The Incredible Business of iPhone Apps

The joke had a questionable flavor. Her name was Baby Shaker, the baby shaker. The principle was as simple as preparing a bottle at 3 am. We clicked on his iPhone’s icon and piercing cries of babies gushed from the device. To make them stop, there is only one solution: shake the phone until it goes silent. Child protection associations did not appreciate it. And Baby Shaker was disastrously withdrawn from the catalog of applications Apple offers to owners of its high-tech device. A failure that is an exception.

Because otherwise the success of the App Store, the site that offers these ‘apps’, as insiders say, is overwhelming. In the restaurant or at school, in a meeting or on the train, between old friends or strangers, the scene has become commonplace: one iPhone owner meets another. And hop, they’re going to compare their software, like two collectors of old stamps. “And Orange TV, do you have it? It’s great, I have all TNT channels live! “No, but I just downloaded Avertinoo. Look, it detects all speed cameras, even mobile ones”.

The conversation can take hours, as there are already 35,000 registrations. Playful (poker, Scrabble, etc.) and serious (the annals of math from Baccalaureate S), practical (currency converter) and wacky, like those that turn the phone into a virtual lighter – ideal for concerts – or in a pillow-top box. whoopee . There is also something for every budget. Some free, others barely paid (0.79 euros), and even a bit expensive (almost 15 euros).

repeated Bis. As it had already done for music with the iTunes platform, Steve Jobs’ company has created a new company that it wants to dominate. Today, the turnover of software sales amounts to 330 million euros annually. According to the Strategy Analytics agency, this is just the beginning: the number of applications should indeed increase to 70,000 within four years. As for iPhone owners, they should triple in a year to reach 45 million by the end of the year.

It all started a year ago with the creation of the App Store. It was the first time that a phone manufacturer launched its own online store. Overnight, the swarm of applications, very easy to download, became the main selling point of the iPhone.

“That’s how it conquered the general public, while other smartphones are reserved for professionals and techno fans,” says Laurent Geffroy of Greenwich Consulting. Still, this success arouses jealousy: Google, Nokia and BlackBerry have just opened their online stores and Microsoft and Palm will follow in September.

But Apple has taken a good lead. The software launch factory is running at full capacity, with no major investments required. In fact, the brand is content to sell developers (from 79 euros for small independents to 229 euros for large publishers) an advanced programming kit. A kind of Lego box whose bricks (3D sound and image interface, GPS, motion detector) allow to build software compatible with iPhone quite quickly. Once completed, they are submitted to Apple for approval and are valid within one to two weeks.

“Everyone has a chance. Unlike other brands, they don’t make a selection,” a French developer rejoices. Still a bit the same: the American refuses any X application, or even a little naughty.
Other than this prudish caveat, Apple is doing everything it can to encourage publishers to get involved and enrich its offerings. If the latter decide that their application is paid, he gives them 70% of the proceeds. “Before the iPhone, the distribution of applications was handled by mobile phone operators, who received a commission along the way and therefore paid less well to the authors,” explains Jeff Clavier, a French venture capitalist based in Silicon Valley. By removing this middleman, Apple has sparked vocations. With the iPhone software update, which is expected in June, more will certainly come to light, as services can now be billed in addition to purchasing the app. An extra game level for example. And of course, Apple will continue to collect its 30% tenth of these transactions.

Among the countless independents who have already tried their luck, some have already experienced a success story. The most famous is that of Ethan Nicholas. This 30-year-old computer scientist, formerly of Sun Microsystems, won nearly $700,000 with iShoot, a war game designed in his spare time. The story of Frenchman Frédéric Descamps, 43, is similar. An astrophysicist with a passion for computers, he devoted three months of evenings and weekends to Starmap, a planetarium that recognizes the stars above your head. An immediate success: 60,000 copies sold worldwide for 10 euros each. “3 euros for Apple, 7 euros for me, or almost 200,000 euros net profit, after taxes”, calculates this resident of Grenoble, who admits to living “a fairytale”, but keeps his feet on the ground. “To make it my full-time job, I would need one successful product per year. Not easy,” he explains.

In fact, if some Sunday programmers hit the jackpot, very few professionals manage to be profitable right now. Check out Tapulous, a Palo Alto startup that created the world’s most downloaded game, app blockbuster, Tap Tap Revenge. However, this company of ten employees will not break even in 2010 at the most. It must be said that Tap Tap Revenge is free for the time being. Like three quarters of iPhone software. This is especially true for those developed by the big names on the web (like Facebook, MySpace or, for France, PagesJaunes).

For these multinationals, who have been writing off their products for a long time, adapting to the iPhone does not cost much: between 20,000 and 40,000 euros. Anyway. Even for them, the question remains open: how to make money with “apps”? Expert studies and specialized blogs multiply to share solutions. First option: offer a light and free version (“lite” in the language of the editors), which serves as a bait to a more advanced and paid version. This is the one chosen by many game publishers.

Second possibility: advertising. In the newspaper “Le Monde”, number 1 for information about iPhone in France, the management, which bites its fingers not to charge the application, hopes to catch up by selling banners for 5,000 euros a week. In May, for example, Cartier was one of the newspaper’s advertisers. “Many top brands are interested in this new media support targeting a clientele more affluent than the Internet,” confirms Prylos, a mobile marketing specialist.

However, some experts predict that iPhone applications will run out. First, because hackers have already found a way to “jailbreak” the device, that is, to break the security that prevents the download of programs on a platform other than the App Store. These hackers can go to Cydia, a competing store created by a California student, where everything is free. Plus, the more the catalog grows, the harder it is to get noticed. “Either the program is noticed by Apple because the teams find it successful and original, and it is featured on their site, or it has every chance of going unnoticed,” analyzes Jean-Yves Hepp, inventor of iDélices – 100 cooking recipes.

In the starting blocks, the iPhone’s competitors obviously want to take advantage of its weaknesses. For example, Google uses its know-how to provide users with a more powerful application search engine. And BlackBerry declares the price war by offering to donate 80% of its recipes to developers, or 10% more than Apple. Finally, Nokia is belly dancing to operators by promising them a commission on sales if they showcase its devices. In short, the world of applications has not yet found a profitable business model, but everyone is hurrying. Doesn’t that remind you of something?

Caroline Michael

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