Apps the Digital Cash Cow

How do you define success? For iTunes, I think reaching the 25 billion downloads mark sounds like a good standard. Apple is known for its hardware like the iPhone and iPad. But apps have become a cash cow. Experts predict that Apple will generate 13 billion dollars from selling apps next year. That’s a lot of money, even for a company that’s estimated to be worth nearly fifty times that. In iTunes, particular apps being sold are a centerpiece of Apple’s business strategy. The risk on any individual app is very high. Given the risk, the rewards are vast. The app Angry birds made over 70 million dollars against its 140 thousand cost to make. That’s over a 500 fold ROI. Even taking to account all the apps that failed that’s still worth for Apple to gamble on given their diverse portfolio of developers.

Microsoft is very keen on this market. The long term success of its upcoming smart phone, the Lumia 900, depends on how good its apps are. To this end, Microsoft is paying developers to develop apps on their platform. Shelling out between 60 to 600 thousand dollars, Microsoft wants to cut into the Android and Apple market in order to gain a foothold for their other products. Only time will tell if this approach will work.

Looking at all the apps that have done well in the past, I can say this: the success and failure of apps depends on three key features, simplicity, accessibility, and integration. Simplicity is important because the app must be usable by a large audience. Everyone from a mobile IT support worker to a half blind grandma should be able to use a successful app. Accessibility is the way apps can be downloaded and accessed by the phone itself. Given that two things are equal, consumers will generally chose the one that is easier to get too. Apple created iTunes to do this and Microsoft needs to design a marketplace that is equally, if not more, visible. Integration is final piece. The apps that are most used can flow seamlessly between the real and digital world. Good apps can be picked up and put down at the drop of the hat since they are most likely used on a mobile device on the go. It’ll be interesting to see what apps developers will come up with in the years to come.