If this keeps up, content owners may forget the whole “on-deck vs. off-deck” argument. Instead, they’ll be trying to figure out which mobile application stores’ shelves they want to stock.
Google Inc. is the latest player in the app-store game, launching its Android Market last week for early adopters with the new G1 from T-Mobile USA Inc. The storefront launched with several dozen free applications – it won’t support paid offerings until early next year – such as MySpace Mobile, Namco’s Pac-Man and a song-identification program from Shazam.
The effort is loosely modeled on Apple Inc.’s App Store, of course, which launched a few months ago and last week delivered its 200 millionth download. Research In Motion Ltd. looks to be next into the space, unveiling plans last week to launch its own storefront in March, and Microsoft Corp. is said to be launching its Skymarket outlet next year.
Cash up for grabs
Each player is wooing developers with fistfuls of cash: Google is doling out $10 million as part of its Android developers challenge, Kleiner Perkins has created a $100 million iFund to entice coders to the iPhone, and RIM is dangling $150 million with its BlackBerry Partners Fund.
There are some important – if subtle – differences between the three distribution channels, however. Apple takes a 30% cut of App Store revenue, leaving developers with 70%, while RIM allows its partners to keep 80% of revenues. Google, meanwhile, is staying out of rev-share arrangements, allowing carriers and developers to cut their own deals. And Apple has aggressively managed its store, occasionally pulling controversial content, while Google – for now, at least – promises an unfettered marketplace where developers can easily upload any offering. (Google can leverage a “kill switch,” however, removing offerings remotely if it chooses to; RIM has yet to say whether it will manage its store.)
Pay to play
Payment mechanisms differ as well. While Android Market is likely to employ the old-fashioned carrier-billing model for its premium apps, iPhone users must download their goodies through the company’s iTunes service, requiring them to have an account. RIM is working with PayPal to allow users to purchase and access offerings over-the-air.
While third-party storefronts are nothing new to mobile – Handango, Handmark and others have long served smartphone users – the high-profile outlets are a threat to carriers in several ways, of course. Not only do they present another face to the consumer, they spur loyalty to a handset or operating system – not to the operator. In addition, the Apple and BlackBerry stores leave carriers out of the content-revenue loop entirely, handling everything from retailing to distribution to billing.
T-Mobile USA is hoping to mitigate those factors with its own storefront, effectively expanding its role as a mobile content deck to online storefront. But just how perilous the new players are is uncertain – at least for now. While smartphones are undeniably gaining market-share, the high-end devices accounted for only 19% of 2008 mobile phone sales in the United States through July, according to NPD Group.
And the app stores face other hurdles, as well. The rise of smartphone platforms has created a fragmented market where developers must choose which platform into which to pour resources and build applications. That fact was evidenced last week when Android debuted with several dozen offerings – about 550 fewer than the App Store launched with.
Perhaps most important, though, is the fact that none of the newcomers have any real experience as a retailer of mobile software. Apple’s user experience is highly regarded, of course, but the company is only beginning to learn the mobile-application world, and both Google and RIM have many lessons to learn in the nascent space. Which may give carriers wide-open opportunities to establish their own storefronts and continue to own their customers.
“We know this is all about the user experience and about the innovative marketing catalyst the iPhone represents for brands, retailers and content publishers,” JupiterResearch’s Thomas Husson wrote last week. “However, I think many things could be improved. What about the ability to sort apps by prices and other criteria (languages, size, launch date, number of reviews), preview of the apps, obtain more detailed descriptions. . Mobile merchandising is still in its early days.”