Why Apple’s app store has a built-in advantage with iTunes

Wed, Dec 30, 2009

Analysis, News

The iTunes App Store is a monster that’s spawned a number of competing app stores from the likes of RIM, Microsoft, and of course, Google. The Android Marketplace in particular has been growing at a steady pace over the past few months, with the latest reports indicating that there are now over 20,000 apps available for download.

Interestingly, though, there are a greater percentage of free apps on Android than there are on iTunes (51% to 43%). One theory is that the Android Marketplace, by virtue of being an open-sourced OS tends to attract developers who, on average, prefer to just give out their software to whoever wants it fo free.

That may be part of it, but a more telling explanation, and one addressed by Paul Boutin in Venture Beat, is that the relatively burdensome requirement that all payments for Android apps must pass through Google Checkout has effectually convinced developers to shy away from charging money for their apps.

Vincent Hoogsteder, CEO of the Dutch analytics firm Distimo, had this to say on the matter.

The majority of iPhone users have a credit card attached to their iTunes account and are therefore able to buy applications in the Apple App Store with just one click. Users with an Android phone use their regular Google Account, which does not require them to sign up for Google Checkout. The first moment the user is asked to provide his credit card details is after he actually decides to buy a first app in the Android Market.

And there, in essence, is the built-in advantage Apple has constructed for itself via iTunes. The biggest hurdle when it comes to online sales is getting a consumer to hand over their credit card information. Once that’s out of the way, one-click purchasing provides a seamless way for consumers to access content without conjuring up any feelings of intrusion, while also greasing the wheels for inevitable and important impulse buys.  And because Apple has millions upon millions of customers with credit cards already linked up to their iTunes accounts, it’s been able to sidestep an issue that other mobile software stores have to contend with.

Every step between a click and the checkout page simply provides users with another opportunity to second guess their purchase and decide not to pull the trigger. That being the case, developers need to look beyond the sheer number of apps between competing app stores and also take into consideration which app store tends to attract customers more willing and more likely to part ways with their hard-earned cash. “App developers, seeing that the paying Android customer base is much smaller and less spendy than its iPhone counterpart,” Boutin writes, “don’t rush to build an Android version of their app.”

One suggested solution is to have purchased Android apps simply show up on a users phone bill, but then you’d have to assume that the phone companies would want a piece of the pie as well. Also, adding another party into the equation would only serve to complicate things. What if a user, hypothetically, purchases an update from within an application, but he’s now on a different carrier than he was when he first purchased his device? Also, and as Boutin points out, Google’s business model of providing nearly everything for free may in fact work against it when it comes to the Android marketplace – “To most people, Android equals Google. Since when have we paid Google for anything?”

The success of the iTunes App Store is of course rooted in its extensive library of apps, but equally as important is that the ubiquity of iTunes has made acquiring those apps a thoughtless and one-step process. In many ways, iTunes has served as a virtual trojan horse for Apple’s success with the iPod and the iPhone, a topic we’ll address in a coming post.


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2 Comments For This Post

  1. Constable Odo Says:

    The haters just don’t get the iTunes ecosystem. They say it’s too Applefied. Which means that Apple has too much control. And anything that Apple has control over is just plain wrong. Adults don’t want restraints because they’re old enough to know what they need. (I doubt that’s true, though). They may know what they want, but I honestly don’t think even most adults know what they need. I’ve had an iTunes account for about five years and I never have to worry about something going wrong. Same with Amazon. Anyway, I’m know for a fact that Apple has a huge amount of long-term customers in iTunes and it’s not about to fail anytime soon. Day by day it’s growing immensely in size and popularity. Yet there are always those who say that iTunes Store is horrible. I really don’t see how that can be, but everyone has their opinion.

    I do know that iTunes is the glue for the whole Apple ecosystem and it’s necessary to have a gatekeeper or whatever to control the whole shebang. iTunes is giving Apple the huge advantage which most companies will never have to build a solid platform/ecosystem. When the tablet comes due and has support with newspapers, magazines and books and added educational support from iTunes U, it will be unbeatable even by companies that will likely offer better hardware at lower prices.

  2. Sean Padraig Says:

    I think that the payment methods iTunes, Google Checkout, & AmazonPayments is really not the issue at hand when it comes to the product and services battle. All three do a very good job of managing credit card details and allow for single click purchasing. I would rank Google Checkout at the top of the single click checkout experience. Where iTunes excels compared to the other two payment providers is their global presence. iTunes comes with many caveats when purchasing their products especially apps, but they exist in large # of countries globally. Amazon Payments and Google Checkout have a long way to go.

    The question of Apple vs Google on mobile app stores is the debate of appliance vs. “beta” app store. Stability vs. the next neat feature. Both organizations have fundamentally different views on what their brands and products stand for and how they are measured by their users. As Google moves to take-on Apple thru desktop or mobile computing they need to understand the target market share. Currently, the market share lies with users who are less technical and more appliance oriented in their usage. It has to work consistently and reliably for them to continue clicking on the buy button. Google culturally has a long way to go on this front.

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