Chapter 3: A Bedroom Revolution
“Steve Jobs told USA Today that the Apple App Store will launch with “more than 500 apps”... Of these, 25 percent will be free and 90 percent (of those for sale) will cost $9.99 or less. “This is the biggest launch of my career,” said Jobs. Analyst Tim Bajarin at Creative Strategies said, “When IBM introduced the PC, it was good, but it didn’t take off until people started discovering the software.” It’s these apps then, he adds, that “dramatically differentiates the iPhone” from Treos and BlackBerrys. Indeed, while consumers are focused on the launch of the iPhone 3G device, it’s the App Store which has analysts in such a tizzy.” — Thomas Ricker — Engadget
Birth of the App Store
It’s testament to the cleverness of any great idea that once it exists, you can hardly imagine things any other way. The App Store has become such an influential part of the mobile phone scene that it’s difficult to imagine what things were like before the app explosion, or to rationalize the extremely short amount of time in which the app business has taken over the tech industry.
Amazingly, the first iPhone did not launch with an App Store. The App Store is a relatively recent invention, unleashed on July 11th, 2008, but in that time it has come to dominate both the mobile industry and popular culture itself. For a company that sells a tiny percentage of the mobile phones on the planet, Apple takes the majority share of the profits. So, not only does the App Store have influence beyond its users, but the devices through which apps are sold — the iPhone, iPod Touch, and the iPad — have defied what was thought to be a basic capitalist tenet: to make the most profit you must sell the most of a given product. Apple demonstrated, bizarrely, that you could make a hell of a lot more money by selling less.
Stranger still is the story of how the App Store came to be. As with many stories involving Apple, the definitive truth is difficult to uncover. The company thrives on a culture of secrecy that has worked extremely well for it in keeping a step ahead of their competition and in building anticipation for future products. We can be reasonably sure, however, that the success of the App Store took Apple by surprise — 100 million app downloads were achieved in the first three months and then double that just one month later. As Steve Jobs explained at a 2008 Apple earnings call, “We’ve never seen anything like this in our careers.”
Initially the App Store contained a meager 550 apps, one third of them games (some things never change), but the store had increased its stock to over 800 apps by the end of launch week. This was the tiniest hint of things to come: In the months to follow there would be a supernatural fervor from app developers; an explosion of interest in mobile phone software and the rebirth of the bedroom programmer. Finally, with the iPhone, there was a mass-market software platform and a low bar to entry for creatives — $99 to sign up as an iPhone developer — and there were also millions of potential customers who had already supplied Apple with their credit card information through iTunes.
It’s no exaggeration to state that for the first time in history, thousands of garage programmers and designers were suddenly given direct access to the mass market — an App Store purchase was one finger-tap away from millions of consumers. For a brief moment, it no longer mattered if you were as big as Disney, or simply one human, alone in the light of your computer screen, everyone was on equal footing. There was still a gatekeeper, and an unpredictable one at that — Apple — but for all its demands, the company would operate a much more egalitarian system than what went before. It was no longer the suits at Warner Bros or Random House who decided whether your music or writing was worthy of global distribution.
A Retail Magic Trick
Many of the barriers that had made the Internet a haphazard nightmare for small-publishers evaporated. Because Apple already held the credit card details of millions of iTunes users, and these users already trusted Apple, it was possible for one app to make a fortune from thousands of very small transactions. This was the micro-payment dream repeatedly promised in the Internet age, and finally it had arrived: except it wasn’t happening on the Internet per-se, it was happening in the App Store. It seemed that people were willing to pay small one-off sums for low-cost, single-purpose applications as long as it was to Apple, a company they trusted, through iTunes. It’s easy to under-estimate the retail magic-trick Apple pulled off with the App Store: They effectively used the same payment system that millions were using to buy music, and applied it to software. What seems blindingly obvious now was once a completely alien concept.
What Apple Learned from the First Successful Apps
By the end of 2008, over 300 million apps had been downloaded by iPhone owners and the App Store was brimming with more than 10,000 apps — so many that Apple struggled to keep up with the backlog of submissions waiting to be vetted before they were allowed into the store, a problem that would continue to plague the company for many years. Although some of the top-sellers were familiar brands like Super Monkey Ball (Sega) and Crash Bandicoot Nitro Kart 3D (Vivendi Games Mobile), many others were true indie success stories. There was Koi Pond (Shinya Kasatani), borne of a relatively simple idea: to create a simulation of a Japanese water feature. Users could tap their fingers on the iPhone screen to make the pond ripple and briefly scare the Koi fish away. The result was hypnotic and oddly addictive.
Then there were apps that have now attained a legendary status, apps like iBeer (Hottrix), which creates the illusion that the iPhone is a small glass of beer which, when tilted towards the user’s open mouth, appears to be swallowed down.
iBeer was a runaway success and is likely responsible for selling more iPhones than any other app to date. It took a simple, human concept — drinking beer — and married it to one of the iPhone’s most obviously unique features: the accelerometer (a circuit inside the phone that allows the device to detect the angle at which it is being held). This accelerometer feature was fairly complex to visualize based purely on a spec sheet, then one day it was suddenly glaringly obvious to the masses what the accelerometer was for: It was for fun. You could pull your phone out in a bar and pretend to your friends that you were drinking a beer. Steve Jobs surely shuddered at the crassness of it all, but what better advertisement for the company’s new phone than to have Apple’s customers showing the device off at every opportunity.
Koi Pond simulated rare tropical fish. The app was an early success on the App Store.
SOURCE: Reproduced with permission of Brandon Bogle © 2011 The Blimp Pilots.
With the success of iBeer came two interesting discoveries. One: That a very simple and inexpensive app could make an Appillionaire of its creator. Two: That apps could sell iPhones. Lots of iPhones. Popular apps encouraged users to share the experiences they had with the iPhone hardware. They would show off iBeer, and other apps, to non-Apple-users, who might then go on to buy an iPhone.
iBeer let iPhone users create the illusion that they were drinking a glass of beer.
SOURCE: Reproduced with permission of Hottrix © 2011 Hottrix.
The Developer Community Grows
Apple’s realization that popular apps could sell more iPhone hardware led to the company’s increased investment in the developer community. By 2009, Apple was approving 95 percent of app submissions in under 14 days, no mean feat given the volume of apps being created. Anyone who believes that Apple’s relationship with developers is restricted to rejecting apps has been misled by the press coverage given to these events — in fact, a very small percentage of apps are rejected for objectionable content — around 10 percent.
“We review the applications to make sure they work as the customers expect them to work when they download them. We’ve built a store for the most part that people can trust,” Apple senior vice president for worldwide product marketing, Phil Schiller explained to Businessweek in 2009. “You and your family and friends can download applications from the store, and for the most part they do what you’d expect, and they get onto your phone, and you get billed appropriately, and it all just works.”
Nobody talks very much about the good Apple does for developers, and to an extent Apple likes it that way, preferring to operate in secrecy. Many developers are reluctant to discuss the ways in which Apple helps them to achieve success in the App Store — the Appillionaires rely on Apple for their livelihood and would rather not risk angering the world’s most notoriously private corporation by revealing too much. I’ll return to this topic later.
Profits and Downloads Grow
“Thanks a billion. Over one billion downloads in just nine months,” Apple announced in April 2009. The App Store had reached a giant milestone, with users collectively downloading approximately 5.1 million apps every day. An astonishing 97 percent of iPhone owners had downloaded at least one app, more than 43 percent had downloaded more than 10 apps and 17 percent had downloaded 31 or more apps. If there was ever any doubt that Apple had begun a revolution in computer software, that doubt had now evaporated. By the middle of that same year, 1.5 billion apps had been downloaded by Apple users and the App Store was now home to over 65,000 apps created by some of the 100,000 programmers now signed up to the iPhone Developer Program. Two months later, Apple had shifted another 500,000 downloads and an average of 65 apps had been downloaded for every iPhone and iPod Touch sold so far. Apple had now reached a total of 85,000 apps in the store.
Free apps accounted for 65-70 percent of the software installed on iPhones in 2009, which meant that an impressive proportion were paid apps, with 99¢ already established as the most popular price. By the end of 2009, Apple had supplied over 2 billion apps to iPhone and iPod Touch users in 77 different countries, netting developers over $900 million. Customers were downloading an average of 11 apps each per month and a mind-boggling 8,500 new apps were being submitted to Apple by programmers every week.
Growing Pains
The popularity of the App Store was now at risk of spoiling Apple’s carefully self-managed image as a poster child of liberal thinking. The company’s role as gatekeeper was a significant reason for the success of the App Store — Google would quickly discover the mess that resulted from a store that was not curated. But Apple put itself in a tricky position as moral arbiter. It has confronted everyone from outright criminals and pornographers, through to political cartoonists, rivals, and people who they just didn’t like much, to prevent them from selling apps on the store.
The danger of taking up the role of curating the App Store has often put Apple in conflict with its own ideals. Jobs himself places Apple at the “intersection of technology and liberal arts.” But there are many unsettling examples of the company’s conflicted motivations. The controversy over Pulitzer Prize-winning cartoonist Mark Fiore’s app NewsToons is just one example of the difficult responsibility Apple faces as a curator.
NewsToons was initially rejected from the App Store in 2010, for “obscene, pornographic, offensive, or defamatory content.” In reality it contained nothing more than political satire. The resulting outcry in the press convinced Apple to reconsider the app and eventually approve it. On the face of things, it might seem that the App Store approval system, although clumsy, ultimately works. But, as The Register editorialized at the time, “To gain admission into the iTunes App Store, a political commentator shouldn’t have to win a Pulitzer Prize.”
By the middle of 2010, just over 80 percent of apps downloaded were free, and yet developers had earned more than $1 billion from selling paid apps.
The analysts at Munster estimated that Apple’s profit from the App Store, after credit card processing fees, was $189 million — the company takes a 30 percent share of every app sold. Compare this to Apple’s $33.7 billion profit from its entire business during the lifetime of the App Store up to this point in 2010 and a curious picture develops: The App Store accounts for barely 1 percent of Apple’s profits. Yet it is a focal point for the media, and has by virtue of its success, provoked the purchase of thousands of iPhones. By the end of 2010, Apple had announced the sale of over 120 million iPhones, iPods, and iPad devices and also revealed that the company activated over 230,000 new devices every day. To deal with the extraordinary influx of new app submissions, Apple published the App Store Review Guidelines.
Enter the App Store Review Guidelines
“We have over 250,000 apps in the App Store. We don’t need any more Fart apps… If your app doesn’t do something useful or provide some form of lasting entertainment, it may not be accepted… If your App looks like it was cobbled together in a few days, or you’re trying to get your first practice app into the store to impress your friends, please brace yourself for rejection. We have lots of serious developers who don’t want their quality apps to be surrounded by amateur hour… We will reject apps for any content or behavior that we believe is over the line… What line, you ask? Well, as a Supreme Court Justice once said, ‘I’ll know it when I see it.’ And we think that you will also know it when you cross it,” the document says.
A Renaissance in Gaming
Graph showing the rapid explosion in iPhone app sales.
SOURCE: Reproduced with permission of Distimo © 2011 Distimo.
Today, users have downloaded well over 10 billion apps from the store and the developer community surrounding the iPhone is the biggest in the world. Despite the store’s massive success, the cost to play the development game remains at $99. Every day more and more wild-eyed dreamers sign up to try their hand at the App Store dream: to build a hit app, usually a game. The iPhone’s relative simplicity, and the way it has historically rewarded very basic, casual game formats, makes it an extremely attractive proposition to anyone with a biro and a napkin handy.
Just five years ago videogame and application design seemed so profoundly inaccessible to the layman that it was idiocy to attempt to build a software company around an idea like Angry Birds, Tiny Wings, or Cut the Rope. But the reality of micropayment transactions through iTunes, combined with a pocket-sized device with enough power to run basic apps — the iPhone — has completely changed the landscape of software engineering. Game design made a transition away from expensive, complex, 3D titles (as is still required for platforms like the PlayStation and Xbox) and towards cheap, simple 2D gaming.
As the iPhone encouraged an aesthetic shift back towards the 2D, it brought with it a renaissance of mechanic-driven gameplay familiar to Commodore 64 or Atari owners: a simpler, arguably more enjoyable game experience that did not require hours of learning and immersion to reward the players. The mainstream gaming companies like Sony and Microsoft had spent a fortune building the videogames industry into a replica of the film business, but Apple would undo it all in a matter of months.
Prior to the iPhone, the industry was almost exclusively fixated on massive titles that they worked on for years, with budgets stretching into the millions. It was the most effective way to make money — or so they thought. But the iPhone demonstrated that the mainstream console manufacturers had abandoned casual gamers. The masses wanted cheap, straightforward games they could dip in and out of during a bored moment on the train. They didn’t necessarily want a virtual film experience with layered plots and an advanced control system; they just wanted the next Tetris. Although the videogames giants initially shrugged their shoulders at the iPhone and carried on, it eventually became hard to ignore the effect Apple’s device was having on the public. By the spring of 2011, two of Nintendo’s leading marketing executives had abandoned the gaming monolith and joined Apple. The heart of gaming had clearly made a shift into the pockets of millions of iPhone-toting youngsters.
App development that once cost millions could now be undertaken by a single dedicated individual working alone with enough spare cash to buy food for a month or two. The threat was enormous, and nobody saw it coming.
Summary
Here’s a roundup of the important points covered in this chapter:
• The scale of the App Store’s success came as a surprise, even to Apple.
• Garage programmers were instantly drawn to the App Store. The $99 price of entry was low, and these developers were put on equal footing with large corporations. The App Store is as close to a meritocracy as the software world has seen yet.
• With the success of the App Store, Apple has taken on a difficult role as gatekeeper and moral arbiter for the content on the store. In exchange for a safe shopping environment, users can only purchase software that has passed Apple’s rigorous and infamous reviews process. Every app on the store is vetted by Apple’s own hand.
• The App Store has provoked a renaissance in gaming, especially games that prize fun and enjoyment over graphical complexity. The limitations of the iPhone hardware and the touch-input mechanism are restrictions that have inspired a new generation of programmers.