If you are following along you will know that the latest iOS App Store changes caused us some (hopefully temporary) misery. Instead of doing what I was supposed to do yesterday, I spent the morning getting new revs of powerOne back into the App Store so we can change the keywords. Apple’s end-of-week changes meant that we were no longer found for searches like “mortgage calculator” and “rpn calculator” although we were front-and-center for searches like “mortgage” and “rpn.” In the end, the changes will be a good thing for customers and us but the near-term pain is a 30% drop in sales.

I’ve been at this a long time and app store changes wreaking havoc is nothing new. In the Palm OS/Windows Mobile days, we worked with two primary e-sellers, PalmGear and Handango. As sales slowed for all handheld devices, these two decided they would jack up the rates they charge developers. Instead of 25% it soon became 35% then 65%, which was more than our physical product resellers were charging. Handango also served as the back-end for Palm’s website. I was so annoyed that I lobbied Palm to switch to PalmGear. What’d I get? Worse terms when they switched. Not only did they keep the rate at 65% but they also forced everyone to remove their own website links from their apps.

When we rely on a third-party to make our sales, we are just asking for trouble.

In a nutshell, here is the vicious loop of what has happened: with the iOS App Store being the only source for sales to iOS customers, every sale goes through it. Because every sale goes through it, all customers search there for the product they want. Because distribution is restricted and marketing in the App Store is limited, competition starts revolving around price alone. Prices get compressed and with lower prices the opportunity to spend money on marketing the app is limited, forcing us to focus on the App Store for our marketing, which reinforces to customers that it is the only place to find apps.

This isn’t exclusive to iOS. Android has two leading stores, Google Play and Amazon’s store. (Yes, there are a number of vendor sponsored ones as well but the reality is the same: customers search for apps in these stores.) Microsoft has one. RIM has one.

Furthermore, this not a rant against any of the app stores and providers. There are good things to this, too. Installation, reinstallation, and purchasing are all so much simpler than they were back in the day. With smaller volumes than we have now, we used to need a full-time support person who spent 80% of his time handling install and reinstall problems. We even needed telephone support with 800 numbers because many of the issues weren’t resolvable via email.

Nor is this a problem for all kinds of apps. Games, for instance, seem to thrive in this environment.

But what it leads me to conclude is that app stores are no place to make money. Not real money, anyway. App stores are great for distribution. App stores are extremely efficient for the process of transferring money from customer to vendor. But what they are not is a great place to differentiate, a great place to market. We are too much at the whims of the app stores.

We are working on something new (I have hinted a hundred times and will share very soon). We are exploring a freemium (get some for free, pay for more) subscription model. The pricing and recurring revenues would actually support us marketing and selling the product outside of the app stores. No surprise, there will be a heavy mobile component to this app and we look forward to offering pay options through Apple’s, Amazon’s, Google’s, Microsoft’s and other stores.

But in no way will I restrict myself to those channels. The opportunity is too great.

Four years ago we put our first app in Apple’s App Store, a product called FastFigures. This was our first experiment and, for a short while, it did quite well. This were back in the days when Apple looked at your name, description, ratings and downloads to rank your app. Since we had an app that did lots of stuff — everything from finance and business to conversions and scientific functions — and we discussed that in our description, we ranked very high in a lot of searches. We tried a number of different price points, finding that $5.99 was the right combination of units and revenues to generate the most income. We also tried $9.99, $4.99 and $1.99, where $1.99 was the best at getting us high in our category. We were ranked #2 in Finance at that price.

But then Apple made a change. They stopped using the description and started using keywords and title only. Keywords were restricted to 100 characters (including spaces and commas to separate them). While the title seemed to weigh higher, the keywords and title were mixed together to create a pool of words with which Apple used to rank us for search. This change caused us to drop from #2 in our category out of the top 100, pretty much killing our sales in a matter of weeks.

Because of what happened here, we decided to revert back to our original brand and released a new version as powerOne. We were smarter here. We did a bunch of research, figuring out keywords to use, making adjustments with each release. For the last couple of years we could count on a pretty consistent volume of sales day in and day out, allowing us to plan for the future with a consistent base of sales.

Sometime over the last few days, all of that was thrown out the window again as Apple changed their algorithms. We pay the closest attention to our powerOne Finance Pro product, which traditionally generates 50%+ of our sales. We went from top 25-28 on iPhone Finance category with our primary paid product, powerOne Finance Pro, to top 50-75. (Interestingly, we didn’t change drastically on the iPad.) Our sales dropped across our entire product line nearly 30%.

The reports coming in from others (see here, here, and here for a few of them) believe that, among other changes like increasingly emphasizing downloads and ratings, the biggest change is that Apple is now treating titles as titles and keywords as keywords, not mixing the two.

My data proves this out. Every one of our keywords were specifically chosen and honed over the past two years but now we don’t appear for a number of them. Key phrases like “mortgage calculator,” “loan calculator,” “business calculator,” and “real estate calculator” do not show our products at all. Each of the first words are in our keyword list but we omitted “calculator” since it is in our title. As mentioned the old rules didn’t require it to be in both places. One example that proves this change is our keyword “rpn.” We rank 10 and 8, iPhone and iPad respectively, for the term alone. But if you change it to “rpn calculator” we don’t rank at all. Another example is “mortgage”. No rating for “mortgage calculator” but “mortgage” alone ranks us 14 and 5.

We do, however, still show for “finance calculator” and “financial calculator,” which is very interesting. We have traditionally had to include related words like this. However, we do not have “financial” anywhere in our title or keywords, which means Apple is now grouping related or similar words. This is a great improvement.

In the end these changes (and I’m sure others to come) will be a huge improvement in finding the app for which you are looking. Given that, every one of these changes means massive changes for developers.

Now I get to fret about sales for the next few weeks as I wait to see the ramifications of these changes. I also have to divert attention to a new set of powerOne releases so I can update the keywords. (You can only change app name and keywords on a new product release.) Luckily, it is a simple fix, though, as adding “calculator” to our keywords should solve our problems.

Given all that, the worst part is it feels like I can never count on revenues for long in this world. But that will be a discussion for another day.

Microsoft’s new Surface tablet *looks* awesome. The keynote *looked* great. The fold out keyboard *looked* innovative. No one was allowed to play with it afterward.

There is little reason for me to doubt Microsoft can pull this off. They’ve done hardware before, albeit nothing of this magnitude. But there is nothing to say they can pull it off, either. For reference, see its tablet history.

I’m 60 words in and that’s all there is to say. I could expound further on Microsoft moving into devices against their licensees, trying to sell it exclusively through their 20 stores, whether new-style Metro and old-style Windows can work on one device. But it isn’t worth my time.

Surface is vaporware. It will be available sometime in the future for some undisclosed price. And if I can say anything, Microsoft is exceptionally good at vaporware. After all, it was a Microsoft engineer that coined the phrase.

Many people have described Apple’s worldwide developer conference (WWDC) as uninteresting. I think that Apple is turning up the heat. I felt a great tension in the air there.

Right now, Apple is filling in some gaps. We get these great API calls for more effectively making UI elements resize and retain relationships to other elements, we get new mapping apps, we get new ways of controlling devices and the ability to very very easily customize UI elements so everyone’s apps can feel the same while looking different.

But it feels like biding their time. There are so many hints and rumors, from Apple television sets to 7″ tablets to 4″ smartphones. Back to the Mac feels in flux, half way to completing its goals. Laptops and desktop computers are adding components that make them more powerful and more visually appealing, but only some of them get upgrades and only one gets a retina display. Half of the Mac systems have moved to SSD drives and half of them haven’t. Siri is a very interesting start that could change the way we interact with small devices, but I wouldn’t want to rely on it right now. Apple bakes in Facebook and Twitter, but only Facebook and Twitter. Apple demonstrates a new sharing API but it only offers sharing from a handful of services.

There was nothing earth-shattering announced, but at the same time there is an amazing groundwork being set for what feels like a burst of creative energy out of Cupertino, a blow your socks off moment, maybe more than one.

WWDC itself, conversations with people at Apple, conversations with other developers, it feels like that Giants-Astros game Wednesday night. It’s the ninth inning and the crowd, very passive earlier, suddenly senses history. Matt Cain has three outs to go, three outs to a perfect game, three outs to only the 22nd perfecto in baseball history.

We don’t know what is going to happen. It just feels like we are on the verge of something spectacular.

With Apple set to delve into the next version of its mobile operating system next week at its world-wide developer conference (WWDC), here are the features tossed around the web that I would like to see the most. I’m not focusing on this list as a developer; instead this is the stuff I’d most like to see as an avid user of iOS:

• App Sharing: Android and Windows Phone have this app ability to generically register for an action that it can take care of for another application. Let’s say, for instance, that I wrote an application that knows how to print to any printer. I could register my app in iOS and say, “Hey! Anyone out there that needs to print can look for my app.” Another developer needs his app to print. All he needs to do is make sure the print app is there and show an option to my customer to print. When the customer selects “print” it would send the material to the print app, which would know what to do with it. This makes it very easy for applications to share.
• Apple TV Apps: As I mentioned previously we cut all ties to cable recently. This means my Apple TV, which was already a critical component in the search for evening entertainment, just became even more important. Let’s go the extra mile, though, and give me the choice of what apps I want to run on it. Yes, Netflix and MLB.com are two excellent apps. But I’d like to consider Amazon Prime subscription, Hulu and a host of other “channels”. Seems like the new screen layout set us up for this, so here’s hoping.
• Better Background: In particular, I’d like to see the ability of VOiP and IM apps to always run in the background. Skype is fairly useless on the device. We have to have a phone call first to say let’s have a Skype call, then we can switch to Skype? Really? I want Skype to ring if I get a call there. Same is true with my IM app, Verbs. I want this stuff to just work.
• Better Address Book Integration: I’d like to see all communication capabilities flow out of one app. Today you need to think about how you want to contact someone before you think who you want to contact. That’s backward. I don’t want to say “I’m going to Skype Fred.” What I do want to say is “Going to contact Fred… via Skype.” By integrating the address book with third-party services (via App Sharing, no less!) this can be accomplished.
• Improved Auto Correct: The auto correct on iOS is pathetic. Half the time it changes my words to something non-sensical, it doesn’t format things like URLs correctly, and it can’t tell the difference between “Well” and “We’ll”. Please, Apple, fix this already. It’s embarrassing. (I wished for this last year in a much funnier post.)

All the other stuff is interesting but isn’t critical to me as a user. Improvements to Siri are nice and an API would be cool, I guess, but as a user I don’t use Siri all that much since it doesn’t seem to be on the same wave length as me. I’m lucky if it records what I ask. A new maps interface would be nice but it isn’t in the “gonna be disappointed if it doesn’t happen” category. New screen resolutions, too, could be amazing or could be disastrous. (Man, are those Android screens ridiculously huge.) And I already talked about what I really want as a developer: improved tools to help me develop, market and sell my products.

So, with that in mind, I’m off to WWDC. I’m sure, one way or the other, it will be a mind-blowing week!