Media Overhypes App Stores, Says Report

While Apple, Google, Microsoft, RIM and others are growing their application stores, a new report from researcher Strand Consult suggests that, for the mobile industry, the future of value-added services isn't in app stores.

Apple's App Store now offers more than 100,000 apps, and has facilitated approximately 2.2 billion downloads. Google's Android Market is next in line, with an impressive 10,000-plus app offerings. Palm's App Catalogue is nearing the 300-app mark, and Microsoft continues to tweak and update its new app store, Marketplace for Mobile. But is the value of app stores, to these players, being overhyped?
A November report from Danish research firm Strand Consult raises this question, while suggesting that the attention the media has lavished on app stores might be better focused on value-added services.
"In the world that Strand Consult does business in, we do not have many customers that can make a living from giving customers free applications for their mobile phones, and we are for example more focused on the $32 billion U.S. market for premium value-added services that exists today, than the many app store attempts we run into," the firm explains in a statement on the report.
It goes on to state that is one of the oldest players in the market, focused on delivering apps to smartphones and PDAs. In October 2005, Nokia launched Preminet, now called "Download," which is similar to Handango's concept, except that it pre-installed the service on phones. From there, Apple essentially did the same, though with a more attractive user interface. The cash flow generated by Apple's App Store, Strand States, is likely still limited compared to the global cash flow from content sales created on a model like that of the SMS market.
"We believe that the path forward for premium value-added services is not to build App Stores," writes the firm.
"What we believe will create a market is a healthy business model combined with massive marketing of mobile services to the end users. The success of this strategy has already been proved by the ring tone and Java game market. In an app store the primary focus will be on the few services being marketed on the front page, and the path to success could be very long for most application developers."
The firm likens app stores to a bookshop, writing that the mobile industry doesn't need booksellers, so much as people who "can educate users and teach them how to use mobile phones for other things than just voice and SMS."
Strand expects the value-added services market to "explode," from the current $32 billion market it is, as more people purchase mobile broadband connections.
"The big question is not whether there will be a market, or whether it will be huge, but rather who will dominate the market?" Strand writes. "We do not believe it will be app stores or other similar solutions one reads about in the media."
The report is available at the Strand Consult Website.

Editor's Note: The text has been change to reflect that Strand Consult is Danish, not Dutch.