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 Macs  ‘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.

22 thoughts on “App stores set to dominate future software sales?”

  1. Dan Weese

    I went through the “Works With Windows 7” process and it was a breeze. The Vista test was a nightmare, but it must have been for everyone because they made it a lot easier with Windows 7. I would say the advantage for MIcrosoft having an app store now is that so many people are familiar with the app store concept due to iPhone, iPad and Android, it might be more well received, especially with the ClickOnce deployment model of WPF and Silverlight apps. As for your comment about being cut out of a “large chunk of the market” if you don’t sell your app in a Mac store, Mac still only has about 5% of the market share for personal computers, so I would hardly call that large unless you were comparing it to the Linux share. I would agree with that statement if you were strictly referring to the iPhone/iPad app store as they are clearly the dominant phone/tablet available.

    1. Andy Brice Post author

      >As for your comment about being cut out of a “large chunk of the market” if you don’t sell your app in a Mac store, Mac still only has about 5% of the market share for personal computers

      I meant a large chunk of the Mac market. Also the Mac has grown to nearer 10% of the desktop market.

  2. Christopher Bruno

    I agree the app store for Mac OS X is not exciting. It makes sense for an iphone where things like small games need to be native to work well. But for a real computer, most of these trivial games can be run in a browser. What is left are non-trivial applications can be distributed over the internet as easy as an app store. It may be slightly easier/convenient for the user to download Pages or Word from the app store (instead of navigating to the product page). However, for except small trivial games, I dont think its worth giving up 30% revenue in exchange for slightly easier distribution and payment processing.

  4. Rico

    30% of revenue compared to the 10% that a payment processor charges may sound a lot, but you have to factor in one more thing that is so darn important especially for small software companies and single developers: reach. Getting your app in front of thousands, potentially millions of people is hard if not impossible for the small shops (at least in a predictable, repeatable way).

    Being one of the first 1,000 apps when the app store comes out will boost visitor numbers and sales (hopefully). Problem is long term it will just be as hard to be seen on the app store than it is on the net (or harder as the app store is more restrictive). The iPhone app store has how many apps right now? 300,000?

    Your article nicely sums up the issue. I absolutely agree with your conclusion of what might follow: customers will expect low-priced software not only for their iPhone, but also for their Mac.

    The potential reach of the app store for the Mac is so appealing that developers can’t resist and we will see $5 apps that would sell for $50 or more outside of the store.

    Can the lower price be compensated by higher volume? Even it it can: there is one important difference between iPhone apps and Mac apps – support requests.

    iPhone apps are used for short periods of time “in between” other tasks. If something goes wrong, the user restarts the app. Mac apps are used for longer periods of the day to get work done. If something does not work the user is most likely turning to your support hotline/email.

    That’s another big hit for small software companies: they simply can’t handle huge number of support requests. The MicroISV model of fewer sales at a higher price won’t work when you have to make up low margins with higher volume.

    1. Andy Brice Post author

      >Getting your app in front of thousands, potentially millions of people is hard if not impossible for the small shops (at least in a predictable, repeatable way).

      I’m not sure that is going to be any easier in an app store with thousands of competing products.

    2. Clay Nichols

      Rico,

      Being in the App store doesn’t get your app “in front of” all those store visitors.

      In Andy’s case, it gets it in front of only those searching the store for wedding software. Andy is already #2 for “wedding seating software” on Google. Incremental Cost? $0. value? priceless.

      Hmmm.. I wonder if Apple is trying to Commodotize it compliments?
      I think that strategy won’t work long term b/c driving down the price of software will (for the reasons you stated) drive down the complexity: Mac apps will start being as simple as Google Apps: High volume, commodity apps.

      Who do you think is going to win that battle: Google or Apple?
      Google has the advantage that their apps can be used by 10x the number of people and they’ll be free (advertising supported).

  5. sims

    “Suddenly web apps are looking more interesting.” – EXACTLY what I was just thinking. Exactly.

    Bingo! The light bulb has turned on.

  6. Romain

    @sims: “Suddenly web apps are looking more interesting.” – EXACTLY what I was just thinking. Exactly.

    Yes for applications that lend themselves well to a subscription model.
    But I doubt small one off payments could be extracted for a web app. As opposed to the app store/iTunes which make very easy and painless for people to click and pay $1-$5 for their app.

  9. Charlie

    One more reason why the future of application development will be online.

    I think in the short term, developers will bend to the model, though I think the unintended consequences you mention are exactly right. The big software companies will pay for the additional distribution channel, and the smaller companies will simplify their apps to hedge risk. Over time, I would expect to see more and more small developers migrating to web apps, where Google has predicted the future of computing will be (with thin desktop and all apps online). So this may only be a short / medium term trend which will be trumped by the larger trend in the next decade.

    As a small independent developer myself, I avoided the iPhone for this reason, and will similarly avoid developing any products which seem to require app store distribution for success.

  10. Pingback: The Future of Independent Software Development | Bootstrapping Independence

  13. Sergiy Kolokolkin

    Andy, since you already have Qt-based applications for Mac OS X, could you possibly give it a try and submit one of them to the new Mac App Store (the app store for Mac OS X applications)? Mac App Store is already open for submissions.

    My Qt-based app is not finished yet… If they accept Qt-based apps, I will not bother with my own copy protection and automatic updates.

    I have an iPhone app, and it provides enough income for my family the last 2 years. I would love to sneak my desktop app into the desktop Mac App Store.

    1. Sergiy Kolokolkin

      Andy, if I had a ready-to-ship Qt app, I would give it a try instead of waiting. My Qt app should be ready in about 1 month.

      I submitted my iPhone app rather soon after the iOS app store was opened. At first there was almost no competition, and sales were great, despite that version of my app had around 1/4 of the functionality compared to the current version. Those sales have prompted me to quit my programming contract and work solely for myself.

  15. sims

    I’m thinking a career change is in my future. Maybe become a cook/deck hand on a large sailboat in the Mediterranean, maybe dumpster diver in Rome.

    Dunno right now.

    Got one more app almost finished here, going to modify a bit, make it subscription (which works well for this app), or some such thing. Still need to have the brain settle here.

    Just am not feeling warm and fuzzy about what is on the horizon.

    [please excuse the drama if it offends – feels real to me]

  16. Sergiy Kolokolkin

    I don’t see a technical reason for Apple to reject a Qt app, if the app includes all necessary Qt stuff inside the bundle (for example in as a private framework).

    But they can reject Qt apps because of Qt bugs, that make Qt apps look non-native on Macs.

    I have reported 2 such bugs. One is very bad, it’s about certain modal dialogs permanently losing their focus.

    If those bugs bother you too, please vote for them, so that they get more attention and are fixed sooner.

    http://bugreports.qt.nokia.com/browse/QTBUG-15474
    http://bugreports.qt.nokia.com/browse/QTBUG-15475

  17. Amrit

    I have already checked the Qt application in Xcode..it is working fine…but the problem is that How can I upload the Qt app in mac app store. The Build & archive option is disabled in my Xcode in the mac project & it is not showing any device.
    And the application loader is also not working.

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