Report: Apple's Mobile App Store Zaps Competition

The Global Intelligence Alliance Group's new report on the success of mobile application stores lists five ranking criteria: Time to market, developer relationships, device adoption, ease of use and the number/variety of apps.

An unofficial sixth factor: the number of cool TV commercials with catchy pop music showcasing those apps. In this category as well as the others, Apple (Nasdaq: AAPL) is racing to a formidable lead while other device makers and software companies are still lacing up their sneakers.

The GIA report puts Apple's App Store in front of Google's (Nasdaq: GOOG) Android Market, Nokia's (NYSE: NOK) Ovi Apps Store, Windows Mobile's Skymarket, BlackBerry Apps Storefront and Palm's (Nasdaq: PALM) webOS Software Store. Research In Motion (Nasdaq: RIMM), BlackBerry's parent company, as well as Palm, have yet to launch their offerings; Microsoft (Nasdaq: MSFT) recently announced its intentions to go deeper into the mobile app space by using a storefront design.

"Veteran Microsoft has to reinvent and redesign their current setup of mobile application distribution in order to keep up with the pack," Erwin Baumgartner, Head of GIA's Information Technology Practice in Asia-Pacific, wrote in the report.

"Industry players have to look closely at how and where an application marketplace fits within their own strategies. Some intend to generate revenue, some plan to strengthen the user community, and some even work to create a demand pull for the corresponding handset brands and models. Furthermore, mobile carriers need to be convinced that these marketplaces will work more efficiently at a platform level, not at individual operator level," Baumgartner said.

Window Shopping App Stores

Apple certainly didn't invent the app store concept, said Lewis Ward, IDC research manager.

"The network operators have had mobile applications available on their decks for years," Ward told MacNewsWorld. "They're both smartphone-oriented and feature phone-oriented. The huge difference here is that Apple has allowed free apps to be offered. The carriers want to monetize everything that they do. They might give you a demo or a 24-hour trial period, but they have no interest in seeing data go over their network or any consumption of service for nothing."

Most of the Apple apps are free. The rest are in line with what the carriers offer -- but at a much cheaper price, Ward says. "Most of those are 99 (US) cents. The carrier applications tend to be five, six dollars."

That plays into one of two important distinctions, in Ward's view, that have enabled Apple to break free of the mobile app pack: Apple is letting those developers set the prices for their apps. "The carrier is not getting a cut, and that's reduced the number of mouths in the supply chain to feed. But on the carrier side, when they did it, the OEM (original equipment manufacturer) wasn't getting anything."

Also, companies like Verizon are basing their apps on C++ computer language, while Apple is swimming in a much deeper pool of Java development writers.

Apple's Core Strengths, Weaknesses

"They (Apple) are blowing everyone away," Gartner (NYSE: IT) analyst Ken Dulaney told MacNewsWorld. "They are the first organization to get the mobile portal right. They have pointed out how poor the mobile operator, hardware and ISP portals have been. They have set themselves up for huge growth in the future."

Dulaney laid out the challenges for competitors: Palm is still formulating its strategy and is doing so as an undercapitalized company with one carrier. "Blackberry will probably focus on business, but they don't have the user interface and excitement around their app store. Microsoft can catch up and will try with Skymarket, but they have tried with music and other areas and have never done well."

Dulaney also doesn't see a lot of app store potential for Verizon, AT&T (NYSE: T), T-Mobile or Sprint (NYSE: S). "The operators don't know software. Think about how many times they have tried to create Web portals, starting with WAP browser technology, and have failed."

The very factor that enabled Apple to capture a lot of attention -- free apps -- also keeps other players in the game since Steve Jobs' company is giving up a lot of revenue in return for total number of downloaded apps, Ward says.

"It's going to get much more crowded, and what we're seeing is relative," Ward said. "The success with the iPhone has reinvigorated or reopened the debate about whether carriers are in the best position to offer and monetize applications. In terms of where this is going to go, it's far from clear that they will remain in that strong a position as these other stores come online."