The rise and fall of app stores

Jakob Hagemann, Hi3G
28 Jul 2009


Apple's App Store reached more than 1.5 billion downloads just after its first birthday. Now everyone seems to want an app store - from handset manufacturers, operators and service providers. But is the app store game for everyone, and who might be in a better position to offer an app store. At this point, it appears to be a matter of not missing out on the app store race, even if the various providers are not quite sure whether to consider their app store as a pure revenue driver, an acquisition tool or simply another value added service that tightens the grip with the customer.

Nokia's Ovi Store and Sony Ericsson's PlayNow Arena were around before Apple started thinking about the app store concept, but have both struggled to get a hold of consumers. Their failure so far seems to be a result of lack of providing application developers with a dedicated platform for pushing their apps to the masses.

Instead the Nordic handset manufacturers have tried to take ownership over the apps in their app stores - in direct contrast to Apple's App Store where the process of downloading the intuitive SDK and submitting an application is straightforward. Both Nokia and Sony Ericsson are re-launching their app stores this summer, Blackberry launched Blackberry App World, LG will launch an app store, so will Verizon in the US - and the list goes on.

This pretty much outlines the battle for center court in the app store tournament; handset manufacturers and operators are the most prolific type of players in the game. So what is the deal for operators in this setup?

In my opinion, operators have a clear competitive advantage over the handset manufacturers for a number of reasons. Firstly, operators have a close-knit relationship with their customers and communicate via SMS-notifications of new services, self-service pages and a high level of above-the-line-marketing. In addition, operators' main focus is on their local markets where app stores, so far, have provided a confusing mix of applications for various purposes - and probably not relevant to a the majority of users. This is probably why only 20% of the free apps downloaded from Apple's App Store are used the day after download. The number for paid-for apps is 30%. The usage rate is even worse after a few days as users may download the app but probably do not see an ongoing need to use it. After all, it is probably not that interesting for a Dane to see what is on in the New York cinemas.

Operators have the chance to promote local applications to their customer base, thereby improving usage of the apps and customer loyalty. It's not that handset manufacturers and don't have the chance to promote local applications - hmm, thinking about it, maybe they could make an app that lists the local apps in their respective app stores. Or, as Apple would put it: there's an app for that!

Jakob Hagemann is product manager of mobile applications at Hi3G in Denmark


Jakob Hagemann, Hi3G

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