Why Native App Stores Like iTunes And Android Marketplace Are Bad For Mobile Developers

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Unlike almost anything we’ve seen before, the market for apps is exploding.

According to a January 2011 report, market research firm Gartner forecasts that global mobile app store revenues will triple from $5.2 billion last year to $15 billion in 2011, and will keep growing to an astounding $58 billion by 2014.

Further, Frost & Sullivan predicts that total downloads from smartphone app stores are expected to increase globally from 9.6 billion in 2010 to more than 120 billion by 2015.

And to think that many of the next-generation TV sets and Tablets haven’t even arrived on the scene yet!

With app stores popping up seemingly by the hour, timing is more critical than ever; and many developers are already in the middle of making tough decisions on how to best market and promote their wares.

Native app stores like Blackberry App World, iTunes, and Android Marketplace, all have proven successful at launching some of today’s hottest apps, but in truth, that has only really benefited a handful of top developers. New rules instituted by Google and Apple in the past few weeks have even further complicated the path to discoverability.

With so many apps competing for a prominent place at the top of so many different categories, the market has begun to cannibalise, creating a true feast or famine scenario for publishers. Meanwhile, the once hallowed ground of native app stores is now more like a graveyard, littered with so many corpses of apps long forgot.

So why is it that native apps stores, which used to seem like the most obvious choice to reach consumers, are now failing developers?

Here are four reasons why:

1. Native app stores have maxed their potential

Native app stores, were instrumental in educating consumers about the value and availability of Apps. They facilitated discovery for consumers and commerce for the application developer but with the vast majority of apps being free, this doesn’t really apply any more.

Today, what a developer needs most is reach – as many possible eyeballs as possible. Open app stores can give you broader exposure across multiple platforms, while providing the tools you need to make better decisions with regard to marketing, promotion, and commerce.

All the top mobile brands including Yahoo!, Facebook, and Google are cross-platform, so why then is everyone so eager to get their apps up on native stores when the majority of consumers are elsewhere?

2. Shelfspace is gone. Overcrowding = poor discoverability

If you combine Google, RIM, Apple together, you’ll find over 500,000 apps from every imaginable topic. Now consider this: 70% of downloads come from the first two pages of any given category. This means that the chances of someone finding your app, let alone downloading it are getting slimmer by the day.

The sad truth is consumers don’t search very deep. They want what they’re looking for and they want it quickly without having to scroll through pages and pages of irrelevant apps.

Crafty developers have also learned how to game the system and manipulate rankings (using fake keywords as an example), which can create an even more frustrating user-experience.

What this means for other developers is that if you’re not already one of the top 25 in a given category, there’s a good chance your app will never meet the eyes of a prospective downloader.

In an industry driven by accessibility and conversion, a robust search engine is no longer a luxury but a necessity. Native apps stores, even the Android marketplace have not cracked the code on a search experience for apps that rivals the mobile web or PC web for that matter.

3. Little to no marketing support

Most native app stores provide little marketing support directly to developers. Developers can’t effectively market their own apps other than create a link backs, which sends the consumer away from their site.

Outside of being unable to control the brand experience, they get the same revenue share no matter how the user finds out about the app, so there is no financial incentive for them to spend their marketing dollars.

On top of it all, native app stores don’t provide developers and publishers with the tools they need to make informed decisions, such as the ability to track downloads and analytical software that helps maximise conversion rates and downloads.

What this leads to is ineffective merchandising and poor ROI. If you are one of lucky developers that courts Apple, lets them control your marketing message and give you input on your product, you may have a slingshot chance of getting featured in their store. The idea of this being sustainable for any developer is a flat-out joke.

4. Simple revenue models

In many ways, native app stores have become mere marketing platforms for publisher’s brands.

Consider Angry Birds, the most downloaded app in the past year, which has generated roughly $100 million dollars for the company, the vast majority of which has come from advertising. While this model is great for the top-selling games, it leaves relatively thin margins for the rest.

Bottom-line: Developers need more ways to make money. As smartphone penetration catches up with feature phones, we’ll see a tremendous uptick in revenues generated from mobile payments. Case in point: Juniper now estimates that by 2015, download fees and in-app purchases will generate 10 times the revenue of mobile advertising.

With so much money up for grabs, now more than ever, developers need to get a firm handle on ways to make money other than downloads. This could include in-app billing, carrier billing, and/or a commerce engine that allow you to sell content on your own site. They also need to be able to control marketing and distribution in order to maximise these revenue-making opportunities.

Despite the tremendous upswing in the market for apps, it’s become apparent that native app stores have failed the majority of developers.

The question remains: Will they be open to change and embrace new ways to offer support, or have they just become too big, greedy and specialised to care?