Your article missed another example of this from the demo. In "The SIMS" the demonstrator bought a stereo for his character to enjoy. In all the examples, the started with a menu of options to upgrade things within the already purchased app, then switched to premium content from the server.
I agree that these examples are setting a bad precedent and hope that others here are right in that reviews will help weed out the good from the bad. Overall I agree that an in app purchase model is useful (the book and guide use cases are particularly appealing) and I think it is better for Apple to make the API a general tool for in app purchase than it would be to build the API for specific models. I think it would be better for reader apps to be allowed to be free for the shell, then pay for the content, but I assume developers will be able to use the initial app purchase as a credit towards the first content purchase.
I am totally agree with this feature.
More dynamic AppStore. I you try to penalize your costumer you lose, for sure. But if you try to play a win win game [or Nash Equilibrium] you win and your customer too. Imagine to guys playing the same game. Both have same version. But, somehow the developer push and extra feature for $.10. Both players wants this feature [both want win] and with equal opportunity both bought this extra. More exiting game, more challenge for a cheap cost. Then, the smart developer gain and extra. win- win. Great one, Apple.
The reviews will take care of developers who try to squeeze too much out of their users.
Developers will have to decide carefully what to include in the base app cost (or even the free version) and what to make optional. This allows developers to also have a version at $.99 (instead of free) to entice people to try, and if they like it, buy the full game right then and there.
Nonsense. The App Store is one shining example of capitalism at its best. If developer A makes opts for tiered pricing, there will be tons of other (and probably younger/hungrier) developers who will NOT tier their app. Assuming the alternatives address the same market need, competition will quickly rectify the situation. Developer A will have to peddle his product over at the Windows Mobile Store, where tiered pricing is an accepted way of life.
We live in a land of whiners.
Wow – that's just awful. I mean, these apps are already dirt cheap, and if some developer wants to innovate with an application that encourages users to purchase paid "upgrades" – so what!
Yes, it's the users going crazy over all the apps that has made the App Store a runaway success. However, if the developers can't make some profit from it, there won't be apps.
Also, I love content packs like buying individual e-books from within a consoldiated app (all of the ebook apps just add clutter to the store, anyway, and artificially boost the app counts) or even location-based packs like city tour guides, or additional languages for learning to be multi-lingual.
I don't think it's all about nickel and diming. I think it's about having an easy user experience to make buying the content and functionality you want drop-dead simple.
That's the trouble with so many other smartphone platforms – the amount of work required of the user to make a purchase is just rediculous! So I have to give you money – and I get to go through this headache?!?!? What a deal!
hey phil. you have the choice to supersize your fries and coke too!!
ex ped: See here.
I agree with Dave Small and other readers who think that multi-tiered pricing will open new opportunities, some of which we (or even Apple!) haven't thought about.
For those who view this negatively: you still have the freedom not buy an app (or its upgrades) if you don't want to. Personally, I would rather purchase additional content from the current app instead of going through the "download our Premium version for $4.99 for more features". Even just in terms of bandwidth it does not make sense to download the same app with different content.
Finally, I am sure that some developers will try to abuse the system and offer you, e.g., extra advantage in games for extra price. However, with the built-in feedback system those apps will have lower reviews if users complain, so it's not a problem!
Allowing more flexibility – for buyers and sellers alike – is always a good idea. Stifling flexibility most often is not. By the same token, there would not be an eBay if buyers and sellers could not make their individual decisions.
Also, notice how Apple is ready to allow tiered pricing in the App store even while it has been reluctant to do so in the iTunes Music store. I think they've done some due diligence in market research and realized that the 2 markets are quite different.
If too many buyers of games and other apps find they have to pony up to play on, I'm sure the reviews will take care of everything.
Phil I thought this was a for profit company? Help me out here I'm confused? You're a business writer correct? Yoou get apid because I click on your site, then I may click on an ad and buy something? What am I missing here Phil?
I think the biggest news is the 1,000 new APIs. Whole new classes of applications can now be written. Watch for those graphs to keep shooting up at an incredible rate. Watch for a lot of new hardware accessories too.
From the perspective of RIM, Microsoft, and Nokia, the bar has been raised so very high. it's up, up, and away! Game, set, and match to Apple.
The new purchase within apps ability will generate even more money for Apple. They'll be getting their 30% on a lot of content.
The more I think about it I keep coming up with examples of how this will work out and how smart it is for Apple.
Here are a couple examples that come to mind.
Michelin publishes the red book guides for Europe which are the last word on restaurant and hotel recommendations. They have an army of reviewers and the reviews are highly reliable. We have restaurant reviews over here but nothing you can really rely on.
So Michelin put the guide to Europe on the app store for $19.99. That's a big purchase from the app store and you'd be buying all the countries rather than just those you plan to visit. Now they can break out individual countries and sell the chapters within the guide application. They'll sell many many more copies that way and I think generate more $$
There are many other travel books that you can buy at Barnes and Noble for $20 or 30 with titles like "France" or "Italy". You buy the whole book despite the fact that your vacation is only to the French and Italian Rivieras which adjoin. So now instead of buying two books for perhaps $40 that you have to pack in your suitcase, You just get the Frommer's App for Europe for a couple bucks and then the app sells you the two chapters you need on the Riviera's. Much more appealing way to buy travel info.
How many other book categories are there where a similar model would apply? It's the same sort of thing that happened with iTunes. The big deal is the ability to buy the individual songs you really want rather than being forced to buy entire CDs
Personally I think that the in-app purchases can be a good thing. However, Apple better make sure that the purchases have to be confirmed by the user prior to the purchase going through. Additionally, there better be a way for parents to limit purchase activity on their children's phones.
I don't have an iPhone, so I don't know how the App Store handles this now, but I am sure Apple is on top of the issue.
"… a player pinned down in a bloody first-person shooter can tilt the odds his way — and blow an opponent to smithereens — with a $0.99 rocket launcher."
Oh great. So money is power, just like in the real world.
I do not know why people are creating so much negative energy at Apple for their API allowing in-game transactions. Exposing an API is not the same as forcing software developers to use it. Rather, it allows more functionality only. Imagine being able to buy directly from ebay using your itunes account, or renew a podcast subscription in the application itself. If a game developer uses the feature to allow users to create a bidding war for victory, then just don't buy the game. If enough people don't buy the game, no one will use the feature like that again. Just don't blame Apple for allowing flexibility!
Wow. So a brand new market niche is opened up and the first thing you dudes do is shoot it down – because YOU wouldn't want to pay the bucks!
How positively uncapitalistic of you….
This article is nuts. There is absolutely NO MONEY in iPhone app development for developers. NONE. Unless you live somewhere where making $10/hr is considered high living, this platform is a non-starter economically. Complaining that a new feature makes it easier for developers to suck more money out of users is completely off-base.
The App Store is an unequivocal win for iPhone users. Not (directly) for Apple, and certainly not for third-party developers.