Vilfredo Pareto, Mobile Apps

Vilfredo Pareto, an Italian economist, around 1906 coined the Pareto Principle, popularly referred to as the 80-20 rule, "the law of the vital few" or "the principle of factor sparsity." It states that, for many phenomena, 80 percent of the consequences stem from 20 percent of the causes. As applied to any sphere of business or life, it means that a disproportionate share of the results come from 20 percent of the decisions, actions, people, partners, employees or just about anything else you can think of. The rule should therefore apply to virtually any part of the Internet or communications business, because it applies in any business.

If one looks at what is being bought out of the Handango catalog of more than 190,000 titles, across mobile platforms, and aggregating apps by type, you can see that no single category dominates. You might initially conclude that Pareto doesn't apply to the purchase of mobile apps. A different presentation of sales data--ranking sales or discrete items by volume or revenue--would clear that matter up.

Still, there's an important business implication here. It always is true that a small number of drivers (applications) account for a disproportionate share of sales. It also is true that as much as 80 percent of the actual apps sold represent niches important enough to users that they pay money to get them.

So fashion your business around the relatively small number of high volume items, or around the huge number of small and smallish volume items. Either way, it works. You just can't build the same sort of company to chase niches as you would build to chase the high volume segments of the market, if you want to succeed.

You might also be surprised at where the niches are. Handango says that in 2006, the top two selling apps for BlackBerry were "Ringtone Megaplex" and "Ringphonic Lite." Ringtones in a segment dominated by business users. The top two titles bought by Palm OS users in 2006? Quite different. "Agendus Professional Edition" and "Treo Voice Dialing" were tops there.

Still, across every major operating system, "business and professional" apps were the top category, followed by "productivity", then "entertainment," "games," "travel," "utilities," "communications" and "multimedia."