Why Palm’s “Open” strategy to take on the iPhone won’t work

Tue, Oct 6, 2009

Analysis, News

The app store on the Palm Pre is now open for business, and Palm CEO Jon Rubenstein announced at yesterday’s Palm Developer conference that there are already about 127 apps that have been downloaded a total of 7.5 million times.  Now that might seem impressive until you consider that the iPhone app store currently has over 85,000 apps that have been downloaded over 2 billion times.

Clearly, the iPhone is a juggernaut that won’t be giving up its spot as the top smartphone on the market anytime soon.  Still, that isn’t going to stop companies like Palm and RIM from trying, but finding the right way to attack Apple is a tough challenge.

Palm, however, has staked out a position for being an open platform for developers.  As opposed to Apple’s iTunes app store, developers for the Palm Pre aren’t required to undergo any review process to make their apps available to the masses.  Instead, developers have the option to write an app and make it available for download on the web – draconian app store review process, I bid you adieu!

The downside to this freedom, however, is that developers are then left to handle advertising duties all by themselves.  Moreover, it seems highly unlikely that a significant number of Palm Pre users would even want to fiddle with getting an app onto their phone outside of the official Palm Pre app catalog.  And lastly, developers who make their app available for download on the web will miss out on all the detailed analytics that developers love to pore over with a fine tooth comb.  The flipside is that apps outside of the Palm Pre catalog will net developers all of the earned proceeds, as opposed to the 70/30 revenue split in place for apps that are subject to the Palm review process.

Of course, developers will also have the option to submit their apps to Palm, have it reviewed, and subsequently show up in the Palm Pre app store catalog.  That’s all well and good, but from a developers point of view, that’s no different than submitting an app to Apple for the iPhone.

So while Palm is apparently banking on this openness to differentiate it from all the other mobile phones out there seeking to carve out a niche in Apple’s playground, I wonder just how many developers will take advantage of Palm’s open app guidelines.

The reason why the iPhone App Store is so successful is because it allows developers to directly place their apps in front of millions of eyeballs.  Once you place your app outside of that system, you’d have to spend a ton of money to get that same kind of audience.  Similarly, why would Palm Pre developers choose to operate outside of the Palm Pre catalog?  I’d imagine that netting 100% of all app downloads would be insignificant in comparison to the number of lost sales resulting from not appearing in Palm’s app store.

That being the case, it may very well turn out that Apple’s way of running things is the ideal compromise for developers.  Sure, you lose out on 30% of all revenue, but you undoubtedly make up for that with sales volume that would undoubtedly dwarf any sales you’d make on your own via your own website.

In the end, it’s nice that Palm is giving developers more options, and I certainly can’t knock em’ for that, but whether or not that open strategy will actually benefit developers is a whole another story.


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