What are app stores and content ecosystems actually for?

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...

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TOPICS: Smartphones, Tablets
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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

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16 comments
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  • Wrinkles

    There's also a wrinkle in that Google doesn't tie you to their app store the way Apple does and Microsoft wants to.

    Pretty much every Android device can install apps from any source just by checking a box in the device preferences.
    dsf3g
  • So? So? So?

    Agreed, the purpose of stores is to rip off an extra 30% in parasitic fashion from everyone: partners who made you big, customers, 3rd world countries; anybody you can really. In addition to locking the Schmucks in: like ZDNET bloggers and their readers.

    Your Conclusion
    "App stores and content ecosystems are everywhere, and there's no reason to go away."
    "That's pretty brilliant."

    My Conclusion
    I'm losing patience with you Matt: you are a grade 1 sheep.

    How about:
    - I'm reducing your income by 30%. You OK with that?
    - no, you cannot leave. You OK with that?
    - well you can leave but it is hugely disruptive to your finances and working practices. Is that OK? Sign here for the lifetime subscription.

    Matt: how come you are so good at analysis but so crap at synthesis?
    Why when faced with tightening restrictions by convicted exploiters ... are you such a stupid obedient sheep?

    Why?
    jacksonjohn
    • Where is the opposition ...

      ... to this exploitative strategy?

      Where is the constant criticism of monopolists and exploiters?
      Where are the countermeasures?

      Where is your journalistic pride?

      Where is your integrity?

      Where is your intellect?

      Where?
      jacksonjohn
    • Post PC

      The 'reimagining' of the post-PC era by the greedy, American incumbents is a small number of locked ecosystems with constant high revenue streams ... aided and abetted by restrictive cloud and device architectures.

      And all you can say is "it's brilliant".

      Loser.
      jacksonjohn
  • Worse than Dignan

    This post is worse than Dignan's 'no use in complaining'.

    It shows you how you are being ripped off and concludes ...
    ... "it's brilliant".

    I have a question ...
    ... what are ZDNET bloggers for?
    jacksonjohn
  • What are ZDNET bloggers for?

    The established, corrupt, inefficient, expensive status quo.

    Sheep to the core.
    jacksonjohn
  • Really?

    How is this surprising anyone? OF COURSE IT'S TO MAKE MONEY! No substance here.
    jhnnybgood
  • IT for the benefit of consumers, businesses, communities and countries ...

    ... you're reading the wrong blog mate!

    This is MSFT, APPL, GOOG, AMZN Inc. support clan here.
    Even from the UK bloggers!

    BAA!
    jacksonjohn
  • It's brilliant!

    NT
    jacksonjohn
  • The Apple store...

    I have loads of inexpensive apps from the Apple store. It's tightly controlled, so I don't get any Malware. It updates quickly, and it's extremely easy to get your code up onto the store. Every commercial on TV shows apps for i platforms, and Android. Yet, people complain that Apple is all controlling. Well, someone is figuring it out, since everything is on the Apple platform by default. Perhaps those complaining are old IT guys who aren't needed because the Apple platform is so easy?
    Tony Burzio
  • Win 8 is a big part of this push

    "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."

    Valid points in your blog, but especially those involving increased revenue to the platforms.

    Why do you think there is this big MS push to Win 8 Metro apps? It's not really because benevolent MS wants to help us by have the same interface on all devices, it is because they want force everyone away from package software and into app purchased through their store and/or rented from them.

    To that end, it is my firm belief that they will do all in their power to cripple and ultimately remove the desktop and legacy software.

    If they really had the customer's best interests at heart, why would they put a "Start Button" in Win 8.1 that really does nothing? They really don't want people using the desktop. The button is there, but the menu is still missing. Gee, thanks, MS.

    MS (and others such as Adobe) definitely are trying to change the computing world, and for their betterment, not ours.

    Doc
    Doc.Savage
    • Not exactly true.

      As a developer, I can choose to monetize my app through Microsoft's monetization structure, or a different one if I choose. Unlike Apple, who forces you to use their monetization structure if you want to be in their store, Microsoft provides their ecommerce engine as an option, not a requirement.

      I can choose to provide in app purchases but bypass Microsoft altogether and use Pay Pal or my own ecommerce engine if I choose. Microsoft made it very clear that they are not forcing developers to lock in to their ecommerce engine.

      That said, there is benefit to having a homogenous method for software sales and delivery that provides real value to customers and to software owners. I'm not dissuaded from using their ecommerce engine in exchange for the great value they provide.
      gomigomijunk
  • Microsoft missed out?

    Maybe you are too young (or asleep) to remember the Netscape wars. When Microsoft finally figured out how a software company could make money by giving away its primary product for free, they pulled out all their tricks to make IE something that a user couldn't opt out of. Following the same model that Adobe uses with Acrobat, Microsoft has been collecting those tolls you think they have missed out on for years.
    Apps are just the shareware of the 21st Century, they should be available from lots of trusted sources, not just one or two. (I can get an Android app directly from a merchant, why do I need to go to Apple?).
    David Beachler
  • That 30% is barely above break-even.

    When you consider the cost of maintaining the infrastructure and administration, that 30% isn't generating a ton of profit. However, it does provide a big competitive advantage in the device market. More importantly, it maintains control of the customer relationship. iPhone users are much Apple customers than Verizon, AT&T, or Sprint customers. THAT'S where the value is!
    matthew_maurice
  • The "App Store" was something else, originally...

    ... who originated the concept? not Apple. And what was the original purpose of a repository of applications? not "cold, hard cash". No, that's a proprietary-software developer perspective, pure-and-simple. And as with all good ideas - including democracy - inevitably, if left in the control of greedy corporations, it can be used for something self-serving and despicable.
    Robynsveil
  • Microsoft would be bankrupt.

    "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."

    I don't consider it a mistake. Nobody had the technology to implement such a thing, and even today it can still be argued whether it's really the best way to sell software. "But it makes a lot of money for the platform owners!" is not really all that convincing.

    "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?"

    Yup: Bankrupt. Consumers would hate the idea. Microsoft was already in major hot water over anti-trust, adding their own personal store to that would have made it boil over, easily. Yes, how consumers think has changed over the past 30 years.

    It would also fail technically. It would overload the young Internet (which was not designed for this scale back then), and recent advances in stability and security would simply not be there (Microsoft got a clear "F" in security and stability in their early days).

    "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."

    Except there is. You can't use the app on any platform - it's not the same binaries, and you're actually downloading different binaries on different platforms. Pay apps are even worse, as you actually have to re-buy the app for every platform you own.

    And it's very expensive for developers: Every platform is a new app written in a new language. iOS apps? Written in Objective C. Android apps? Java. Windows apps? C#.

    There's no getting around it: It is VERY EXPENSIVE for developers to write and maintain all of these different codebases.

    "And, although 30% seems high in terms of commission, ISVs get an awful lot of that."

    I give you an "F" in logic. Even if ISVs got 100% of that 70%, it's still 70%. There's no getting around the fact that a cut is a cut is a cut. Whether or not the benefits you list are really worth 30% is debatable.
    CobraA1