Cashing in on the app store craze

Just how many app stores do we need? According to GetJar, there's 38 of them out there.

The vast majority will not be just flops, they'll be megaflops. It's the nature of internet business that all of the spoils go to the winner, and precious little else goes to the rest. Think search (Google), social networks (Facebook), and online auctions (eBay), books (Amazon) and so on.

That said, the app store is different because it's essentially a function of the handset platform. If you have a kickass OS, you have a business. Which means maybe five companies - Apple, Google, RIM, Nokia, Microsoft.

Apple's extraordinary run of success is a result of its ability to integrate its three innovations - the device, music store and the app store - into a single seamless, profitable whole.

A recent study by Dutch firm Distimo found that Apple store had clocked up 151,000 apps, and was adding 13,900 a month. Android is the fastest-growing (percentage growth), with 19,900 apps and adding 3,000 each month. Nokia (6,100), BlackBerry (4,760) and Palm (1,450) and Microsoft (1,250) make up the rest.

The app store is challenging to operators because, apart from highlighting their poor mobile web offerings, it disrupts their near-monopoly over the customer billing relationship.

Many of the tier 1 operators have announced app stores, although only Vodafone's and China Mobile's have actually launched.

China Mobile's was such a disaster that the company had to relaunch several months later.

It's hard to see any of the top four app stores being eclipsed by an operator store, but there are spaces in the market for cellcos.

Their biggest problem is that while telcos have always collaborated well to set standards or accounting rates or interconnection rules, they only seem to work with similarly hierarchical corporate organizations. Not so with the small, lithe app developers - the two groups are on different planets.

Theoretically, the operators would seem to be ideal customers for a white-label app store approach but that ain't going to happen, despite the eager efforts of vendors like Samsung.

Anyone who could build a decent app store by now would have already done so. However, it's not just the operators who've missed the app store bandwagon. The big handset guys have been equally woeful. Samsung and LG may have displaced Motorola and Sony Ericsson on the handset sales charts but, lacking a decent smartphone OS, they've struggled with the online store. Their strength is building sexy hardware, not software with open APIs.

Two instead of one

Then there's Nokia, which has just blown a decade's worth of investment in Symbian. It's teamed up with Intel for a Linux-based OS, apparently aimed at tablets. It's telling that whereas Apple effortlessly grafted its app store onto iTunes, Nokia separately started a music platform - Comes With Music - and the Ovi app store. Reportedly it's now planning to merge the two. Doh!

Still, Nokia is the only other company outside Apple, Google and RIM and Microsoft with a chance of building some kind of app store business. It's just hard to see how.

The key for telcos in all of this is not to compete head-to-head with the handset app stores.

The first opportunity is that vendors tend to be weak where operators are strongest, which is in local markets. Cellcos should look to work with local developers to get local content out to their customers.

The other business is what Telstra CTO Hugh Bradlow calls the shopping mall approach, which is selling space in a store to app developers and charging them a flat fee rather than taking a commission.

It's basically competing on price with the handset stores, but it's also leveraging the fact that the cellcos are - or should be - closer to the local market.

Unlike the device players, operators also have billing platforms and can actually provide customer support.

It's still early days in the app store game. Operators have plenty to bring to the table. It's time they brought it. 

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