Me: What about all the free apps?
Relay: When the app store opened, most apps were not free: somewhere in the 75% range. Today that number is sinking, it might be 25% as developers go to the in-app or advertising model to drive revenue. People seem to be much less willing to pay outright for apps than they used to, and again, competition amongst developers is a big part of that. Of course, without revenue for us, there’s less revenue for Apple. Like I said, Apple needs to help developers find new ways to monetize.
Me: It seems like the public only hears about a few apps out there. Angry Birds, etc.
Relay: A mere 25 of the top US developers accounted for half of app revenue. With such a consolidation of the power, it seems inevitable that there will be increasing pressure on how much of a cut Apple gets.
Me: In other words, they won’t want to give Apple their 30%, say 20%.
Relay: Exactly.
Me: If you were Tim Cook, how would you address this?
Relay: Make sure to keep the App Store front-end fresh with new, highlighted applications ensuring that new blood will come in and the success stories continue. You need more than a few ultra-success stories. At some point those will get stale. By fostering this, Apple isn’t beholden to a few large developers. As they say: diversify.
Me: How is your company making money? Your app is free, and I didn’t see any in-app purchase options.
Relay: Right now we aren’t making a dime off it. We’re experimenting with a few options but our goal was to provide a valuable service to our users and not charge for “Relay Stuff.” The mobile experience tends to be more intimate and people are less willing to jump out of an app to follow a traditional display ad, and we are focused on building our user base first. We’re evaluating partnerships that allow us to offer our users valuable discounts, credits, or other offers as a result of their use of Relay. I expect this type of approach we’ll be seeing more of in the mobile space. It takes a little more to get right as the tools aren’t quite there yet so there’s no single solution.
Me: Last question. If you had Tim Cook’s ear, what would you advise him to do in a way that would benefit both developers and Apple?
Relay: Build or buy tools to help developers monetize, including ad mediation. Do something more with Passbook: create a Passbook Partner service for retailers or service providers that is easy for developers to integrate into their apps for referral or pass-through sales to customers. These are a couple that would ultimately be a win-win-win as Apple will continue to get a cut in the emerging “free” models and have a voice in how those evolve; Developers would have a more complete set of monetization options directly from Apple; Users would continue to see app innovation and services that encourage engagement and usage.
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Again, thanks to the guys at Network Anomaly, makers of Relay Stuff, for the time they took to help us all understand the app store a little more thoroughly. If you have a thought or comment or question that will help us all gain a better understanding of Apple and app stores — especially if you’re an app developer! — please enter it below.
The article These Headwinds Could Dethrone Apple’s App Store originally appeared on Fool.com and is written by Margie Nemcick-Cruz.
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