Apple App Store v/s

Android Market

Deepak Bhandari
Contents
What are mobile applications?.............................................................................................................................3
What are application stores..................................................................................................................................3
App facts...............................................................................................................................................................5
Value chain of a mobile application......................................................................................................................5
Business Model.....................................................................................................................................................6
Apple App Store....................................................................................................................................................7
Android Market...................................................................................................................................................11
The final showdown between the giants: Apple App Store v/s Android Market................................................14
Future Predictions...............................................................................................................................................19
References..........................................................................................................................................................21

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What are mobile applications?

Also called mobile apps, it is a term used to describe Internet applications that run on smartphones and other
mobile devices. Mobile applications usually help users by connecting them to Internet services more
commonly accessed on desktop or notebook computers, or help them by making it easier to use the Internet
on their portable devices. A mobile app may be a mobile Web site bookmarking utility, a mobile-based instant
messaging client, a standalone application for a specific purpose, a game, etc.

Also known as downloadables, mobile applications are common on most phones, including inexpensive, entry-
level devices. These are widely used due to the many functions they perform including basic and advanced
features.

Mobile application development is the process by which applications are developed for small low-

power handheld devices such as personal digital assistants, enterprise digital assistants or mobile phones.
These applications are either pre-installed on phones during manufacture, or downloaded by customers
from app stores and other mobile software distribution platforms.

The major categories of mobile applications that are available are:

 Communications
 Entertainment
 Books
 Education
 Multimedia
 Games
 Productivity
 Travel
 Utilities, etc.

What are application stores

A Web site for downloading free and paid applications to smartphones as well as computers and other
portable computing devices is known as an application store. Launched with the iPhone 3G in 2008, Apple's
App Store popularized the concept of a single point of contact for downloading applications and updates.
Following are the major app stores: (as of June, 2010)

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Worldwide mobile application store downloads are forecasted to reach 17.7 billion downloads in 2011, a 117
percent increase from an estimated 8.2 billion downloads in 2010, according to Gartner, Inc. By the end of
2014, Gartner forecasts over 185 billion applications will have been downloaded from mobile app stores, since
the launch of the first one in July 2008.

Worldwide mobile application store revenue is projected to surpass $15.1 billion in 2011, both from end users
buying applications and applications themselves generating advertising revenue for their developers. This is a
190 percent increase from 2010 revenue of $5.2 billion.

Gartner analysts said the hype around application stores in 2009 continued through 2010 with alternative
offerings to the Apple App Store gaining some traction. Android Market, Nokia's Ovi Store, Research In
Motion's (RIM's) App World, Microsoft Marketplace and Samsung Apps are the key competitors that saw the
number of application downloads grow in 2010.

Free downloads are forecast to account for 81 percent of total mobile application store downloads in 2011.
This percentage has been decreasing since the first launches in 2008, and Gartner estimates free downloads
will continue to decrease in 2011, but it will increase again from 2012 through 2014. Users will begin paying
for more applications as they perceive values in the concept of mobile applications, and they become more
trustful of billing mechanisms.

In 2010, application stores' revenue is estimated to have reached $5.2 billion, both from end users buying
applications and applications generating advertising revenue for their developers. The growth between 2010
and 2014 is forecast be over 1,000 percent.

Application stores' revenue is split between the store owners (such as Apple, in the case of the App Store, or
RIM, in the case of App World) and the application's developer. The average revenue share is based on a
70/30 split, with 70 percent going to the developer. By the end of 2014, advertising will be generating a little
under a third of the revenue generated by application stores, up from 16 percent in 2010.

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App facts

Out of the total apps available for users, around 2/3 rd are paid apps while the remaining 1/3 rd are free to install
and use. Also, the major segment of applications available on app stores are books, games, entertainment and
education.

Value chain of a mobile application

The application value chain consists of developers, applications and customers. Application developers are
either individual developers or companies specializing in creating mobile platform based applications (e.g.
Zynga, Rovio, EA Sports, etc.). These applications are then downloaded and installed by the users from the
respective application store like Apple App Store or Android Market.

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Business Model

In most app sales, the developer’s cut is around 70% of the purchase price, the exception being BlackBerry,
which gives the developers around 80% of the purchase price. The various third party stores average at
around 60% remuneration to the developers.

In just over two years since launch, Apple’s App Store has created a new business model for the mobile
industry and now boasts 250,000 apps on offer and more than 6.5 billion downloads (that’s 200 apps every
second). 25,000 of the total app offerings are specific to the company’s iPad tablet. 1.5 billion downloads were
focused on games and entertainment applications to the iPod touch alone.

App stores have created a new distribution channel for software, and a new way to create and sell applications
at lower price points than traditionally have been possible, especially in a mobile context.

Below are the developer fees charges by the application stores for allowing the developers to create and sell
applications via their app store platform:

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Apple App Store

The Apple App Store is a service for iOS devices (the iPhone, iPod Touch and iPad) offered by Apple Inc. which
allows users to browse and download applications from the iTunes Store that were developed with the iOS
SDK and published through Apple. Depending on the application, they are available either free or at a cost.
The applications can be downloaded directly to a target device, or downloaded onto a computer via  iTunes.
30% of revenues from the store go instantly to Apple, and 70% go to the seller of the application.  The App
Store opened on July 10, 2008 via an update to iTunes. On July 11, the iPhone 3G was launched and came pre-
loaded with iOS 2.0 with App Store support; new iOS 2.0 firmware for iPhone and iPod Touch was also made
available via iTunes. As of October 20, 2010, there are at least 300,000 third-party applications officially
available on the App Store. As of January 18, 2011, the App Store had over 9.9 billion downloads, which was
announced via the company's "10 Billion App Countdown". On January 22, 2011, the 10 billionth app was
downloaded from Apple App Store. The median revenue per developed application is estimated to be $700,
while the average costs range from $15,000 to $50,000

After the success of Apple's App Store, and the launch of similar services by its competitors, the term "app
store" has been used to refer to any similar service for mobile devices. However, Apple claims "App Store" as a
trademark. The term "app" has become a popular buzzword; in January 2011, "app" was awarded the honor
of being 2010's "Word of the Year" by the American Dialect Society. 

On October 20, 2010, Apple announced the Mac App Store which was eventually launched on January 7, 2011.
It is similar to the one for iOS devices, only it has applications designed for Mac computers. The Mac App Store
is only accessible by using Mac OS X Snow Leopard or the upcoming Mac OS X Lion.

The App Store is accessible from the iPhone, iPod Touch and iPad via an iOS application by the same name. It
is also the only way to directly download native applications onto an iOS device without voiding the warranty.
Web applications can be installed on these devices, bypassing the App Store entirely, but they tend to have
less functionality. The store is also accessible on computers running Mac OS X and Windows through iTunes.

In April 2009, Apple announced the apps which had the most number of downloads since the store was
launched. Among paid apps, the Crash Bandicoot Nitro Kart 3D, by Activision Publishing, was number 1.
Among free apps, Facebook was number 1, and Google Earth was number 2.

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Following the popularity of the App Store, competitors developed their own software stores. Palm Inc.
published an application store similar to the App Store for Palm devices and announced the App Catalog for
webOS on the Palm Pre that was released on June 6, 2009. Another platform, Android Market is used in
conjunction with Google's Android operating system. Microsoft has released Windows Marketplace for
Mobile, an application store for their Windows Mobile platform. Nokia has released The "Ovi Store" (which
replaced its earlier "Download!" application) for its S60 and S40 based mobile devices. Samsung has created
Samsung Apps, primarily to cater for its own Bada OS, but also with support for certain other Samsung
devices. RIM also launched its application store BlackBerry App World. The Nintendo DSi is able to connect to
an online store called the "DSi Shop", along with Sony's PlayStation Portable (PSP) being able to connect to
PlayStation Store to download games, etc.

The below graph shows the number of applications available for download at the Apple App Store against the
actual download till date (in millions).

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SWOT Analysis for Apple App Store

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Android Market

Android Market is an online software store developed by Google for Android devices. An application program
("app") called "Market" is preinstalled on most Android devices and allows users to browse and download
apps published by third-party developers, hosted on Android Market. The website, rather than the Market app
itself, provides details of some of the available apps, in particular those that are termed "Featured", "Top
Paid" and "Top Free".

The Android Market was announced on 28 August 2008 and was made available to users on 22 October 2008.
Priced application support was added for U.S. users and developers in the U.S. and UK in mid-February 2009.
UK users gained the ability to purchase priced applications on 13 March 2009.

On 17 March 2009, there were about 2,300 applications available for download from the Android Market,
according to T-Mobile chief technical officer Cole Brodman.

By December 2009, there were over 20,000 applications available for download in the Android Market. By
August 2010, there were over 80,000 applications available for download in the Android Market, with over 1
billion application downloads. Recent months (in 2010) have shown an ever increasing growth rate, recently
(in May 2010) surpassing 10,000 additional applications per month.

A report in July 2010, a company named Distimo showed that the Android Market features the highest
percentage of free apps, with over 57% being free to download, double the amount of Apple Inc.'s App Store,
in which only 28% of apps are free. Other competitors, such as Nokia's Ovi Store and Blackberry's App World
had 26%, with Windows Marketplace only having 22%.

In December 2010, it was reported that the Market would shortly receive an update, which will, alongside
some minor updates, will add content-filtering to the market, and will reduce the purchase refund window
from 24/48 hours to 15 minutes. Google has said that the new update would be available to all devices
running Android 1.6 or higher, and arrived on unlocked HTC Desires in the UK on 16th December.

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On February 2, 2011 Google presented a new web client providing access to the market via PC. Requested
Apps will directly be downloaded and installed on the registered Android device.

Developers of software (apps) receive 70% of the application price, with the remaining 30% distributed among
carriers (if authorized to receive a fee for applications purchased through their network) and payment
processors. Revenue earned from the Android Market is paid to developers via Google Checkout merchant
accounts. T-Mobile, the first carrier with an Android device, recently updated the market to allow Google to
directly bill app purchases to a customer's cell phone account that show up as a charge on the bill.

Android devices can run applications written by third-party developers and distributed through the Android
Market or one of several other application stores. Once they have signed up, developers can make their
applications available immediately, without a lengthy approval process.

When an application is installed, Android displays all required permissions. At that point, the user can decide
whether to install the application. The user may decide not to install an application whose permission
requirements seem excessive or unnecessary. A game may need to enable vibration, for example, but should
not need to read messages or access the phonebook.

App permissions include things like:

 Accessing the Internet

 Making phone calls
 Sending SMS messages
 Reading and writing to the installed memory card
 Accessing a user's address book data

The Android devices have been able to successfully carve a significant market share for themselves and have
emerged as the single biggest challenger to the iOS from Apple. Although Nokia’s Symbian is still the market
leader in smartphone OS, threat of losing this position looms large upon it.

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Google is all set to commercially launch Honeycomb OS for tablets which will help their store gain more
prominence and compete against the hugely successful iPad from Apple which has been a runaway hit and the
fastest selling gadget ever. Although the immediate focus of Honeycomb was to get Android ready for tablets,
the operating system is really designed to enable Google’s software to power all manner of mobile devices.

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The final showdown between the giants: Apple App Store v/s Android
Market

There has been a lot of discussion lately about the differences between Apple’s iPhone and phones based on
Google’s Android. While these discussions typically center on hardware, usability and the operating system,
they rarely discuss the differences between the Android Market vs. the Apple App Store. There are a number
of differences between the two, some of which primarily matter to end-users and others that matter primarily
to developers.

Open vs. Closed System: The single biggest difference between the Android Market and the Apple App Store
is the difference between an open and a closed system. Apple’s system is a closed one. Applications must be
submitted to Apple for review and Apple ultimately decides what may or may not be sold in the Apple App
Store. In contrast, Android Market is an open system. Developers can directly publish their applications to the
market without having them filtered through a central authority. This means that the Android Market is likely
to have a greater variety of applications and content but end-users have to accept that the applications are
not being screened. There is a definite trade off. The Android Market does support a community rating and
comments section, however, which helps buffer against poorly designed or malicious applications.

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Refunds: Another big difference between Android Market and the Apple App Store deals with paid
applications. The former allows an end-user to obtain a refund by uninstalling the application within 24 hours
of purchase. This makes it much safer as an end-user to purchase an application. If you buy an app that does
not work properly or does not seem to meet your need, uninstall it within 24 hours and you get a full refund.
The Apple App Store does not offer refunds on applications, so while the applications are screened by Apple, it
is still buyer beware. You need to make sure an application will meet your needs before you purchase it.

Developer Initiation Fee: Another notable feature that distinguishes the two stores is how much it costs a
developer to join. Android Market charges a fee of $25 to sign up as a developer. This fee then allows you to
publish your apps in the market. The Apple App Store charges $99 to become a developer. Keep in mind that
paying this fee does not mean your application will get added to the app store. Apple reviews all applications
for acceptance so paying the fee does not guarantee that your app will be published. Both markets charge
30% of any paid application sales. Apple keeps this 30% while Google pays the 30% to the wireless carriers.
This may result in greater cooperation from and adoption by wireless carriers for Android.

Competition: For a developer trying to get a new application noticed, there is less competition in Android
Market. Currently Android Market hosts about 1,00,000 applications while the Apple app store has over
3,50,000 applications. There is a lot more room for new and innovative applications in the Android market.

Being an open system and offering refunds to end-users makes the Android market a great asset for end-
users. The openness ensures a greater variety of offerings and the ability to get a refund makes trying a paid
application a low-risk venture. For developers, Android offers a lower cost to get started and an arena with
much less competition in which to make your application stand out.

Google and Apple have very different strategies with respect building to their app stores. Apple's game-plan
has been a tightly-controlled system in which developers need to pass strict requirements to be listed in the
store. On the other hand, Google doesn’t have an approval system, so developers can quickly submit and
revise their applications at will. Apple's walled-garden approach has long been one of the biggest complaints
for app developers, limiting what they could release and sell based on Apple's ever-changing restrictions.

Another fundamental difference between the two is that the Android OS is open source and the technology is
designed to be extended by an active community. The open source approach has been proven to drive faster
innovation and wider adoption in countless examples and Google is counting on it to best their proprietary
competition.

One other significant advantage of Android Market apps is that they do not differentiate between the phone's
core applications and one's developed by a third-party. This means developers have equal access to all the
mobile device capabilities, providing users with a broader spectrum of available services.

Importantly, both companies do allowing developers to sell inside of apps. However, all payments made
through the iOS generate a 30% cut for Apple, while Android developers receive 70% of the app price, with the
remaining 30% distributed between carriers and payment processors.

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While the iPhone 4 was the best-selling mobile phone in the US during the fourth quarter of 2010 with access
to over 350,000 apps, the Android OS is hot on its heals running 53% of all US smart-phones, including the
Motorola's Droid X & Droid 2 and HTC's Evo 4G, with access to over 130,000 apps.

Google and Apple are positioning themselves with fundamental different strategies, but in the end it's another
classic proprietary vs. open source battle.

Application discovery is a big problem in both the platforms. As there are too many applications in the iPhone
App Store, getting your application noticed after publishing it is a huge problem and may need huge
advertising budgets. One of the best ways to get it noticed is to get it in one of the "Top Apps" list. However,
the AppStore can also be accessed through iTunes which makes it easier for the users to search and find the

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applications they need. Also there are various websites which maintain a library of iPhone Apps with user
reviews.

Visibility in the Android Market is better than the App Store primarily because there are fewer applications in
it. However, Android Market is not as user friendly as the iPhone App Store nor does it have a desktop client
which makes the application discovery process a bit complicated.

Fragmentation is a major concern for Android developers. Android has more than 5 OS versions 1.0, 1.1, 1.5,
1.6, 2.0, 2.1 and 2.2 and more than 60 devices running them. Each of these devices have different display
resolutions, different hardware specifications, etc. which leads to application incompatibility. If you are an
Android developer, you have to worry about supporting devices with older Android OS versions, devices
without cameras, devices with or without physical keyboards, devices with varying display resolutions and the
UI element orientation on each of them. Android developers have to keep upgrading their apps to make sure
they work with every new device and OS release. This leads to an inconsistent user experience. This was one
of the reasons which led to the eventual death of J2ME.

The iPhone on the other hand has only 5 versions - iPhone, iPhone 3G, iPhone 3GS, iPhone 4 and 4 major OS
releases. All devices are backward compatible and support similar resolutions except the iPhone 4. They have
similar hardware and thus offer a much better user experience across the board.

As we can see, both the Android Market and the iPhone App Store have their pros and cons. There is no direct
way to judge which of them is better; both are great platforms for the developers.

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Future Predictions

1. Premium apps pay peanuts

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Cellular companies should remember that selling premium apps isn’t the only way application stores can
generate new revenue. Other options include providing a billing platform for someone else’s apps store, go-to-
market services for developers (such as apps testing, hosting, marketing), and in-app commerce, including ads,
which will eventually outpace revenue from downloads anyway. Of course, cellular companies need not start
out with such broad objectives. Companies need to see this as a bigger opportunity for developers to get
involved, especially local developers.

2. Developers respect money

If cellular companies want to attract developers to their application storefronts, they need to show a clear
monetization path – preferably in the form of billing APIs.

3. Defrag the OS

Possibly the biggest challenge the mobile sector faces in the apps space is that the current OS-driven model
being championed by vendors is already threatening to re-fragment the mobile content market after years of
work by standards bodies like the Open Mobile Alliance to bridge proprietary handset UI specs.

And that’s putting more pressure on developers who now face huge issues of overhead costs and complexity.

A warehouse model that gives the developer a single entry point into the supply chain and can also handle
things like contacts and settlements should be the way forward for the app stores.

The mobile device sector needs to move away from tying apps directly to the OS and look to the runtimes,
virtual machines, widgets and other enablers on top of the OS to help apps go cross-platform, which will make
things a lot easier for developers.

4. Aim for the clouds

Ironically, that complexity is also a major factor driving interest in a cloud-based approach to mobile apps. The
mobile ads and marketing campaigns have to work on all handsets and hence, cloud forms an essential part of
the future strategies of these app store corporations.

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References

 http://www.apple.com
 http://www.asia.cnet.com
 http://www.brighthub.com
 http://www.businessinsider.com
 http://www.cultofmac.com
 http://www.distimo.com
 http://www.engadget.com
 http://www.gartner.com
 http://www.market.android.com
 http://www.metrics.admob.com
 http://www.store.apple.com
 http://www.wikipedia.org

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