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Is iTunes the key to Apple’s paid app advantage?

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Apple’s iOS (s aapl) mobile platform tends to sell more paid software than its rivals, a fact that only seems to become more apparent as other gaps like the size of other platforms’ app libraries narrow. People cite a lot of different reasons for why Apple’s customers are more willing to pay, but its biggest advantage might be a head start that Google(s goog), Microsoft (s msft) or any other mobile competitor can’t do much to eliminate: iTunes.

Video calling service Tango’s new paid features have experienced two million subscribers on both Android and iOS since their introduction, Tango founder and CTO Eric Setton told the New York Times on Monday. But those using Apple’s platform convert from the app’s free basic service to paid add-ons four times as often as do Android users. Setton thinks there is a very simple reason why that is, one that doesn’t have to do with app quality or platform user demographics:

It comes from years of collecting credit card numbers on iTunes. People can use their stored credit card numbers and purchase things easily. Punching in a credit card number on Android is more work.

Of course, you can add and store credit cards on the Android Market, too, but that’s an additional step on Google’s OS that isn’t required on Apple’s for most, since credit cards will already be on file, thanks to previous iTunes music or movie purchases. Also, iTunes allows multiple payment methods; you can tie it to iTunes gift cards or preapproved spending limits automatically, making it more flexible overall.

People are also slow to adopt new online payment methods, which is why it is so crucial that the App Store doesn’t require one; users simply have to continue using the same system they have already embraced for purchasing digital music online for nearly a decade. The iTunes Store has been the No. 1 music retailer since 2008, so it has had plenty of time to win the trust of a large number of users. Google, on the other hand, traditionally hasn’t asked its users to pay a dime for pretty much anything.

The good news for Google is that the barrier to entry for users new to any and all online purchasing is roughly the same for both platforms, meaning eventually users should be just as comfortable with paying on one OS vs. the other. The good news for Apple, though, is that for the time being, it remains the trusted vendor of choice for online purchases, particularly among the generation that cut its teeth on iPods and the iTunes Store.

So far, that role has led to increased consumer activity on Apple’s digital stores and devices, but Apple’s recently introduced EasyPay system indicates its effects could bleed over into real-world transactions, too. Google may have gotten Wallet out into the wild early, but trust could trump speed when it comes to long-term mobile commerce adoption.

8 Responses to “Is iTunes the key to Apple’s paid app advantage?”

  1. It comes down to trust. I dont like giving my credit card out to unknown wallies selling dodgy crap on the internet, and most paid software is really exsensive. Then came the app store on iPhone . Coll, just buy a gift card a preload my account. Then the apps, only a few bucks, then App store for OS X, again not many apps more than NZ$30, Then when I upgraded from SL to Lion, I just redownloaded the apps I wanted from the store to the new Mac, I didnt even need to restore them. I only ended up restoring my home folder.
    Its the closest thing I’ve found to Linuxs repositories. I just wish the front end was a little better for previews, or demo versions allowed, even if they auto deleted, or only installed in a temp sandbox. But mostly it’s just easier than any other oline purchase system I’ve seen.

  2. Rick Breslin

    I couldn’t agree more – Apple is positioned to be “the” one-click payment provider on mobile devices. Facebook could also be a major online/mobile payment gateway (via FB Connect). When I was a T-Mobile subscriber with an Android phone, I did enjoy the ease of charging Android Market purchases to my phone bill – more carriers should adopt this.

  3. champs794

    I’ve got a decent iTunes balance built up through the summer .edu promo, random gift cards, and so on. It’s a shadow bank just like what’s held by Steam, Amazon, PayPal, Xbox Live, and various transit card systems, i.e. Clipper, Oyster.

    Of them all, iTunes is probably not the least transferable, but it does take the biggest cut per transaction.

  4. According to articles I’ve read recently, WP users tend to buy more often than Android users and would face the same inertia hurdle, suggesting iTunes isn’t the only difference.

  5. Hari Seldon

    This seems correct to me, when it comes to buying things online I am definitely getting more risk averse. I use Amazon, paypal or iTunes and a few other trusted sites with my CC. Don’t Android users need a Google wallet account to buy apps? that has to be a barrier to entry for many. This is the first time I have seen this reason mooted as to why android apps are not purchased as much as iOS, it rings true to me.