What the Evolution of the App-Store Model Could Mean

The app-store model may be moving beyond mobile in a big way. But how well can the entrenched wireless players compete if everyone is an app-store operator?

That’s what I began to wonder after iSuppli reported last week that the automotive industry is embracing smartphone-like applications. BMW is developing its own branded app store and Parrot has showcased an Android-based device that offers “automotive implementation of all smartphone features.” Nokia is expanding into the automotive market, too, with a solution that integrates a smartphone with the car’s in-dash computer systems.

And the app-store distribution model seems a natural fit for other industries and platforms. It’s easy to imagine cable and satellite TV providers establishing their own stores, delivering casual games and other interactive offerings directly to consumers through their set-top boxes much as they deliver on-demand video today. Indeed, Microsoft’s Xbox and Sony’s PS3 already enjoy the support of app-store-type systems that distribute games and videos as well as game-enhancing avatars. The next step: embracing mobile as connectivity expands from phones and laptops to a host of consumer-electronics devices, and enabling users to play the same game — or platform-optimized versions if it — on different devices.

Similarly, app stores are likely to move beyond narrow, platform-specific markets and into broader distribution models. I’ve speculated that an app store is likely part of Facebook’s plans, and rumors are circulating that Amazon may join the fray.

It’s those latter two that ultimately could be a threat to mobile-specific stores. Facebook boasts a jaw-dropping 300 million users, has a solid track record among developers, and has launched an in-house payment solution. Amazon, meanwhile, posted $4.65 billion in sales during the second quarter of 2009 and earlier this month introduced payment-processing tools for mobile phones. Uptake of Apple’s App Store — which has been a revolution in mobile data — pales in comparison: just 20 million-plus iPhones have been sold and Apple generates a projected $3.3 million a day (or $297 million per quarter) through its App Store.

The established mobile players have some substantial advantages over any would-be competitors from outside the mobile world, of course. Consumers won’t want to establish accounts at multiple app stores and shop at device-specific outlets every time they want to check out the latest offerings, which is why I think interoperability will be crucial for any player’s long-term success, and why I think Nokia and Parrot have the right idea.

Smartphones will also have an opportunity to serve as a kind of vehicle for apps, enabling users to access them in multiple ways from multiple devices. A phone can serve as an extension of a console game, for instance, allowing users to play the title away from home and sync with the console as he progresses through the game. Conversely — and as Nokia’s solution demonstrates — the car can serve as an extension of GPS-based, web-enabled smartphone apps, integrating information such as fuel levels and engine-status updates with directions to local gas stations and mechanics.

Apple seems particularly well-positioned to withstand an assault from outside the mobile industry: In addition to its massive edge as a first-mover in mobile, it delivers apps to a non-cellular gadget (the iPod touch) and its App Store is a component of the massive iTunes business — an operation that could be expanded to TVs for a true multi-platform play.

The iPhone’s momentum continues to grow, and Apple won’t soon relinquish its crown as king of the app-store space. But Google’s Android is just beginning to get legs, and newer players like Research In Motion’s App World and Palm’s App Catalog are still in their infancy. So the emergence of a huge player looking to distribute apps to a host of different kinds of platforms could create tremors as it lumbers onto the field.

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Colin Gibbs

Colin Gibbs

Founder and Principal Peak Mobile Insights

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3 Comments Subscribers to comment
  1. Stephanie Rieger Thursday, October 22, 2009

    Brilliant analysis. Ultimately, what will keep an app store in business is a combination of user experience and relevant content. For this reason it seems highly unlikely that the early crop of operator and OEM specific app stores will all survive. To them it’s simply inventory and many are already demonstrating that they have no idea how to make the content matter.

    New players like the one you mention will, I think have a far better feel for what types of products will truly work for their target audience–especially industries like automotive which have been segmenting customers quite successfully for years. By comparison, mobile players are quite poor (so far…and with the exception of Apple) at truly determining who their audience is and why this audience chooses certain products over others.

  2. Excellent article. An interesting debate is on the platform (Mobile OS, Browser platform) that can be best positioned for these alternative platforms.

    Key candidates for Web versus a modified mobile platform for the app-store:

    – Web Platform: Opera has potential with the Opera Widgets as the presentation of Widgets
    – Mobile OS: Android is the most promising with an open-source model, rich UI, java like development environment.

    Other alternatives certainly exist, and this market will get crowded, and get lots of interest in the next 12-24 months.

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