Lets have some realism in the apps stores hysteria
This industry is so prone to hype and hysteria. Right now the hot buzz in mobile is "apps stores", and every handset maker, smartphone operating system provider and major mobile operator/carrier is eager to launch their own apps stores, while the tech-oriented press and bloggers all obsess about the traffic and downloads generated by Apple's iPhone Apps Store. I want to bring some voice of reason to this hysteria. And yes, this is one of my trademark long and detailed blog articles, so get your coffee before you start.
So, to start with - this blog story is not about me being 'against' apps stores, or 'against Apple iPhone' for that manner. Please do not misunderstand me. I want to inject realism into what I see as hysteria right now, totally unjustified hysteria and hype, that is leading many executives to make costly mistakes, in mis-understanding the overall picture of the mobile services and data opportunity.
APP STORES ARE GREAT
So lets be very plain about this. The app store innovation is a great new vibrant economic opportunity - for those who make applications. The PC market has been stagnant for many years, so there is not a vibrant new applications market for the PC customer base of about a billion+ devices. Where PCs now go, in many parts of the Developing World, the market is symptomized by illegal copies of software, so application developers do not see much economic opportunity there, where most copies of apps are pirated.
So, when Apple caused all the big media attention launching its Apps Store in 2008, it also attracted a big interest in providing apps to this platform. There are countless big successes and very many innovative mobile applications that have been deployed on the iPhone. It has been very good for the mobile industry, and it has been a powerful incentive for all those PC-oriented developers to move over to mobile, to join the 'mobile revolution' so to speak. Every week we hear of cool new iPhone apps, just today I Twittered about Brittney Spears's fan club app for the iPhone which is very clever. And what attention the Apple iPhone Apps Store has raised, has also helped other players in the industry to improve their offerings in an 'eco-system' for developers, with Nokia focusing on the Ovi store, and all smartphone platforms and makers such as RIM Blackberry, Windows Mobile, Google Android etc providing now similar apps stores, as well as the other handset makers, and big operators/carriers. This is all good.
The smartphone was a very cumbersome and unfriendly development environment for application developers before the iPhone Apps Store. Also payments were a problem, the eco-system for developers very immature. Today there is a clear race to have the best application developer environment and this competition is good for the industry - and for developers.
APPLE iPHONE APPS STORE IS WONDERFUL
So, what of the Apple iPhone Apps Store? It is wonderful - for the developer. I have heard from so many developers, who say that developing apps for the iPhone is by far the easiest of any smartphone, and the Apple iPhone Apps Store is by far the best environment to have your prospective customers find your apps, for you the developer to market your apps, and and for you the developer to collect money from your clients. It is currently the best-of-breed in its class. And it is helping set the standard for ever better apps stores and developer eco-systems by all others who offer apps for smartphones.
There are certain unique aspects to the iPhone Apps Store that give it (at least currently) incredible advantages - to the developer. Most of all, the iPhone through three phone models since 2007, and the iPod Touch, have the same form factor for its UI, same screen size and orientation, same inputs and outputs, etc. This is completely disasterous on any other platforms. On Symbian you can find 2 inch, 2.2 inch, 2.5 inch, 2.8 inch, 3 inch, 3.5 inch, 4 inch screens (and more). You can find screen formats of square screens, 4:3 aspect ratios, 16:9 modern TV aspect ratios, even letterbox (movie) screen aspect ratios etc. Portrait orientation or landscape or variable. Then there are differing pixel densities even for same size screens, and color richness etc etc etc. That was just a bit about the complexity of the screens. What of inputs, what of all the other technical parameters? Design for that complexity and cry...
APPS STORES ARE FRACTION OF SMARTPHONES
Now, lets go to reality. First, not every buyer of any smartphone - including iPhone - will install apps. There are users of the iPhone, who use it for its 'looks' rather than its abilities - it is a very sexy desirable looking phone. There are many countries where the Apps Store is not operational. So while the download numbers from the Apple iPhone Apps Store are enormous, this is not all users. It is a fraction - albeit probably far more than half of US iPhone users today, still only a fraction - of all iPhone users. Understand what I mean. If the total installed base of iPhones is 35 million, the download gigantic volume does not change the fact, that the total addressable user base of downloading iPhone users is by definition less than 35 million. Is it half, is it two thirds or one third, we are looking at a very small number globally.
And the iPhone Apps Store is quite a 'special case' and will not necessarily replicate at the same level in the rest of the world, across the rest of the smartphones. To start with, the original iPhone was very much an 'incomplete' smartphone. So what do I mean by that? I mean that most contemporary cameraphones in 2007 when the iPhone launched, with 2 megapixel or better cameras - did record video 'natively' out-of-the-box with the camera feature. But the iPhone camera only took still images, did not record video. But then, no problem - at the Apps Store you could download an application to your iPhone, and 'fix' this 'deficiency' by simply installing a video recording app to your iPhone.
One, this is a clever way to enchance your device. But it did mean, that for some uses of a phone, that most contemporary rivals like Nokia, Samsung, SonyEricsson etc included as standard, out-of-the-box, like video recording on the camera function, or say the QR Code/2D Barcode reader - Apple had left those functionalities off the shipping (early) iPhones and then users could go and download these from the Apps Store - often for free.
So some of Apple's smartphone application load traffic is not likely to be repeated by other smartphones, simply because for example the market leading Nokia Symbian phones would have these software elements pre-installed on their smartphones - like video recording for the camera feature. One could say there is 'artificial demand' only for Apple branded smartphones due to their 'stinginess' in pre-installing apps and features to the iPhone.
APPLE IS LUXURY BRAND FOR PHONES
Meanwhile, on Apple - the iPhone is a super-premium high cost smartphone. It is (currently) in the luxury price bracket. Just to be clear, for those readers who may not know of this - that US price tag of 200 dollars is an illusion - you are still buying a 600 dollar iPhone, only paying for it in installments over a 2 year payment plan. The iPhone 3GS is not a 200 dollar phone, it is a 600 dollar phone exactly like the Nokia N-97 or the Blackberry Bold, and even in the most wealthy markets on the planet, that is a super-premium luxury brand phone pricing, not a mass market phone. At that kind of pricing it will never be in the pockets of a majority of consumers in any market.
It does not mean its a bad phone - the iPhone 3GS is a very good phone, but it is as much a luxury product as a Jaguar or Mercedes Benz car, and will never have a mass market type of market share among all phones (or cars in my analogy). Far cheaper smartphones exist and will flood the market - Nokia has many smartphones in the 200 dollar price range.
Obviously it does mean, that the typical iPhone owner is very affluent, in any country, and is a very desirable type of customer for any brand for example for advertisers, and is a good candidate to buy other premium and luxury things (and well-designed things).
But please, for all that hype, do understand, at the iPhone Apps Store market potential, the way the iPhone is today, it is NOT a mass market phone. And don't be fooled into thinking that somehow Apple dramatically dropped its price from 600 dollars 'premium' pricing to 200 dollars 'mass market' pricing. That price drop was an illusion. The iPhone does cost 600 dollars and that is its value, and that places it squarely in the luxury phones category, super-premium cost phones.
It is NOT like the iPod which became a mass market music player, or the Apple branded PCs which have been mass market PCs. Don't be misled by the press headlines of Apple having 17% of smartphone market share. That is like saying Porsche has 17% of sports cars. The sports car segment in cars is still the luxury bracket. You need to look at all phones, not just follow Apple's PR spin to look at only smartphones.
The reality is that currently only 3% of Americans have an iPhone and if its price stays at around 600 dollars in real terms, it will never hit 10% of Americans or 2% of the world. That price level has to come down dramatically, for the Apps Store market to ever be a viable mass-market consumer channel. There is nothing wrong with having a premium luxury product and selling goods (apps) in a premium luxury store - but that will not get you the mass audience. It cannot. 97% of all Americans do not own an iPhone. Most cannot afford the deal AT&T is forcing them to sign up to. no matter how much they may 'aspire' to own an iPhone. Many people want to own a Jaguar or Beemer or Benz or Cadillac then buy a Toyota or a Chevy. For American readers, the Apps Store is like having your product sold in Saks 5th Avenue stores only, not at K-Mart. You will make sales at the Apple Apps Store, but it is only a tiny niche of the addressable market of all mobile phone owners.
NOT ALL APPS DOWNLOADS ARE PAID APPS
Now, back to the Apple iPhone Apps Store. It has a lot of free content, and a lot of paid content. The early evidence suggests that the majority of apps downloaded are free apps. Now, that is not such a bad thing, even free apps have to be developed, so there usually is some sponsor or owner of that application concept who was willing to foot the bill. A lot of the free apps are adver-apps, and that is also a good concept. But do understand, that of the massive download volume we hear about, most is free and that should not be very surprising.
What of paid apps? Here the early evidence suggests the majority of paid apps is games. That is fine too, but then we are looking at a relatively narrow market of consumers who are willing to pay for videogaming. Again, don't think they'll buy your clever information news management application, if most Apple paid apps are games. Or then try to turn your idea into a game perhaps?
The biggest category of 'applications' by volume of titles at the Apple iPhone Apps Store used to be games, and just this month it shifted so that today the biggest category of 'apps' is ebooks. Yes, we do download them and save them to our device, but is that really 'an application' or are we now selling 'content' or 'titles' via the apps store? So the Apps Store is murphing into being a smartphone-oriented rival to Amazon bookseller and Kindle eBook reader? Pay attention to this shift, some of that revenue that is being generated is not any type of app, it is pure content (eBooks for example) not applications.
So - lets take a breather here. Apple's iPhone Apps Store is great, it has tons of apps and gets massive amounts of downloads. However, whether its a hundred million downloads or a billion downloads, the total accessable market did not grow whether apps were 100 million or a billion - its still only 35 million total iPhones out there globally, and total installed base of iPhone users is by definition less than that, as some iPhone users have upgraded and thus some of the newer iPhones were sold to those who already owned an older model.
Not all iPhone users will download apps. Those who do, will greatly prefer free apps. With free apps, there will be a disproportionate amount of downloads compared to apps that are actually used. Out of paid apps, most are games. Today, out of all items available at the Apps store, the largest category is eBooks - which are not even true applications. (Incidentially, I applaud this strategy by Apple, but just want this to be clear - lets not now fall into more hype and hysteria about it, if Apple manages to rival Amazon via the Apps Store and somehow equate that as an 'applications' opportunity. Mobile phone books are a far bigger opportunity sold directly to phones, without 'apps' and in Japan generate half a billion dollars of revenues already, sold directly from the mobile internet websites of Japanese booksellers or direct from m-books publisher sites)
It can well be said, that the iPhone (and iPod Touch) is the nearest rival to the Playstation Portable, as a pocketable gaming platform. And offering eBooks, it is turning the iPhone into a viable rival to the Kindle style of eBook readers, while making the Apps Store a rival to Amazon. As the total 'downloads' shifts from real apps to 'content' like eBooks, please do not be deluded into thinking just because it was sold by Apps Store, it is an application. That is Apple cannibalizing Kindle and Amazon sales, not creating a bigger market for any developers out there coding applications.
Does that mean that every title in the Apps Store is an app, no. Does it mean that there is something unique here for Apple. No. But yes recognize on the most hyped Apps Store, at Apple, not all iPhone users download apps, not all apps are paid-for content, and of paid content, not all are real apps. So far so good. This is Apple's best market, the USA where the iPhone has 3% of American and under 1% of the rest of the world's phones.
OTHER APPS STORES
Ok, so Apple is a special case. What of the bigger smartphone platforms? Symbian has 10 times more smartphone handsets in use around the world. RIM's Blackberry has about twice the installed base of smartphones than the iPhone worldwide and is far the biggest smartphone platform by installed base specifically in the USA. And there is Windows Mobile, Google Android, Palm etc. Will their users download apps. Yes they will. But will they do so as much as Apple sees now in the Apps Store. I think not. Makes no difference how 'good' their Apps Stores and how many 'titles' they may have.
Why? Well, first the Apple is a very uniquely consumer-only focused smartphone platform. It is the least business/enterprise oriented smartphone platform. Compare it to Blackberry, which is predominantly a business/enterprise smartphone, which is currently breaking into the consumer smartphone space. So while the Blackberry does have a vast library of apps, they are mostly business/enterprise applications. These are sold through various business/enterprise solution providers and are not sold via any 'apps store' but rather they are installed by the IT departments of the enterprise/corporate customers who deploy Blackberries by the thounsands as employee-phones to mid-managers and executives. So if they have some app built to do say CRM system integration with the company's SAP based CRM solution - that is an application for a smartphone, it will be deployed to thousands of Blackberries at that corporate customer, but it will not equate to thousands of individual SAP apps 'bought via an Apps store' at the RIM apps store.
So for at least Symbian, RIM, Windows Mobile and Palm, a significant part of all apps that are truly sold to their smarphones - do not show up in any apps store statistics (Google's Android is still so new, we don't have a clear idea of their precise focus area).
The Apps Store measurement is a consumer focused opportunity and when we obsess about it, we ignore a huge already-well-established mobile applications opportunity for business/enterprise apps. Not sold via apps stores. Don't think, if for example RIM or Symbian/Nokia 'apps store' sales are not as impressive as Apple's that their 'total' apps opportunity isn't bigger. Blackberries and Nokia E-Series phones both have bigger installed bases among just business/enterprise customers worldwide - than the total installed base of Apple iPhones. And I'd suggest for practical purposes every single enterprise/corporate smartphone for large corporate customers has at least one 'application' installed for the business use - corporate email if nothing else. That is not your Hotmail or Gmail or Yahoo email client. A robust, secure corporate email solution, and its smartphone client. An application for a smartphone... Most likely business/enterprise smartphones have many apps, pre-installed by the IT department before the employee even gets to turn on his new Blackberry or E-Series.
EMPLOYEES OFTEN FORBIDDEN
Palm, Windows Mobile and Nokia's E-Series (Symbian) are typically strongly enterprise/business customer -oriented, so again, there often business/enterprise employee phone guidelines expressly prohibit the employee phone from being used for personal uses, ie installing Facebook etc and installing games and so forth. Out of all smartphones out there, Apple is singularly not successful in the enterprise/corporate space (had something like 2% of all US based iPhones with corporate customers according to their CTO earlier this year) so Apple does not have this 'hindrance' to its iPhone users coming to its apps store and 'freely' buying apps.
Now, all smartphone makers are rushing to capture the bigger consumer market (bigger than the enterprise/corporate market) and Nokia's N-Series is a good example of this strategy already years prior to the launch of the iPhone. But recognize, of the total installed base, the Symbian, RIM, Windows Mobile etc smartphones - many are with corporate/enterprise customers and this will distort the total pattern of downloads of apps. Conversely, far more true enterprise-apps will be sold to RIM, Symbian and WinMo smartphones than ever can hope to sell to Apple iPhones for the same reason. And enterprise apps often feature corporate licenses - often annual licenses - rather than single unit downloads - can be far more lucrative business than trying to develop a hit app game to the consumer market, for example.
On most other smartphones, a large proportion of apps will be sold to the enterprise/corporate client, bypassing any apps store. And with many employee phones, there are restrictions of what may be installed to it, limiting their total market potential to sell consumer apps. No other smartphone platform can replicate Apple's performance, when counted as a percentage out of its installed base of phones, due to these unique reasons about Apple's situation in smartphones.
USA MARKET IS ANOMALY
There is a further dramatic distinction. One third of total iPhone users are in the USA. but only 6% of all mobile phone subscribers of the planet are in the USA. The success of the iPhone is totally disproportionately in the USA. The smartphone applications market opportunity is dramatically more 'mature' in the USA than in the rest of the world. The US is very highly penetrated on personal computers in the homes and offices. Most PC users are quite familiar with application downloads and installs, and have personally done it many times, on many PCs, and are quite comfortable doing it. And no doubt, PC users find that the experience of an application installation onto an Apple iPhone is particularly pleasant, easy, hassle-free.
The rest of the planet is not like the USA. Even in the advanced parts of the Industrialized World, Europe and advanced Asia-Pacific, the penetration rates of PCs lag those of the USA, and their history of use by consumers is often far shorter. So users are far less familiar with the concept of apps to install to PCs. There is more 'fear of computers' so to speak, among regular consumers, especially those who in their work do not use PCs. Beyond the 1 billion people who live in the industrialized parts of the planet, the other 5.8 billion people do not have easy access to PCs at all (one PC for every 20 people on avarage, most of them have not touched a PC in their life). There is not a historical precedent for any kind of 'applications downloads' or installs.
What this means, is that the hysteria around smartphone apps stores is centered in the USA, especially around Apple fans and enthusiasts (but also Google, Microsoft, RIM and Palm) and they get ample 'good evidence' from their home market, which will (probably) not translate to the rest of the world. It actually distorts the picture being artificially strong in favor of an applications market for smartphones. Just like for example push-to-talk, a great mobile communications idea that worked in the US market due to it being so far behind in SMS, and never took off in the rest of the world who were far more advanced in mobile at the time.
By the way, while we are on the history side, Apple did not invent this apps store concept in 2008. The world's first Apps Store was launched by Japan's NTT DoCoMo as far back as 2001, as the i-Appli. All three big mobile operators in Japan have had apps stores for most of this decade
So, not all Apple iPhone smartphone users will install apps. Both the Apple and the US markets are 'extreme' and thus more apps-oriented than the rest of smartphones and rest of the world. Even among all other smarphones, the proportion of customers and the total number of downloads - will not be as great as Apple sees today with iPhone Apps Store.
Conclusion number 1 - the apps store maximum opportunity is a sub-set of all smarphones, and will be proportionately less successful on other brands of smartphones than the iPhone and in countries other than the USA.
Conclusion number 2 - Apple's iPhone Apps Store is a small subset of all smartphones and even in the USA, a far larger installed base of RIM Blackberries exist, and worldwide more than 10 times bigger Symbian installed base exists for apps. Lets not obsess only about the iPhone. If you do want to discuss smartphone applications, please do note Apple is a small slice of all smartphones. And apps stores exist for all major smartphones, and - very importantly - apps are also sold through other means, including business/enterprise apps, and don't forget embedded apps to the phone directly.
SMARTPHONES IS SMALL PART OF ALL PHONES
So we then compare and contrast. Smartphones are actually a very small part of all mobile phones in the world. When compared to personal computer sales, if we hit 180 million smarphones sold this year, that is about 64% of the size of total PC sales worldwide, and since last year, more smartphones are sold annually than all laptop style PCs (laptops, notebooks and netbooks) combined. So it is very easy to see why the global PC focused IT press is very eager to study smartphones.
But yes, we will sell roughly speaking about 1.1 billion new mobile phones this year. The market for non-smartphone mobile phones (cellphones) is over five times greater than the market for smartphones, out of new phone sales this year. When we look at the installed base, its even worse. There are about 3.8 billion actual activated mobile phones in use this year (out of a total of 4.6 billion phone subscriptions)
The total installed base of smartphones is about 550 million in round terms. So about 14.5% of all mobile phones in use on the planet are smartphones, 85.5% are simpler 'feature phones' or basic phones. Before you think - but I can't sell my app to simpler phones - think again. This year 50% of all phones in use are Java/Brew capable, meaning you can install apps to them! Thats 1.9 billion devices - almost twice the total worldwide installed based of PCs, and 3.5 times more than all smartphones - oh, and 54 times bigger opportunity than total installed base of iPhones. Did I get your attention?
Now, I am not in the least bit suggesting that its 'easy' to develop to this market, and yes, Java has all sorts of problems starting with a zoo of specifications, and you'd need to go through a myriad of environments to get the apps to your consumers - but hey, lets be clear about this. If we talk apps, Java/Brew will get you the world's biggest apps platform, far far bigger than all types of PCs. Why isn't anyone talking of this side of the business?
Conclusion 3 - a far greater mobile applications opportunity exists beyond smartphones, for all phones, on simpler platforms but with plenty of global coding and software competence, such as on Java and Brew.
THINK BEYOND THE APP
If you are thinking of your application, and the service you want to deploy. In most cases, you can deploy your mobile service either as a stand-alone installed app, or a 'service' on some service platforrm like HTML/web, or WAP or MMS or SMS etc. Now the economics get stunning. On the PC based web, you can reach a total internet-connected PC population of 1.0 billion (the rest of the 1.7 billion internet users access in web cafes or on their phones).
Then on the WAP so-called 'mobile internet' environment, you reach an installed base of.. get this.. 3.4 Billion phones ! Obviously not nearly all are actively using WAP services, but over 1.2 Billion people already do use the mobile internet - Yankee Group said 29% of the planet were active users of browsing on mobile phones at the start of this year. So you have an installed base of 1.2 Billion who need no training, their phones are correctly configured, they have the right pricing plans, etc, and they already consume mobile content via their mobile phone browser. It may be news via WAP or get their weather or sports scores or do Google searches or access Facebook etc. And if you are adventurous, to reach beyond - yes, globally you can target a potential market of 3.4 billion conneced WAP-capable devices in use around the planet.
Now consider the money involved. If you think your clients are willing to pay 2 dollars for the app 'download' on the Apps Store, wouldn't they be willing to pay a dollar a month for the 'service' instead? And you get 12 dollars of regular revenue annually from your customers, rather than one 2 dollar payment? This is the magic of mobile apps. The CEO of Softbank (Japan's third largest mobile operator/carrier, and its exclusive iPhone network) was just speaking at the Mobile Asia Congress this week and said the total value of mobile content service revenues in Japan alone - are worth 14 Billion dollars annually! Japan has had apps stores since 2001. Softbank is Japan's iPhone network. Yet its CEO says mobile internet content revenues is the giant market opportunity. Perhaps he knows something. Nobody is suggesting Apple's Apps Store generates even one tenth of that amount of revenues globally, this year...
But if you are willing to keep it a bit more simple and standardized, on a sounds, pictures, videos and interactivity -level, then there is a multimedia standard for mobiles, called MMS. You may think of it as 'picture messaging' and think its a lousy idea to try to charge consumers enormously to send pictures from one phone to another. That may be true, but the astonishing part is that MMS is a global hit.
MMS is enabled at more than 2.8 Billion mobile phones and their networks, and has 1.4 Billion active users. Yes, more users of MMS than all PC based internet users, far more users than total user base of email or Google or Facebook or YouTube or Twitter. MMS has almost as many users worldwide as there are TV sets on the planet (its neck-and-neck this year, next year MMS will be bigger). All sorts of entertainment and news services are being deployed on MMS from pictures to clips to sounds to games to quizzes to coupons etc etc etc. And MMS is fully interactive, like SMS. How big is MMS ? Globally worth 26 Billion dollars last year said Portio.
While many who do not understand this industry very well, still think MMS is somehow a 'failure', in advanced markets its totally normal, used by the majority of mobile phone owners, and generating tons of money. The CEO of China Mobile (the world's largest mobile operator/carrier with 500 million subscribers) just said at the Mobile Asia Congress that MMS in China is a 'mature' mobile content type in line with SMS. In Norway 84% of the public send MMS. It is experiencing phenomenal growth. In Australia MMS grew 300% just last year. Even the USA is getting into MMS, as four out of ten Americans have sent an MMS according to Jagtag. If you can deliver your customer mobile experience on a simple multimedia format, then MMS is your best bet. The Apple Apps Store total revenues are likely to be far less than a billion dollars. MMS delivered 26 Billion dollars of revenues last year. Hello?
And if you go really simple, there is SMS text messaging. 3 Billion active users on the planet, and over 99.9% of all 3.8 Billion connected mobile phones on the planet has that ability. 76% of all mobile phone subscribers are active users of SMS text messaging. There is simple SMS and premium (paid) SMS and it is obviously an interactive medium. SMS even has the ability to launch WAP page sessions, so you trigger 'mobile internet' experiences from SMS. Worth globally over 100 Billion dollars, SMS is the data giant, either on mobile or on the PC.
So Conclusion 4 - for a truly massive audience and a truly massive revenue opportunity, that is totally viable today, go mobile 'services' not mobile 'applications'. Use WAP, or MMS or SMS, depending on your need, and you reach an active user base that is at a minimum 34 times bigger than the total installed base of iPhones. Except that these WAP users are all already experienced to pay for their WAP experiences. On MMS the total active user base is 40 times bigger than the total installed base of iPhones and on SMS it is 88 times bigger - and every one of these users is willing to pay (at least a little bit) extra for that MMS or SMS experience. Most iPhone users don't pay for apps, they only download free apps.
Obviously we can do free on mobile services as well, do free experiences, adver-games, promotions, coupons, trials, sponsored messages etc. But best of all, the user is not whining like on the web that somehow 'everything needs to be free' but the consumer on mobile is quite willing to accept, that all content and services on mobile cost something.
THIS IS OUR BIGGEST OPPORTUNITY: SERVICES NOT APPS
So, apps are a great opportunity - not for mobile, but for the much smaller IT/PC industry. Apps are a great chance for any service developer to get some money now, and if the Apple iPhone market is suitable for your needs (especially any developers in the USA), it is the easiest to develop for. Their total market however is tiny. Less than 1% of all phones on the planet are iPhones. Even in its best market, the USA, only 3% of all mobile phones (cellphones) is an iPhone. You can only reach 35 million iPhones globally and about 12 million in the USA today. It is a niche only, a rich person's luxury niche, no matter how you slice it.
If you do apps, then remember, Symbian and RIM/Blackberry are far bigger by reach of their audience - but yes, you get device fragmentation issues etc. It makes sense especially if you are based in the USA, to start with the iPhone because it is so easy to develop to and to sell on. But don't limit yourself to that tiny lake, go for the big seas of the other much bigger smartphone platforms.
If you do apps, think also beyond smartphones. The Java/Brew market is several times larger than all smartphones of all operating systems, rolled together. Its not always a friendly developer market, but you have reach into most pockets of most consumers in the Industrialized World, and well into a quarter of all pockets in the Developing World. So if the iPhone app market is a lake, and other smartphone markets are seas, the Java/Brew apps market is the ocean.
Beyond apps, think services on mobile. WAP, MMS and SMS will totally dwarf the smartphone market size. In all countries today these are viable service environments to deliver 'browser-based' and 'web-like' (but definitely not 'real internet') experiences via WAP, or very robust and compelling interactive multimedia experiences on MMS, or basic interactive messaging services via SMS. It is different selling applications for download, or selling a monthly service, but the scale is so enormous, its like comparing the reach of the oceans, to the reach of the air on planet earth.
Thats my view of apps stores. I am certain, that when we look back at the industry ten years from now, the vastly greater opportunity in mobile content, apps and services was selling services than applications, no matter how successful smartphones may become this coming decade. Apps are a side-show, the services are the main event. If you develop apps now, please study the services opportunities, and make sure you capture a piece of that bigger pie now, before everybody else is doing it too.