Ain't Price Erosion A Bitch?

Angry Birds is the current reigning champion of iOS Paid Apps. The simple, addictive game from Chillingo & Rovio has sold over 6.5mil copies in 8 months. This eclipses former App Store phenoms like Lima Sky's Doodle Jump, which hit 5mil in June, the Tap Tap franchise from Disney's Tapulous, that was allegedly pulling down between $500k and $1mil a month in late 2009, and Firemint's Flight Control, which realized 2mil downloads within 11 months of launch. No doubt, all amazing feats from great, small companies. Moreover, the impact these companies have had in terms of introducing mobile gaming (and apps in general) to a broad audience, and in perpetuating the cult of iPhone, cannot be overstated. Unfortunately, the economics of the very ecosystem they edify are conspiring to keep them small.

As PocketGamer reported yesterday, the average price of an iPhone game is now $1.24. We can all see that the Top Paid Apps chart is now dominated by 99¢ titles. Increasingly user reviews bash titles that are priced any higher, and perhaps to appease these consumers, publishers now run frequent, often endless price promotions. Let's face it, 99¢ is the price the user community has come to expect for most games. Apple, of course, fosters this scenario, as part of their reverse razorblade model in which they provide budget priced entertainment for their premium priced hardware.

Ironically, back in the much maligned carrier deck era, the economics were actually better for top-tier games. Circa 2006/2007 the average blended global wholesale price (after carrier) for a triple-A Java/BREW title, including monthly re-ups, was about $2.25. That's more than 3X the 70¢ Chillingo, Lima Sky et al are seeing from each of their downloads post Apple. And it's not like hit games weren't doing boffo download numbers back then... in fact less competition, recurring subscriptions (in the US) and some politics conspired to create mega-blockbusters on a scale (considering the addressable user base) we may never see again. Of course, the all time king is Tetris, which has allegedly been sold over 100mil times in its various mobile incarnations... yielding at least $200mil for EA Mobile and its predecessor companies. On the lower end of the Java-era hit spectrum was the Fast & Furious franchise, which I-play openly claimed had sold 13 million units by the dawn of the iPhone era... which meant something like $30mil for the publisher if my math is correct. Then there are franchises like Namco's Pac-Man and PopCap's Bejeweled that sat between these two... closer to the Tetris end. At today's App Store prices, Chillingo would have to sell 40mil copies of Angry Birds to be in the league with these Java/BREW era revenue stars, and over 300mil to be the new Tetris. Even considering the the cost savings afforded by slicker development environments and not having to port, I'm confident that today's hit titles are far less profitable than those of the pre-iPhone era.

So, the consequence of current smartphone platforms being more democratic, and their owners being price agnostic, is that publishers not only have a significantly more difficult time manufacturing hits (in the fog of 10s of thousands of titles), but thanks to price erosion, those hits are less meaningful to their bottom lines. These dynamics, along with the added complexity of the freemium model, will further escalate a frenzied state of competition without price differentiation amongst publishers... virtually ensuring that none will amass enough wealth to aggressively scale their businesses, and that many will be forced to exit altogether. Meanwhile, it's better news for consumers, who continue to get more for less, and the hardware and network guys, who are laughing all the way to the bank.

The Beginning of Think Different

Thanks to Pekka Parnanen for pointing me to this great video from the beginning of Steve Jobs' reinvention of Apple, soon after regaining control in 1997. I'm not an Apple fanboy (and don't use an iPhone), but I have no end of respect for this company, its products and its market savvy... and I think most of it is attributable to the singular vision of Mr. Jobs. I would go on to propose that Apple has emerged as the most important force in terms "consumerizing" the mobile entertainment products many of us worked on, in relative obscurity, for years (I expect some arguments) and that the mobile revolution they've spawned is a corollary of Think Different. BTW - the ad Jobs introduces in this video still gives me goosebumps.

Updated: Apple Still The Big Story In Gameloft's Earnings... But Not As Big As It Initially Appears

Gameloft issued a release last Wednesday outlining their top-line Q2 2010 performance. Revenue was up 14.7% over Q2 2009 to €33.60mil ($44.44mil), and for the first half of the year it was up 11%. That puts their revenues for the last 4 quarters at $169.95mil, at current exchange rates. North America held steady at 34% of revenue or $15mil, while Europe lost some ground to developing markets. Overall this looks like a solid result pending the release of comprehensive financials at the end of August.

The most amazing claim in the release is actually one made in error. The release states that "Gameloft has positioned itself as a leading game publisher on Apple's iPhone and iPad and has seen its sales on the AppStore grow by 113% during the second quarter of 2010." That initially led me (and others) to believe that their iOS revenue had spiked from €6.93mil in Q1 to €14.76mil in Q2... which would represent a whopping 44% of revenue. However, after contacting investor relations it turns out what they meant to say is that their iOS revenue has grown 113% since Q2 2009 and that the figure associated with iPhone, iPad, iPod touch is actually €7mil, or 21% of revenue... which is the same percentage they reported for Q1 2010.

Now that that's straightened out I'd be interested to hear what their revenue looks like on other smartphone platforms. Despite all the hype about Android, publishers keep telling me that paid app sales in that channel are still insignificant (attributable to Google Checkout, poor management of Android Market & OS fragmentation), and that the other smartphone platforms are barely worth mentioning. Meanwhile the carriers, at least in North America & Europe, are becoming less important with each passing quarter. For games publishers, this has got to be troubling... it's never a good thing when one distribution channel dominates the agenda of an industry. Unfortunately, for Gameloft et al, it appears that they're gonna have to be comfortable with a dependency on Apple, and the dangers inherent in that type of relationship, for the foreseeable future.

Consumer Reports Can't Recommend iPhone 4... Without Duct Tape

Mossberg Talks About The Rise of the Super-Smartphone

Apple & The Balkanization of Content

Andrew Seybold wrote a great piece on FierceMobileContent this morning bemoaning how Apple has taken us back to the future by creating their own version of the walled garden from the bad ol' days (not that long ago) when the only way to get content for mobile devices was through a carrier deck. The smartphone revolution was supposed to liberate us all from those proprietary, AOL-esque environments, and give us access to a universe of content available across devices... right? Well Apple apparently didn't get that memo and/or think that was a good idea, at all... and instead took the opportunity to Think Different.

The crux of the matter, and content owners and creators need to understand this, is that (big headline) Apple is not in the content business... at least not the way most folks think they are. As I'm very fond of saying (eyes roll collectively) Apple is in the reverse razorblade business. Despite having a huge ecosystem of 185k Apps, thousands of movies & TV shows and millions of songs, they run iTunes, as Peter Kafka recently pointed out, as a pretty much a break even business. Content is a means to an end for Apple. Their interest is in creating a hyper-competitive market featuring proprietary, low-priced Apps and other entertainment content, that makes consumers excited about buying every form-factor of their high margin devices... and upgrading them regularly. You know all your friends who are crazy-passionate about Apple products? They've bought into this hook, line and sinker and now that they've spent a significant chunk of their disposable income on music, movies and Apps for their iPhones and iPads, (guess what?) they're never gonna switch to an Android device or a BlackBerry... but in the next year they'll probably spend what's left in their wallets on a new a sexy new razor to show off all those blades.

Content owners and creators who are hoping Apple will winnow the field of Apps or move prices higher in the market, so they may realize better margins, are deluding themselves. The model is all about you fighting for your very life, against hundreds of others, so Apple customers get the best content at the lowest price (why not free). They definitely don't want any one provider getting too much pricing power within their ecosystem. Oh yeah, and remember you're playing in Apple's sandbox... so that tech innovation leveraging their platform, that's giving you some competitive advantage... Apple might just decide one day to roll that out to tout le monde.

For some small companies this highly manipulated, low-price, high-volume market provides a real opportunity. Moreover, the sheer scale of it, the shopping experience and the elegant billing mechanism makes it an important place to play for all content providers. But iTunes is a very dangerous market in which to place all your bets. In terms of closed markets, content owners should ultimately be favoring those in which the owner's interests are more closely aligned with their own. More importantly, if we hope to see a healthier mobile content ecosystem, content owners and creators need to support, and advocate for, more open standards and markets.

WW Handset Metrics Q4 2009

Check out the full story on FierceWireless

Who's Most Successful Getting Paid Apps in the Top 100?

O'Reilly Radar published a post yesterday with the results of an analysis of the US iTunes App Store by Senior Analyst Ben Lorica. Among other things, he looked at which publishers (with over 10 titles) had the highest success rate getting their titles onto the Top 100 Paid Apps list. The list is dominated by games publishers, with Gameloft and EA Mobile performing the best. It is somewhat ironic that Lorica labels the chart Most Efficient iPhone Developers... because Gameloft, while an awesome publisher, is usually considered famously inefficient... with their 4k or so employees contributing to a $42k rev/emp/yr figure, that's surely one of the worst in the business.

If The App Store Rocks So Hard Why Are So Many Game Publishers Hurting?

As we all know and as was reinforced in spades by Monday's boffo earnings report... Apple has rapidly and radically revolutionized the mobile content industry with the iTunes App Store. In just 20 months the "fruit company from Cupertino" has created the mobile retail ecosystem that Nokia and the rest of us have been dreaming about since Y2k. There have been beneficiaries of the post-carrier app store revolution (besides Apple) in mobile gaming, which continues to be the biggest category. Notables include some great, small developers like Firemint, which has now sold 2mil copies of its Flight Control game and Lima Sky which is nearing that number with Doodle Jump. But, even some of the big players are claiming great success... Namco has just claimed 23mil App Store downloads, 3 weeks ago Gameloft claimed it had sold 10mil iPhone games and it's no secret that EA Mobile is the biggest App retailer of all. In many respects this should be the glory days of the mobile games space... so why is it then that many established publishers are suffering financially, and that some former luminaries might not survive 2010?

Here are some key factors in my opinion:

Content Clutter: Sure, the App Store is a great platform, but it's a cluttered mess, with over 140k Apps currently competing for the attention of iPhone and iPod touch customers. With very limited promotional real estate it's extremely difficult to create a breakout hit unless Apple has your back or a publisher has the marketing resources to fund substantial off channel promotion.

Price Erosion: As a corollary to the point above, the way many publishers are electing to compete is on price. While you'll see the occasional game as high as $9.99 inevitably the price begins to slip. Unless a game is exceptional, it's difficult to move product above $4.99 and as we all know many of the best sellers are 99¢. If you troll through the ratings comments you'll see that consumers increasingly believe that the price of a game on the platform should be 99¢. For quality publishers who traditionally spend 6-figures on game development (and licenses) that price point makes it exceptionally difficult to realize ROI.

The Carrier Channel's Diminished Importance: Although the majority of mobile game publisher revenues are still coming from carrier decks on Java/BREW feature phones, everybody knows that the consumers with the highest propensity to buy premium content, including games, are abandoning those platforms as quickly as they can get out of their contracts. This sea change is resulting in many publishers seeing 20% year-on-year declines in their Java/BREW revenues. Rapidly, the ability to push product through that klugy channel, by way of having strong relationships with key carrier personnel and having the ability to port games to hundreds of handsets, is shifting from being a competitive advantage, with strong barriers to entry, to being a relatively expensive liability.

Goodbye Recurring Subscriptions: It's a dirty, but poorly kept secret that lots of Java/BREW publishers adored the US carrier channels because of their embrace of the recurring subscription model. You know, buy the game for $9.99 or subscribe for $4.99 per month... which consumers think is such a deal 'til they realize (or don't), when they replace their handset in 15mos, that they spent $74.85 on a game they played 4 times. Publishers are seeing a whole lot less of this scenario, and it's associated lucre, as even the most gullible gamers move to smartphone platforms... where this model doesn't exist. Sure Apple has introduced in-game purchases, which facilitates the up-sell potential of virtual goods, etc. within Apps... but that relies on active decisions by purchasers and will only benefit those publishers that invest in making that a compelling proposition. The "sleeper" subscription model that benefited many game publishers for years is disappearing and those publishers that haven't factored that into their plans and found a way to compensate are going to have a rude awakening.

As a consequence of these factors, my feeling is that the greatest beneficiaries of the smartphone, app store revolution will be small, super-nimble, high-quality developers who elect to move up the value chain and publish to these more democratic platforms. I also believe that the very biggest publishers can survive the transition, and even flourish, by virtue of deep pockets, big brands, big marketing and close, trusted OEM relationships. The many publishers in-between are destined to be victims of this paradigm shift, I'm afraid, unless they learn to behave like their smaller competitors or consolidate into a bigger one.

Before iSlate, iTablet, Whatever It's Called, There Was Newton

Velti Forecasts $106mil in 2009 Revenue

UK mobile advertising outfit Velti Plc (VEL), the company that bought AdInfuse last year, got a jump on FY 2009 earnings season by forecasting revenues of over $106mil... which represents 24% year on year growth. The company claims to have run over 2k campaigns for over 450 brands during the last year and indicated that demand for its products remains strong. While the company is trying to spin the earnings as "in-line", many analysts had them pegged in the $115mil range, so the company's stock took a 3% hit in London trading today. It'll be interesting to see the rest of the numbers when they report full details in the next few weeks. Despite the near miss, Velti is probably the biggest of the mobile advertisers, with revenues more than double those of hyped US plays like Millennial and AdMob (in the process of being acquired by Google for $750mil) and at least 5x the revenues of Quattro (which is being acquired by Apple for $275mil). Oh, and by the way, these guys actually turned a (real) net profit last year. One wonders why, in light of Velti's performance and the recent frothy valuations of other mobile advertisers, that its market cap is only around $153mil.

Dredging The CESpool For Cool

So, I'm back from Las Vegas with a lighter wallet, no voice, potential liver damage and some decent business prospects. Good show, good times. I've aways contended that it's hard to get perspective on the entire beast that is CES when you're on the ground, living it... but for what it's worth here are the things that I thought were cool, interesting or notable from the slice of the show I experienced:

• First, props to the nurse at the First Aid Station at the Las Vegas Convention Center, who by virtue of providing me with an isopropyl soaked towelette was ultimately much more helpful rectifying my latest BlackBerry Bold trackball crisis than the charming yet useless folk in the RIM booth.

• 3D TV is way cooler than I expected, especially the full HD version (1080p in both eyes). But, it is still hard to fathom kickin' it in active 3D glasses along with 22 of my closest friends during a Superbowl XLV, or a Superbowl L party for that matter. I think Samsung is on to something with the glasses-less solution. The good news in the short term is that excitement around this niche should make that sweet non-3D 55" LED set I'm coveting much cheaper.

• Thanks Nokia booth guy for the great demo of the N900. Slick device. I particularly liked the social networking topscreen widgets (like MotoBlur) and thought the Flash 9 enabled browser was awesome. Now go and get yourselves a carrier subsidy you sillies.

• Slates, tablets, eReaders galore... some like the Kindle except better, like Plastic Logic's Que proReader, and some that are more rich media friendly the the HP slate. There's a lot of froth and fear in this product sector that I'm convinced (and reliable sources I spoke with agreed) is about to be defined (on Jan 27th) by Apple.

• I'm happy to report that based on the balance of parties there's evidence to suggest the AVN is virile of spirit (if not of revenue) in the face of potentially withering challenges that industry faces from an onslaught of free digital services and its cultural destigmatization. Didn't get to spend any quality time at that show, but I did get to attend one of the aforementioned parties courtesy of some cool folk at Gawker, and I was gonna say it didn't suck at all, but...oh never mind....

• Android, Android, Android... the exuberance continued into the show following Google's Nexus One event last week. The fact that Flash 10 was announced to be coming to Android browsers didn't hurt. (Hopefully this will push Apple over the hump with Adobe). On the Android handset front I heard some strong positive buzz from industry insiders about the Sony Xperia X10 device (see demo below), that will unfortunately sell like 2 units in the US if the SE can't get any carrier love.

• I like to say I'm into architecture, so I thought my mind would be blasted by the newly opened City Centre property... but no so much. I felt that it took some modern concepts from a dream team of kick-ass designers and plugged them into a tired LV model (set back hotels, promenade mall, etc.). Instead of feeling original and exuberant, it felt formulaic and strangely anachronistic given its embrace of super-premium Eurotrash retailers and it's cookie-cutter (though dark) casino. On top of that, several locals I spoke to expressed hatred for the already notoriously crap attitude of the staff. I did have an Eric Schmidt sighting there on Friday, which felt as much like a check-the-box as the property itself.

• Samsung blew it on the mobile front by not showing their highly anticipated Bada S8200 featuring their Bada OS (yeah! another smartphone OS?). I think they had the most impressive booth at the show, but overall I must say their handset selection made me long for another Red Bull (without Vodka this time).

• Unexpected superawesomeness in the form of the Schlage LiNK demo in the RIM booth. They have system where you can use your BlackBerry (or, presumably, any other web enabled phone) to remotely access and activate your door locks, temperature controls, lights and remote cameras in your house. While my initial thoughts tended toward hijinks, in retrospect this system may be one of the more useful innovations demonstrated at the show.

• Lenovo had some bad-ass looking netbooks, including the tabletesque, capacitive screen S10-3t. But you know, in terms of netbooks that Nokia Booklet 3G that was deployed all over the Nokia booth maybe the netbook eyecandy du jour.

• There was a lot of excitement about the Boxee Box (made by D-Link) that allows consumers to access the internet content on their TVs without a computer. Uh, er... wasn't that called WebTV? I'm not convinced I should be excited.

• Sprint's Overdrive 3G/4G portable hotspot device has a lot of potential...like Verizon's MiFi but faster. However, it's not even worth considering in LA til almost 2011, when their WiMax network rolls out here.

I'll add more if I think of them... in the meantime I'd love to hear what impressed you. Let me know.

Did France Telecom's Stéphane Richard Parle Out of École About Apple's iSlate?

Is This How Gameloft's 10mil iPhone Game Sales Break Down?

CLICK ON IMAGE TO ENLARGE

Jon Jordan at PocketGamer.biz had a story today covering Gameloft's announcement that they've sold 10mil iPhone (and iPod touch) Apps since the App Store opened 18mos ago, in which he points out that the French publisher "didn't reveal any per title sales figures." Well, considering my recent fascination with correlating User Ratings with downloads, I thought I'd take a stab at decoding this... just for kicks. In my post on Dec 16th I told y'all that based on some conversations with publishers I was getting comfortable with the notion that each User Rating on a Paid App accounted for 75 downloads as a rule of thumb... I then went on to perform some calculations on iTunes Rewind 2009 to support my thesis. This seemed to work pretty well, as long as I adjusted the numbers to show that casual games downloaders have a lower propensity on average to post a User Rating and that those who downloaded games for gamers have a greater propensity to post one... which made intuitive sense to me.

Well, in looking at the total reviews of Gameloft's 56 Paid App titles as they relate to their 10mil download claim, assuming their title mix is typical of all Paid App games in the store, then it looks like my average number of 75 may have been a little high. Gameloft games have received a total of 163,931 User Ratings and if I divide 10mil by that number I get 61... so maybe that's the right correlation. I still think adjustment for casual and gamerly games are required, but for the spreadsheet above I simply decided to apply the number equally across all titles. The spreadsheet is sorted by downloads and the estimated revenue is based on today's price (so take that with a grain of salt), as opposed to the Estimated Average Price over the game's lifetime I'd use if I had more time (remind me to hire a staff when I get rich off this blog... right). One thing that this does seem to show (if this is correct) is that Gameloft actually does have 1 title with over 1mil paid downloads... "Hero of Sparta" which launched in December 2008.

Is This What Reading A Magazine On The iSlate (Apple Tablet) Will Be Like?

Update: Apple Buying Quattro For $275mil

iSlate Will Help Apple Dominate ePublishing

Earlier today WSJ's John Paczkowski revealed that Apple is hosting an event in San Francisco on Weds Jan 27th (2 weeks before Macworld 2010), presumably to launch the hotly anticipated tablet device the technorati confidently call the iSlate. There's been rampant speculation for months in the tech press and blogosphere about this product's form factor, OS, UI/UX, hardware components, etc., but I think the most interesting discussion is around the digital content category it'll help Apple dominate. The iPod quickly allowed them to control digital music and the iPhone mobile apps... so what will it be with the iSlate? Stu Dredge had a great post this morning theorizing about which games would be best suited for a tablet-like device, and there's been a lot of talk about how its rumored 10" screen will make it the ultimate portable video player. While I think the iSlate has potential to be awesome for both of those categories... the big win for Apple will be in electronic publishing. I'm confident Apple has it's sites firmly set on Amazon's hot-selling Kindle, and believes it has the chops to deliver a much better consumer experience (the bar isn't set too high, frankly). Imagine all your favorite books, magazines and newspapers available for sale or subscription through iTunes, at super-reasonable prices (an Apple hallmark), that can be enjoyed in full color, with intuitive interactive tools and sharing features. Assuming they can get deals done with all the major publishers (talk about old media, oy vey!), that the hardware isn't prohibitively expensive (~$500) and that they also make ebooks & emags available for legacy devices (e.g. the iPhone), I think within 1 year they could easily dominate the space. Unless I've got this all wrong, publishers, particularly those on the newspaper/magazine side getting massacred by the online ad-supported business model, should be kissing Steve Jobs' (feet) about now. Meanwhile, I suspect Bezos & company are chewing copious fingernails in anticipation of the Jan 27th event.

Some Predictions For 2010

• The Nexus One and myriad other Android devices will launch with varying degrees of fanfare, but the Google devices in aggregate and the Android Market will continue to pale in the shadow of iPhone/iTunes as a consumer event due to inconsistent marketing, klugy app billing and OS fragmentation

• Mobile marketing will graduate from the experimental stage, and become a core strategy component for several enlightened global brands

• Several established mobile games publishers will either be acquired or file for bankruptcy protection... companies that could be in play during 2010 include: Hands-On Mobile, I-Play, Twistbox, Digital Chocolate and perhaps Glu Mobile

• Apple will finally strike a deal with Adobe that will allow iPhone users to access content built in Flash through the browser, creating a boon for Hulu, Vevo, YouTube, MovieClips, et al

• Apple will make eBooks and eMagazines available through iTunes for their upcoming tablet... but they will also be available for iPhone and touch

• Nokia will scrap it's Comes With Music offering, will continue to struggle to make Ovi a meaningful consumer proposition and will see declining market share as it gets squeezed by Apple, RIM and Android devices on the smartphone front and by low cost Chinese manufacturers in developing markets

• LTE & WiMax services will continue to roll out slowly, but 4G won't be a significant consumer event during 2010

• Google Googles will move beyond Android and quickly establish itself as the world's most popular augmented reality application... leaving companies like Layar & GetFugu in its dust

• The current Top 5 companies in my Cabana Mobile Entertainment Top 20 by Revenue (Zed, Index Mobile, UMG Mobile, MobiTV & Buongiorno) will all see mobile revenues decline during 2010. Smaller App-focused publishers will see the greatest revenue gains

• Carrier-based App stores will make consumers yawn, but on a positive note they'll benefit the coffers of several advertising and identity/design agencies

• An application developer, a credit card company and a major retailer will collaborate to launch the first commercial in-store mobile transaction service in the US

More to follow throughout the day...

Is Each Game App Rating Worth 75 Purchases?

As part of my ongoing (quixotic?) quest to create a correlation between the number of user ratings for a Paid Game App on iTunes and its downloads, I've been doing some concept testing with sources and just spent way too much time building the spreadsheet above to guesstimate the revenue generated by the top 30 best selling games in the US store from iTunes Rewind 2009. I'm beginning to get more comfortable with the idea that in general each rating is worth about 75 downloads (as opposed to 100 that I've posited previously), or in other words, that 1.33% of game App purchasers submit a review. In looking at the spreadsheet you'll notice that I've had to tweak to the download to review ratio in order keep Apple's Rewind ranking intact... and these mostly make sense to me intuitively. Basically, what this shows, is that purchasers of more casual games (e.g. Bookworm, Radgdoll Blaster) are less likely to submit a review and those that buy more gamerly titles (e.g. Zenonia, Myst) are more likely to submit one. There are two anomalies here worth noting... one which I can explain, the other I cannot. You'll notice that the revenue associated with Rock Band seems be out of sequence, however this is an App that allows in-App purchasing, so there's a revenue stream that I'm not capturing. The one I can't figure out is Sally's Spa, which in this analysis has the characteristics of a hard core game title... which doesn't make any sense. There may be a point when titles get over a certain number of ratings (this one has 16,750) that a different paradigm kicks-in. I know some of you'll be thinking that I partied too much in college (and after?) and this is all evidence of some kind of long-lasting impairment... but if that's not the case, and this model can be refined a bit further, it should be a great benchmarking tool. Let me know what you think. I'd especially love to hear feedback from peeps who weren't sleeping during statistics and, of course, from publishers.

btw - I have noticed that in some instances Apps have lost ratings from previous versions despite iTunes claiming to have ratings from all versions of the product. This is the case here with Wheel of Fortune, for which I was able to estimate all ratings from data I had collected for an earlier post.

Will Ovi 2.0 Help Nokia Catch The App Store?

Earlier today I read Stuart Dredge's extensive, candid interview with Nokia's George Linardos about the Ovi store debacle, in which the VP of Product, Media & Games was refreshingly self-deprecating and obviously keenly aware that the store has deeply disappointed consumers and mobile content publishers. “We have screens in the office with the Twitter feeds running all day long, and it’s like constantly getting punched in the face!” he says... I probably threw a few of those punches and I have to admit it's kinda satisfying to know they landed (nothing personal, George). To the extent that awareness of a problem is half the battle to finding a solution, this is good stuff. In addition, the fact Nokia is in the final stages of building an all new infrastructure for Ovi, that will replace the current tape and glue version this Spring, is positively inspiring.

This interview confirms what we've all suspected for many months... that Nokia vastly underestimated Apple's ability to rapidly establish the iTunes App Store as the benchmark of mobile content retailing. But, despite the Finn's efforts to step it up a bit with a technologically enhanced Ovi 2.0, I feel pretty confident that Apple will continue to kick Ovi's ass for the foreseeable future. The "fruit company from Cupertino" accelerated out the gate like a bullet on a rail, and shows no sign of slowing, while Nokia hobbled onto the track and is just beginning to trot. Ovi claims almost 1mil app downloads per day with a 100% monthly growth rate, but as impressive as that sounds it's gonna be a herculean task for them to meaningfully compete with the App Store beast... with its 2bil downloads lifetime and 6.6mil per day, from a catalog of 110k Apps that's getting 10k new submissions per week. And then there's Nokia's crappy (and getting crappier) footprint in the US which, frankly, will make the job so much tougher. I recognize that Nokia has dominant share in much of the world ex US, particularly in some of the fastest growing markets. But, from a practical perspective the US market is really an ideal base from which to build a digital retail empire by virtue of its population, common language, developer community and culture of consumerism. That means Nokia will have to continue to build scale the hard way, from disparate territories with their own language/cultural issues that require multiple marketing and retail strategies, that are expensive and labor intensive to execute. This model creates a negative side-effect for publishers (especially those smaller shops that have benefited Apple)... who'll need to be convinced that it makes sense to deploy apps in 20+ languages before there's any meaningful sales volume. So bonne chance with that Nokia, and if you have the chops to successfully build scale this way you can shift your agida to Apple's other huge advantage... iTunes billing.