Smartphone apps are multiplying faster than Gremlins at a pool party - but should your company be making one too? silicon.com has the answer...
One of last year's biggest technology stories was undoubtedly the rise of the mobile app. From bedroom developers to some of the best known multinationals, it seemed everyone was building an app of some sort.
The uptake of apps among consumers is only set to grow as more and more people upgrade their everyday feature phone to a smartphone, while devices companies and operators continue to woo developers to build apps for their platform and launch the app stores to house them.
There's no doubt apps are here to stay in a big way. But what do they mean for the companies that produce them? What kind of business opportunities do they really offer? And, most pressingly, should your business launch an app of its own?
In the first part of an exclusive three-part series, silicon.com reveals how you can determine whether your business should be building an app - or steering well clear.
Start by asking the right questions
As you contemplate whether your business needs an app, first on your to-do list should be to take a long hard look at your customers and their tech habits: if there aren't enough smartphone users in your target market or customer base, you should think twice before setting your developers loose.
According to Forrester analyst Neil Strother, the two most important questions that businesses should ask themselves to determine whether their users are ready for an app are: do we have a significant number of customers using smartphones and how active are they on those devices?
It may sound obvious, but if your customers aren't using smartphones they won't be able to download or use your app, and the cash earmarked for its development may be better spent elsewhere.
That said, there are other reasons to build an app than to serve an existing user base: companies might hope to gain new customers, for instance, or use a quirky app for brand extension or a marketing campaign.
But in order to make that decision of whether or not to go ahead with an app, you will first need to formulate your mobile strategy.
"Companies must avoid jumping straight to the app as the answer without thinking about: 'What are we doing with mobile? What's our objective? What audience are we trying to reach?' - and then on the basis of that work out whether an app is the right thing to do," principal analyst at Forrester, Ian Fogg, told silicon.com.
Businesses should begin by asking themselves...
...what is their aim in mobile, and then work out whether an app is the best fit.
"The app should be well down the decision-making process," he added. "It shouldn't be: 'we need an app'. It should be: 'we want to do this on mobile, for this target customer group - how are we going to do that? What are the options? How does an app fit in?'."
As you seek to build a business case for an app you might, in fact, realise your company would be far better served by developing a mobile version of your website, say - or even using the humble SMS. "If more of [your customers] are just text messaging and not accessing the mobile internet then you probably want to wait [to build an app]," noted Forrester's Strother.
So the mantra is: do your customer research; understand the business need; identify the solution - and keep in mind that solution might not be an app at all.
What mobile platform should I target?
For many people, talk of apps is shorthand for Apple iPhone apps. The Appshopper website, which keeps a running count of approved iPhone apps, reckons almost 150,000 have launched - of which more than 130,000 are still available for download. Not bad for a store that's only around a year and a half old.
But a word of warning: apps don't just mean iPhones. The app world is expanding at an impressive rate as new players jump in and consumers become conditioned to expect more and more from their handsets.
Far from being an all-Apple show, apps are being sold to Android lovers, BlackBerry owners, Symbian users and beyond.
"There isn't just one app platform that's worth targeting," said Forrester's Fogg. "One of the… big challenges for a company thinking about building an app is which app store do they develop for? Which smartphone do they develop for? Every different smartphone a company builds an app for is additional cost."
How many app platforms are there? Probably more than you realise: platforms with apps stores up and running include Google's Android OS and Android Marketplace; RIM's BlackBerry OS and BlackBerry App World; Nokia's Ovi Store which hosts apps for devices running Symbian or Maemo software; and Microsoft's Windows Marketplace for Mobile to name a few.
There's no shortage of new kids joining the market too - only last December mobile maker Samsung launched an open OS called Bada with a plan for a corresponding app store, while plenty of PC makers are adding smartphones to their device portfolios (Dell recently announced an Android handset, for instance).
Proper customer research should help you find out just what type of handset is in your customers' pockets and so inform your choice of smartphone platform - or platforms - to target. If your customers are BlackBerry addicts then building an iPhone app probably won't be such a smart move, for example.
And if your marketing chief has their heart set on launching a customer service app on the iPhone, yet 90 per cent of your customers own Nokia devices, be prepared to stand up and point out the folly of such an action.
Once you have identified a marketplace you think is a good fit for your customers take a long hard look at what it offers - and make sure it can deliver the type of customer experience that you want your customers to associate with your brand.
How do you do that?...
Start asking a lot of questions, according to Fogg: "How efficient a marketplace is it? Is the marketplace one whereby consumers are likely to find their app or are likely to buy it if it's a paid app or download it if it's a free app? And there, it's not purely about how many apps there are competing for attention, it's also about how well designed is the overall experience?
"How likely is a consumer to browse through the app store looking for things? If they start doing that how likely are they to find it? If they find the app how well is the product described? Are there screenshots? Are there reviews from other users? How easy is it to download the app? Does it happen automatically? If you lose mobile reception does it automatically restart?"
As well as making sure your platform of choice can do what your customers will want it to, you'll need to make sure it tailors with your company's commercial plan too.
For example, some platforms have been considerably more successful than others to date in actually getting consumers to their shop windows - such as app stores that come pre-loaded on devices, which have been better at driving users to their wares.
You should also make sure the platform or platforms you want to target offer the functionality you desire in your app. If not you may need to scale back your app ambitions, or consider an alternative platform.
Stores can also vary in sophistication, such as whether they support paid apps yet, or offer in-app purchasing - a recent addition to Apple's App Store.
In-app purchasing allows users to buy additional content for the app, whether it be a magazine subscription or extra game levels, and could potentially open up another revenue stream.
iPhone vs 'the others'
For many mobile users, Apple's iPhone and iTunes App Store combo remains the undisputed kingpin in the app space.
The App Store's 2008 launch catalysed demand for apps and kick-started an app developer gold rush by simplifying the process of getting apps on phones. While it had been possible before, now it was easy.
And while app downloading has improved considerably across other platforms and devices, the iPhone and App Store remains the benchmark for the others to beat - making it still a very attractive ecosystem to build an app for.
However, looked at from the perspective of raw numbers, the iPhone does not hold the trump card...
While it may generate the majority of the hype in the app space, the Apple device doesn't have the majority of the smartphone market: just 17.1 per cent marketshare in the third quarter of 2009, according to analyst house Gartner, making it the third biggest player behind Nokia and RIM respectively.
"If you look beyond the Apple App Store there are a number of other app stores out there - none of them today have got the same breadth of category as Apple but there's enormous activity in the Android Marketplace, Nokia are putting a lot of effort into their Ovi Store for the Symbian platform. There's a lot of effort going into multiple app stores at the moment," notes Forrester's Fogg.
BlackBerry App World has around 4,000 apps; while smaller platforms such as the Palm OS and Palm app store will have fewer apps - and a smaller addressable market - still.
While it might be easier for an app on a non-iPhone platform to stand out - simply owing to the relative lack of competition - much of the attention and momentum around apps still remains with Cupertino.
The iTunes App Store also remains the most sophisticated app delivery mechanism around, and a successful iPhone app can rack up millions of downloads - and even has the potential to make serious money. A Pizza Hut app (see video below) for US iPhone users reportedly raked in $1m in revenue in its first three months after launch, for example.
However, for every smash hit Pizza Hut app that garners millions of downloads and maybe even millions of dollars, there are thousands and thousands of apps that go largely unnoticed and rarely downloaded.
One thing's for sure: the smartphone ecosystem is incredibly dynamic and as Apple has proved, the market can change almost overnight, so while the Android platform has been relatively slow to build a following up to now, it is being tipped by analysts to gain ground and momentum this year.
There's likely to be serious potential in other platforms too, be it Nokia's Ovi Store or RIM's BlackBerry App World that have large user bases to draw on.
All of which is to say that iPhone is not - and will not be in future - the only app game in town.
App platforms are growing - even if not all of them will continue to thrive or even ultimately survive - so keep a close watch on market developments and be prepared to align your mobile strategy accordingly...
When apps make sense
So you've done your research, chosen a platform or platforms - now you need to work out in which kind of scenarios an app might make business sense.
Here's the lowdown:
- If enough of your customers are demanding an app, that's a pretty good place to start. "If [a certain segment of your customers have] clamoured for something like this then you're obligated to at least investigate it," says Strother.
- Technology businesses may feel they have to join the app party in order to continue to be relevant to their customers. "For some businesses their objectives may be something highly interactive which only an app is suited to deliver," notes Fogg.
- For a multi-channel retailer, an ecommerce-enabled app adds another string to their bow. "If you're a retailer and you're showing actual sales through that device... it's a new channel so it makes sense that you're there, where some of your audience is," says Strother.
- Your business is such that your products or services can be enhanced by exploiting mobility. Questions to ask yourself are: "What are you going to do on the mobile phone that's different or better or enhanced," according to Strother. "Just putting a brochure on a phone for an airline doesn't add a lot of value - people could have a better experience just reading that brochure on the internet," adds Andrew Fisher, the CEO of music discovery service Shazam, which has been in the mobile app business for years. But an airline app with a mobile timetable and ticket-booking facility would offer additional value. "That's taking advantage of mobility so it's a well-thought-through proposition," he adds.
- You have an in-house development team that can make the app at relatively low cost for the business, giving you some leeway to experiment, learn and build skills. "A lot of the firms that are doing mobile initiatives are doing it as a learning exercise... or to support some other part of their business, or as a retention play," says Fogg.
- You have an idea for a utilitarian app that can fill an underserved niche - and will thus be useful to many people. "You have a really big idea or something that is really important that people want to do on their phones, so if you're a bank it can be pretty simple because people are starting to do mobile banking and if an application is built so that it involves something of utilitarian value then it's probably worth doing," says Strother.
- Your brand is big enough that people might expect you to have an app - and will actively seek it out. "If you're looking for just a branding experience that can be a possibility too - I know Coca Cola's done that with a couple of their applications," Strother continues.
- You want your business to be perceived as cutting edge. "Brands want to be seen at that cutting edge if they can," says Strother. "Especially brands that are maybe perceived as not being cutting edge."
Of course these are just guidelines: there are no hard and fast rules to say which businesses should and shouldn't have apps. "It really depends," said Strother. "It depends on your particular audience and whether that effort is going to be welcomed by your customers - or at least a significant portion of your customers."
And a word of warning: launching an app in the hope of making pot-loads of money is not for the faint-hearted. Businesses that actually make a profit out of apps are outnumbered by those that merely cover their costs or actually lose money on the venture.
Apps are only a get rich quick scheme for a lucky few: building an app with the sole intention of turning a profit is always going to be a gamble and could turn into a disaster.
Instead, it's more a more sensible approach to label the app as providing a potential new revenue stream as just one of several other business aims - such as brand extension, customer or staff retention.
In part two of this feature we'll talk to businesses that have launched apps - including Aurora Fashions, BA and Ocado - about what they were hoping to achieve and what sort of success they have had.