Success and Failure in the App Store World

POSTED BY Global Administrator

At least ninety per cent of app stores will fail in the next 12-18 months.

That is the rather gloomy prognosis from Getjar CEO Ilja Laurs, who certainly knows the app store business inside out – in terms of cumulative app downloads, GetJar is second only to Apple’s runaway leader, App Store.

But – ninety per cent? At least ninety per cent? At the MDA’s Mobile App Stores workshop yesterday, various reservations about the future for app stores were expressed, but these were counterpointed in roughly equal numbers by individuals keen to stress the opportunity that app stores offered across the value chain.

As soon as the mobile industry saw the scale of downloads that the App Store had enabled, it wanted a piece of this means of distributing and monetizing content, and so now we have some 30 or so apps stores on the marketplace, from vendors (Samsung, LG, Nokia, RIM), OS Providers (Google, Microsoft), network operators (Vodafone, China Mobile, Verizon) to independents (Handmar, mikandi). There will doubtless be more – a lot more – launched over the next year or so. Some will undoubtedly struggle to survive. But – if implemented correctly – then there should be more winners than losers

If implemented correctly. From an operator perspective, these stores need to be different – dramatically different – from the existing portal offerings. Let’s take a hypothetical operator (hypothetical operators are best, because they don’t take umbrage when I criticize their strategies) and call it Blue Cat. Blue Cat has a portal, called Blue Cat’s House. Now, it’s no good Blue Cat merely assuming that, by renaming Blue Cat’s House as Blue Cat’s App Store, that customers are suddenly going to flock in their millions to the storefront and download huge volumes of apps. It ain’t gonna happen. Blue Cat will (a) need to ensure one-click access to the storefront (b) that once at the storefront, customer navigation is straightforward and (c) that users are presented with an attractive array of apps to download. And in many cases, bearing in mind that – with the best will in the world – operators haven’t got the best track record in monetizing content (hence the reason why they’re now trying to transition from portal to app store) then (d) might be required, (d) in this case being to bring in a third-party to manage some or all aspects of the storefront business.

The next point is that storefront managers must manage expectations. One of the reasons that the App Store has seen downloads climb into the billions is that the storefront UI is exceptionally user friendly; the other is that there is a rather nice touchscreen device onto which you can download those applications. In short, to get high levels of downloads, you need a good storefront, good content and a good handset. (And, as an oh-by-the-way: you need a fairly high addressable user base. If you’re a national tier 2 operator with maybe two or three million users, then persuading developers to create apps for you will be far more difficult than if you’re a multinational player.)

If customers are presented with this combination, then the likelihood is that they will download applications. If not, then the chances of failure are fairly high.

There are some app stores currently out there which do, unfortunately, come into the latter category: where there is little attractive content; where the billing process is cumbersome and irritating; where navigation is slow. These traits will not lead to repeat usage amongst customers, and app stores which do not address these issues do stand a high chance of going to the wall.

So – how many will fail? Some, certainly; ninety per cent – highly improbable. Firstly, there is certainly scope for multiple app stores to compete on a given handset, for operator app store to be pitted against vendor app store. Such competition should even serve to improve the performance of each app store, forcing them to up the ante by offering more attractive content or a more compelling UI. Secondly, and critically, it is crucial to point out that just because an app store isn’t achieving the two downloads per user per week that the iPhone has seen, it doesn’t mean that that app store is a failure: from an operator perspective, if usage is even moderately higher than the levels experienced on portal, then its app store can be classified as a success.