Mobile today is like the Internet in the 90's with relatively slow connections and limited browser capability. Just like the PC Web, improvements in mobile Web will bring down today's walled gardens. Apple (Nasdaq: AAPL) is not AOL (AOL) but still has much to lose.
I have an iPhone 4 and I love it. I love apps and l love the app store. Apps simply deliver an experience you can’t get on the mobile Web. But this love is not meant to last.
It’s understandable why many believe that apps are here to stay. Reportedly 6.5 Billion apps were downloaded from iTunes; that’s 54 for every iPhone. The trend line is steeply upward, but I think the runaway success of mobile apps is because they fill a temporary void and the use of mobile apps will decline.
Mobile Past – RIM Misses the Need for Apps
To understand why let’s look at the past. Mobile apps have been necessary and viable since the first Blackberry. While Research in Motion (Nasdaq: RIMM) should have won the battle of the app they missed the opportunity.
I co-founded a company call iTendant in 2000, acquired by Servidyne (Nasdaq: SERV) in 2004. We built a Web and mobile SaaS platform (although we did not call it SaaS back then) to manage service and maintenance in hotels and office buildings. For many reasons (although there was a mobile Web), it would not work for our purposes. So we wrote applications for the Blackberry as the mobile component.
Initially we had no support from Blackberry; we even had to pay to be part of their developer program. They did not see how making the devices more useful could significantly expand their market and since they could not generate revenue from our app, they never offered more than token marketing support in the form of brochures to hand out at trade shows.
Part of Apple’s genius in the app store was the understanding that free apps not only made the devices useful but also drove herds for traffic to their app store.
Mobile Today – The Need for Apps
Apps were needed in the past and are needed today, but in five years, maybe not so much. In August, Chris Anderson and Michael Wolff wrote, “The Web Is Dead. Long Live the Internet” for Wired Magazine. They contend that a lot of what we do on the Internet is not on the Web but in apps and that trend is expected to continue.
However they missed a key observation; the trend in mobile is largely just a replay of the trends in the early Web and pre-Web, where applications (once called software on PCs, now call apps on mobile) were built to overcome inherent limitations. For example, PointCast, mentioned in the article, overcame slow dial-up speeds by pushing content, while AOL also cached content. As internet speeds increased and browsers gained capabilities, these approaches were no longer necessary.
Remember Microsoft (Nasdaq: MSFT) Outlook, probably was the biggest PC app ever? As browser capabilities and network speeds evolved, standalone apps were less necessary. Today PC apps are generally for only the most demanding applications, like games, spreadsheets and word processing; and even those are moving to the Web. Big money is betting on migration to the Cloud to continue.
Look Back to See Ahead – Mobile will Follow PC Evolution
Even mobile Web banner ads look like 1997. Of course we need apps today. Applications fill a void by providing richer functionality, caching and pushing of content to overcome mobile’s present-day limitations. But if I could get the same experience by just going to a bookmarked Web page, why would I bother with downloading and endlessly upgrading apps?
The iPhone apps that I use most frequently like New York Times (NYSE: NYT), CNN (NYSE: TWX), Wall Street Journal (Nasdaq: NWS), The Weather Channel, Facebook, LinkedIn, Twitter, and Yahoo (Nasdaq: YHOO) and Gmail, (Nasdaq: GOOG), also rank as the top PC Websites and my top destinations.
Just like the PC Internet’s evolution was driven by faster computers to support better browsersand faster connection speeds, as mobile devices get more powerful and connection speeds increase, mobile's evolution should continue to follow the same evolutionary path. In perhaps just a few years, we may see a much smaller market for mobile apps. They simply won't be needed for most functions, so the growth will abate, then decline.
Implications – The End of Walled Gardens
Much has been made of today’s re-emergence of walled gardens created by Apple and Google because of their app stores. If you are in the media business, you need to continue developing new apps with innovative ways to connect with your audience. You can’t let someone else fill that void. Today Apps help extend and retain your audience.
But you also need to prepare and even push towards a post-app world to take power back from the walled-garden.
Just like the PC, I expect the rise of a good mobile Web to topple the walled gardens while creating a platform agnostic environment that levels the playing field. In this scenario, the one with the biggest garden has the most to lose – Apple. The diminished importance of apps will reduce switching costs for consumers since they will simply need to log-in to Web sites rather than worrying about losing favorite applications in the transition to a new device. This would put price pressure on Apple and create an opportunity for others to take share.
Disclosure: Long YHOO, TWX