Most app stores are going to fail

A whole lot of mobile publishers and content providers have anxiously awaited the arrival of around a dozen new "app stores." They believe that this is the dawn of a new era, one where handset OEMs will rise up as the new marketplace for mobile content, while the cellular phone carriers fade away quietly into the sunset.

If you're one of these people, I have chilling news for you--80% of these new mobile storefronts will fail, and I can tell you exactly why. In fact, they might all fail, every last one of them. (Except for Apple's of course, the rules don't apply to them. I can explain that, too.)

My prediction of the early demise of the competitive app stores is not enough, however, to save the carrier storefronts. They've got major problems and they need to change their policies immediately or else they really will turn into the dumb pipes that so many people think they should be anyway.

It all starts with your understanding of the three fundamental requirements for a successful mobile content business. If you don't have all three, at the same time, your mobile storefront (AKA, developer program) will fail.

1. Discovery

A storefront, as a collection of mobile content and games/apps, must be discoverable by the end-user. This sounds pretty obvious, but you it's not as easy as it used to be. Somehow, users are just supposed to trip over a storefront, fall in love with it, and then return over and over. It just doesn't happen like that--not in mobile, not in retail. Brand is no substitute for discoverability, either.

The largest retailer in the world is Wal-Mart. Their brand recognition is extremely high. Yet Wal-Mart does not rest on its brand to bring customers to their stores. They have, in fact, the highest marketing and advertising budget of any retailer. They spent $1.6 billion in 2008 in the United States alone.

Discovery for carrier storefronts used to be assured. The store button is located right on the phone, so you're just one click away from digital downloading nirvana. However, over the past year, users are skipping that button and clicking on the Internet browser button instead. Over 60 percent of the mobile browsing traffic is now off the carrier decks.

2. Billing

For as long as I can remember, content providers have dreamed of taking credit cards for mobile content purchases. I've seen many working systems that prompt users to enter their credit card info and now matter how slick the UI is, or how sophisticated the target end-user is supposed to be, the results are abysmal.

To simply say that "billing must be easy" is almost too cliché to be helpful, but it's the truth. Every click, every new input field, every "proceed" button is a reminder to the end-user that the purchase they're about to make is for something they really don't need. It's just not worth the trouble.

3. Positive ROI for publishers

The potential financial returns have to be high enough to offset the financial risks of developing to the platform. Publishers must at least believe they will make money or they'll never risk the time and money to find out. This is why it's so important for app stores to generate pre-launch hype.

How the carriers screwed up and allowed this to even happen

For a while, the cellular carriers were firing on all cylinders. They had discoverability (the storefront button on the phone's menu). They had a solid ROI. (If you could just get your game accepted by the carrier's content committee, you were assured a decent spot on the deck for awhile which made your company profitable and also got you a second round of VC funding.) And third, they had (and still have) billing.

But here's what went terribly wrong about nine months ago. The ROI for publishers started to crash. It's hard to know exactly what to blame it on: the economy, the shift to smartphones or the launch of the iPhone. Regardless of the reason, carrier sales of all content started sliding...Continued

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