Understanding Mobile Application Stores

All App stores have a number of common features that provide users with access to mobile applications.

Storefront – every app store has a store front that’s basically a mobile application but is structured to provide a directory of all available applications. The store front enables users to find an app and then pay for it.

Download – once the app is selected and purchased (or it’s free), the user downloads the app to the device. The download process is actually quite a clever and complex process that happens behind the scenes of the apps store.  Once the app is purchased, the app sends a command to the server (cloud) to download the app.  An icon for the new app is then displayed by the operating system and the user can see that the app is downloading.  It appears that the selected app is doing this when, in fact, it is the operating system.  Once the app finishes downloading, then the operating system passes control to the app, and it begins to run. From the user perspective, it seems simple and straightforward, but inside the device it’s one of the more complex procedures.

Catalog – the full library of mobile applications is stored on the internet, but the directory of those apps is displayed locally on the device apps store catalog. Thus, the catalog represents a cloud/mobile integrated application. It appears to the user that the entire catalog of what may be hundreds of thousands of applications is stored on the mobile device when, in fact, only the summary of the applications is shown and not all of the ‘thumbnails’ are in the local app.

Categories – the primary way in which mobile users find applications is via the various categories which group together applications of a similar function.  The category listings often also show which apps are most popular, which are free and which are paid. Some of the more advanced category lists provide sub-categories since there are so many applications that are in the supplier’s app store.

Search – using a ‘search’ process to find an application is really in its infancy. While search processes for web pages are now quite robust, it’s more difficult to search through an apps store library to present the user with the most appropriate and relevant application. Does the search algorithm present the most popular apps based on a search request?  Or, does it try to best match the user’s search inquiry?  Or (even more interesting), does the search process look at the user’s profile and provide a recommendation that is truly more relevant to the user’s interests? The algorithms to search the web are far different from the algorithms to search through an apps store library.  Most app stores create an index of the apps library so there are many different ways in which the search can proceed. And, apps stores may intentionally ‘lock out’ external search engines to keep their environment as a ‘walled garden’ which can only be accessed by the users of that platform. It’s interesting to note that Apple has now tagged applications in the iOS Apps Store as for iPads if the application takes advantage of the larger screen. All iPhone apps will run on the iPad but simply in a small subset of the total screen.

Analytics (downloads, pay/free) – a new and important part of apps stores is the ability for the provider of the store to give developers and resellers summaries of the store’s activity.  This becomes the ‘analytics’ of the store much like there are analytics of web sites that summarize activity. The primary analytic is the number of downloads that have occurred over a specific time and to summarize the downloads by category (e.g. games, productivity, health, fitness, financial, etc.) or by device within a platform (e.g. iPod touch, iPhone, iPad). Other analytics include such statistics as paid vs. free apps and which generate post-download revenue as well as how frequently the app is used. A number of companies (e.g. ClickTale) are extending their customer experience analytics to mobile, e.g. where the user touches the screen, what type of gesture they do and what screens they visit while running the application. This is a fruitful new area in mobile in which we can expect to see more interesting development efforts. Flurry is one of the more well-known analytics companies. They provide their analytics APIs free to developers.  Code goes into the developer’s app that sends behavior information back to Flurry that aggregates the information so that developers can obtain overall performance data on their applications.  Flurry’s primary business model, however, is advertising. They give their analytics resources away to get the chance to work with developers to get their advertising platform added to their apps.

In-App Purchase & Subscriptions – while the original process of downloading an app was the end of the story regarding financial activity, more recently both iOS and Android have enabled in-app purchasing – either as a transaction (“buy this digital asset to help you win the game”) or a subscription (“subscribe now to get access to enhanced information and services”). This is a new and exciting arena for developers of consumer applications but may not be of interest or relevant to enterprise IT departments that don’t really sell their mobile applications.

Billing & Payments – Apple was innovative in the billing and payment arena for the iOS Apps Store by disconnecting the selection and downloading process from the payment process. Consumers are required to establish an iTunes account which includes a credit card.  Then, when the account is either pre-paid via a gift card or is charged for an application or service within the app, Apple takes care of settling the payment by the user to Apple and then from Apple to the developer (the developer gets 70% and Apple gets 30%) all behind the scene, so that the user can focus on enjoying and using the application. Every time the application is updated, Apple requires the user to verify their iTunes account which ensures that the credit/debit card on file is valid. Google has worked with a number of operators to facilitate convenient billing through the operator’s cell phone bill (as well as via credit card) so that when a purchase is made, the amount shows up on the user’s cell phone bill from the operator.  In this way, operators have become financing institutions since they are providing credit to the user of a post-paid account. Pre-paid accounts would have the transaction processed immediately so that credit would not have to be extended. All of these processes have made it easier for developers to create exciting and useful applications rather than forcing the developers to each includes payment processing inside their application (as is currently required for payments made on the web).

Cloud Services – many mobile applications are ‘self-contained’ in that they load and only utilize local storage.  They don’t interact or communicate with the outside world.  A local game would be a good example of this service.  But, many other applications interact with the user locally but then request information from a server (cloud) that extends the capability of the mobile app. A good example is a weather app that gets the local weather summary from the server and displays it locally in an attractive manner.  Or, another example would be a financial application that is getting the latest stock prices stored online. These ‘hybrid mobile/cloud’ applications provide users with services and benefits that are more valuable than local-only applications.

Business Models – there has been a great deal of dialog and debate on pricing strategies for mobile applications. Is it better to offer a free app and then charge or to charge upfront?  Is it better to provide the user with unlimited access to the application at no charge for a period of time and then to charge them? Here is a summary of the most common business models used on mobile applications today:

Freemium – The core of the Freemium model is to offer the application for free to the public and then offer value added services that generate revenue. The idea is obvious: let users try the app at no charge and see the value and then they will want to buy additional services. There are two ways in which Freemium is implemented: 1) where access to the application is free for a period of time and then a charge is imposed and 2) the app itself is always free but the user is offered a number of upgrade services that are provided on top of the basic app.

Upfront purchase – According to apps analytics from Fisku, upfront purchase of apps is happening in about one-third of the time and the average price is around $1.95 although prices vary from $0.99 on the low end to over $10 for rich, high-end apps designed for vertical markets. This model is often used if the only thing offered into the market is a mobile app with no web or value added services.  If the app has value, then the upfront purchase works well.

In-App Purchase – In-app purchase allows for not only upgrades to purchase the application after a period of free trial (Freemium), in-app purchase also includes purchasing other services within the app which could be services provided by the app or affiliated services. In-app purchase was a huge improvement to the Apple Apps Store and has since been followed by others. This allows the developer to not have to force a final decision on purchasing until later within in the app itself. We’ll see more of this going forward in innovative ways (see Conclusions).

Wholesale – this is a model that is similar to traditional publishing model in which the publisher contracts with the author for the publishing of one or more applications (at the wholesale price) and then the publisher invests in marketing and promotion to sell the application at retail. This is new to mobile applications but something that will become more important over the coming months and years.

Subscription – this model is focused on having the mobile application provide a service that is paid on a subscription basis. There is often a trial period – just as with magazines.  The in-app purchase capability enables subscription models to be offered to users.  Thus, a publisher such as Time, Inc. might offer the Sports Illustrated digital edition on a subscription basis either in combination with the print edition or separate from it.

For more information, see:

http://www.mindcommerce.com/Publications/FutureAppStores.php

About Mind Commerce

Analysis of telecom and ICT infrastructure, technologies, and applications.
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