Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Takeaways from mobile’s second quarter
• CES 2012: a recap and analysis
• Who and what to watch in the new era of the living room

Apple’s App Store downloads and downloads from the Google Play store became roughly even last fall, as Erica Ogg wrote recently, and then in the first quarter of 2013, Google pulled ahead in sheer number of mobile app downloads worldwide. However, Apple got 74 cents for every dollar spent on apps during the that quarter, according to a report by Canalys published in April, and the 50 billion downloads now puts Apple back with a slight lead.

The company announced the number of downloads on the first day of Google’s I/O conference, as Google announced that its Google Play store has seen 48 billion app downloads since launch in late 2008. However, it’s good to remember that app downloads only tell part of the story — someone could download an app and never use it again.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• How to Market Your iPhone App: A Developer’s Guide
• An overview of the photo and video app market
• OTT technologies and strategies for broadcasters

The end result is that Nook HD users will have access to a broader media ecosystem, but the move seems a bit odd for a company that has a strategic partnership with Microsoft. However, Jim Hilt, B&N’s VP of ebooks, said the move only shows that Barnes & Noble remains committed to the Android platform. The company has done a “tremendous amount of work with Windows 8,” he said, and the decision to further integrate with Google is “consistent with our business, which has always been to bring the Nook reading or content service to all the platforms available.”

Google Play also sells ebooks and digital magazines, but Hilt said that B&N isn’t worried about that: “We’re incredibly confident that when people pick up a Nook device, they’re going to use the Nook shopping experience.”

Nook Video, which sells movies and TV shows à la carte, will continue, the company said.

Current Nook HD owners will receive an over-the-air update to their devices.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• The fourth quarter of 2012 in mobile
• The 2013 task management tools market
• Connected consumer third-quarter 2012

This is basically mirroring the dynamic we’ve seen play out between Android handset makers and the iPhone maker: Apple takes in a vast majority of the profits in the smartphone industry while Android device makers sell far more handsets.

Here’s the stat breakdown on Android versus iOS downloads in the Canalys App Interrogator report:

Worldwide, Apple’s App Store accounted for the largest indexed proportion of revenue between the four stores, at around 74%, while the Google Play store saw the greatest number of downloads, accounting for about 51% of the stores’ collective total, with Apple close behind.

Google has a bare majority of downloads, but that will likely get bigger as Android is by far the leading mobile platform by volume. What’s less certain is how quickly Android app downloads will be able to draw away the revenue advantage that Apple (and its developers) so clearly enjoy. Android app downloaders have historically demonstrated a preference for free apps.

As I wrote earlier this year, Google’s app marketplace is indeed starting to catch up to Apple’s in a variety of metrics, including quality of available apps, better store management and app curation. But the revenue factor is a huge one: as long as developers can continue to count on iOS device owners being more likely to spend money on apps, the longer it will take for the Android platform to attract high-quality, popular and exclusive app hits that make iOS users feel like they’re missing out.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Podcast: Mobile winners and losers in 2012 and what to expect in 2013
• An overview of the photo and video app market
• Analyzing the wearable computing market

Google Play is a rebrand of the Android Market, intended to remind users that Google sells content besides apps. So far, success has been mixed. When it comes to ebooks, for example, Google hasn’t been able to compete with Amazon or even Apple; its share of the ebook market is likely in the single digits, and while 5 million ebooks sounds high, a lot of those are free public domain titles. And as our Erica Ogg wrote recently, while the number of Android apps has grown quickly, developers almost never choose to develop for Android before or instead of iOS.

Google is taking some steps to bring more users to the store. It started offering gift cards and a wishlist feature last year. Today it’s running sales on a bunch of content — $5 ebooks, some 99-cent movie rentals and other promotions.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Analyzing the wearable computing market
• The evolution of consumer-media cloud storage
• The future of mobile: a segment analysis by GigaOM Pro

Juniper Research has just put out a report about mobile content business models and, according to the UK analyst firm, just 6 percent of content downloads now come from these portals, with the rest being attributable to third-party stores, chiefly Apple’s App Store and Google’s Play store. Frankly the 6 percent figure is surprisingly high – report author Windsor Holden told me the portals in question belong to “China Mobile and two or three others”, and even those are “going to wither away over the next few years”.

And the real money isn’t even in app sales, as Holden explained:

“Only a small proportion of apps are monetized at the point of sale. On the App Store it’s at the 10 percent mark, and it’s around 3 percent on Google Play. Where the apps are really making money is in terms of in-app payments and in-app billing. If you look at the highest-grossing apps… none of them are predicated on the pay-for-download model.”

In selling all those virtual swords and poker chips, the standard developer-OS vendor split is 70-30, meaning the carrier needs to try to wrangle some share out of that 30 percent cut. Is that just wishful thinking on the operators’ part? Not necessarily.

What carriers have to offer

According to Holden, there is still a problem that needs to be solved if even more money is going to be made out of mobile apps: in order to buy apps and make in-app purchases, the customer needs to register a bank card. And who doesn’t have one of those? Kids, and a heck of a lot of people in developing countries – in these segments, the ability to buy content with pre-paid phone credit makes a whole lot of sense.

“While operators have never been the best at direct content sales, there is a growing opportunity for operators to monetize their assets,” he said. “On a number of storefronts, including those for Nokia and BlackBerry, the conversion rates when you add carrier billing go up by a factor of 5 or 6 – there’s significant uplift on second or third purchases.”

In the U.S., customers of operators such as Sprint and Verizon can do this for Android apps, and Holden reckons around 15 percent of such transactions take place through carrier billing in that country. Globally, Juniper expects carrier billing-derived mobile content revenues to soar from $2 billion to $13 billion between now and 2017.

Of course, iOS is not part of this party, as Apple doesn’t share like that. However, Holden said, the flow of second-hand iOS devices into developing nations may eventually mean Cupertino is missing out on an opportunity — would it rather share revenues, or not make any?

Welcome evolution

This shift towards giving operators a slice of the pie is, in my opinion, a good thing – not because the operators deserve it by virtue of existing (a stance they’ve taken many times before), but because it rewards them for the use of assets that only they can provide.

We can see an analogy in the slow but steady emergence of carrier apps that exploit the good old mobile phone number. In that case, the operator’s asset is its ability to manage identity — my colleague Kevin Fitchard reported just the other day on an interesting new carrier initiative called OneAPI that shows how serious they are about expanding this role. In the case of app and content sales, the carrier can capitalize on the existing billing relationship it has with its customer — this makes the smartphone game more lucrative for the carrier while making life easier for the customer (see also: carriers getting a cut of Skype credit sales).

Recent years have involved so much struggle on the part of the operators against newer, more nimble players in the mobile value chain, but carriers are starting to find a comfortable and rewarding new position in that chain. In time, this evolution of their role may reshape the mobile ecosystem yet again.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Mobile 2012 and beyond
• Takeaways from mobile’s second quarter
• Carrier IQ and the continued erosion of operator trust

Luther went on to explain that Google did a lot of work on the security layer that delivers the videos encrypted to an HTML5 player. “As far as I know, we are the first to ever do that,” he said.

He added that there is a lot of interest from other content services to use this type of technology for their offerings as well because it would allow them to deliver video to a variety of platforms that support HTML5, as opposed to customizing solutions for each and every platform. “A lot of content providers really want to do HTML5,” he said.

WebM was open sourced by Google in 2010, and the company has been working on integrating the format into both real-time video communication as well as video delivery for sites like YouTube. It was meant to become an open, royalty-free alternative to the predominant H.264 video codec, but the overwhelming majority of videos are arguably still delivered in H.264. Luther replied Wednesday by saying that H.264 had the same kind of adoption curve, adding: “I’m very bullish on VP8 for the next … many years.”

Nonetheless, Google is already working on a successor to WebM’s VP8 video codec, which is unsurprisingly called VP9. “VP9 is starting to come together, and we are seeing some pretty amazing results,” reported Luther. “We are seeing huge imporvements over VP8. It’s kind of a gigantic leap forward.”

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Who and what to watch in the new era of the living room
• Connected Consumer Market Overview, Q2 2010
• Connected consumer third-quarter 2012

The monetary boost doesn’t stop there, however. After every six-month period from the beginning of the program, which starts on March 4, the developer cut decreases 10 percent, down to the industry standard of 70 percent after two years.

This differs from the two other major Android app stores. Google offers a 70 percent cut in Google Play, as does Amazon’s Appstore but it generally retains more control over mobile app prices and therefore, developer revenues. For example, Amazon picks a free app each day and also can also lower app prices to match promotions in competing app stores.

I see no mention of exclusivity in the program, but even if it is required, it may not give developers a reason to shy away. Samsung devices account for the largest share of all Android phones sold: 42.5 percent of the global total last year, says Gartner research. The opportunity for a higher revenue percentage then could easily outweigh any audience limitations from keeping the app in the Samsung Apps store.

If nothing else, this may even provide some incentive for devs to bring their newest, best titles to Samsung devices first before offering them to others through Google Play or the Amazon Appstore. That could add more fuel to the growing fire between Samsung and Google as the Wall Street Journal recently reported that Google is already concerned by Samsung’s influence over the Android platform as a whole.

The “100% Indie” initiative kicks off on March 4 and the first 3,000 developers to sign up will be fast-tracked in the program.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• An overview of the photo and video app market
• Is Android broken and if so, will Google fix it?
• How to stand out in the app development game

Only two months prior that figure was under 30 percent; in 60 days the total percentage of Android 4.x users hitting the Google Play store increased 10.8 points. And devices running the most common Android version, Gingerbread, finally dropped to under one half of all smartphones and tablets running Android: 47.6 percent are using some variant of Android 2.3.

Both trends should continue accelerating as most Android 2.3 devices aren’t getting more software updates. Instead, users will transition to newer smartphones and tablets that run Android 4.0 or better. I’m still holding to my prediction from last October: “In four to six months, the majority of Android devices are running on Android 4.0 or better.”

Something that all Android devices will benefit from are digital magazines. Android Police learned that print subscribers to certain magazine titles can easily get the digital version due to a change in the Google Play store.

There’s now a Play store option to get the title digital, if the publisher provides free digital access to subscribers. The action appears seamless and should make the overall digital magazine experience better on Androids.

While I don’t expect any blockbuster news out of Samsung at next week’s Consumer Electronics Show, the company is surely working on a successor to its best-selling Galaxy S III. Logic dictates this will be the Galaxy S4 and a leaked image of the alleged device appeared this week. SamMobile shows a phone that unsurprisingly looks like a larger Galaxy S3, but with a thinner bezel and no hardware home button.

The rumored Galaxy S4 will reportedly use a 5-inch display with full HD resolution of 1920 x 1080. Samsung’s next generation Exynos is sure to power the smartphone; possibly in a 2 GHz configuration. Again, Samsung isn’t expected to debut such a device at CES. It’s far more likely that any new Galaxy flagship will debut at Samsung’s own press event a few months from now.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• The fourth quarter of 2012 in mobile
• What to watch in mobile in 2013
• Forecast: the converged mobile messaging market

The service will likely appeal to Android smartphone and tablet owners as Google’s music app is native to the devices. Although I use Android, I recently upgraded to a paid Amazon MP3 account for these functions, partially because Google didn’t offer a music matching service and I didn’t want to upload thousands of digital audio files. Perhaps my decision was too hasty, because Google’s service supports higher quality files for streaming:

“Our new music matching feature gets your songs into your online music library on Google Play much faster. We’ll scan your collection and quickly rebuild it in the cloud – all for free. And we’ll stream your music back to you at up to 320 kbps.”

A quick check of Amazon’s bitrate for MP3 files streamed from the cloud shows these are “high quality 256 kbps” files. It’s not likely I’ll notice a vast difference, but I’m paying $25 a year to Amazon for lesser sound quality. That fee allows me to store up to 25,000 250,000 music files; Google allows 20,000 files on its servers at no charge. Apple too, charges $25 for its iTunes Match service, making Google’s music match the only free game in town for now.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Connected world: the consumer technology revolution
• How consumer media will change in 2013
• Connected consumer third-quarter 2012