How Important Are App Stores?

Consumers will spend $6.2 billion in 2010 in mobile application stores while advertising revenue is
expected to generate $0.6 billion worldwide, say analysts at Gartner. But app stores might be far
more important than the simple sales revenues would suggest.

There seems little question that the success of Apple's iPhone App Store came as a surprise to just
about all observers, including Apple itself. Perhaps none of us should not have been surprised.

Apple already used iTunes to dramatically reshape music distribution, music formats and relationships within the music ecosystem.

At this point, it is reasonable to look at the similarities between iTunes and the App Store and suggest that the Apple App Store, and other application stores, and wonder if they will not have a similar impact on some key portions of the software business, and further shape the attractiveness of any particular piece of hardware.

For some, perhaps many buyers, the software library could be the factor that pushes buyers toward a particular device or family of devices.

But there might be equally-important implications for service providers as well.

Ask a telecom service provider executive why they do not move faster to introduce new applications "at Internet speed" and you very likely will be told that carriers have reputations for quality and brand equity that require them to test the reliability of any new products very thoroughly, and that necessarily slows the pace of innovation.

Others might point out that moving "at Internet speed" to create new applications now is how things often are done, and for that reason delay can be troublesome.

Perhaps app stores are the crucial missing element in allowing service providers to emphasize the quality, stability and robustness of their transmission networks, while at the same time allowing them to stay abreast of rapid application innovation.

It is possible, perhaps even likely, that users can differentiate between the quality or userfulness of a third-party application sold through a service provider supported or affilated app store.

If so, that offers a way forward for service providers rightly concerned about their reputations, yet also needing to move more quickly on the application development front.

In that sense, app stores might offer a convenient way forward. Network performance and stability can be be separated from the perhaps less robust process of making available new applications of uneven quality and value.

Mobile application stores will exceed 4.5 billion downloads in 2010, eight out of ten of which will be free to end users, Gartner analysts predict.

Gartner forecasts worldwide downloads in mobile application stores to surpass 21.6 billion by
2013. Free downloads will account for 82 percent of all downloads in 2010, and will account for 87 percent of downloads in 2013.

Something of the same argument might be made for e-book readers and other new devices whose value depends on the availability of content or applications.