The Wireless Application Marketplace: Apple, Google, Microsoft and RIMM

For the past month I have been transfixed by all my wireless applications on my iPhone from Apple (AAPL). Now Microsoft (MSFT), T-Mobile and Google (GOOG) are entering the fray! AAPL's iPhone App Store reported 60 million downloads and revenues of $30 million in its first month. Developing a marketplace to sell mobile applications developed by 3rd parties is growing by leaps and bounds with three new powerhouse entrants this week.

Enter GOOG: Last Thursday, Google announced it will host a new applications store called Android Market and unlike AAPL, has stressed that Android will be a central point of distribution rather than a content filter. They are choosing to use the YouTube distribution method.

This also puts GOOG in an unusual position of both challenging and supporting AAPL's iPhone software goals at the same time. This conflict of interest has even affected AAPL board meetings where Eric Schmidt, CEO of GOOG, has had to occasionally leave the meetings when those sensitive issues are addressed. The first Android phone isn't expected until late Fall and it is rumored that Android Market will ship as beta and that only free apps will be available at first. A payment system and paid applications will follow later.

Analysts have not factored into earnings this potentially lucrative marketplace and its subsequent revenues. GOOG share price has been under pressure lately due to their last earnings disappointment and also concerns on future headwinds from currency exchange pressures on overseas revenues due to recent dollar strength. If GOOG can accelerate revenues from YouTube and GOOG's Android Marketplace, it should help counterbalance those future currency effects.

Here is a shot of GOOG's Android Marketplace:

click to enlarge

Enter T-Mobile: T-Mobile has also opened its own store. and is also in partnership with GOOG's Open Handset Alliance, which not only promotes Android but pushes the notion of open software development for cellphones.

With a single go-to location for apps, T-Mobile could potentially shake up the normally closed US cellular market, which has only recently begun to loosen its control over which programs customers can run with initiatives such as Verizon's (VZ) Any Apps, Any Device and Sprint's (S) unrestricted, WiMAX-based Xohm network. Still, the prize for T-Mobile is said by one developer to be less about revolutionizing the phone market and more about creating an allure for its service that transcends any one handset, in contrast to AT&T's dependence on the iPhone and other star devices. "The App store was a big deal, but that's one phone," the anonymous developer says. "This is an entire carrier."

Enter MSFT: No software party is ever complete without the 800 lb. Gorilla. Yesterday MSFT announced plans for "Skymarket", its applications store for Windows Mobile 7 in 2009. Interestingly, MSFT is choosing to enter the marketplace arena even when it presents a philosophical dilemma. In essence they are choosing to embrace this "platform" due to the increasing popularity of easy distribution applications and innovative software products. The potential profit and revenue is of course a compelling reason as well. There are also possible synergistic collaborations and ideas which could be born from these market places to core company software products.

The philosophical question surrounds the balance of this new marketplace which could be a threat to MSFT's core business and the development of a possible new MSFT which embraces the democratization of software revenues with 3rd party providers. MSFT is now on the hunt for such a person to lead the new program.

MSFT's slide in recent years in the smartphone market has been due to the success of the iPhone and also the rise of the RIMM (RIMM) Blackberry. As of now MSFT currently recommends developers join Handango which takes a cut from between 40% and 70% of mobile developer's revenues.

One thing is for certain and that is "Mobile Computing" is the future and it is important for the biggest players to be involved. It seems that the acceleration of this phenomenon has just increased velocity with the rise of the Mobile Developer Community and the expansion of platforms. It seems that the wireless war just got hotter and that small developers are now the elite foot soldiers.

Enter RIMM: What is RIMM's next move? A partnership or an organically born mobile app marketplace? They too have a philosophical dilemma much like MSFT but they are also at a greater advantage due to the popularity of their products and their sheer mobile consumer coverage. We will be waiting.

Comments

[Jon T]

Microsoft's Skymarket will be as poorly received and used as ALL of its consumer offerings, like the Zune and its marketplace.

One day we'll wake up to find that all Microsoft has left are dumb terminals. Its real customers having walked to Apple, Google et al.

[dean collins]

I'm wondering when a 'cross platform mobile' application market will be launched?

Obviously there are more windows mobile applications than any other mobile platform out there just seems strange nothing competing with the iPhone app store has been launched.

Seems like an obvious choice with
windows.MobileAppStore...
or
android.MobileAppStore...
or
iphone.MobileAppStore.... etc etc.


Cheers,
Dean

[Brandon]

Will be interesting to see what happens during the exclusivity period with t-mobile.

[KenC]

App Stores are low margin businesses. I can't see how that will help Google. App Stores, help adoption of devices, just like iTunes and the iTunes Music Store drove customers to buy iPods. The profit is in the iPods, not the Music Store. The same holds true for Apple's AppStore. The profit is in the iPhone not the iApps. The iApps drive people to adopt and buy iPhones.

I suppose a Google App Store will help sell Android-based phones, but still, a plethora of devices where some apps work on some phones, better than on other phones, is confusing to the customer. Look at MS and Nokia and Palm's efforts so far.

[mollytjm]

mcsf's slide in the smartphone business isn't just because of the other vendors...it's Zune left a lot to be desired, like innovation, for instance...though they did offer it in brown. apple's moat is so wide at this point that it's hard to see what kind of catching up the others will have to do..and if they can manage it. my $'s on Apple.

[scott s]

Thanks. I wish more people would start writing about the increasingly relevant conflict of interest in having Mr. Schmidt on Apple's BoD. I am becoming quite concerned about this. There are a number of products and services that are now in direct competition between AAPL and GOOG. There is no possible way that Mr. Schmidt can perform his duties at this point without significant disruption to the meetings. We have the iphone (vs. android), the app store (vs google app store), and now the browser (safari vs google) just to name a few. I'm sure that AAPL has benefited by having Mr. Schmidt's insights during his tenure and I am grateful for his service, but it is time for him to go!!! AAPL can not afford to either 1) give away potentially very sensitive competitve data to GOOG, and/or 2) have an ineffective board member. Shareholders should be concerned and should demand a replacement for this seat on the BoD!!!

[Kyle B]

Great observation by scott s.
AAPL cannot go forward without "watching" an important BOD member.
I vote him out.

[Lumens7x]

Schmidt is intelligent, insightful, and a good leader. Doubtless, the Apple board finds him a valued member, even with having to send him to the coke machine sometimes while they talk iPhone vs gPhone.

Is Google in the wireless handset manufacturing business? no. Is Google in the wireless subscriber business? no. Is Apple in the advertising business? no.

Google uses tech, but remember it isn't a computer, software, or cellphone company. Google's revenue comes from one source: advertising. All they want is all the eyeballs in the world. T-Mobile or AT&T can sell devices and run the network, HTC or Apple can make them, so long as the ad sales on those screens is Goog's.