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The Mac App Store: can it change the software business?

What is it that makes the iTunes App Store so compelling? Will the value the App store added to the iPhone be added by the Mac App Store to the Mac?

Here are the characteristics I think make the App Stores valuable:

  1. They redefine software as content. The pricing, marketing, discovery and buying process is identical to that for content like music or video.
  2. They redefine the skill required to create a relationship with customers. They allow a new class of less-skilled and less-capitalized developers participate in selling software directly to the buyer. By “skill” I don’t mean engineering skill but marketing skill. A developer can create a product that can reach millions without having to acquire with channels and distribution skills.
  3. From a consumer’s point of view, they simplify purchasing and lower the price of software.

These three characteristics of app stores make them disruptive. The disrupted companies are the traditional software publishers. The response from game publishers to the App store were predictable: they condemned it for destroying value, “cheapening” their product, and creating a race to the bottom. They also predicted that it would all end badly as nobody would make any money.

The truth is that they were disrupted by different cost structures. The entrants did not need to spend on market development, and focused on innovating on the essential novelty of the user interface.

So the Mac App Store could be disruptive to traditional software vendors. A large new population of software developers could emerge targeting the Cocoa environment and they may bring new apps that move the jobs that the computer is hired for to appeal to new users.

However there is a problem. The Mac is a small target market relative to iOS. Apple announced that there are 50 million Mac users. This compares badly to the 130 million (or so) iOS users. It won’t be long before 50 million iOS users will be added every three months.

So the first thing that Apple needs to do is grow the Mac installed base. Perhaps the new Air and following updated to the MacBooks will do just that. But the growth rate needs to be an order of magnitude faster. And I suspect price is an obstacle to this growth.

Regardless of this obstacle, the Mac App Store has the potential to change the appeal of the Mac. As the first personal computer with an App Store, new uses may emerge and create the same app-platform effect.

  • http://www.happybuy.com happybuy

    The Mac App Store is also a way for Apple to control and enforce the distribution, update mechanisms and tool chain for their platform. It would not be too much of a stretch to see that once Apple controls this mechanism that they can pivot and change the Mac platform from X86 to ARM processors. If they do this, its a simple checkbox in Xcode, and update from the App Store to easily migrate all your software to a new processor architecture.

    This would provide Apple with opportunities to further differentiate the Mac from a battery and form factor perspective.

    • http://twitter.com/_ChrisHarris @_ChrisHarris

      You're right it really is just a matter of time before they switch to ARM. A part of me wonders if PA Semi are really tasked with making a new laptop/desktop/iOS chip in the long term rather than new iOS chips short term. I remember reading an Ars Technica article from a chip guy who explained that what Apple has done with the A4 chip was mostly about removing stuff it didn't need – not a big deal for a chip company with PA's skill.

  • sl149q

    How long until they make the Mac friendly for IOS app's?

    In other words, make Mac laptops the equivalent of iPad's with built-in keyboards…. WRT to iPhone/iPad apps.

    Either add support to IOS for mouse as an alternative to touch… or introduce touch into hardware specs for Mac laptops.

    • nomduguerre

      Not going to happen. UIKit and AppKit will remain separate, but similar for a while.

    • Marcos El Malo

      Multi touch on the trackpad is already standard on the notebooks, iirc. There's also the new magic trackpad accessory. So it wouldn't be a huge stretch to see iOS apps working on OS X at some point, through emulation or some other means.

  • Kristian

    "The Mac is a small target market relative to iOS. Apple announced that there are 50 million Mac users. This compares badly to the 130 million (or so) iOS users. "

    I would not say like that. It is more like that you can add that 50 to that 130. Now those iOS programmers can also make Apps for the Mac or vice versa without increesing the cost so much (Apple and it's subsidiary FileMaker already does this with products like Pages and Bento. Omnigroup is doing that with all of their products. Autodesk is doing it and so on…). We also have to remember that Mac users buy more software than any other group (Windows PC or Linux users), so you can "double or trible" that 50 million Mac users when you think about the purchasing power. Either way this is excellent. I have dreamed about this Mac AppStore for long time (from the 90's). Sometimes it is so very difficult to find a suitable program for the Mac so this will help alot.

  • dms

    If this Mac App Store takes off, it could usher in a major shift in how we perceive software. On the PC, our lives are dominated by bloatware like Office, Photoshop, and iTunes. iOS software, on the other hand, are much more focussed and limited in their scope.

    Personally I welcome the move towards smaller-footprint-software. I'm sure developers are not too happy about this potential trend, but I tend to think this could benefit consumers.

    • Kristian

      "The Mac App Store: can it change the software business?"

      Answer to that question is that It already changed it forever. The customer expectation is now that everybody (especially me) wants to find all the programs from the one place. If you are not there I am not going to try to find you. Rude but true so you have to be there. Software that is outside of the Mac AppStore does not exist.

      • Kristian

        That was not a comment @dms as it was comment to Horace.

      • http://twitter.com/aegisdesign @aegisdesign

        Which would be a damn shame as there's a whole set of software that isn't allowed in the Mac App Store based on Apple's criteria.

        Until the rules change it'll essentially be dumbed down iOS style mini-apps.

    • http://twitter.com/tommy4490 @tommy4490

      I recently read an article by and for developers about the restrictive and upsetting rules for the MacAppStore. The author was going thru the causes for getting apps rejected with much distain. He was shocked that an app might get rejected if it was buggy! WHAT? How dare they?
      No, devs are struggling here too, just like they are with iOS. It seems they really believe in the Microsoft approach to things: use my OS or my apps, but beware! There are traps and snares you'll never know about until you've fallen in, and then you can post it on some discussion board that only devs will ever read! BUT WE GOT YER MONEY!!!!

  • Kristian

    "The Mac App Store: can it change the software business?"

    Answer to that question is that It already changed it forever. The customer expectation is now that everybody (especially me) wants to find all the programs from the one place. If you are not there I am not going to try to find you. Rude but true so you have to be there. Software that is outside of the Mac AppStore does not exist.

  • techMonkeyBou

    The Mac app store may also be an effort to reinforce the halo effect of the iProducts on Mac sales. For me the entire iOS push on the Mac platform is an effort to blur the lines of difference between Mac and iDevice. Essentialy Apple is saying to the customer, “if you like your experience on the iPhone/iPad/iPod then try out our Mac’s.” Not only is the physical quality there, as well as the UI quality but now the two UI’s are very similar so you’ll feel at home over here as well.

    • http://twitter.com/aegisdesign @aegisdesign

      I really hope not. The iOS UI is not a desktop UI.

  • Kristian

    Then there is the security concern. Why is this program outside of the Mac AppStore? What is wrong with it?

  • David Chu

    I think the big question is when does Apple make a big push for marketshare. Apple went for marketshare with the iPod and iPad. When do they go for the jugular with the Mac. I think anyone who thinks Apple will be happy to remain a niche player in PCs has been lulled to sleep. If they think the market is ripe, I have no doubt that Apple will go for the jugular.

  • Tommi

    I'd guess that Mac software sells for much higher average price than mobile software: iPhone app a dollar or two, iPad app maybe 5 dollars, Mac app easily 10-20 dollars or more. If this will be the case, the "small" installed base will be compensated for, to certain extent. Of course Apple must grow the share, and it will, but the Mac App Store could already fly with the current installed base.

    One question mark: how big a portion of Mac users are already using iTunes Store? All iOS users have an account, but if there is a significant portion of Mac users who don't, there will be some teaching to be done.

    I'm quite sure Mac App Store will be huge. These days, an average user may install some big-name application such as Skype or Spotify, but that's pretty much it. With the Mac App Store, people will start to actively expand and personalize their computing. Just like Horece's first bullet puts it: applications redefined as content. (A case in point: My wife, a professional writer, had no idea that Word is actually not the "writing capability" of her computer but an individual application, and that there are alternatives specifically designed for creative writing.)

    • Brad Larson

      The Mac is a very lucrative market for software. While you hear many overnight success stories about iPhone developers, I see more examples of sustainable long-term software businesses on the Mac.

      Not only does a higher price point on software compensate for a smaller market, but it allows you to do things that you couldn't do with extremely cheap software. The most important thing it lets you do is advertise. If you are selling a $0.99 application ($0.70 net after Apple's cut), you can't advertise using AdWords or banner ads and still turn a profit on each user you direct to your product. For a $9.99 application, you can.

      In my case, I've been able to sustain sales of my $9.99 application for a year and a half while never appearing on any App Store charts. This is going to be even more the case for a $19.99 – $49.99 Mac application.

      In regards to iTunes, the Mac App Store will exist outside of iTunes as a standalone application (on Snow Leopard). On Lion, I imagine that it will take the place of the redirect to Apple's download page under the Mac OS X Software… menu item in the Apple menu. Any Mac software developer can tell you that this download page is their single biggest source of traffic, so it seems people will be able to discover this pretty easily under Lion.

  • Rob Scott

    The Mac App Store: can it change the software business?

    The answer is yes, absolutely. Some companies like Adobe and Microsoft will probably resist the change for a while, 1). because they do not what to share the revenues with Apple and 2). because they do not what to unbundle their suites and charge separately for each app.

    I also think/agree with those who say the Mac App store will result in a certain kind of apps. Imagine what would happen if iPad apps where to hook up with Mac OS X apps resulting in very functional and polished apps yet lightweight in both footprint and memory.

    I also think there will be a lot of repackaging and repurposing of websites and content. Think polished and functional banking apps or educational apps that take advantage of each platform, that is, OS X and iOS, and synch seamlessly. This I believe will be very hurtful to Google. Google is betting on the web and advertising, Apple is betting on the web through apps – paid and free with ads.

    Security is the biggest plus next to discoverability. I love TuneUp but will never give them my credit card details, so no sale for them and my music is still a mess as a result. The Mac App Store solves this problem.
    No more worries about malware: vetted software from a trusted vendor. To Horace’s point about market share – addressing security concerns before the Mac goes for market share is possible the last piece of the puzzle.

    I think Apple with the implementation of the Mac App Store with be in the best place ever to go after Microsoft in PCs and Google in Ads.
    I hope as a final nail against Microsoft, Apple makes Mac OS X upgrades free.

    • Kristian

      Lion could be free. Apple needs to push the Lion for everyone.

    • David Chu

      "Addressing security concerns before the Mac goes for marketshare"

      Very good point.

      I'm sure that OSX Lion will bring some major solutions dealing with security. A precursor is Apple's removal of Flash on new Macs.

      • Kristian

        Apple did take the Flash away only to make sure that people installs the absolutely latest Flash plugin. Though it will not hurt if they skip the Flash totally ;) I am not sure if there is money involved? ie Adobe pays for Apple that they get their software ombord or vice versa.

      • Rob Scott

        Absolutely correct. By making Flash opt-in Apple absolves themselves of any blame should a user suffer malware because of Flash (and now Java). People have made a lot of noise about how secure Windows 7 is and how behind OS X is. Apple is not doing randomization and other such things. They are preempting everything.

        Are they going mass market?

  • FalKirk

    I can see five things happening with the new Mac Store, occurring in the following order:

    1) Some small or mid sized companies that were unable to previously compete will suddenly emerge with surprise mega hits.

    2) A ton of new tiny software programs will emerge. With the economic viability of the one dollar purchase, developers will first try to duplicate any program that was successful on the iOS platform and then get creative with Mac only widget type programs. Some people will buy 20, 30 or more "mini" programs for their Mac.

    3) The average sale price of Mac programs will begin to drop, perhaps dramatically.

    4) Everyone keeps saying that the big boys will stay out of the Mac store. I disagree. When the Mac store becomes the ONLY store that most consumers use to buy their Mac software, then the large software houses will be forced to join the app store or insure their own destruction by creating a void that other developers will happily fill.

    5) Something unpredictable will occur. Well, at least something that I can't predict.

    • Rob Scott

      3). Agreed, and I guess bloat as well.

      Maybe someone will start by breaking Excel (Word and other monstrosities) to its logical pieces. I need a great graphing tool!

      • Kristian

        I but this here only to demonstrate that there are small & handy tools already, but nobody knows about them: http://www.omnigroup.com/products/omnigraphsketch

        I use this software because it is so snappy. Horace uses much better tools suited for Craf Art Magicians. I don't use Office because it is so easy to get lost with it. There are snappy tools and I believe that these companies will make a huge success out of Mac AppStore.

  • http://twitter.com/lantinian @lantinian

    It will be very interesting if Apple mirrors the iOS distribution strategy with OS X, where Mac users who bough their Macs after Show Leopard get Lion for free and only the next OS 10.8 as a paid upgrade.

    One advantage of the current software strategy behind iOS is that Apple has been able to move its entire eligible installed base very quickly to the latest version of its iOS software. This has benefited developers and encouraged innovation by making develops use of the latest tools and capabilities.

    Upgrate pase of Leopard to Show Leopard was twice as fast as the previous upgrade from Tiger to Leopard. I am absolutely certain, Apple would want to double the upgrade speed of its installed base to Lion again.

    AnMac App store and other innovation eventually borrowed from iOS will help OS X get more stable, secure and have shorter update cycle.

  • CndnRschr

    Adapt or die. The old business model of Adobe and Microsoft (in particular) is to crank out major revisions to large software suites with additional functionality that takes advantages in technological hardware advances. The problem is, the hardware changes have become incremental and commoditised. The hardware makers know this and hence have put more emphasis on design and unique functions (something Apple has always done) rather than specifications for the sake of specifications. For professionals, there is a need for the latest capabilities in software as it helps differentiate their product. But this is not the case for productivity software where Microsoft Office features that are most commonly used have remained unchanged for over a decade (and three major versions). Moreover, updating software breaks other software which then needs updating. For some applications that are serving immature markets, updates are well worth it, but most are incremental (and expensive bug fixes in some cases).

    The AppStore model helps people to get around the bundling of unnecessary code and to customize their needs without a cost penalty. They can add other components as needed. This will dumb down some of the larger suites as each needs to be more compartmentalized but the bigger suites are broken in any case (Creative Suite is the worst offender for additional components).

    Besides, Apple is not excluding regular software distribution, they are adding a new stream. Heck, a publisher can conceivable use both to distribute their applications with only minor changes (although, presumably, there is a rule to cover listing on the AppStore and also selling functionally equivalent software for less outside of it to prevent publishers getting the advertising clout but avoiding the 30% cut.

    This is bound to be good for competition – especially if porting tools for iOS and OSX make it relatively easy to crossover. What's most significant, however, is that this model plays to all of Apples advantages and cannot be easily replicated by Microsoft or Google. Adobe sees the threat and is launching its AIR platform. Will Chrome be a home for Windows apps?

    • Kristian

      Mac Os X has part that is called services and programmers don't use that functionality at all. I hope that this is the beginning where everybody starts using that.

  • Andrew Brown

    To your list of characteristics that make App Stores valuable, I would add: deployment and sandboxing. Users can install apps without fear that they will permanently alter or corrupt system state, and all apps have a uniform install/uninstall procedure.

    The importance of this cannot be missed. There is an entire class of users who dare not install a new app on their computer, lest anything stop working. But I know from personal experience these same users will purchase apps for their iPhone, because they know the worst that will happen is that the single app may crash, and they may have wasted the purchase price for that single app.

    Bringing that level of user empowerment back to the desktop will be a huge, long overdue achievement. Java and .NET brought sandboxing, but completely ignored or botched the aspects of distribution and desktop integration.

  • Mark Hernandez

    While the PC market is saturated, people will be replacing their PCs eventually, especially since Windows seems to be made to slow down until people get frustrated and want to just chuck it and get another one.

    What a great opportunity to funnel people over to the Mac, which has already been happening.

    Remember that old statistic: A typical PC user knows how to use 3 -5 programs, a Mac user 10-plus .

    I am so SICK AND TIRED of repairing my friend's PCs, and I feel the tide shifting myself. I've lost one acquaintance because I refused to help him any longer. I never hear from my Mac friends.

    Nothing more powerful than word of mouth. It's happening.

    • Marcos El Malo

      "I never hear from my Mac friends."

      That sounds so sad. D-:

      I was tech support for my dad when he followed my recommendation and bought a Mac. And it wasn't much actual tech support; more like hand holding as he learned about computers. When my step-mother prevailed upon him to get a Win PC, I stopped. I really don't have the time or inclination to learn the Win platform to the level where I can provide him hand holding by telephone. Now he doesn't use the PC at all. Last time I did check his computer, it was so filled with malware it was slow as molasses.

  • scott_jordan

    Always stimulating reading, Horace.

    But, two quibbles:

    1) iOS didn't always have 130 million users. The App Store had a lot to do with igniting the iOS phenomenon. So to suggest that the Mac installed base is too small for an App Store to succeed is cart-before-horse-ish.

    2) Another is the overarching trend that Apple has keyed into: People don't have a trust relationship with their computers anymore. Apple's end-to-end user experience is an answer to that… so far, a unique one. To consider the potential of an App Store without that philosophical foundation is to risk missing a big part of its point, IMHO.

    • asymco

      Perhaps I mis-stated what I hoped to say. The point was that the device market is inherently larger and faster growing. The installed base of the Mac is 50 million after decades, whereas iOS reached 130 million within 3 years. I don't think the size is too small to succeed, but it may not attract the same level of developer interest.

      I agree with the lack of trust relationship, but not with respect to their computers, but rather with the software on those computers. The number of applications purchased for each computer must be a decreasing number. Speaking for myself, I may buy iLife, iWork and perhaps Office for my Mac but almost nothing else. the Mac App Store may entice me to buy more apps.

  • Marcos El Malo

    "commoditize the complements"

    I'm not sure what this means. Is this standard jargon that I've missed?

    "what if Apple had instituted a try-before-you-buy policy?"

    On what apps? They already offer trials on some of their in house apps. I'm not sure how they can do this with third party apps. If you mean try before you buy on Macs and OS X, that's what the retail stores are for.

    • unhinged

      The complements of a product or service are those things that have to exist before your product or service can be used, e.g. Operating Systems require computer hardware (and vice versa). By reducing those complements to commodity status, you raise your product or service to a more desirable level. Which is not to say that every player in that ecosystem does not make money or that the ecosystem as a whole does not grow in value, but the lion's share goes to the differentiated product – just like Windows took the largest share of the profits from the PC ecosystem. Windows was more valuable because it was on more PCs, and because the PCs had Windows they were more valuable than Macs (for those people who needed the security of doing the same thing as everybody else).

      Microsoft succeeded in doing this so well that they effectively became a monopoly, and then the risk to consumers became the reliance on a single provider – it didn't matter that they could choose from several different hardware providers, they were still stuck with Windows and so they ran the risk of Windows not doing what they wanted any more.

      This is why, as Horace says, the telecoms operators are working to restrict the success of any given supplier – they recognize the risk that arises from relying on a single provider. They too are trying to "commoditize the complements" (the phones) while the phone makers are trying to do the same to the telcos (the data providers)