The App Internet: What It Means For Tablet Product Strategists

My colleague John McCarthy just published an excellent report sizing the "App Internet," a phenomenon Forrester defines as "specialized local apps running in conjunction with cloud-based services" across smartphones, tablets, and other devices. Tablet devices alone will generate $8.1 billion in global app sales in 2015, up from $300 million in 2010. This is a huge number, but as the report explains, it's only a fraction of the total spend on apps when you factor in the cost to develop the apps and reinvent the processes behind the apps. This is no surprise to companies like News Corp., which will have spent $30 million through June 30 on "The Daily" iPad app. That $30 million included major process reinvention such as building an entirely new content management system to handle the all-digital production of The Daily's newsroom.

I recommend that product strategists developing experiences for tablets read John's report. Some key takeaways:

  • Apps are a source of dynamism and innovation for tablets. What we've seen with tablets is that even on the iPad, consumers report spending more time using browsers than using apps, but apps are an important part of the experience. iPad owners in Forrester's January 2011 consumer survey report downloading, on average, 20 apps for their iPads since getting the device, and spending an average of $34 on tablet apps. 
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Apple's Policy Harms Subscription Providers Today, Apple Tomorrow

 

Yesterday Apple announced its intention to tighten its hold on the payment for and the delivery of content through its successful iTunes platform. (I’ll leave off the I-told-you-so; oops, too late.) Apple will require that all content experiences that can be paid for in an Apple app must be purchasable inside the app, with Apple collecting its 30% fee. The app can no longer direct you to a browser or some other means for completing a transaction. Crucially, the in-app purchase offer must be extended at the same price as the same offer made elsewhere. Though the announcement of the subscription model was the triggering event, the policy extends to all paid content.

I do not believe this is where Apple will stop – I personally expect them to eventually deny the delivery of content paid for outside of the app without some kind of convenience charge. But my personal expectations are irrelevant here, because what Apple has done already is sufficient to make providers of content aggressively invest in alternative means to reach the market.

Subscription content services are the lifeblood of the content economy. A full 63% of the money consumers spend on content of all types comes through a renewable subscription (I’ll be publishing this data from a survey of 4,000 US online adults as part of a bigger analysis next month, hang tight). Most of that subscription revenue goes to pay-TV providers, but 17% of it goes to newspaper and magazine publishers, including their online or app content experiences.

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