http://www.marco.org/2012/07/26/mac-app-store-future
This article raises some interesting points. Specifically about the effect of ... well "political instability" within the Apple App store. This is equivilent to any other form of instability in an environment or niche.
The population within that environment cannot adapt to the environment because the "time to adapt" is longer than the environments "time between changes". Effectivly the population will mostly "suck" at "exploiting" the opportunities in the environment in an optimal way.
Now..... what to do? What to do? Do what?
Well if there is an exodus of both customers and sellers from a market place... the market place will either diminish or must recruit more of both. Since the Apple App store has a constant stream of new customers ( purchasing new devices and being main-lined into the App store exerience) this is partially mitigated. The other side of this is that there is a whole mass of App developers who are just waiting for the opportunity presented when a big name app exits the market place. This mitigates the other part of the problem.
The only people who loose are the developers who exit the app store and their customers who follow. They all go to tiny niche app stores ( developer web sites ..etc) which are more fagile and have a much higher level of risk. Let me put it this way... would you bet on a small app developer being here in five years or Apple being here in five years?
The problem with the position in the article above is that the developers think they are unique and have some irreplacable "stuff". This, I would contend is ..."crap". (Technical term...)
In the event that an App exits the market place simply because the developer is too arrogant to adapt to the changes in the market place... it will be about 0.01 seconds before someone else starts trying to replace them....even if they offer less functionality or do things differently... they will grow and follow what the customers need/want/crave/etc.
No one will miss the apps and developers that have left to find there own destiny in the waste outside the walled garden.... simply because they have no way to control the "Unique-ness" they assume they possess. It can be replaced with other "Unique-ness" of similarly ephemerial specialness.
NO ONE CARES IF YOU TAKE YOUR TOYS AND LEAVE THE GAME.
A few may follow... for a while, but there is no cost to the customers to return to the walled garden when they choose. There is a huge cost to the developers to leave and then return. Their position will be lost/diminished/destroyed. And no one will care.... There is no loyalty when the choice is between functionality or no functionality. The customer will go where their pain is least... however, they also will not try every option to optimise their choice... they will simply stop with the first/nearest option that reduces their pain enough to be worth while. Satisficing.
Showing posts with label app store economics. Show all posts
Showing posts with label app store economics. Show all posts
Friday, August 3, 2012
Wednesday, June 20, 2012
More on the economics of the mobile space
http://ralphbarbagallo.com/2012/06/18/the-big-business-of-small-audiences-in-mobile-games/
This article is a nice little snapshot of the changing dynamic in the mobile game/app space. Its interesting and kinda obvious that the market has reached saturation the way it has. It will be interesting to see if the dynamics are the same as the PC software market of years gone by when there was 1) Industry leader with "Rolls Royce" product and price tag to match. 2) Product for everyone who hated Industry leader with similar features, some compatability and a "budget" price tag. 3) A small tail of partial/imitation/amature variants as freeware/shareware/scamware with some features, high bug counts and unstable market niches. And to illustrate...
http://www.lukew.com/ff/entry.asp?1563
My guess would be that within most of the market segments in the app store, there will be a similar breakdown. Its only between the top couple of contenders that there is any action as they fight for their market share/profit margins. The rest will fade away as their startup capital runs out and their dreams of wealth get a little more real. These are the people factors.
The other thing that has a huge attrition effect on the market is platform changes. It costs little to keep an app alive once its "done". However, having to update it or massage it or keep pumping marketing money into it will bleed a lossmaking product to death, so if the market dictates that there is a high maintenance cost to any app, expect to see a fairly quick rationalisation of the segments.
The problem with the app store is that the whole market place has still not explored all the possible applications that people can/should/might do with a phone/tablet. Until there is "an app for that" that tests each possible use and gets some sense of demand/need/want... there will be a lot of "prospecting" going on. This will keep the app store inflated with lots of new entrants and old timers. This is similar to the model that gold mining boom towns go through. Until its clearly proven to all the dreamers that there is no easy fortune... they will keep comming and keep pouring their energy into the app store. Once it gets hard and the rewards reduce and have a larger and larger entry cost you will see rationalisation and consolidation. Larger companies will be formed that can efficiently extract the value from the availible market. These will jockey for position but generally get on with becoming more efficient.
I would expect most of the niche segments to rationalise out to about half a dozen profitable apps or less.
We will then see more rationalisation as apps consolidate across niches and cross compete by eating each others markets.
All this little ecosystem will bubble along until there is another platform change or a new platform entrant ( Microsoft Surface?) which will upset the equilibrium by rapidly changing one or more variables. (Pull away capitalisation, start another round of gold-rush mentality, tap a new group of buyers, offer new technical features or make something obselete)
I would predict that radical changes in platform will reduce simply because it will destroy the existing application pool for the devices. I think Apple will be very careful about breaking existing applications now that Microsoft are solidly in the game. Backward compatability has always been a bigger issue for MS than for Apple. Android is in a total mess with the Google platform, so I would expect to see them either stabalise that or go into a death spiral now that MS is in the game.
MS will eat Googles lunch simply because they can walk into the enterprise space, if they produce a good product. If they produce a great product, they will sew up the enterprise space and a large chunk of the pro-sumer and power user space simply be existing. If they produce an insanely great product and it has real sex appeal, they can take a chunk out of the mid and top end of Apples pie. The thing they cannot do is create a cheap product to compete with all the android crapware. So the bottom end of the market will still belong to Android rubbish and cheap iPads for a while longer. But then again, theres no money in that segment... so who cares.
Ok... FIGHT!
This article is a nice little snapshot of the changing dynamic in the mobile game/app space. Its interesting and kinda obvious that the market has reached saturation the way it has. It will be interesting to see if the dynamics are the same as the PC software market of years gone by when there was 1) Industry leader with "Rolls Royce" product and price tag to match. 2) Product for everyone who hated Industry leader with similar features, some compatability and a "budget" price tag. 3) A small tail of partial/imitation/amature variants as freeware/shareware/scamware with some features, high bug counts and unstable market niches. And to illustrate...
http://www.lukew.com/ff/entry.asp?1563
My guess would be that within most of the market segments in the app store, there will be a similar breakdown. Its only between the top couple of contenders that there is any action as they fight for their market share/profit margins. The rest will fade away as their startup capital runs out and their dreams of wealth get a little more real. These are the people factors.
The other thing that has a huge attrition effect on the market is platform changes. It costs little to keep an app alive once its "done". However, having to update it or massage it or keep pumping marketing money into it will bleed a lossmaking product to death, so if the market dictates that there is a high maintenance cost to any app, expect to see a fairly quick rationalisation of the segments.
The problem with the app store is that the whole market place has still not explored all the possible applications that people can/should/might do with a phone/tablet. Until there is "an app for that" that tests each possible use and gets some sense of demand/need/want... there will be a lot of "prospecting" going on. This will keep the app store inflated with lots of new entrants and old timers. This is similar to the model that gold mining boom towns go through. Until its clearly proven to all the dreamers that there is no easy fortune... they will keep comming and keep pouring their energy into the app store. Once it gets hard and the rewards reduce and have a larger and larger entry cost you will see rationalisation and consolidation. Larger companies will be formed that can efficiently extract the value from the availible market. These will jockey for position but generally get on with becoming more efficient.
I would expect most of the niche segments to rationalise out to about half a dozen profitable apps or less.
We will then see more rationalisation as apps consolidate across niches and cross compete by eating each others markets.
All this little ecosystem will bubble along until there is another platform change or a new platform entrant ( Microsoft Surface?) which will upset the equilibrium by rapidly changing one or more variables. (Pull away capitalisation, start another round of gold-rush mentality, tap a new group of buyers, offer new technical features or make something obselete)
I would predict that radical changes in platform will reduce simply because it will destroy the existing application pool for the devices. I think Apple will be very careful about breaking existing applications now that Microsoft are solidly in the game. Backward compatability has always been a bigger issue for MS than for Apple. Android is in a total mess with the Google platform, so I would expect to see them either stabalise that or go into a death spiral now that MS is in the game.
MS will eat Googles lunch simply because they can walk into the enterprise space, if they produce a good product. If they produce a great product, they will sew up the enterprise space and a large chunk of the pro-sumer and power user space simply be existing. If they produce an insanely great product and it has real sex appeal, they can take a chunk out of the mid and top end of Apples pie. The thing they cannot do is create a cheap product to compete with all the android crapware. So the bottom end of the market will still belong to Android rubbish and cheap iPads for a while longer. But then again, theres no money in that segment... so who cares.
Ok... FIGHT!
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