Announces Plans for AppStore

| About:, Inc. (CRM) (NYSE:CRM) revealed moves yesterday to monetize its AppExchange marketplace of third-party applications built on the on-demand CRM provider's platform. The AppStore will be an automated, self-service bazaar where customers can try, buy and deploy partner applications. will take a cut of the first year's revenue earned by ISVs who closed deals via AppStore. At the same time, it will collect money from partners that want to take part in the AppStore Referral Program. Partners who kick in fees will get premium placement in application search results and head various application categories, in a system similar to the paid listings that search engines place at the top of natural search results.

Standard Referral partners will pay a 10 percent referral fee on the first year's revenue from all closed transactions. Premium Referral partners will kick in 25 percent of the first year's earnings, in return for additional benefits including handholding and mentoring by The standard program is scheduled to go live in the first calendar quarter of 2007; the premium program is scheduled for the third quarter.

Since it launched the AppExchange, has taken no fees or percentages from participants in the marketplace; executives said the company benefited by selling more basic subscriptions as the software ecosystem offered more benefit to customers.

At a lunch for press and analysts today, CEO Marc Benioff said that partners and the company's internal sales division had pushed for the premium referral program.

The company already offers support and co-marketing to partners:

"The referral programs turn an expense into a profit center," Benioff said.

Ariel Kelman, director of Apex platform product marketing, said partners wanted to work on a shared risk basis with the company:

"They want to feel confident that it's part of our revenue generation strategy."

The company also announced AppStore Checkout, a package of commercial services that will let customers immediately purchase AppExchange products, with facilitating the transaction and taking a cut. Checkout is expected to go live in the fourth quarter of 2007.

In addition to providing incremental revenue to in the form of transaction fees, Checkout will act as an upsell mechanism. When a customer logs in to the AppExchange and selects a product, the system will check to see whether that customer has enough seats of the basic application to cover the app, as well as suggest upgrades.

Also this morning, the company raised its guidance by $10 million for its full fiscal year 2008, expecting revenue to be in the range of $710 million to $720 million.

Benioff said he expects the referral programs to generate more revenue than Checkout:

"Most customers do want to talk to someone before they buy," he said, "especially medium and large customers, who buy more."

Disclosure: Author has no position in CRM

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