Mobile Apps: A Mexican Stand-Off?

The mobile apps market is rapidly evolving and has massive potential for growth, especially as smartphones become increasingly ubiquitous over the next ten years.

A quick glance through the top ten in any of the major app stores today reveals how things have changed. Gone are the once highly successful novelty apps like iFart and Sonic Lighter – displaced by big brand names like Google and CNN.

Apps are set to be the next battleground for brands fighting for greater market share. Manufacturers, developers and consumers will have conflicting interests during this struggle, over issues such as cross-platform apps, handset retention and exclusivity.

For example, while exclusivity might give developers a short term advantage, it may be to the detriment of long term innovation and customer satisfaction. What does the future hold for the mobile apps market and the different players involved?

Don’t adjust your handsets 

Manufacturers are struggling to differentiate their offering from the competition, and although all manufacturers proclaim the unique selling points of their particular handsets, these are quickly duplicated, making them commonplace. Even pricing no longer provides much differentiation between the top tier handsets.

Apps continue to offer consumers greater mobile functionality and content. Consumers will start to buy mobile phones based on which ones provide the most highly recommended apps. It will no longer be sufficient for industry giants to create an app store with thousands of potential downloads.

What will become critical is securing the best-selling apps. Handset manufacturers have already begun to participate in an apps “arms-race” – purchasing exclusive rights to the apps that they see as the most influential with their potential buyers. The success of BlackBerry Messenger (BBM) shows the power an exclusive app can have on driving consumers to your devices.

The quest for exclusivity is already paving the way for specialisation from the manufacturers; location-based services, travel and music are particularly popular. In the past few months, Nokia has purchased companies like Novarra and Dopplr and we can expect other manufacturers to follow suit. What will come next is a trend towards consolidation – fewer apps being available, but the ones that are will be focused on quality and functionality rather than providing consumers with hundreds of low-quality apps that do the same thing.

The developing world 

Developers will need to maximise potential opportunities wherever possible. Many app developers currently see cross-platform availability as their default position in terms of maximising the profitability of their apps. They are also realising that their mobile apps have a limited lifecycle when it comes to revenue generation. This lifetime can be extended by releasing similar apps across different stores to reach as many consumers as possible. Twitter and Facebook currently use this method to great effect.

If a cross-platform strategy equals longer app lifecycle, a greater customer reach and more revenue, then exclusivity deals are unlikely to be an attractive proposition for developers. What could work is a solution that blends the two models. Exclusive licenses with a set expiry date would provide the manufacturers with the exclusive app carrot to wave at consumers to turn them into paying customers, while allowing developers to work in the background perfecting versions of their app for every other store – to be immediately released when the license expires.

Although this will not guarantee success for every developer, the ones that do recognise the commercial benefits of this type of exclusivity will look for further ways to add value. Whether that manifests itself in designing highly addictive apps that can start a purchasing craze or solving manufacturer issues like in-app payments or advertising, successful developers will find ways to make themselves as indispensable and as lucrative as possible.

Consumer impact 

With more consumers turning to smartphones, the changing relationship between manufacturers and developers will have a significant impact on more consumers than ever before. Consumer demand will evolve from always-on access to mobile social interaction across any handset, on any network.

The ongoing competition between manufacturers and the exclusivity between manufacturers and developers will fly in the face of the consumers who are looking forward to the potential of apps that make further use of social connectivity.

The fragmentation of the app space will eventually lead to further consumer dissatisfaction with the mobile marketplace – frustrated by the limited social interaction available to them and being constantly forced to change platform just to get the content they want on their mobile. We are already seeing this frustration demonstrated by console gamers.

Microsoft’s purchase of game designers like Bungie means hotly anticipated new games will only be compatible with Microsoft hardware. The proposition to consumers is all too clear: “if you want to play this game, then you’ll have to buy our hardware first”. Clever tactics from the corporation but bad news for the gamer with limited funds.

So where does that leave us? It’s clear that all three parties want different things. But it’s not enough to just use the old adage and say “never the twain shall meet.” Someone needs to take a stand now and work out a solution – even if that means compromising for the sake of moving the market forward.

Manufacturers and developers need to see that they can work closely together, whilst still maintaining a competitive edge. Otherwise the apps market could see itself devolving into the next MMS-style disappointment. Even today MMS is not used to its full potential and we have no-one to blame except the industry for its lack of collaboration.

Without this collaboration the future will produce more losers than winners in the apps race.

Perhaps the answer lies in open ecosystems. With open APIs, service providers are free to work on the most compelling platforms, manufacturers and operators are free to strike exclusive deals, developers are free to work on the platform of their choice and consumers are free to reap the benefits of competition.

Allowing open access to their APIs makes perfect sense for service providers. They can concentrate on profitable deals while external developers can create for undeserved platforms. Customers benefit by having a wide range of device on which to use their preferred services. Opening up is the only way to ensure exclusivity deals remain profitable and ensure users aren’t locked out of the services they desire.