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.

The Lumia 900 is here

One of the world’s largest cellphone maker, Nokia, has teamed up with the world’s largest operating systems creator, Microsoft. Their goal was to create a new smart phone that would usher both companies into a new age. Prior to the partnership, both companies recognized that they were stagnant giants. This project attempted to give Nokia and Microsoft a new edge in the market place. They came up with the Lumia 900, but does it really offer a challenge to the iPhone?

Starting at 99.99, the Lumia 900 is priced appropriately. It’s cheaper than the iPhone, which is key since everything is worth what the purchaser will pay. And people won’t pay much for an untested item. Its sleek design is large but comfortable, allowing more battery space and screen. Windows operates well on this phone. It carries all the standard features such as GPS and Wi-Fi. Where it falls flat is in the apps department. Apple has a huge advantage in this arena. Microsoft has even resorted to paying up to 600,000 dollars for popular app developers to make their programs compatible with Windows. For its long term health, the Lumia 900 and its successors will need a steady stream of lucrative apps. From IT consultants to people who just use their smart phones as watches, it’s all about the apps.

From the outside, Microsoft has provided the software and Nokia has offered the hardware. Like the black words and white pages, one can’t survive without the other. A year ago, Nokia was in a similar situation that Research in Motion is in now. Microsoft has deep pockets. An infusion of capital into an under used manufacturing system is recipe for success. In return, Microsoft has found an in road into a new technology that their previous Windows Phones were denied. Microsoft wants to avoid the pitfalls of companies like Wang Laboratories. Wang created great stand alone word processors, but failed to capitalize on the PC market making them just a foot note in tech history.