Wholesale Application Community

As many of you know, the App Store landscape is becoming quite fragmented. There are scenarios where a device may have an OEM App Store, Platform App Store, Operator App Store and maybe even a 3rd Party App Store – as a developer, this is a challenge and you really have to think about where to spend your time to prioritize your energy. It’s not uncommon that the vast number of downloads come from one particular App Store or maybe even your own website. Gone are the days that being listed on an operator deck meant a gold rush unless of course you are still very feature phone focused.

In any case, as much as I’ve wished for reduced fragmentation, I haven’t seen it yet in 11 years in the mobile industry (and philosophically, it can be argued both ways as to whether fragmentation drives or stymies innovation). That being said, Apple’s success with the iPhone in some ways demonstrates what happens when you have 40M phones that can all run a single version of an app (ie no porting required). Nokia’s plans (at least what I heard) to focus on fewer devices that are cross-compatible going forward is consistent with this view (ie do you rememer J2ME’s original goal of write-once, run anywhere!?)

Anyways, my long-time friends at WIP have led a charge to ask operators and the WAC (Wholesale Application Community) to be cognizant of developers needs in an open letter to the ecosystem. Caroline Lewko is seeking additional comments/endorsements and had asked me to make this post, please check out the letter and provide your feedback – the goal here is to solve the App Store fragmentation problem – thanks in advance.

To Operator or to Not to Operator

At CTIA last week, I helped lead a session on “Making Money” at WIP JAM run by my friend, the mobile machine, Caroline Lewko. Anyways, a couple interesting notes came out of our discussion that I want to share – the question is whether I partner with an operator to distribute my application?

  Direct to Consumer Partner with Operator
Volume 100s of K Millions
Money Not guaranteed Guaranteed but painful rev-share
Time ~3 Months 6 to 18 months

This simple table actually represents quite a bit of learnings. The most controversial row is volume – app stores have definitely made it a lot easier to achieve millions of installs but most developers still get stuck in the 100s of K of installs.

Most interesting is with revenue, many of my friends at many of the large mobile game publishers are struggling with the iPhone and other “democratized” app stores. The problem is, with carriers, they have guaranteed revenue since they have guaranteed placement – with the app store, there is no guarantee, they could spend 3 months of dev time, money on licenses and not achieve an ROI. This high-risk distribution avenue doesn’t immediately suit well for the traditional “tight margin” mobile game publishers.

And as you would expect, working with operators takes a lot longer (and a lot more money) than most people imagine. Most of this is because of the painful requirement of having to port to all their phones – I fully expect this to change since there has been increased focus on the high-end.

One final note, sort of the VC pain, how many mobile companies do you know that make millions a year that do not require operator partnerships (very few) – that’s why I’m an industry fan of the lifestyle business.