iPhones, App Stores and Ecosystems

By Mark Sigal
March 16, 2009 | Comments: 11

pipe-wrench-1.jpgAccording to the prognosticators, Google Android is "destined" to overtake the iPhone by 2012, and Palm Pre, which hasn't even shipped yet, is already being touted as a "compelling alternative" to iPhone.

Plus, now that Apple's App Store is nearing a $1B business pace just nine months after launching, the competition (Google, Palm, RIM, Microsoft, Nokia) is so totally getting themselves one of them App Store "thingys."

But can the competition outflank Apple, and what is an App Store anyway?

Let's start with what it is not. An App Store is not simply an e-wallet or marketplace that you bolt on to your (pick one):

  1. Hardware device business;
  2. Open source smartphone software play;
  3. Next generation mobile service provider.

Sure, it includes elements of the above, but fundamentally, a cash register ringing App Store is the manifestation, not the root cause, of having built a thriving developer platform and "ecosystem."

So what is the root cause? Number one, is having a good toolset (known as a software developers kit, or SDK) that is compelling to developers. Why is this integral? Because it's the developers who ultimately make or break a platform by embracing it (or not).

If your eyes are glazing over, it's understandable, but know this: executing a tools and ecosystem initiative is REALLY hard because there are a lot of pieces that have to go right for the platform to take root. But when you get it right, it's a game changer.

In fact, it is unarguably one of the top 2-3 reasons that Microsoft became the PC gorilla in the desktop computing wars. They built a thriving developer ecosystem, and Apple didn't (or at least not on a par with Microsoft).

In the mobile realm, this implies a platform that is synchronized across hardware, software and service layers. This synchronization is necessary to deliver a superior user experience, which is what consumers now expect post iPhone (I cover this topic in more detail in my guest post for GigaOM, 'Android vs. iPhone: Why Openness Might Not Be Best').

As a result, for the competition, who may only control one or two of these pieces (e.g., hardware and system software but not the actual mobile service, or in the case of Android, software only), the reality is that this means that they will be solving a different problem than Apple's end-to-end solution, which integrates these disparate layers and then makes them extensible and programmable via the iPhone SDK.

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And let's be clear, regardless of the metric that you choose to measure Apple's success in this realm (developers, downloads, dollars, margins or consumer engagement), the platform engine and ecosystem is unquestionably humming on all cylinders.

Beyond the $1B business momentum for App Store; AND beyond the fact that iPhone has already emerged as the number two smartphone maker (behind only Nokia/Symbian, whose market position is at best, tenuous); AND beyond the fact that the device unit numbers don't even include iPod touches (which run virtually the identical software, sans the phone); AND beyond the fact that there are over 25,000 applications available right now on iPhone/iPod touch (yielding over 500 million downloads to date), there is one "unfair advantage" I haven't even mentioned.

That is the iTunes media/content piece of Apple's strategy, which no one else offers, which in itself is over 65M users strong, which has made Apple the number one seller of music on the planet (larger than Wal-Mart) and which integrates into the same user experience, workflow and marketplace function set as App Store.

So, as a developer, who can ride on top of the iTunes media freight train; write applications that reach into one device and device software form-factor across all global carriers that sell the iPhone; and reach the carrier-free segment vis-à-vis the iPod touch, that is a lot of leverage to build upon.

picture-18.pngTwo parting thoughts. One is that the bar (for the competition) is about to get even higher, as on Tuesday, March 17 Apple will be holding a developer event to preview the 3.0 version of iPhone software.

Will it provide visibility into the next hardware refresh of the iPhone and iPod touch? Will it be the point when they introduce new form factors of devices powered by the platform, such as a tablet/netbook sized iPod Touch HD? Perhaps it's the moment, when they will begin supercharging Apple TV with the iPhone's platform and ecosystem goodness.

Apple_touchbook.jpgOr maybe, it's something entirely different. What if Apple decided to reinvent the digital camera as a smart, connected, programmable device? It would certainly sync up with some of the features they have recently baked into iLife, such as facial recognition and geocoding of photos.

Finally, when you listen to the analysts prognosticating the good, bad and ugly of Apple as an investment, keep in the back of your mind that the financial market really hasn't a clue on the economic and competitive impact of the App Store. When they finally figure that one out, I expect Apple's stock to see a positive pop.

The bigger deal is that I don't believe that most of the competition really has a firm grasp on what App Store means from a platform perspective.

Now, that's a story that is yet to be written.

Related Posts:


  1. iPhone 2.0: What it Means to be Mobile

  2. 65 Million Reasons to be bullish on Apple

  3. Apple's Mobile Gaming Gold Rush

  4. Guest Post for GigaOM - Android vs. iPhone: Why Openness May Not Be Best

  5. Mobility Lives! The iPhone SDK Looks Awesome


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11 Comments

While I agree that the SDK/dev ecosystem is important, what makes the AppStore very successful is the delivery of the software to the customer--download and installation is seamless, purchase is seamless, and Apple actually promotes the availability of apps.

Palm *had* a thriving developer community and ecosystem for many years and selling apps still had a lot of barriers: Customers had to know apps existed, to find where to download them, to actually download them to their desktop, to install them onto their phone/handheld, and to actually go back and purchase them, usually after a trial. Every step of the way was painful, created lots of support issues, and provided for many reasons not to complete the transaction. Add the barriers that the carriers added when handhelds moved to smartphones and the high commissions from the electronic distributors....

Hi Justine,

Don't get me wrong. I completely agree that the friction-less aspect enabled by end to end integration of marketplace, e-wallet, wireless download, install, enjoy is hugely compelling.

I put a big fat bow around the SDK/platform side of this because surprisingly few (even techies) grok that the App Store is the enabler, but if the platform isn't compelling, if it doesn't offer significant leverage the shelves in the store will be empty.

While Palm definitely mis-stepped in their approach, the new upstarts definitely can't just bolt on an app store and hope for success.

They really have to woo, cultivate and enable the developer community.

Cheers,

Mark

The iPhone is ubiquitous. Good luck unseating it!!!

While I agree completely with this article, but I want to question this one section:

"In fact, it is unarguably one of the top 2-3 reasons that Microsoft became the PC gorilla in the desktop computing wars. They built a thriving developer ecosystem, and Apple didn't (or at least not on a par with Microsoft)."

Can you really explain how Microsoft built a thriving developer ecosystem ?

I think Mac OS X platform is better in terms of SDK, and what you can do with it. The only problem is the platform itself is not popular. Now, the iPhone has reach large amount of users, and it does increase the amount of developers willing to develop for iPhone.

I can only say that the reason of why Microsoft wins in the PC market, is because of their OS availability on various hardware. So, it reach many PC users, and the amount of PC users with Microsoft attract developers to develop software for them.

Hi Jesse,

The PC wars is a reference to the time in the personal computing market when Microsoft became the dominant operating system, desktop apps, server apps and development tools provider.

Originally, Apple was the dominant player but refused to license their platform for other hardware OEMs. This decision, coupled with IBM's embrace of DOS, enabled Microsoft to build a standard OS layer, while allowing hardware OEMs to fight over what ultimately became a commodity business.

When IBM pushed it's own proprietary OS, OS/2, Microsoft came out with Windows, which was a poor imitation for Mac OS (and actually inferior to OS/2).

Most app vendors didn't initially support the platform because DOS was the standard. This opened door for Microsoft to come up with native applications for word processing, spreadsheets and database functions, crushing WordPerfect, Lotus and DBase.

Not having to worry about hardware complexities, they created a great OEM channel, and built tools the took advantage of their proprietary APIs to integrate with and extend Office and to create native apps.

By contrast, Apple stayed at high end of market, frequently competed with its developer base, was undisciplined with the technologies it pushed (I can not tell you how many cool APIs they abandoned) and effectively lost the R&D battle to the coalition of Wintel + Hardware OEMs + third party developers.

Philosophically, Microsoft coddled its developers, had a bit of a geek culture and kept things simple. Apple, with an arguably better system, pissed off its third party developers, had an elitist culture and got ahead of the market.

I still remember a great video on YouTube from a few years ago where Bill Gates and Steve Jobs were on stage and the panel leader asked each what they wished they were more like their counterpart. Gates said he wished that he had Jobs' vision to see grand ideas and lead the market accordingly. Jobs said he wished he emulated Microsoft's style at partnering better.

Flash forward, Microsoft is no longer THAT Microsoft, and Apple is trying to become THAT Microsoft, albeit on Apple's change the world terms.

I hope that that clarifies.

Cheers.

Mark

Your viewpoint is valid in the US mobile space only.

After reading the article and comments I felt just as Justine did - seamless distribution was the most important factor. I still think it is tremendously important (not to mention brilliant) but now that Apple has solved that issue, competitors will emulate it. That's the easy part. Like Sigal said, the hard part will be building the tools and platform that will attract developers.

I think RIM could be in a position to compete against Apple if they get their software & tools up to snuff. While Android and Palm Pre are hardly worth mentioning, RIM has many millions of devices in the market today, a strong brand and high customer loyalty. They also control both the Blackberry hardware and software. However, RIM never put much effort in cultivating a rich 3rd party application ecosystem. An application store might help in this respect but they're still weak on software - operating system, web browser, SDK, etc.

As a developer, I'm going to embrace any platform that will make money. I'm inclined to believe that the success of the App Store will transfer to other platforms but that's no slam dunk.

Thanks for the comments, David. To be clear, Apple's distribution model is tremendously inspired, and seamless. It just works for try/buy, software updates, new app discovery, and is synchronous with the workflow for iTunes.

All of that said, as you note, there are a small handful of successful platform plays in the history of computing (okay, I am exaggerating a bit) so getting this one right for the competition is non-trivial, especially since the DNA of these companies tends to worship the cult of hardware over the god of software.

To your last point, what is most intriguing about iPhone is that you see one person upstarts making real coinage, big companies making material dollars and mid-size companies feeling like players.

For what can be an elitist company, the platform is amazingly egalitarian.

For example, I have a friend at a 25-ish person gaming company who has sold on Mac, iPhone, XBox, games, utilities and done so online, through physical retail channels and now App Store, and he waxes poetic about access, control and margins in Apple's model.

Best,

Mark

Back in the day, Palm OS had a similar success with its SDK and had enthusiasm from many developers from hobbyists on up. One person upstarts were able to be quite successful and the store shelves were filled, despite the primitive means for selling software (before online shopping took off). But as technology progressed, the OS did not keep up with the hardware; the smartphone replaced the handheld, adding the carrier control over customer access; and the greedy distribution channels increased their commissions to 50-75%. It became increasingly difficult for developers to take home enough income to continue to support themselves.

Apple's SDK and technology for today is very compelling, but the Palm Pilot, in its timeframe, had a similar excitement to it. However, today Apple has solved many of the barriers to entry that now exist in many of the other mobile software options, from RIM, to Windows Mobile, to even Symbian.

The whole package that the AppStore supplies is truly what makes the platform successful, from the SDK and technology, to the accessibility, to the customer awareness that software exists, to the seamless distribution. Any AppStore wannabees that don't provide all the pieces could find it tough to attract developers and a volume users to support them.

Justine, you boiled it down to the core essence. Faux App Stores need not apply. ;-)

Have a great one.

Mark
--
Getting Real: On Doomsday, the Demise of So-Called Experts and the New Arbitrage
READ ME: http://bit.ly/tjd3

I agree - the iPhone is taking over the mobile world and nothing will stop it.

I think the toolset is critical to success, but it's not its core strengths. The iPhone is elegant and that is why developers love it so much.


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