App Store success could change software-buying habits

Editor’s Note: This story is excerpted from Computerworld. For more Mac coverage, visit Computerworld’s Macintosh Knowledge Center.

More than 2 billion applications have been downloaded from Apple’s App Store, with more than 85,000 apps available to 50 million-plus iPhone and iPod touch owners worldwide.

The numbers announced by Apple Monday are staggering to even normally reserved analysts, who noted that after a somewhat slower summer buying rate, App Store downloads globally have exceeded more than 10 million a day in much of September.

After the App Store launched on July 11, 2008, it took nine months to hit 1 billion, and only six more months to hit 2 billion, noted Carl Howe, an analyst at Yankee Group Inc.

“The more devices that are out there, the more people want to download software, and they see it’s an easy and fun experience,” Howe said in an interview. It also helps that Apple has attracted 125,000 developers to its iPhone Developer Program, he noted.

After the one-year mark was reached in July, analysts were heralding application stores, including several imitators of the App Store, as the new way to buy software.

“You don’t have to go to a store to a buy a disc and get the ultimate in instant gratification,” Howe said.

With the success of the App Store and the growth in other application storefronts backed by BlackBerry, Android and others, “any digital media is fair game,” Howe said.

In fact, while games are a big hit on the App Store, both the free and the paid versions, Apple is calling attention to its “staff picks,” which include a free app for the complete works of Shakespeare, with a text-sizing tool. In a 28.8 MB app, users get all 40 plays, 154 sonnets and six poems, as well as some works attributed to the Bard, although whether he wrote them remains in doubt.

Howe said one of the secrets of the App Store’s success is the large number of devices downloading them, but another is the ease with which the apps are downloaded.

“If you provide a friction-free way of buying things like App Store, which shortens the time it takes from an impulse to buy to actually buying something, you’ll sell a lot,” Howe said. “There’s not a lot of time for buyer’s remorse, and it’s a lot like going past a magazine stand in a store and paying $3 for a magazine. There’s not a lot of remorse in buying that item.”

A Yankee survey of 1,200 U.S. smartphone owners showed that 18 percent of applications are paid for. However with growth in the average cost of the paid apps, and the growth in the number of devices, the U.S. revenues from applications will grow by 10 times between 2009 and 2013, reaching $4.2 billion in 2013. In that survey, more than 70 percent of all the apps downloaded in the U.S. were games.

“It’s interesting that you see how the App Store is doing when it was not that long ago—about 2001 when the dotcom bubble burst—that people were saying people would want information to be free on the Internet,” Howe noted.

Even the recession has not held back this kind of impulse buying. “The recession doesn’t seem to be having an impact. These small impulse purchases are kind of recession-proof,” Howe said.

Rob Enderle, an analyst at the Enderle Group, said the two billion mark is “outstanding” given the number of phones available for downloads. Enderle said the application store concept might have come along earlier had bricks-and-mortar retailers not objected.

“The fact is, that with enough bandwidth, there’s very little that can't be delivered over the Web,” Enderle said. “We’re witnessing what will probably be the end of the traditional software delivery model. App Store is an indicator that the times they are a-changin’.”

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