This article by Marek Pawlowski, founder of MEX, explores the long-term implications of the current app store race and the impact on user experience, with specific insights into Nokia’s recent Ovi developer day in London.
Handset manufacturers, network operators and software companies have for some time been falling over themselves to win over third party developers to their platforms. After attending Nokia’s less than successful Ovi Developer day in London, I couldn’t help but ponder whether this industry infighting is in their long-term interests and those of their customers?
These companies share a simple, common objective: increasing the value of their main product offering (be that handsets for Nokia, network capacity for operators or advertising for Google) by ensuring as many applications as possible are available within their eco-system, preferably exclusively. This is what drives all those developer conferences, free handsets and partnership marketing budgets.
It is hard to dispute the initial logic of this premise: customers will naturally be inclined to buy products which allow them access to the best services. Apple is the benchmark example, where the availability of iOS apps is a key selling point for the iPhone, iPod Touch and iPad. In our consumer research we are seeing increasing numbers of customers making handset and operator purchasing decisions based on the quality and economy of access they provide to specific branded services.
However, numerous companies in the mobile industry are simply trying to beat Apple’s App Store at its own game without stopping to consider if this is in their long-term strategic interests. Apple has established the targets with its app store metrics and now a long list of competitors, including Google, Nokia, Microsoft, Qualcomm, RIM, a consortium of operators backing the Wholesale Applications Community (WAC) and numerous others are caught in a race to catch up.
How many of these companies have stopped to question the metrics (e.g. number of apps, downloads and developers) they are using to measure their success? If Google’s Android Market or Nokia’s Ovi Store outgrow the number of apps in the iOS App Store, will this – ultimately – improve the bottom line for these companies and the satisfaction of their customers?
It would be fascinating to put an exact number on the amount spent by the mobile industry to support proprietary third party application development in the last 2 years alone. The ever increasing complexity and number of these developer programmes is driving billions of dollars of spending each year, across events, staffing costs, administering the app stores and partnership marketing. Some, such as Microsoft, have even started to offer direct financial incentives to developers to create third party apps for their platforms.
It raises a pertinent question: how long can so many individual companies support so many individual app stores and so many individual platforms? The economics simply do not add up. Every company, with the possible exception of Apple, is operating their app store and developer programme at a substantial loss. This cannot continue indefinitely.
We track the quarterly performance of all of the world’s major handset manufacturers with our MEX Handset Industry Insight service across a number of metrics, including market share, unit shipments and profitability. Since 2007, the combined average annual profit margin of the 5 major handset manunfacturers (Nokia, Samsung, LG, Motorola and Sony Ericsson) has fallen from 12.5% (2007), to 9.4% (2008) and further to 6.3% in 2009. In Q2 2010, it dipped yet again, reaching 5.3%. In real terms, this means the total combined profit made by these 5 companies has fallen from about USD 15.1 billion in 2007 to USD 5.8 billion in 2009.
They are caught in a negative spiral. On the one hand, they are cutting handset prices so as to grow market share and rapidly provide an attractive target audience for developers. On the other, the cost of wooing developers and supporting them is increasing.
The only mitigation comes from the resulting app store revenues, but the fact that none of them are willing to share much detail about these numbers speaks for itself: they do not come anywhere close to covering their costs. Only Apple, the most successful, has released some figures, stating a couple of months ago that in approximately 2 years of operation it had distributed USD 1 billion to its developers as part of their 70% revenue share – this translates to about USD 429m for Apple itself.
The app store concept is a means to an end: enabling deep personalisation of customers’ user experience with a range of relevant, affordable services. However, there is a strong argument that the likes of Nokia, WAC and Microsoft will fail to achieve this end by simply trying to replicate the iOS App Store. The resulting fragmentation will result in a race to the bottom, with platform providers subsidising low quality app stores in the hope of gaining enough momentum to surpass early market leaders like Google and Apple.
Soon app stores will start to undercut the currently accepted norm of a 70/30 developer revenue split in an attempt to gain short term advantage and price competition will make many of these stores even less viable to operate.
There needs to be rapid consolidation in the number of platforms and developer programmes. Companies currently pursuing the internal development of their own proprietary app store would do well to re-evaluate whether that money could be better invested in a combination of user experience enhancements to their core products and co-operative efforts to make mobile application development more accessible, lower cost and standardised.
Turning specifically to Nokia, their London developer day provided an unfortunate reminder of the many potential pitfalls facing those with ambitions of creating a successful platform and app store.
There was, from the outset, an almost apologetic tone adopted by Nokia. They spoke of the ‘tough conversations’ they had with developers a year ago and the efforts they were making to improve the Ovi Store and their developer support. As a result, the atmosphere in the room was dominated by a sense of metaphorical distance between the Nokia staff and the developer audience, despite almost every Nokia spokesperson imploring the attendees to get involved and create a community spirit for the sessions.
It was obvious Nokia failed to achieve the tone they were aiming for. This was confirmed in the conversations I had with attending developers. While intrigued by the possibilities, they seemed unconvinced Nokia could provide much to help them and even more skeptical Nokia’s Ovi Store could provide as attractive a marketplace as the iOS App Store or Android Market.
An observation: I didn’t see a single Nokia handset being used by any of the audience. Google Nexus Ones, Apple iPhones and Blackberry Bolds were the most common – although I did notice one outre individual sporting a rarely seen Sony Ericsson Aspen (Windows Mobile, Qwerty and touchscreen in a candybar format – and about as successful as it sounds…).
The session was a brutal contrast with the triumphant, self congratulatory and almost cult-like behaviour in evidence at Apple and Google developer events. While a certain amount can be attributed to geography and the native cynicism of a London audience, there was much Nokia could have done to improve the event itself.
Despite hiring a large and generally well-regarded private members club for their exclusive use, Nokia made several basic event organisation mistakes. For instance, Nokia’s UK managing director opened the session by congratulating himself on the session being ‘standing room’ only. This is a classic mistake made by event organisers focused on their own performance rather than the experience of their attendees: ‘standing room only’ may sound great when the organiser tells their boss how the event went, but for delegates it simply means you’ve failed to provide them with a seat.
As the room grew more crowded, the temperature rose and the grumbles from the audience increased. No one wants to do business in a hot and cramped environment.
Several of the developers I spoke with also felt they had been mis-sold. The invitation clearly stated: ‘There won’t be any PowerPoint presentations’, yet there were several hours of these, mainly delivered as monologues despite Nokia’s invitation for the audience to ask questions. When questions were asked, a considerable percentage of them could not be answered by Nokia’s spokespeople and were instead requested to be ‘taken off-line’.
There’s seems little point investing the not inconsiderable costs of running such an event if it fails to fulfill its promise of an open and constructive dialogue. Nokia could have saved a great deal of money and the audience could have saved a great deal of time by simply looking at the presentations online.
There were, however, some interesting statements made by the Nokia staff and – for me at least – these cast new light on the company’s long-term strategy.
The move to its cross-platform Qt application framework is accelerating. It is clear Nokia are making a major effort to simplify third party development across their range of products by adding Qt as a layer on top of Symbian and Meego. Crucially, this will include allowing developers to bundle the Qt framework with their applications, so if a user downloads a Qt app to a device which doesn’t already have Qt installed, it will be added automatically. This should help grow Qt’s footprint on the large number of Nokia Series 60 devices already in the market.
The theory, as ever, is that Qt will allow applications to be written once and ported easily to a wide range of different devices, from Series 60 candybars costing EUR 150 up to EUR 600 tablets running Meego. Nokia went to some lengths to stress that developers should no longer think about developing Symbian Apps or Meego Apps – they didn’t need to worry about the underlying OS – instead they could just code for Qt and take advantage of the platform framework. The phrase Nokia used was: “This is about apps for people.”
While this is a seductive hypothesis, developers I spoke with were unconvinced. There was a general feeling that apps advanced enough to be valuable and genuinely different would still need to be coded at the native level.
Nokia also stressed they saw Java as the primary development environment for Series 40, with mobile web and Qt reserved for Symbian and Meego. There are two major issues with this: firstly, Series 40 devices still represent the majority of the 1.2 billion Nokia devices currently in use worldwide, so the new Qt tools and support will do little to assist those targeting these devices. Secondly, it is surprising and disappointing not to see Nokia promoting mobile web development across all of its platforms, when for many developers this will provide the quickest and easiest way to roll out services to Series 40 users.
Nokia are working to reduce the costs associated with development on all of their platforms. They charge a one-off EUR 50 regsistration fee, but after that the tools are free and submitting your application for approval is free. In addition, they are committed to offering tools for PC, Mac and Linux – in addition to their web-based app wizards – to ensure you don’t need to buy new kit to start creating Nokia applications.
Starting on 9th August in the UK, there will be a TV advertising campaign to support the Ovi Store. Developers were shown a preview of the commercial, but unfortunately it provided yet more evidence of the gulf between the community spirit of iOS, Android and Nokia developers. Whereas such previews often lead to spontaneous applause and cheering at Apple and Google events, Nokia received a hesitant and subdued reaction, despite the somewhat desperate requests from the Nokia spokesperson for more support. It was let down by weak advertising creative and the overall negative atmosphere in the room caused by Nokia’s event management failings.
It is, of course, a positive for developers that Nokia is investing in this kind of marketing, but I couldn’t help but feel they are failing to capture people’s imagination.
Further evidence of this was provided by Nokia’s engagement of Marvellous, a mobile marketing agency, to ‘launch app-led campaigns which capture the social mood around the UK’. The exercise smacks of a misguided leap onto the social media bandwagon.
Nokia have Marvellous creating a series of light-hearted, short-term apps such as an ‘instant marriage’ game, which is intended to talk you through your vows with a mate when sitting at the pub. Nokia’s spokesperson emphasised they saw these kind of ‘buzzy’, fun applications as key to capturing column inches in the press and generating awareness in social media channels.
It is a waste of money and a case in point example of how easy it is for a company to become distracted from its core mission of providing useful, appealing products for their customers. It is true that devices like the iPhone have benefited from the free publicity generated by the availability of interesting applications, but this is a symptom of good user experience and a vibrant development community. Nokia have fallen into the trap of paying to recreate the desireable symptoms of their competitors rather than looking at the root cause of their rivals’ success.
Of course, Nokia will not be alone in looking back ruefully a few years hence on the wastage of such ‘social media’ nonsense campaigns – they have become de-rigeur for companies who want to be seen at the forefront of marketing practice.
Many of the developers present had come specifically to spend time with the N8, but inexplicably the demonstration of this device formed only a small part of the presentations. Everyone I spoke with also expressed disappointment that, unlike Google, Samsung and Microsoft, Nokia failed to provide attendees with a free device to start developing with. These kind of giveaways have become an expectation at developer events.
The N8 itself has several impressive characteristics. The use of good quality brushed aluminum and availability of several colour choices will be a strong selling point for many customers. The imaging capabilities, with a 12 megapixel camera and HD video recording and output are exceptional. When it hits the market, it will establish a new benchmark for music and video quality with features like Dolby 5.1 sound.
The Ovi Store has also been re-vamped in preparation for the N8. The new UI is easier to use, and has been re-written in Qt rather than web run-time, making it significantly faster and smoother.
However, weaknesses remain. The home screen is a user experience disaster. It is very cluttered and interaction flow is inconsistent.
I found it quite telling that ‘single tap’ interactions (i.e. you no longer need to click twice on an icon to open it) were cited by Nokia as a key new feature of the device. This is 2010.
There were some specific weaknesses of Nokia’s London forum (easily avoided by taking some basic classes in event management), but many of the deeper problems it revealed are shared by all those companies playing a desperate game of catch-up with the iOS App Store.
These companies must consider the following:
- Long term, do you really believe your particular proprietary app store, running on your particular proprietary platform, is viable? The test of that viability should be: does it enhance the majority of your customer’s experience, is it profitable and can it be run without distracting you from your core business?
- Is a replication of the iOS app store and Apple’s business model the best way to advance the concept of customer-led personalisation? Simply surpassing Apple’s metrics may not actually be in the long-term interests of your company.
- How many of your resources are currently dedicated to catch-up exercises with your competitors versus fostering your own, independent and customer insight-led product enhancements? Third party developers will flock to platforms which, firstly, inspire them personally, secondly, are selling well and, thirdly, make it as simple as possible to add new features. We see very few companies which are focused on these priorities and too many allowing themselves to be led by current industry trends.