Tag Archives: app store

App stores set to dominate future software sales?

Following the success of the iPhone app store (over 6 billion downloads to date), app stores are becoming more and more of a feature of the software landscape. In case you missed it, Apple announced yesterday that there will be an App Store for MacsĀ  ‘within 90 days’. In summary:

  • The Mac app store will be tightly integrated with Mac OS X, including automatic install and update.
  • There will be restrictions on technology, for example Java apps will not be allowed.
  • Apple will keep 30% of any revenue from sales.
  • $99/year subscription for developers.
  • Developers will still be able to sell their software outside the App store.

It is easy to see why Apple would want to do this:

  • A potentially huge new revenue stream from third party Mac software sales.
  • They get even more control over the customer experience.

And this could have advantages for Mac users:

  • Simpler payment and installation.
  • Screening out of low quality apps and malware.

And potential advantages for Mac developers:

  • Mac users might buy more software if it is easier to do so.
  • One main channel to concentrate your marketing efforts on.
  • Some of the boring infrastructure of selling software (licensing, shopping cart etc) can be taken care of by Apple.

But the disadvantages are all too obvious:

  • Your app could be rejected outright. And you won’t know until you submit it for approval. Apple are judge, jury and executioner. The iPhone app store has been infamous its capricious and opaque approval process.
  • 30% is a huge chunk of revenue. Typical payment processors take 5-10% of revenue. Where the new app store cannibalises existing sales (and it is hard to see that it won’t) vendors will lose 20-25% of existing sales revenues.
  • New apps and updates will be delayed by days or weeks as they go through the app store approval process.
  • A single centralised app store is likely to make it harder for niche/long-tail apps to make any sort of living. Certainly this is what seems to be happening in the iPhone App store.
  • Apple are control freaks and have traditionally taken a rather heavy handed approach with developers, including the liberal use of NDAs. The app store will give them even more control.

And worse might follow:

  • Apple makes a lot of their money from selling over-priced hardware. It may be in their interest to drive software prices down so they can sell more hardware. $5 is considered expensive in the iPhone App Store.
  • This could be the first step to making Mac OS X a closed system, like iPhone, where only Apple approved apps can be installed.

I guess they can’t piss off developers too much – a computer without third party applications isn’t going to be very attractive to customers. But I am finding it hard to work up any enthusiasm for a Mac app store. If it is successful I can either be in the store and give up a lot of freedom and cannibalize exisiting sales at a much lower margin, or stay out and be shut out of a large chunk of the market. It isn’t an attractive choice. As my app is written in C++/Qt, rather than Objective-C/Cocoa, I am not even sure that it will be eligible for inclusion in the store. I could just abandon Mac OS X, but Microsoft is also rumoured to be working on their own app store (despite the failure of DigitalLocker). That is a truly terrifying prospect given the awfulness of their ‘Works with Vista’ approval process (I speak from personal experience).

Suddenly web apps are looking more interesting.

iPhone App store economics

If you believe all the hype about iPhone apps, you can just hammer out an App in a few weeks, let that nice Mr Jobs take care of all that sordid marketing for you and then sit back to collect a big cheque every month. However the numbers in a recent sobering post about the economics of paid iPhone apps tell a rather different story:

  • average annual income for a paid iPhone app (after the App store 30%): $3,050
  • median annual income for a paid iPhone app (after the App store 30%): $682

The numbers are based on various published data from Apple and other sources, plus a few assumptions. I haven’t gone through the numbers and the analysis with a fine tooth comb, but I can’t say I am surprised.

The disconnect between the hype and the reality is so large because Apple (understandably) only want to tell developers about the success stories. The media and the public seem quite happy to go along with this because it makes a more interesting story. But when there are 225,000 apps shouting for attention, only one way to access them via a notoriously dictatorial third party and $5 is considered expensive, it is likely that the majority of developers will do badly. Hence the median is so much worse than the mean. Before you write your iPhone App I think you should ask yourself if it has got a realistic shot at making the top 10 in its App store category. If not, don’t give up the day job just yet.

Further reading:

The Sparrow problem

How to Evaluate a (paid) iPhone App Idea