Wow. That's an insane number of programs available for any platform. Many are free, many cost a few dollars. Clearly a pile of companies and individuals think of this as a whole new market place, a new ecosystem here good tools can be made available to a willing consumer-base. There have been press stories of the cash made by some of these applications. Riches! A whole new market! Let's all write iPhone applications and get rich!
I disagree with that assessment. The Apple AppStore is not an ecosystem and it's not a new market where companies can participate freely. It's a trap baited with fools gold - and a lot of folks fell into it.
I know many of you think I'm a heretic for saying these kinds of things. After all, Apple is the nice underdog and boy, they make such nice things that are so easy to use. So why do I think Apple has created the modern equivalent of the La Brea Tar Pits?
First of all, to be an ecosystem there has to be an open marketplace. The only place you can buy iPhone apps is through Apple - unless you jailbreak your phone (voiding the warranty) and use unofficial sites like Cydia. Few users will do that - they will go with the flow. So Apple controls the gateway to even offer an application to the market. Imagine the reaction by the market if Microsoft tried that! What if the only place to buy applications for your PC running Windows(tm) was through an online application store run by Microsoft. Ha! That would have been laughed out of town. But for some reason when Apple does it, the consumers think it's OK.
So suppose an enterprising developer looks past the fact that it's a closed market controlled by a single vendor. 100,000 such developers already have. The aspiring developer takes the time to develop an application - several months of work at least for anything non-trivial. They submit the application to Apple for approval. That will take a few weeks to a few months to grind through the process. If approved, Apple adds the application to the App Store. Party time! The market can now buy the app! Money should start pouring in! Of course Apple takes 30% as their cut. Ouch. You have to price your application at the consumer level and Apple still takes the middleman hunk out of it. What did Apple do to add value? Nothing. They built a wall around their pretty new 'market' and charge a toll for every sale that happens in the market. Oh, and the application may not even be approved! If it's not approved, the developer wasted months of time and will see no financial return.
Closed, controlled marketplace. No assurance that goods produced can be offered for sale in the market. Implicit cap on the price you can charge based on what others are charging. Apple takes 30%. These facts alone should make a businessman think twice about the viability of a business selling iPhone applications.
But it gets worse! Even after being approved Apple can reverse their decision and remove the application from the App Store. The developer has no recourse. The developers customers are stranded.
Apple's stated policy is that they will reject any application that is too similar to something they provide. They apparently will also reject anything that violates some provision of a deal they have with a partner - like AT&T for example. Google Talk came to the iPhone, allowing free SMS text messages and voice calls over the Internet. Bang, Bang! Apple rejected the app.
And this gets to the core of the problem: Apple is also a seller in this marketplace that they control. If an application does not compete with them or their partners, it's fine. But what about downstream, as they add their own functionality. Will third-party Twitter apps be banned when Apple offers their own? No one knows, and frankly, it's just too much risk to take for a company that wants to make a viable business selling iPhone software.
And I'm not alone in this thinking. The brain drain has already started. Other blogs are making the same points. Michael Fern analyzed the potential market for iPhone applications and determined that the potential revenue is not there - certainly not with the risk of revenue loss if Apple unilaterally decides to ban your app.
The crazy thing is that Apple could fix this easily. Just open the iPhone for third-party developers and allow other application stores. You know, like the Blackberry and Android phone markets. Allow a free market. Encourage competition. I bet most Apple users will still buy Apple software - probably because it usually is better. Apple will still make more than enough money - maybe more, since there's ample evidence that open platforms do generate more revenue in the long term.
But, as my colleague and friend Alan Stein says, "Apple is the new Microsoft." I don't hold out much hope that Apple can wake up and steer clear of their greedy ways.
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