By Ermal Hajrizi
Apps: they’re an integral part of an operating systems ecosystem. Apple started the app store craze with their aptly-named App Store, which was launched in the summer of 2008 - a year after the introduction of the iPhone. More app stores followed, with the debuts of Google’s Android Market (recently renamed Google Play), Amazon’s App Store, and Marketplace for Windows Phone 7. These app stores have exploded in growth. Just this past February, Apple celebrated the download of its 25 billionth app. Billion. With a “B”. Clearly, the demand is there. But what about the supply?
The supply for apps for any OS stems from developers. These are the guys (and gals) who sit behind computer screens typing away code for hours upon hours to make the programs we love to use on our smartphones everyday. Everything from Angry Birds, to Twitter, to those stupid fart apps, its all thanks to the hard work of developers. Some of these developers work hard enough that they believe they deserve compensation, and rightfully so. I mean, some of these people code apps for a living. Developers essentially have two options for a revenue stream: making their apps free with the inclusion of advertisements, or simply making their apps paid from the start.
So, do paid apps make a lot of money? Well, to give you a perspective on things, Apple has recently announced that it has made payments out to developers totaling $4 billion. Even the Amazon Appstore is doing pretty well, according to this chart by Flurry Analytics.
As you can see, Google’s very own market of apps, although considerably larger than Amazon’s, ranks drastically lower in terms of revenue. So now the questions is why? What is Google missing? There’s many factors that may be at play, but I think I know the major problem. Read on to find out what it is.
So you’re lying around, doing nothing, and you’re bored. What do you do? Well, you have your brand-spankin’ new Android smartphone on you, so you decide to try out a new game. You head into the Google Play app to look for a game and find one that looks pretty cool: Doodle Jump. And look, it’s only $0.99. Sweet! You proceed by clicking the “Buy” button. That’s where you run into a problem.
You see, in order to buy an app from Google’s app store, you have to have a credit card account tied to your Google account. And this is pretty common, as can be seen around the industry. Both Apple and Amazon employ similar systems for their app-purchasing ventures. So, what’s wrong with Google’s method? What’s different between their system compared to the rest of the pack? Its actually simple: there’s no way to get around the credit card requirement.
What do I mean by that? Well, I’ll explain using a hypothetical situation, which can apply to both Apple’s App Store and Amazon’s App Store. When you want to purchase an app from either of the previously mentioned platforms, you are presented with two choices: the credit card method mentioned above, or the use of a gift card. Where can you get these gift cards? Pretty much anywhere. You’re local supermarket, an electronics store - even online. The cards have redemption codes on them that can be used as a sort of “prepaid credit card”. This is what Google is missing. And this is what they need if they’re going to succeed in the app store war, and indirectly, the smartphone war, because we all know its the apps that make the phone, not the other way around.
So why are gift cards important anyway? Why don’t credit cards suffice? The most obvious reason is simple: not everyone has a credit card. A recent study showed that only about 20% of 18 year old students have credit cards. Furthermore, Pew Internet has shown that nearly a third of teens aged 14 to 17 have a smartphone. This is a large market that remains relatively untouched by Google. Without access to a credit card account, millions of users are restricted to free apps, which doesn’t generate much revenue for developers, especially small-scale ones.
Now, you may be thinking, “Ok, so most teens don’t have credit cards. So what? They aren’t the majority of smartphone consumers anyway”. This is true. But it is also true that even amongst those adult users that possess credit cards, not all of them want to tie them to their Google account, for whatever reason. In fact, analytics firm Distimo had this to say about purchases of paid apps on Google’s market platform.
Distimo says only two paid apps have been downloaded more than 500,000 times worldwide since Google’s market opened in early 2009. But it says six paid apps in Apple iPhone’s app store did similar volume in March and April–in the U.S. alone.
The introduction of gift cards for the Google Play store would surely help the situation. The evidence is clear in Apple and Amazon’s case. Google must work on its app distribution in order to build an ecosystem that is more enticing and securing than what is found in its current state.
However, while Google is struggling with apps, it has begun to show progress. Last year, after revealing that they were (unsurprisingly) unhappy with their app store performance, Google introduced a new way to pay for apps: direct carrier billing. What this means is that users could tack on app charges, whether flat-out fees or in-app purchases, onto their monthly bills. Clearly, this isn’t enough, though, and more needs to be done. It remains unclear where Google Play is heading, but we are sure to find out more in the near future.