The Apps Stores are as irrelevant to mobile telecoms as Segway is to cars

I have had it with the silly obsessions with apps stores. I have really had it now. Come on guys, please please go back and get your basic prep-school math books and then read this blog. Apps stores are IRRELEVANT. Irrelevant to the global mobile telecoms industry and irrelevant to handset sales and gosh darn, TOTALLY IRRELEVANT to any intelligent brand owner like a Disney, CNN or Time Warner ever considering mobile. Come on. Its so small, and meaningless, you can't find their relevance with a good microscope.

IS FREAK SHOW

The apps stores are the big hype for the telecoms industry but they are total side-shows. Yes, they are important initiatives and developments in an industry that is in rapid transition. Yes, they are of interest as one angle of the mobile data industry, and a within it, only a tiny tiny part of it, a nascent but promising part that may become borderline meaningful - in a couple of years from now.  

Today apps stores are trivial - trivial - in total income to the industry. Trivial. No. I can't accept that. Trivial is far too positive a word. LESS THAN TRIVIAL. For those geeks and nerds who obsess about smartphones daily, and who can recite all versions of all operating systems and their launch dates, then yes, we may perhaps PERHAPS want to look into apps stores a couple of times per year.

But not darn-it, every week. These numbers are so silly. Three billion downloaded from Apple iPhone App Store since it opened. Who cares? 16,000 apps on Google Andoid app store. Who cares. The vast majority of Apple's App Store are free apps including 'bug fix' types of apps most normal smartphone makers pre-install on their phones (yeah, why would any normal smarphone maker put a 2MP camera on the phone in 2007 that couldn't do video, and force users to download an app so the cameraphone can be turned into a video recorder. When I'm at the rock concert and want fuzzy grainy dark videos with lousy sound, of my fave band as totally un-recognizable blobs in the viewfinder, and I take my super-expensive smartphone out of my pocket to record that once-in-a-lifetime memory, gosh, I expect the cameraphone to be able to record video - out of the box, like any other normal phone, not like early iPhones that needed this silly download 'bug fix'. No wonder so many are downloading apps).

And of the 'paid content' on iPhone App Stores, the vast majority is games and of what remains, then of the rest of paid content, the biggest part is books. BOOKS. Come on, while Apple now competes with Amazon and Kindle, and congratulations to Apple for all that but do we really bother to go count every week how many books Amazon has sold and celebrate that inveitably, that number has gone up?

This is an utterly silly SIDE-SHOW. A FREAK SHOW in fact. Those downloads on Apple are not all apps even, gosh a book is certainly not an application.

But please understand what I mean. This is a TRIVIAL and STUPID obsession with a non-story. Mobile data services are a HUGE opportunity and story, but "apps" are not it. Anyone wasting time and effort to count apps in apps stores is taking attention away from the real story, a huge story, a money-making story, a profitable story.

Yankee Group measured in 2009 that the total value of all apps sold in all Apps Stores, not just the Apple iPhone App Store was worth 343 million dollars. I do not mean to belittle some number that is hundreds of millions of dollars worldwide, and yes, its a very attractive opportuntiy for any application developer.

But applications are a small part of the software and services income of the computer industry. And software is only a part of the global computer industry. And the global computer industry is far smaller than the total telecoms industry. Now you get the picture? That 343 million total value of all apps store sales globally in 2009, compares to 5 BILLION dollars of annual income for one category of downloaded content of paid mobile service worldwide - get this - the ringing tone (says Juniper Research). I do not mean full track downloads to phones, not 'real tones' type of better quality ringing tones and am not talking about 'ringback tones' - each of which is also worth over a billlion dollars for mobile content by the way. No, basic ringing tones are worth 5 Billion dollars all by themselves.

Just one 'moronic' type of ultra-simplistic cellphone content type, the basic 'ploink-ploink' style ringing tone, that is downloaded roughly speaking by about ten percent of global cellphone owners, earns 14 times more than ALL app stores worldwide, not just Apple's. (and yes, you read it right, basic dumb ringing tones sell more than 2.5X more than all iTunes music sales worldwide annually). All of ringing tones are 'downloaded' content to phones. You don't need a smartphone for ringing tones (oh, silly iPhone, early iPhones didin't even accept ringing tones). And yeah, while most Apple App Store downloads are free, all ringing tones are paid content. Which is the better more economically viable story? The magnitude in just one category is so enormous as setting up a zoo and then celebrating the goat and ignoring the elephant at the zoo.

Do you now understand, why I am so insistent, that this is a freak side-show of totally disproportionate attention, this silly obsession with App Stores and counting how many thousand apps exist and how many billion free app downloads happened to some smartphone? Let me show you the real economics.

The total value of all premium content and services sold to mobile phones worldwide is somewhat bigger than that 5 billion of basic ringing tones. "Somewhat"? Hmmmm... yeah, this is perhaps even a bit more than just somewhat.

In 2009, Portio Research counted the global value of 'non messaging' premium content (music, gaming, news, etc) downloaded or consumed on phones and sold to them worldwide, to be worth 85 Billion dollars. Yes, 250 times bigger opportunity for any content owner like say a Disney or TimeWarner or Turner etc to make money today, on ALL phones, not those few iPhones that are in pockets of some 4% of Americans and less than half of one percent of the rest of the world. Understand how enormous this number is. Just 'premium' mobile data income (I am excluding messaging) is bigger than ALL internet content revenues, and all internet advertising income - added together! (Morgan Stanley said they totalled 64B dollars in 2009). Mobile content alone, is worth more than all global cinema box office revenues, and all global videogaming industry software income, and all global music industry income - PUT TOGETHER. Again? Mobile data paid content industry is bigger that music, hollywood and videogames, all added together. Its that big. And some crazy journalists count free downloads on App Stores and think this is the mobile data opportunity for the industry. Now in our zoo we are obsessing about the standard field mouse rather than the elephant.

But even this is not the real comparison. I just said, that Portio measured 'non messaging' premium content revenues for mobile. What of the total mobile data industry? It is now worth over 284 BILLION dollars globally, including messaging income (says Morgan Stanley). Thats 825 times bigger in value than all apps stores. Its not mouse to an elephant in our zoo, it is focusing on the ant and ignoring the elephant.

How can I put this in context? Its like taking the city of Wichita Kansas (pop 360,000) and only studying Wichita to make assumptions about what is happening in the USA (population 300 million). Thats exactly the same ratio, 825 times too small. I am sure Wichita is a nice town, but if you only study Wichita you now ignore the coastal towns with sea ports like Los Angeles, Houston and New York. You ignore the beach town in Florida and California. You ignore the cold regions like Alaska and the deserts of Arizona and the islands of Hawii. You ignore the mountain towns and the mining towns and the steel and oil industry towns. You ignore big cities like Chicago and small towns of 1,000 people. Wichita is certainly a part of the USA, but that one town of such small population is not representative of the USA. America's most popular newspaper is not the Wichita Eagle, etc....

We have mobile phone based data services and a giant industry of it. But it is NOT based on apps (today) and it is worth 284 Billion dollars. Consider this. If the global apps stores economic opportunity doubles in revenues every year, and the global mobile data industry (which grew by something like 20% last year in revenues) stops growing totally - then the apps stores can happily double every year, year after year, and year and year, for the next DECADE to catch up with the size of the mobile data services industry size today. Wake me in 2018 and we'll re-examine this. But don't give me updates every week of how many free content downloads it is now or how many books were added to some 'apps' store.

CONTENT FOR MEDIA BRANDS

And yes, you can make lots of valid content services - profitably - on SMS from anything like voting for American Idol on TV to such peculiar new services like ChaCha (The US SMS based human search engine for mobile which became profitable in under 2 years). We have magnificent stories of media brands and ad campaigns launched on mobile even in North America now. I am thinking of for example the print magazine The Hockey News which had been seeing decline in circulation like most print titles, and then after launching a paid mobile magazine (on WAP) they gained new readers - and get this - they increased print edition sales. Who increases paid print magazine or newspaper sales in North America these days? But this is the power of mobile. Don't obsess with apps. We have good news in the real opportuntiy of mobile data, the services side. And yes, store this number in the back of your brain: with a little bit of rounding off, the 'mobile data' opportunity is roughly speaking one THOUSAND times bigger than all apps sold in 2009 to all smartphone brands globally.

Or perhaps this will help you understand. If you take all content revenues on the internet, like Wall Street Journal asking us to pay for back issue stories, and add in all worldwide internet advertising income like Google Adwords, and then add in all global broadband access fees, and add all narroband dial-up internet fees - the literally total global internet industry - then mobile phone data business is bigger than that, by a huge margin. Why on earth would anybody BOTHER then to regularly go and count that one speck of dust that is near one tenth of one percent in size they call apps stores. Not one percent in size. Almost one tenth of one percent. Or how about this. The global mobile data industry is worth more than the global radio industry. Get your attention? Global paid mobile data earns more than half as much as global TV already and is expected to overtake global TV income in a couple of years (and many TV shows make their profits out of SMS voting). Hello.. Who cares about apps stores?

Apps stores are totally meaningless to the mobile telecoms industry and its revenues and economies and any handset sales (for now). It does not mean, that we should not innovate, and it does not mean, that from little beginnings big things cannot grow. But I can show you literally dozens of - dozens of - content CATEGORIES of media content in mobile that are far bigger than these silly little apps. My sixth book (Mobile as 7th of the Mass Media) has chapter after chapter and 16 case studies of true worldwide success stories in the mobile data opporunity on how you can join in this and make money TODAY with all cellphone users, not bothering with the trivial apps opporutunity that can only reach a tiny part of phone owners who have a smartphone.

APPS STORE TO MOBILE INDUSTRY IS LIKE SEGWAY TO CARS

How can I put it more clearly. You know those "Segway" automated two-wheeled electric things you can use to not walk, but move around. A kind of new type of non-motorcycle but something in that direction. The kind that should be impossible to fall out of, but President Bush famously managed to make it fall, etc. The Segway. Well, apps stores are so totally irrelevant to the mobile telecoms industry (today in 2010) as the Segway is a threat to car makers. I am sure that in Toyota headquarters and Ford headquarters and VW headquarters they do not read weekly reports on how many Segways have been driven or sold or used. They may perhaps, perhaps, read about them, once per year to keep an eye on it. But for the Trillion dollar global car industry, the Segway is totally beyond irrelevant economically.

And yes, the total global telecoms industry is far bigger than cars, in fact mobile telecoms alone is as big as cars. So the apps stores - its the Segway. Don't pay any attention to them for at least the next few years - unless you are an application developer obviously, you can make good money in the tiny scales involved. But even if you are a media brand - the big opportunities are MMS, SMS, WAP etc, far bigger, by factor of hundreds, than all apps stores.

Ok, did I make my point? Don't make any assumptions of why 'popular' or not some Windows Mobile or Apple or Google or Palm or Blackberry or Nokia smartphone happens to be, because of this silly 'obsession of the day' they call apps stores.

BUT THEY DECIDE WHICH PHONE WE BUY

No they don't!

We do NOT buy phones based on apps. We buy phones based on its communication abilities. If apps were the killer decision-maker, Palm would be selling far more smartphones than Apple because do you remember, just two years ago - the original iPhone 2G had no apps store - many industry pundits laughed at the original iPhone as not being a 'real smartphone' precisely because consumers could NOT download and install apps. Palm has had apps for a decade. Why isn't Palm the world's biggest smartphone maker? Palm had years and years of a head-start to sell apps to its smartphones. Oh, and so had Windows Mobile. Yet in its first year when it had no app store, Apple sold 10 million iPhones, and poor Palm, with all those apps, sold only 800,000 units worldwide. Come on. What happened to mankind between 2008 and 2009, that a year ago we did not care about apps - but bought iPhones which didn't have them, but today we somehow select iPhones 'because it has apps'... Apps is totally silly.

Apps are of interest ONLY to GEEKS. And don't bother to write that your grandpa just used the fart app on the iPhone and therefore all grandparents will buy 600 dollar iPhones on 2 year contracts, so they can download farts apps too. No. The iPhone currently has a little over 10 million active users in the USA on the AT&T network (had 10 M in June said AT&T) at which time it meant that 4% of all Americans with a cellphone had an iPhone.

EARLY ADOPTERS ARE GEEKS AND NERDS

That is by every marketing expert the textbook 'early adopter market'. The geeks and nerds. That does not change, that your wife 'who is not a geek' happens to have an iPhone. The marketing theory is crystal-clear about this, the early adopter market is DEFINED like this. The early adopter market will be in force past the first 10% of the total population getting any given technology, regardless of what kind of 'normal' customers happen to buy some of them. I did not invent this, the theory is universally accepted by marketing theorists and is over 30 years old and referenced in countless marketing textbooks and taught in all major business universities in basic marketing classes. The Apple iPhone is exactly like any other new high tech early in the adoption, and at the 4% level, more 'regular' users will accidentially get the device, and if yes, your wife and your grand dad like the iPhone, it bodes well for Apple's sales this year.

But mass market customers do not bother with loading apps to their phones. IDC said that worldwide there are 450 million smartphones in use in December 2009. The ITU said we have 4.6 Billion mobile phone subscriptions globally. So again, literally only 9% of all phone users, and only 7% of the planet's population have any kind of smartphone (half of them are Nokia's by the way and twice as many are Blackberries than iPhones and iPhones outnumber all Google Android phones by huge factors).

Again, this is TEXTBOOK early adopter market, and early adopter rules apply. Don't come and argue that your sister is not a a geek but loves her iPhone. Go argue with HUNDREDS of textbooks on marketing, that for all other technologies like TVs and VCRs and CD players and DVD players and TiVo and PCs and laptops and basic cellphones, the rules of 'early adopter' applied, but for your silly reason, now a marketing theory has to be thrown away because its the iPhone or Google phone. I will not bother to respond to those who claim 'early adopter' theories do not apply anymore for smartphones.  Go take a basic marketing 101 course at your local community college.

The early adopter theory further was developed by Geoffrey Moore in his books about Crossing the Chasm. It means that the marketing rules - why we are willing to pay for our technologies - CHANGE TOTALLY for the mass market. Early adopter markets are for geeks, mass markets for normal people.

The normal consumer will NOT be selecting their phone based on which operating system it has - and will not care - and the normal consumer will not bother to care how many thousand apps it has. Some geeky customers will, of course. But normal people will go to the store, and want their normal features. Some want a good camera (far more care about the camera than care about apps). Some want a QWERTY keyboard - far far FAR more than want apps. Some want a touch screen (but don't care for apps). Some want a good media player. Some want a good large display. Some want a simple phone. Some want a phone with a particular feature like a TV tuner for example. Some don't care what the phone does, as long as it fits a certain size criterion like perhaps fitting a pocket or purse or tight jeans. Some will care only about its looks - don't be an engineer about this, face facts, for some people looks are more important than functionality. Maybe the person will only buy a pink phone and if your ultra-smart superphone comes in black or silver but not pink, that customer won't consider it. Some users are so loyal to their brand they will only insist on the latest version of that brand of phone and couldn't care less if it is or isn't a 'smart' phone.

Oh - and with smarpthones - half of them in America are sold not to you the consumer, but in batches of thousands to corporate/enteprise customers as employee phones. Those are predominantly Blackberies (Changewave reported that 74% of enterprise phones in the US were Blackberries, oh, and the rest are not Apples, they are predominantly Windows Mobile, Palm and Nokia E-Series phones designed for business use, not consumer-oriented iPhones). With business phones their apps are intalled by the IT department. The normal mid-level employee won't have any say in the matter and the 'app store' will never factor into the decision - for HALF of all smartphones TODAY in America. So for all that hype, at least as much attention should be paid to business apps like for Blackberries? Oh, you forgot about those? The world has twice as many Blackberries in use as iPhones.

And yes, of course, some customers will be interested in apps and some will be interested in the operating system. Most of these, however, will be heavily into their PCs already, so they are the geeks with PCs who now want their PC experience in their pocket. They probably owned Newtons too with their earlier Mac computers. (hey, I should know, I'm a geek)

APPS IS A MYTH

If apps trumped telecoms, then stand-alone PDA would sell 200 million units today - all early stand-alone PDAs had tons of apps for them while early smartphones didn't, and smartphones would sell 5 million. But the reverse is true. Ten years ago the level of sales was the same. But in the past decade the 'I have tons of apps' stand-alone PDA sales DECLINED while the 'I only have some apps' smartphone sales exploded and today the ratio is 200 to 5. Normal people don't care about apps. Only geeks and silly American tech journalists obsess about them. How many downloads is it now? Can you go re-count it. How many is it now? Silly!


PS Apple fans - I am an ex Apple Mac trainer with an authorized Apple/Mac dealer out of Manhattan in the 1990s long before I was employed in the telecoms industry, and love the Apple brand and have tons of Apple stories in my books including iPod as a case study in my fourth book. My latest book has the iPhone in its subtitle and has part of a chapter dedicated to it. I called the iPhone the world's only transformational phone and said we will measure the total industry in two eras, the time before the iPhone and after iPhone in one of my most widely referenced and praised blog articles.

Just because some silly pundits and journalists are now distorting a real contribution and story (Apple did revitalize the stagnant apps store concept first launched in Japan a decade ago), does not mean that I somehow hate Apple. and while the original iPhone transformed the whole industry, I am also a realist and were among the first to point out, that the iPhone 2G was not yet a complete phone for its intention, and obviously Apple agree, as the 3G and 3GS iPhones were mostly fixes to faults in the original 2G iPhone that I had meticulously listed back in 2007 (not that they would do what Tomi Ahonen says haha), to bring the iPhone up to par with most of its smartphone rivals today. 

I was very clear to say that the 3GS is the first complete iPhone worthy of the Apple brand, and obviously it is by far Apple's most successful device so far. It is obviously possible to transform an industry with an iconic phone (iPhone 2G) and still for that product itself to be 'incomplete' or 'less than perfect'. So to be very clear, iPhone is brilliant strategy by Apple, profitable, gaining market share, with loyal users, and the App store is a brilliant further move by Apple. I am here arguing only against the hype about App Stores, and both those of Google Android and Apple iPhone App Store and to a lesser extent all other apps stores like Nokia Ovi etc. I am not in any way critical of Apple's strategies.

UPDATE Feb 10, 2010  - The TomiAhonen Almanac has now been released, it has 180 pages, 84 charts and tables (13 more than the 2009 edition) with sample stats, first opinions and ordering info at this story (there is even a new section in the Almanac about Apps Stores) TomiAhonen Almanac 2010 Released.

PSPS Thanks Jason Grigsby for correcting the spelling of Segway (I originally spelled it Seguay)

Comments

[Jason Grigsby]

Hi Tomi,

Looks like a good article. Similar tack on something I was planning on blogging about in the near future. Thankfully, you didn't make my post irrelevant. I still have something to say. :-)

I'm going to finish reading a bit later, but wanted to drop you a quick note that Segway is spelled incorrectly in the article. http://www.segway.com

[ARJWright]

Me thinks you were a bit more perturbed than I've been about the app store phenomena ;)

[Graham Brown]

Telecoms is always going to try pick the lock rather than discover the keys to long term success. Appstores are one such short-cut that appeals to our inherently unimaginative (read lazy) mindset in seeking that elusive silver bullet/magic wand etc. For the most part, as you note Tomi, they are of no consequence to 90% of the customers.

It's worth noting that the game has shifted away from top line revenues now and that the more astute players are looking for services that reduce churn rates across the network. On that basis, there is mileage in the belief that an Appstore of sorts will address the attrition issue.

[Jan Ole Suhr]

Hei Tomi,

just curious, but where did you get those numbers from!? They don't seem to make sense at first glance. Checking via Google, I found a prediction by the Yankee Group of those US$ 342 million but only for the U.S. and only for the Apple App Store, Android and Palm Pre. The same reference predicts $4.2 billion in revenue for the U.S. only by 2013.

While I personally don't care about predictions, I was just wondering if your numbers (comparing app sales and ringtone revs) were correct.

[Tomi Ahonen]

Hi Jason, ARJ,. Graham and Jan

Thank you all for the comments, boy these came fast haha.. I'll reply to all individually.

Jason, thanks. I corrected it and thanked you.

ARJ haha, what makes you think so. The really funny part was, that about an hour after I Twittered about this blog, I found a Tweet about a news article that said something like 'at 3B downloads, Apple forgets to mention 75% are not used after 3 months' - ie suggesting the 3B number is over-inflated. I went over, read the article, and then Twittered - with a straight face - after this rant haha - that yes, 75% of apps still used on iPhones is not bad news, it is very good result... I am feeling so schitzophrenic today (and so am I)

Graham - haha, so very true! Going for the silver bullet.. And how much has this industry managed to waste with that thinking haha.. But yeah, the churn/loyalty factor is very relevant. I do think, any operator for example (many now launching apps stores) would get FAR better bang for their buck, in churn/loyalty, in some more direct methods to make customers satisfied and loyal, but thats just me and my wishful thinking, eh?

Jan - thanks. I understand yea, the numbers seem staggering and its easy to think I must have mis-scribed the numbers, placed the decimal place in the wrong place or something. So yeah. I am totally confident the scale is right for all those numbers. Take ringing tones (basic) were about half a billion dollars in 2001, passed a billon in 2002, hit 2.5 billion in 2003, passed 4 billion in 2004 etc. Source Informa and other such sources. I monitor these numbers weekly and report on at least some industry stats here monthly and do a big annual industry review (all free) annually. And my nine books all are loaded with stats from the industry from Ovum, Gartner, IDC, Yankee, Informa, ITU etc. They call me the 'stats police' for the industry, so I am totally not a hobbyist in this space, I am deeply passionate about my numbers. So yeah, is the exact number 5 billion for ringing tones in 2009 or perhaps 4.5 billion or 6 billion, pick your analyst. It is several billions. TOTAL mobile music is in the magnitude of 10B to 14B dollars in 2009 including more advanced ringing tones, so-called true tones, plus MP3 downloads, plus ringback tones, plus subscription music services plus other smaller music categories. All major analysts say basic ringtones are still the biggest category of music. So just on the ringing tones, is totally consistent and give me +/- half a billion, all major analysts agree on the scale.

I could do the same for SMS and VAS data and MMS etc etc etc. I trust you'll take it on reasonable face value that the scale is right for these numbers. I have tracked every one of them for the whole decade and am quoted in the FInancial Times and Business Week and Economist etc on the stats so its not sudden one-time weird numbers pulled out of thin air haha...

Thank you all for writing

Tomi Ahonen :-)

[Romain Criton]

Wow, Tomi, what a rant ! How much coffee did you sip today ? ;-)
Well I've commented in the past on one of your previous post on this subject, and whereas I agree on several myths you're taking aim at, I don't really agree on the conclusion that apps and app stores are just "irrelevant".
So yes I'm with you when you say nobody chooses their phone based on its App Store shelf space: as you say, most people buy a phone because of its looks, its features, its brand strength... Then app developer simply rush to the most popular phones. The particular strength of the Apple App Store, is that it lets you address in one shot a significant number of people (don't forget it's not just about the iPhone, but also the iPod Touch) with 1) deep pockets and 2) a device homogeneity not found elsewhere (limited number of different devices, same OS, same screen resolutions, same input methods, binary compatibility...)
Despite that, yes the App Store "Gold Mine" is a Myth. But if you put the App Store in the perspective of the whole consumer software market, the App Store is no different: it's not easier to strike it rich selling PC software than it is selling iPhone or Android apps.
The whole software industry is undergoing a painful transition these last years, with the advent of Open Source software, web apps and in general new business models where the software is provided for free.
So my point is that apps should not be considered only as content that is directly monetized like ring tones, they should be considered as a "bearer" (like SMS, MMS, mobile web or WAP...) that a brand, a company, a non-profit organization, can use to reach its users or consumers, whether it is to provide a service, extend features of their other products, or provide a product per se.
And right now, apps are the "bearer" providing the richest, most interactive experience to the user, with full access to hardware capabilities, connectivity, etc.

Also, there is more to mobile apps than the iPhone, and smartphones in general. Many many basic phones are Java-capable, so also app-capable.
As you point it out, mobile apps are nothing new, and so are App Stores.
If you set aside games (downloadable Java games have done pretty well for years), the handset manufacturer and mobile carriers are a bit slow to provide an "App Store" offering beyond the iPhone that could attract as many developers, but I really believe they'll eventually find the right mix and generalize app stores and apps on almost all phones, even so-called "dumb" ones
Actually, what I think is irrelevant is really the whole "smartphone" vs. "non-smartphone" segregation.
As you point it, the iPhone wasn't really a smartphone according to many criteria when it was released.
And what will we call the upcoming line of Samsung phones sporting their new "bada" OS ? Are they smartphones or not ?
And don't get me started on today's attempt by Google to coin a new "superphone" sub-category...

[Henry Sinn]

....As per a previous reply to another post....
Who needs an app if you have a browser?

[Auto Marketing Group]

Thank you for such wonderful ideas. I loved your post as well--especially information related to cars.Thanks for sharing...

[Daniel Perry]

I have enjoyed your blog and your e-books! Apps are frequently of little practical utility. I would never pick a smartphone based on what apps were available. I need a phone to be the best phone I can use - I have steered clear of the iPhone because of the negative reviews of its voice quality. I am amazed that it took the iPhone so long to be able to do some of the most basic tasks that older smartphones have been able to do for some time.

I like your advice encouraging developers to develop for the iPhone first but seems to me that your "Pearls" e-books and your hard-copy books point to a better approach: Develop an "app" that provides value at the most basic level - SMS - and you win at scale. As an attorney, I have had to fundamentally revise my own view of such a business model. It is an exciting ... and MOBILE, future awaiting us all.

Daniel Perry
http://twitter.com/danielperry

[kevin]

@Henry:
For many multi-step tasks, doing it through a dedicated app is significantly easier and quicker and nicer than going through the browser. Of course, it depends on the quality of the app. But those who get it right, stand to make a BRAND for themselves.

[Zarko]

Hi Tomi,
a related article came out online today so it's worth making a small comparison on numbers.

One of your statements above is:
"Yankee Group measured in 2009 that the total value of all apps sold in all Apps Stores, not just the Apple iPhone App Store was worth 343 million dollars..."

The GigaOM guys today published this: http://gigaom.com/2010/01/12/the-apple-app-store-economy/
according to which the Apple app store alone generates 550 million dollars in total, per month.

For me that's a very big comparison mismatch but could I be missing out on something here or?

Cheers!

[Douglas Smith]

Hi Tomi
I have worked for Nokia for 7 years. And while I completely agree with you about the apps business. It really is not apps that sell phones. I know journa's love going on about apps as it's really low hanging fruit and gives them something else to talk about as hardware innovations seem slow in coming.

The battle the mobile industry faces today is the UI wars and related haptic technologies, offered at affordable price points. Apple's great game changer was not apps, or even a good phone. It was what they do best, UI and haptics! Nokia, Samsung, LG, Blackberry (especially them) are all struggling to catch up. But Apple's and Nokia's price points are still absurdly high. Samsung is planning to bring these price points down to the far more reasonable 150 USD price point, though Apple is already churning out mass market pricing for its phones.

I think the future of apps will be like the camera, a must have that you quickly take for granted as part of people's desire to endlessly personalise and customise their phones. I suspect that nobody will be talking about this in 2011 once the newness wears off and instead they will all be talking about augmented reality and real 3D, or some other more relevant development. Or then perhaps MIT's SixSense project will get designed and turned into a nice product and change the game for everybody.

[Sean]

"Ringtones' requiem"

"U.S. ringtone revenue this year will reach about $750 million, down from $881 million in 2007 — and the business will be nonexistent in 2016, says IBIS World, a consumer analyst group"

FORTUNE
http://brainstormtech.blogs.fortune.cnn.com/2010/01/18/ringtones-requiem/

[Tomi Ahonen]

Hi Romain, Henry, Auto, Daniel, Kevin, Zarko, Douglas and Sean

Thanks for the comments. I will respond to each individually

Romain - we do mostly agree. Yes, I'm a bit provocative in the blog and I am serious in that the hype currently around apps and app stores is totally beyond any reason. But yes, there is a place for apps, of course, and their role will grow and Apple did a good job re-inventing the apps market opportunity. But I hold my ground that current hype about apps is beyond any reason.

Henry - haha yes. Good one.

Auto - thanks, you are welcome.

Daniel - thank you so much and yes, you get the point exactly. We can prototype on the iPhone (or other smartphones) and hopefully if the idea is good, we can even make some money (most apps developers do not turn a profit). But to really make money in mobile, we need SMS, MMS or WAP or Java.. Thats not easy, but that is where the billions are. 250 Billion is the level we hit in 2009 according to my latest projections..

kevin - good point, it can be done and there is the branding opportunity in an app - but that does not mean we cannot have a branding opportunity on a browser based solution - look at Google, eBay, Amazon, etc. They all did their branding purely as a browser-based solution on the web. Can be done..

Zarko - the GigaOm stats you refer to were totally messed up. GigaOm themselves went back and corrected some of their basic math errors haha. I gave an analysis here then on this blog about the faults that GigaOm still had with their math. I came to the number of 171 million for December based on their reported numbers and 'realistic' assumptions. A far cry from what GigaOm initially published. Even that number 171 million is not consistent with the industry overall, and is likely too high.

Douglas - great points and we mostly agree. Yes, the battle is a lot about haptics (ie how we touch and feel that phone and get it to work, in terms of its user interface). I would point out that if your primary use of a phone is text messaging - thats 3.5 Billion people literally twice the number of internet users at 1.7 Billion people - then the haptic need is a qwerty keyboard first introduced by Nokia 12 years ago and mastered by Blackberry. So while I agree the battle is going more to haptics and Apple totally revolutionized the touch and UI aspects of - internet browsing (and media consumption such as looking at photos) - they are not as good at messaging as a Blackberry or E-Series Nokia is today with full QWERTY. And still in 2009 more QWERTY phones were sold than touch screen phones.. Nokia is rolling QWERTY keypads even to non-smartphone feature phones. But thats a 'detail' distinction. I totally agree on your main point.

Then about the Apple pricing. I am amused how many really think and believe that Apple has cut its price from 500 dollars to 200 dollars (3GS model) and 100 dollars (3G model) in the USA. Apple has done nothing of the kind. It is still a 600 dollar phone - Apple CFO Oppenheimer said so in their quarterly review analyst call last Autumn. Its totally a marketing gimmick. Apple is 'viciously' expensive, overpriced smartphone and has rivals with 'equivalent' touch screen 3 inch smartphones by rivals that cost half or less in real terms. And if you pay 600 dollars today, you do get far more in a phone than Apple offers. Still, just a lot of tech obviously do not mean the 'most desirable' phone - Apple is also a master of creating that desirability, even though their Macs and now the iPhones have always had less bells and whistles than their contemporary rivals.

Sean - yes? What was your point? I told you in the blog that global sales of basic ringing tones was a 5 billion dollar industry. The US level of ringing tone sales of 750 million dollars is well in line with that number, roughly in line with the proportion of the US total revenues of the industry as well. Did you want to agree with me or perhaps disagree with me? To me this IBIS World number is totally in line with my blog.

Thank you all for writing.

Tomi Ahonen :-)

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Romain - we do mostly agree. Yes, I'm a bit provocative in the blog and I am serious in that the hype currently around apps and app stores is totally beyond any reason. But yes, there is a place for apps, of course, and their role will grow and Apple did a good job re-inventing the apps market opportunity. But I hold my ground that current hype about apps is beyond any reason.

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