What are app stores and content ecosystems actually for?

Summary:All of the platform owners have stores for selling apps and content. But why do they do it? The answer may surprise you...

App Store
The Apple App Store. Five years old. They grow up so fast!

It's easy to think of the Apple App Store and iTunes and think it's solely about locking in customers to a platform.

In reality, the ecosystems built by Apple, Google, Microsoft, and even BlackBerry offer different pluses and minuses to all players -- the owners, software vendors/content producers, and smartphone/tablet users. Of course, the game is skewed heavily in the favour of the platform owners.

Platform owners

For me, the idea of "locking in" customers (and by implication that "locking out" competitors) is too simplistic -- too obvious a thing to say. It might sound surprising, but lock-in is not why platform owners build ecosystems.

For example, on the app side Instagram is free on iOS and Android -- there's no lock-in there because the same service can be accessed in the same way regardless of device. Of course, if you don't have Instagram on your platform (cough Microsoft cough), that's going to count against you as a platform owner.

There is arguably some lock-in when it comes to content. If you've invested thousands of dollars in movies, you likely don't want to use them by jumping platform. But content isn't that important on phones and smartphones. A decent iTunes library is adequately paired with a cheap Apple TV device, even if the customer was a stalwart iPhone and iPad user and moves to an Android smartphone and Windows tablet.

No, the big advantage to platform owners of building app stores and content ecosystems lies in undoing the big "mistake" that Microsoft made back at the dawn of the PC era.

Microsoft allowed users and software vendors to interact directly in order to exchange money for software and services. What they should have done, had the technology been in place, was sit themselves in the middle so that they could take a nice slice out of every transaction.

Which is, of course, exactly what all the platform vendors do. A nice on average 30% of every transaction that goes through the system.

Can you imagine what shape Microsoft would be in now if they had taken, for nearly 30 years, 30% of every software sale that landed on a PC?

The ecosystem gravy train is not about something as ephemeral and fluffy as "keeping the customer loyal", it's about cold hard cash.

Software vendors/content producers

The bias of advantage in the ecosystems is held with the platform owner, which is as you would expect, but there are huge advantages to being an independent software vendor (ISV) or content producer.

(I'll bias this discussion more towards software developers, but this will likely count for video, book, and music content producers too.)

What an app store does for an ISV is two-fold. Firstly, it creates a level playing field. Everyone is playing with the same deck of cards. No matter how much money you have, the curation of the store takes precedent. If you want to get promoted by the platform owner, you have to create something of value. You can't as an ISV buy up featured slots on the app stores. (Not yet, at least.)

Of course, if you make a decent fist of what you're doing on the platform, the platform owner will bring you in a bit closer and give you the big love -- however you can't bootstrap that relationship with cash.

The second thing an app store does for an ISV is that it makes marketing easier. Marketing software is unbelievably difficult and expensive -- in my experience it's much, much harder to do this part than it is to actually build and maintain the software. You still have to market your software in the way that you would, but ISVs receive an advantage in that all the potential customers go to the same place to look for apps. You'll get some hits simply by being there, whereas without the app store you'd have to make every single sale directly.

And, although 30% seems high in terms of commission, ISVs get an awful lot of that. They get static and dynamic testing (which from a positive angle helps with QA), they provide a storefront with 100% uptime, they get guaranteed payments, and problems with piracy are immolated by end-to-end trust and DRM.

Users

The users of app stores and content ecosystems get some huge advantages in terms of safety.

There's a wrinkle here in that Google doesn't curate their store in terms of keeping the quality bar up -- however they do curate in terms of what they promote through the store in the way that the others do. Google really should curate -- it's irresponsible for them not to, but that's a story for another time.

Users that use a store that is curated enjoy a hugely decreased risk of buying something that it's simply not fit for purpose, or something that will cause harm or embarrassment. That's a massive advantage.

But another advantage is that users work together en masse to allow the cream of the stores to come to the top. The platform owners help this process through curation. By allowing users to rate apps, it's easy to create valuable signals within the stores that help other users find quality. An app that's been downloaded a million times and has an average score of 4.5 out of 5 stars is likely to be a pretty good app.

That can only happen because there is only one place for the user community to come together and get their apps.

Conclusion

App stores and content ecosystems are everywhere, and there's no reason to go away. Whilst platform owners work to make life better for their customers and partners, don't forget that they'd have to be mad not to skew the game in their favour.

Also, the way they put themselves in the middle and skim cash of the top for every sales? That's pretty brilliant.

What do you think? Post a comment, or talk to me on Twitter: @mbrit.

Topics: Smartphones, Tablets

About

Matt Baxter-Reynolds is a mobile software development consultant and technology sociologist based in the UK. His latest book -- "Death of the PC" -- is available on Amazon now.

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