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The evolving business model of iPhone Apps Part 2: Stickyness and usage trends

In the first part of this article i wrote about the current iPhone Apps business model and what it might evolve into in the future, giving the developers opportunities to maximize their revenue from their original application and enhancing the their product portfolio and lifecycle. In this second part i will be looking at trends in the iPhone Apps industry and how some developers are starting to look at ways to improve on their business model.

Recently several online sources have reported on studies showing how most iPhone and iPod Touch Apps have a very short lifespan, or as one of them (Gadget Lab) referred to as ‘iPhone Apps one night stands’. The study showed how most free iPhone Apps are not used beyond their day of download, which is not really a huge surprise given that they are free apps and in general are early tests from developers looking to move the users over to the paid versions of the application.

According to the study by Pinch Media, only 20% of users will use the free app after the initial download day. This is not to say that all free apps are bad, it is just that there are so many of them that are free for a reason; they are rather useless. There are however many exceptions to this rule, such as Fring which brings Skype to the iPod Touch and iPhone, as well as Google Apps and some classic games that you might not play that often but that is still nice to have. Having tried and tested a lot of these free apps myself on my iPod Touch, i have to admit that there are very few that i will use on a daily basis, and there are a few that has never been used after testing as well, so i can certainly see the data behind this study.

One question that comes to mind is; are the paid apps any better? According to the same study, paid apps do see a slight longer lifespan, but they too deterirate quite quickly after the initial month. This just shows the volatile nature of the iPhone Application industry and how important product portfolio and lifecycle management is to increase the stickyness of your apps. If you are running free apps development and expect to make your money based on advertising revenue this becomes even more important.

Following on from our earlier article on maximizing the revenue stream from your iPhone apps one question comes to mind; what about moneyback for paid apps that we are not happy with? This is one area that i have not been able to find any good answers to. In a normal retail world you have consumer rights to return a product that you are not happy with and get your money back. Is this valid for online downloads as well, on things such as iPhone and iPod Touch Apps? and if not, then shouold it be? Would love to hear all of your thougs on this.

Now there are developers and publishers of iPhone Apps that are starting to look at alternative ways of doing things, such as the band ‘Presidents of the United States’ with their PUSA app that gives you accecss to stream their entire discography for only $2.99. This means that as long as you find yourself in a wifi connection or a mobile connection on the iPhone you can stream the music through the app instead of buying it through iTunes for example. As mobile internet connection evolves applications like these could potentially create a conflict for iTunes and record companies. Say that bands starts offering their music through their own applications with the opportunity to either listen trough a stream or buy the music digitally through the application, thereby bypassing the record labels and Apple iTunes by delivering their music directly to the consumer, not only on the iPhone, but all other mobile app platforms as well including Android. This could potentially be a fundamental shift in the marketing and distribution of music for up and coming artist in the same line as when MySpace gave them a venue of reaching millions of potential new fans.

There is no doubt that we will see this business model continue to evolve in the coming months and years as developers and publishers look at an ever increasing new ways to improve on their own business models and take advantage of the great opportunities of mobile apps. I think one can safely say that this is the start of what can perhaps be described as mobile business 2.0.

We will continue to cover the ever changing mobile application market so keep checking back and feel free to subscribe to our RSS feed here.

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