2009 has been the year of the app store, with everyone from handset manufacturers (dare we call Apple that these days?) to OS makers (Android) to mobile operators (Vodafone) to independent players (GetJar) making headlines with their different approaches to application discovery, installation and management.
It’s worth remembering that app stores aren’t particularly new: most operators supported over-the-air Java downloads at least five years ago, and many did a quite healthy business along those lines, charging an average of 3 to 5 dollars (or pounds) for what were mostly games. At the same time, non-operator portals like Handango were dishing out the apps for PDAs, starting with a tethered approach and later moving to OTA. These approaches gradually converged as the mobile internet grew and operators’ carefully trimmed walled gardens were opened up, and then Apple came along and put the gloss on it, rightly stealing all the headlines.
So what’s actually new about the app store concept? Yes, there’s now “an app for that”, as we’ve all been shown (and perhaps it took that level of mass media marketing to help things take off), but if you had the right smartphone or PDA and knew where to look, there was probably an app for that before, too, if perhaps a less shiny one. Yes, today’s devices — like the iPhone — are much more suited to doing more with applications from both a technology point of view and a user experience one, but that alone doesn’t explain the massive growth of the app phenomenon.
Maybe what really makes an app store an app store is something that is truly new: the ability for developers to make money by participating in an open marketplace powered by advertising revenue.
While not all apps are free, it’s clear that free apps command the lion’s share of downloads on iPhones and are increasingly popular on other platforms such as Symbian and Java, as demonstrated by the resounding success of GetJar, which announced this summer that it had powered more than 500 million downloads. Anywhere you look where ad-funded applications form a part of the equation, you see rapid growth.
“Free” as a price point has been the subject of a lot of discussion lately. Wired’s Chris Anderson, author of a book by that title, argues that free represents a major mind shift in the way businesses are operating in today’s economy. Whether or not you accept the macroeconomic theory, you’d have to agree he’s on to something when it comes to the mobile applications marketplace. And that’s because “free” to the user doesn’t have to mean “free” to the developer or publisher of a mobile application.
As today’s most succesful online businesses know, “free” is a great way to build value. For mobile apps, that value comes in the form of an audience and can be measured in unique users, impressions and click-through rate. Advertising has democratized the application space in a way that no operator or technical working group came close to doing. While it’s easy to complain about Apple’s notoriously opaque approval processes, let’s not lose sight of the fact that a couple years ago, most stores for apps (let’s just call them that) wouldn’t allow advertising within content at all. If they did, it was likely that they would demand a revenue share of the advertising. Apple doesn’t do that. You can choose to sell your app for an initial purchase price — and Apple will take 30% — or you can give it away for free and keep 100% of the ad revenue. It’s easy to see why “free” is so popular.
The advertising world is on the cusp of grasping this trend. Maybe the point is not “there’s an app for that”, but “there’s an ad for that” — the app store environment is facilitating the most powerful audience-building platform the internet has yet seen, with hundreds of thousands of apps creating their own audiences, small and large, every day, replete with a marketer’s dream of targeting information. On Adfonic, for instance, every app publisher is asked for a demographic profile of their audience, and relevant keyword tags to help match relevant offers from advertisers. Apps that engender a trusted environment and can provide additional anonymous targeting information like age, gender and location command even more attention from savvy marketers.
So here’s a challenge: every time you hear someone say there’s an app for that, take the thought one step further and consider the audience-creating dynamic of that app. Chances are you’ll find there’s an ad for that, too.
