Apple's In-App Purchase May Dominate the Mobile App Market

by qxing0001 on 2009-06-12 15:51:07

Pingguo5.com (http://www.pingguo5.com/), Apple plans to let app developers integrate the In-App purchase system into their apps, which will be sold through the App Store. This way, Apple will take the lead in charging in the mobile phone market.

In March, Apple announced this new feature, In-App, at the product briefing of iPhone 3.0.

According to foreign media reports, among all the new features of the Apple iPhone, In-App Commerce is arguably the most significant one. The reason is simple. All transactions can be completed via this app. As a result, Apple will transform the mobile app market and also give developers more opportunities to make money through apps.

If executed smoothly, Apple will leave other smartphone competitors far behind.

Bart Decrem, CEO of app manufacturer Tapulous, said: "In my judgment, this change will make Apple's leading advantage in the market even more obvious. This will be a major test for Apple's competitors. Because when they are striving to establish their own app stores to strengthen ties with developers, the developers have already lost motivation to cooperate with them."

Without a doubt, the App Store has been a great success. Just nine months after the launch of the App Store, Apple announced that its app downloads had reached 1 billion. However, the profit situation for developers varies. Some best-selling paid apps have brought hundreds of thousands of dollars in income to some developers, but most developers are just breaking even.

Today, most apps downloaded from the App Store are free. In fact, most of the apps that are actually sold only cost 99 cents.

Decrem said: "The challenge lies in the difficulty of selling items over $1. Moreover, it's really hard to make big money this way, especially when most of the downloads on the App Store are free."

In this situation, the newly added In-App shopping function should provide developers with better opportunities to make money. This way, developers should be willing to spend more time, money, and effort developing new programs exclusively for the iPhone, rather than for other smartphones, such as Android or Windows phones.

The world's largest game publisher, Electronic Arts (EA), also sees the business opportunity in In-App. EA has sold several mobile games for the iPhone, priced at around $9.99. Adam Sussman, Vice President of EA, said that his company has already made a lot of profits from the App Store. But the new In-App device allows the company to lower the entry price of the game and charge separately for certain items in the game, thereby expanding the consumer base.

For example, in the game "Command & Conquer", EA can sell additional maps for 99 cents. Or, in an RPG (Role-Playing Game), character upgrades can allow players to obtain more powerful weapons to speed up the upgrade process. Another possibility is offering virtual goods, where characters in the game "The Sims" can pay 99 cents or more to buy clothes or other items to decorate their virtual home.

Sussman said: "We believe that the paid model of the App Store will break away from the single download model. The new model will include microtransactions, and microtransactions can expand the user base of installed applications and extend the life of specific games or apps."

The success of the App Store proves that software and apps have trends just like hardware. Recently, with the emergence of counterfeit app stores, Apple's smartphone competitors have started to notice this.

Apple is not the first company to offer downloadable apps for mobile phones. However, it is the first company to unify the search, download, and payment of apps for consumers. These were difficult for the "stores" of previous mobile companies or third-party apps to provide.

Because of this, the mobile app market has never met the expectations of developers.

Sussman said: "The search function was too difficult for traditional mobile phones, and not easy for consumers to use."

However, Apple changed this. The App Store has a well-established E-consumption platform - iTunes - allowing consumers to make payments. This way, downloading software and apps in the future will be as simple as paying to download songs. In contrast, Apple's competitors still need to start from scratch to build their own search and app payment mechanisms, like Google's Android Market, which is slowly getting off the ground.

Sussman said: "Although there is Android Market, I think we are still waiting for the market to mature. Although some platforms have emerged, there aren't enough yet."

Newer smartphones like the Palm Pre don't even have a real market yet. There were only 12 apps available when the Pre launched. Sprint CEO Hesse said this is because the phone has just been released, and he expects the situation to improve as developers create new software after the phone launches.

However, considering the demand for building a customer base for the iPhone, Apple is very likely to continue launching new products in the iPhone family and increase revenue opportunities through In-App, making it difficult to persuade developers to spend resources designing apps for other platforms.

Decrem said: "We told investors that we are happy to design apps for other smartphones, but I can't find any reason to design software for customers other than Apple. In fact, we're putting more and more eggs in this basket."

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