App Store Anniversary: One Year Later

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App Store Anniversary

This past Saturday, July 11, marked the 1-year anniversary of the opening of the iPhone App Store. In that time Apple (s aapl) has simultaneously redefined the expectations of what a mobile phone can do, and fundamentally changed the way that software for smartphones is delivered to consumers.

There are now about 58,000 applications available through the App Store, providing everything from bird-watching reference guides, to live video of baseball games, to first-person shooters like Doom Resurrection, to Koi ponds. Just like the commercials say, whatever it is you want to do with your iPhone, you are likely to find an app for that.

The Good

In April, Apple announced that as of the end of its second fiscal quarter, it had sold a total of 21 million iPhones and 16 million units of the iPod touch. Also in April, Apple announced that one billion apps had been downloaded by consumers, representing about 27 downloads per device at the time. Three months later, at the end of this quarter, we should expect something like 1.3 billion downloads for 45 million devices, if the trends hold up. The App Store has been such a success that all the other major smartphone makers are launching their own app stores, for the BlackBerry (s rimm), Windows Mobile (s smft), Palm Pre (s palm), and Google Android (s goog) devices.

This new model for selling software, pioneered by Apple, is a significant shift for the industry. Previously applications for smartphones were either available from the carrier directly, or involved finding software to purchase from independent software companies or in specialty online marketplaces. These models suffered from significant hurdles. The carrier model held back a large amount — sometimes over 50 percent — of the revenue from sales for the carrier itself. The independent distribution model lagged because of a lack of awareness among consumers, and even marketplaces like PocketGear have taken years to develop a catalog that Apple enjoyed within nine months of launch.

The appeal to developers was an important factor in this growth. Apple has put together some decent tools in Xcode since the transition to Mac OS X in 2001. The Mac developers that were already familiar with the tools and the Cocoa frameworks were eager to develop for the iPhone. Coders outside of the Mac circle were also quick to jump on board because at a fundamental level, writing Objective-C code against Cocoa libraries is not that different from writing C++ code for any other framework.

This distribution model for the finished software is, I believe, the key factor to Apple’s success. Combined with the ability to access the store directly on the device and a dead simple install process, the iPhone model has encouraged customers to try out software. A low price point, of 99 cents, and many free apps have driven download numbers. Now the iPhone is far more than just a great phone with email and web. It can be almost anything. It is no surprise that Apple’s marketing features the App Store by reminding everyone that whatever you want the iPhone to be, “there’s an app for that.”

The Bad

And while I am still blown away by the fact that you can purchase an app for $10 that lets you watch live baseball games on your phone, there is a bunch of junk out there, too. While there was a big stink made about farting apps a couple months ago as the leading title of that genre generated some not-so-insignificant revenues for its creator, the interest in fart apps has (predictably?) fallen off in recent weeks. There is frankly a lot of bad software among those 58,000 apps that doesn’t do much or offer much value to anyone and threatens to choke out small quality titles.

And while other fads will continue to come and go in the App Store, this leads to a crowded marketplace where it becomes difficult to find any software of real interest. One can either use the search field, which isn’t particularly clever and easily gamed with keyword stuffing the app description, or one can browse the categories and Top 100 lists. Either approach is somewhat lacking.

The Ugly

The ease with which consumers can try software has also led to some problems for the App Store. There is a significant trend to price apps at the minimum 99 cents in order to try and reach the Top 100 lists, which convey a significant boost in sales as they are featured to everyone browsing for software. To a certain degree, this price floor limits the potential for developers to push the limits of the platform. It makes sense for many shops to try making several small, 99-cent apps that might enjoy a few weeks or months of glory rather than shoot for a more substantial project whose price may keep it off the top sellers list.

It remains to be seen what patience the market will have for casual titles and software toys as the novelty wears off in this second year of the App Store. I hope we will see some significant titles get the attention that they deserve. I cannot tell you how impressed I was when I first saw Super Monkey Ball at the iPhone Developer Preview event. That title completely changed my perspective on what iPhone gaming could be. Titles like Real Racing, Star Defense and Tiger Woods PGA Tour have continued to advance what is possible. I want to see developers push the envelope to bring us amazing apps that will blow our minds. But there needs to be the right financial incentive in place so that developers can fund larger teams to bring us this software.

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