January starts my 14th year running Infinity Softworks and being in the mobile space. I have seen this market change drastically in those years, from a market dominated by Palm to a market dictated by Microsoft, from handheld computers to smartphones, from Nokia and BlackBerry to Apple and Google. And, from my perspective, the most important change: from software to apps.
I have struggled with these changes the last few years. The methods to market an app have changed drastically with the introduction of app stores. The levers of marketing — place, product, price and promotion — have been reduced by one, eliminating a lot of control we used to have as developers, and the extreme focus of finding all apps in the same place forces a decrease in price. (Amazing how a speech I gave two years ago is still applicable. I just didn’t realize how much.)
powerOne calculator for Palm OS and Windows Mobile ran anywhere from $60 to $160. Now our attempts to raise the price to $10 fails. $4.99, it turns out, is the optimal price. As Fred Wilson pointed out, the economics of mobile are trending toward web economics where alternative licensing models are the norm: micro-purchases, subscriptions, freemium, ad-supported. No surprise that the revenue generated from in app purchases (micro-purchases) is about to pass licensed software revenues.
Horace Dediu lays out this argument beautifully, although I don’t think he thought of it the way I am, in his recent article on the mistake of making strategic decisions based on technology:
Google should be asking itself if mobile computing will allow browsing to remain the predominant interface for internet consumption. If, as I suspect, it won’t then no amount of browser tweaking will help. The browser is already infrastructural. It can’t be the object of strategic focus.
To get an idea of how this would work consider Flipboard. Flipboard turns the entire browsing paradigm inside-out. Instead of consuming social media inside a browser, the app presents it in a more natural magazine-like format.
The browser is infrastructure: it is the technology we use when we don’t have an app to use. At least for the average consumer (not most of us technologists who will read this article) it is far more comfortable to run an app then open a browser, type in a url and use a web site. The browser — or more specifically the web — is infrastructure. It acts as a protocol that lets us keep currency rates up-to-date or connects us to news or enables sharing with friends.
And that leads me back to powerOne. In the past three years of developing powerOne first for BlackBerry and then iOS it has become clear to me that that product and that business model are not sustainable. powerOne is a “heavy” application, extremely complex in development and advancement. While it goes far beyond what other calculators do in the iOS App Store, the app store dynamic makes it nearly impossible to differentiate from the other 5,000 calculators there. The complexity of the app means it takes six to nine months to port to a new platform, taking away this small company’s nimbleness.
There is another, much more dangerous problem with powerOne. We built our market in the old days with partnerships and affiliate relationships. We bundled with Palm, Sony, Garmin and other hardware vendors. We did affiliate deals with leading companies in real estate and education. We partnered with leading marketers in the space to promote our solutions. These models — where us and the partner make money on every transaction — are gone because of the diminished flexibility of app stores. We are restricted to the models that make sense in those environments and affiliate deals are not currently implemented.
So it has become clear to me that my thinking needs to change. It is critical to think about apps as connected entities to the world at large. It is critical to think about apps as “light-weight” and extremely portable so we can remain nimble and take advantage of the shifting market dynamics and the fact that our customers are often using three or four different computing devices. And most of all it is critical to think about how to market in a world where all purchase decisions are compressed into 2000 character descriptions and a few pictures. I have to think about the web economics and how they affect our business.
The business has changed, web economics are taking over, and how we market and build products needs to adjust, fast.