What's The Future Of Application Stores?

At the beginning of this year, we stated that application stores would continue to flourish, but none would replicate Apple's success in 2010. So far, it has been quite easy not to be proven wrong on this one. Android Market and, to a lesser extent, RIM's BlackBerry App World are growing fast in the US, while Nokia's OVI is performing quite well in some regions. Windows Marketplace is likely to benefit from end-of-year Windows 7 sales, while Samsung Apps are not yet really marketed, not to mention LG's efforts. The Wholesale Applications Community (the operators' alliance) has not yet launched. Global operators have yet to significantly launch their own multiplatform stores. Both approaches (the vertically integrated from handset manufacturers/OS players and the horizontal layer added by operators) are likely to continue to expand this year, making it even more complex for brands and companies launching their own applications. Many of them are starting to realize that there is a world outside of Apple's iPhone and that their app will be lost in a back catalog of more than 200,000 apps if they don't market it. They are starting to wonder how to break the Apple App Store ranking algorithm, how much to invest in the life cycle of their application, and which stores they should target to distribute their products and services. I see a couple of key issues that need to be tackled to seriously address this market opportunity:

  • Discovery, discovery, discovery. It is not always easy to find the app you are looking for. In the US, Google Search for mobile now includes mobile app results (see the announcement last week). Many improvements need to be made here, from tailored recommendation engines to social tools that make sure you share your apps with your friends.
  • Local, local, local. That's the missing part in most stores. It is still to difficult to find the app in your own language and in your own currency.
  • Payment, payment, payment. Whether by offering more payment options or by offering in-app payments, there is plenty of room for improvement. From BOKU and Zong to PayPal and operator billing, many players are active in this space. The more choice there is, the better it is for consumers.

From a developer/brand perspective, the challenge will increasingly be to provide the right marketing tools, to move away from Apple's "black box" syndrome. Indeed, many developers complain about Apple's lack of transparency, while many companies complain about the fact that they can't even find out the split between iPhone and iPod touch downloads. They want to have many more details about WHO they can reach via application stores and HOW consumers use their apps.

Lessons from the physical retailing space should also apply. A store is a store, and basic merchandizing rules will also start applying. Hopefully, we will know more about this tomorrow with Apple's conference and more details on iAd. There should be room for niche players, hypermarkets, and groceries! Many will fail, but plenty are considering tapping into the opportunity. That's also why I wouldn't be surprised to see many more stores opening up (just look at how many digital music stores there are and how many failed . . .). Some will rightly specialize by content categories (e.g., travel, health, sport . . .). 

In this regard, I find the launch of www.appcity.com particularly interesting. If you haven't heard of it, it's worth having a look. This French start-up (founded by Paul Ansellem, a mobile veteran) positions itself as a "universal market store" concept but also plans to launch different verticals in the near future. It aims at solving some of the issues mentioned above and aggregates content from the main stores. In addition, it offers a €5 fee per week to download as many applications as you want. Of course, you can't download more expensive navigation apps, but you can still download quite a few games . . .  After all, such a business model proved quite successful for a couple of mobile pioneers (Buongiorno, Zed) in the good old ring tone days).

What's your take on the future of applications and the future of application stores?

I am just starting some new research in this area, so if you want to discuss this topic, please comment below or reach out to me at thusson AT forrester DOT com