Another Apple master class‾

Tony Poulos
08 Sep 2008

Apple's online iPhone applications outlet (AppStore) reportedly delivered more than 60 million programs in its first month of operation. Not bad considering the teething problems Apple suffered in the early days. The Wall Street Journal reported that Apple CEO Steve Jobs stated that the average revenues were $1 million per day, but the business was barely profitable with Apple retaining only 30% of the revenues, which barely covered operating expenses.

Of course, as iPhone sales continue to grow so will the sale of applications that Jobs has tipped to crest at $0.5 billion and maybe even broach the $1 billion per year mark at some time. That should contribute a tidy sum to Apple's revenues and bottom line, one would think.

It begs the question how and why a relative newcomer to the mobile applications arena can establish such a large revenue stream in such a short time. Even more interesting is the fact that mobile operators aren't getting a look in, apart from some data traffic charges, where applicable. It seems their greatest fears are coming to fruition and they might just become nothing more than 'fat pipes' while companies like Apple clean up with off-deck business. Smacks of the same dilemma that has been dogging ISPs for years.

It doesn't help that mobile phone manufacturers introduce hundreds of models each per year, with multiple operating systems and a zillion releases of key components. Content developers have to produce multiple versions of their software to address a broad market spectrum; mobile operators and content aggregators have to stock all these different versions and they have to be certain they deliver the right version to the handset otherwise their customer care departments are overrun with refund requests. Most customers don't even know their handset make and model let alone what operating system it utilizes or what versions of software are running on it.
To make matters worse, applications specific to Microsoft Windows Mobile or Symbian, for example, don't work on all handsets using those operating systems. And how annoying are those Java applets and games that take over a handset preventing anything else happening concurrently. How many great game scores have been lost because someone had the audacity to call you.

Among all this confusion appears a new upstart with one device initially, now two, that all have the same features and software. Their operating systems are soft, meaning they can be updated easily via the world's most popular music synchronising software developed for that previous world-beater, the iPod. Add this to the ability to select, purchase and download applications seamlessly via the handset or PC and you have a market-buster.

If you haven't seen AppStore working, you must. It is the epitome of simple, effective, user-friendly design that works. The product catalogue is well defined, it's easy to find applications you want, all the listings are uniform and one can get a summary explanation on the spot or choose to access the relevant website from either device for more information. Once selected, the application is delivered instantly either to the iPhone direct or via iTunes on the PC for installation at the next synchronisation. From the iPhone, the whole process takes four to five key clicks (or screen touches in iPhone talk). The mobile phone industry has been trying to achieve this through primitive WAP technology for ten years.

It's not that the telcos have not tried the same routine as Apple - it's just that their attempts at becoming content providers to the masses have not exactly been successful. It's hard to tell, of course, because very few are willing to discuss their content business publicly, with the notable exception of NTT DoCoMo. It seems that the retention of between 50% and 70% of revenues by the operators and their lax approach to paying content owners and developers has been neither popular, nor successful.

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