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One of the oldest app stores around is Handmark, formed in 2000 to develop and sell Palm (NSDQ: PALM) applications. It now covers Blackberry, Windows Mobile and the iPhone as well, and has expanded so that its business now is to “build apps, sell apps, aggregate audiences and bring brands to them across every platform,” CEO Paul Reddick told mocoNews. With the increase in the number of people owning smartphones, the market is growing dramatically every day, but with that comes a proliferation of smartphone platforms and the entry of a lot more companies seeking to stake their claim in the mobile-app business, both in the development and distribution businesses. Handmark is trying to work both angles: It gives advice to developers interested in porting their applications to different platforms, and sells its own products through other companies’ stores.
App vs WAP
“It’s indisputable that people want to be informed and want to be entertained and want to be productive. It’s unclear how many people want to do that on a mobile device,” said Reddick. He argues that the WAP experience isn’t good enough to keep people using mobile content and services, but applications cross the threshhold into having good enough usability. Of course, these days the “full web” has replaced WAP on mobile handsets, and some people argue that writing a web app will get it across platforms and in a way that people want to use it. “Our contention is: people don’t want the internet — they want to be informed, they want to be entertained, they don’t care what the back-end system is,” said Reddick. “The iPhone launch helped prove that having an app resident on the device with some info on the device.”
For well-known brands, an on-board app might be good, but lesser-known brands have more trouble getting the downloads. Reddick said that the issue companies face is how much it costs to develop their app and how to get it distributed. He said apps can be cheap to build (Handmark’s Freerange service, which creates mobile apps for publishers, was originally an RSS reader, and can be easily tweaked to access a paper’s RSS feed) and a lot of the OEMs and carriers that Handmark deal with are looking for free apps to include on the handset.
The App Store Epidemic
Everyone is opening an app store these days, but Reddick isn’t too concerned about that because Handmark also builds applications, which it then sells through other companies’ stores. “We have a driving business selling apps on the iPhone right now, we don’t have a driving business with a store on the iPhone because it’s closed,” he said, but noted that isn’t the case with every handset manufacturer. “Our BlackBerry stores are not getting kicked off because the RIM (NSDQ: RIMM) stores are launched. Some carriers are more enamored with the RIM store than others. I’ll leave it at that.”
Reddick doesn’t agree with people who think that having a lot of application stores could fragment the market and confuse people. “Customers are used to being able to find the store that suits their needs best. Apple (NSDQ: AAPL) is a bit of an outlier on that,” he said, adding that the recent advent of app stores for jailbroken iPhones prove that customers want choice.
There are a number of things driving down the average price of applications, according to Reddick, although applications such as one on a Blackberry targeted to physicians still cost $100. In general, though, the lowering of the average price can be attributed to the fact that five years ago, applications on smartphones were largely targeted at business users, whereas now they are mostly consumer applications. Another factor is competition — the market is growing and there is more opportunity for people to get to the market, which drives down the average selling price. The iPhone is a prime example of this.
“2009 is a good time to make money,” said Reddick. “2009 is not an ideal time to go out and lose a bunch of money trying to get an audience.” In other words, the days of madly seeking users and worrying about revenue later are over. For that reason, Handmark is holding off on launching Android applications, deciding to focus on other platforms until Android gains more users. “To date, T-Mobile and HTC jumped, and everyone else has hinted that Android is on their strategy,” said Reddick, adding it is a balancing act of how many resources to put towards certain devices. Handmark is working on some applications for Android; it is selling third-party Android apps, though, and has been since the G1 launched and there was no way to buy an application through the Android stores.
Handmark’s Business Breakdown
Handmark has about 185 employees in several locations around the world, and four main businesses — all of which contribute more than 10 percent to revenues.
— The largest part of the business is Pocket Express, an on-device portal that caches information such as news, sports, weather, stocks, travel and entertainment. That has multiple revenue models, including: The carrier paying to include it on the handset; getting revenue from content sold through the stores in Pocket Express; and advertising, although this was described as a minority of the revenue.
— Handmark also manages other companies’ stores on a white-label basis, such as the Orange UK Games Store, Sprint (NYSE: S) Digital Lounge, Sprint Software Store and Samsung ACS.
— Next is the studios business, where Handmark publishes applications: “There’s a lot that we do cross-platform and that’s what we’re known for,” said Reddick.
— Last is Freerange, which Handmark bought after several companies asked it to develop a version of Pocket Express for them, such as a USA Today version of Pocket Express. Freerange can produce a stand-alone application for a publisher in a matter of days, with real-time information updated in the background based on the publisher’s RSS feed. The Wall Street Journal uses the service to provide the full online version of the paper, which is free and ad-supported. Although this is the smallest segment of revenue, Reddick said it was the fastest-growing piece.