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Posted by Thomas Husson on July 26, 2010
Apple reinvented the distribution of products and services on mobile phones, opening up direct-to-consumer opportunities for nontelecom companies. The numbers look impressive — more than 5 billion downloads and $1 billion paid to developers in the two years since the launch of the Apple App Store.
However, it also generated $429 million for Apple itself in two years. These revenues are not meaningful to Apple’s core revenues. Due to the limited number of paid apps and their significant concentration among games and navigation apps, it is likely that a significant number of independent developers have not recouped their investments via the current revenue-sharing model. The recent launch of iAd is a way for Apple to maintain the attractiveness of its platform, allowing third parties that provide free apps to develop sustainable business models.
But, despite all the hype around apps, only a minority of consumers download them monthly. A recent Forrester survey of more than 25,000 European adults shows that only 4% of all mobile users and 15% of smartphone users report downloading apps at least once per month. However, the fact that 21% of all European mobile users consider apps to be an important feature when choosing a new mobile handset highlights the large gap between today’s limited usage of apps and consumer awareness and interest.
The application store market is still nascent, but it is evolving quickly. However, in the longer run, few players will be able to address the key factors that will make them a success:
What does that mean for your consumers? Well — not much. The subtle differences between widgets, Web apps, native apps, Java apps, and optimized mobile Web sites don’t make much sense to your end users. As long as they have an icon that acts as a touchpoint to access content and services that are relevant to them, it won’t matter. The challenge for you is to make sure that your core target audience has your icon on their home screen, so that they engage with your company and not your competition.
Before succumbing to application hype and increasing costs by porting their services to many platforms, you need to define your mobile road map. This means defining a mobile business model, anticipating technology evolution, and taking a step back before putting all your eggs in the downloadable app basket. My new report on The Future Of Application Stores (available to Forrester clients here) discusses these issues and more, and provides actionable advice for consumer product strategy professionals who are working on their company’s mobile road map. What challenges have you encountered in working with app stores or in developing apps? I’d love to hear your experiences.