iCombat

There has been quite a bit of negative press about the App store in recent weeks where fears are being stoked about downward pricing pressure and poor user engagement rates after download.  I think all of this negative press is missing the point and serves as little more than fodder for bloggers and journalist eager to write anything other than the old news of App store success.  While the data in terms of averages may point to weak trends, this is because most pundits do not back out the effect of the gimmicky and one off free apps on the App store.  The reality is that in the Games market and especially in the niche application space (like productivity or medical) applications are selling well for over $5 and some for as much as $100.  I came across an e-mail to investors by the CEO of Tapulous Bart Decrem (posted in Techcrunch in January of this year) that summarizes why the opportunity is still so great.  While dated slightly in terms of the stats, the answer is that it is not all about the App store but also about riding the incredible growth in iPhones and the iPod Touch:“But it’s not just the iPhone that’s on fire, the iPod touch is just as important to our company. There were an awful lot of iPod touches in those stockings: we’ve heard rumors that some ad networks were seeing a million new iPod touches get activated right around Christmas day. The majority of our users are now using an iPod touch. Leave Silicon Valley (or just hang out with your younger cousins), and you’ll find a world of teenagers and consumers who weren’t ready to take the plunge on the iPhone (maybe they don’t have a phone yet, or they’re locked in multi-year contracts with their current carrier), but have now upgraded their iPods to a shiny new touch. In the process, they’ve upgraded from a great music player to a networked handheld music and gaming device.

With the iPhone and iPod touch, Apple is winning in two formerly very different spaces: The smart phones market… really, the mobile phones market: Apple is already one of the largest phone makers in the world (#3 in revenues after only Nokia and Samsung), and hands-down the leader in smart phones and next-gen devices

The handheld gaming devices market. Who’d’ve thunk in July of 2007 that Apple would be rivaling Nintendo and Sony for leadership in the handheld games devices market? Well, six months into the App Store, there are three times more games available on the App Store than for the Nintendo DS, five times more than for Sony PlayStation Portable – and, says BusinessWeek , Apple is on track to sell as many game-capable handsets in twelve months as Nintendo, the current market leader, has sold in its most recently reported 18 months.

At Tapulous, we’re still getting used to that idea, and trying to shake our habits of assuming that all our users are above the legal drinking age, on an iPhone, and always online.”

Bart offers a much needed dose of enthusiasm and reminds his readers that last year, over 100 million app downloads were done in 90 days.  The numbers are astonishing, and while many of these downloads are free applications, the amazing fact is that developers have access to well over 13 million devices by now (was around 12+ million by Q4 ‘08 see here) for almost no upfront or fixed costs at all.  And now with Apple’s new focus on marketing the App store more aggressively (just check out your local Apple store or turn on the TV) you get free marketing as well.  Perhaps for me the best part about accessing users though the iPhone is the near frictionless 1-click purchase solution that removes all of the trouble associated with purchasing something online.  By lowering this friction, Apple has effectively made the dollar cost of most apps the new free (Europe has known this with SMS campaigns for over 5 years).  This is well worth the 30% cut that Apple takes and in return they get to offer mobile users the most impressive deep resource in mobile computing.  So I say ignore the 25,000 apps (as of 03.05.09) and negative usage stats and focus on creating a quality app for the 13mm+ users waiting for you.

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