Mobile applications, RIP

Summary: The business of making native apps for mobile devices is dying, crushed by a fragmented market and restrictive business practices. The problems are so bad that the mobile web, despite its many technical drawbacks, is now a better way to deliver new functionality to mobiles. I think this will drive a rapid rise in mobile web development, largely replacing the mobile app business. This has huge implications for mobile operators, handset companies, developers, and users.


The decline of the mobile software industry

Mobile computing is different from PC computing.

For the last decade, that has been the fundamental rule of the mobile data industry. It was the central insight of Palm Computing's "Zen of Palm" philosophy. Psion came up with similar ideas, and you can hear echoes of them from every other successful mobile computing firm: Mobile computers are used differently from PCs, and therefore must be designed differently.

We all assumed this also meant mobile devices needed a whole mobile-specific software stack, including an operating system and APIs designed specifically for mobility, and native third-party applications created from the ground up for mobile usage.

That's what we all believe, but I'm starting to think we got it wrong.

Back in 1999 when I joined Palm, it seemed we had the whole mobile ecosystem nailed. The market was literally exploding, with the installed base of devices doubling every year, and an incredible range of creative and useful software popping up all over. In a 22-month period, the number of registered Palm developers increased from 3,000 to over 130,000. The PalmSource conference was swamped, with people spilling out into the halls, and David Pogue took center stage at the close of the conference to tell us how brilliant we all were.

It felt like we were at the leading edge of a revolution, but in hindsight it was more like the high water mark of a flash flood. In the years that followed, the energy and momentum gradually drained out of the mobile applications market.

The problem wasn't just limited to Palm; the level of developer activity and creativity that we saw in the glory days of Palm OS hasn't reappeared on any mobile platform since. In fact, as the market shifted from handhelds to smartphones, the situation for mobile app developers has become substantially worse.

That came home to me very forcefully a few days ago, when I got a call from Elia Freedman. Elia is CEO of Infinity Softworks, which makes vertical market software for mobile devices (tasks like real estate valuation and financial services). He was one of the leaders of the Palm software market, with a ten year history in mobile applications.

I eventually moved on from Palm, and Elia branched out into other platforms such as Blackberry. But we've kept in touch, and so he called recently to tell me that he had given up on his mobile applications business.

Elia gave me a long explanation of why. I can't reproduce it word for word (I couldn't write that fast), but I've summarized it with his permission here:

Two problems have caused a decline the mobile apps business over the last few years. First, the business has become tougher technologically. Second, marketing and sales have also become harder.

From the technical perspective, there are a couple of big issues. One is the proliferation of operating systems. Back in the late 1990s there were two platforms we had to worry about, Pocket PC and Palm OS. Symbian was there too, but it was in Europe and few people here were paying attention. Now there are at least ten platforms. Microsoft alone has several -- two versions of Windows Mobile, Tablet PC, and so on. [Elia didn't mention it, but the fragmentation of Java makes this situation even worse.]

I call it three million platforms with a hundred users each (link).

The second technical issue is certification. The walls are being formed around devices in ways they never were before. Now I have to certify with both the OS and with each carrier, and it costs me thousands of dollars. So my costs are through the roof. On top of that, the adoption rate of mobile applications has gone down. So I have to pay more to sell less.

Then there's marketing. Here too there are two issues. The first is vertical marketing. Few mobile devices align with verticals, which makes it hard for a vertical application developer like us to partner with any particular device. For example, Palm even at its height had no more than 20% of real estate agents. To cover our development costs on 20% of target customer base, I had to charge more than the customers could pay. So I was forced to make my application work on more platforms, which pushed me back into the million platforms problem.

The other marketing problem is the disappearance of horizontal distribution. You used to have some resellers and free software sites on the web that promoted mobile shareware and commercial products at low or no charge. You could also work through the hardware vendors to get to customers. We were masters of this; at one point we were bundled on 85% of mobile computing devices. We had retail distribution too.

None of those avenues are available any more. Retail has gone away. The online resellers have gone from taking 20% of our revenue to taking 50-70%. The other day I went looking for the freeware sites where we used to promote, and they have disappeared. Hardware bundling has ended because carriers took that over and made it impossible for us to get on the device. Palm used to have a bonus CD and a flyer that they put in the box, where we could get promoted. The carriers shut down both of those. They do not care about vertical apps. It feels like they don't want any apps at all.

You can read more of Elia's commentary on his weblog (link).

Add it all up, and Elia can't make money in mobile applications any more. As he told me, "Mike, it's time for you to write the obituary for mobile apps." More on that later.

Although it's a very sad situation, if Elia's experience were an isolated story I'd probably just chalk it up to bad luck on the part of a single developer. But it mirrors what I've been hearing from a lot of mobile app developers on a lot of different operating systems for some time now. The combination of splintering platforms, shrinking distribution channels, and rising costs is making it harder and harder for a mobile application developer to succeed. Rather than getting better, the situation is getting worse.

I've always had faith that eventually we would solve these problems. We'd get the right OS vendor paired with a handset maker who understood the situation and an operator who was willing to give up some control, and a mobile platform would take off again. Maybe not Palm OS, but on somebody's platform we'd get it all right.

I don't believe that any more. I think it's too late.


The mistake we made

We told ourselves that the fundamental rule of our business was: Mobile is different. But we lost sight of an even more fundamental law that applies to any computing platform:

A platform that is technically flawed but has a good business model will always beat a platform that is elegant but has a poor business model.

Windows is the best example of inelegant tech paired with the right business model, but it has happened over and over again in the history of the tech world.

In the mobile world, what have we done? We created a series of elegant technology platforms optimized just for mobile computing. We figured out how to extend battery life, start up the system instantly, conserve precious wireless bandwidth, synchronize to computers all over the planet, and optimize the display of data on a tiny screen.

But we never figured out how to help developers make money. In fact, we paired our elegant platforms with a developer business model so deeply broken that it would take many years, and enormous political battles throughout the industry, to fix it -- if it can ever be fixed at all.

Meanwhile, there is now an alternative platform for mobile developers. It's horribly flawed technically, not at all optimized for mobile usage, and in fact was designed for a completely different form of computing. It would be hard to create a computing architecture more inappropriate for use over a cellular data network. But it has a business model that sweeps away all of the barriers in the mobile market. Mobile developers are starting to switch to it, a trickle that is soon going to grow. And this time I think the flash flood will last.

If you haven't figured it out yet, I'm talking about the Web. I think Web applications are going to destroy most native app development for mobiles. Not because the Web is a better technology for mobile, but because it has a better business model.

Think about it: If you're creating a website, you don't have to get permission from a carrier. You don't have to get anything certified by anyone. You don't have to beg for placement on the deck, and you don't have to pay half your revenue to a reseller. In fact, the operator, handset vendor, and OS vendor probably won't even be aware that you exist. It'll just be you and the user, communicating directly.

Until recently, a couple of barriers prevented this from working. The first was the absence of flat-rate data plans. They have been around for a while in the US, but in Europe they are only now appearing. Before flat-rate, users were very fearful of exploring the mobile web because they risked ending up with a thousand-Euro mobile bill. That fear is now receding. The second barrier was the extremely bad quality of mobile browsers. Many of them still stink, but the high quality of Apple's iPhone browser, coupled with Nokia's licensing of WebKit, points to a future in which most mobile browsers will be reasonably feature-complete. The market will force this -- mobile companies how have to ship a full browser in order to keep up with Apple, and operators have to give full access to it.

There are still huge problems with web apps on mobile, of course. Mobile web apps don't work when you're out of coverage, they're slow due to network latency, and they do not make efficient use of the wireless network. But I believe it will be easier to resolve or live with these technical drawbacks in the next few years than it will be to fix the fundamental structural and business problems in the native mobile app market.

In other words, app development on the mobile web sucks less than the alternative.

Here's a chart to help explain the situation. Imagine that we're giving a numerical score to a platform, rating its attractiveness to developers. Attractiveness is defined as the technical elegance of the platform multiplied by how easy it is for developers to make money from it. The attractiveness score for native mobile app development looks like this over time:



This is why mobile app developers are in trouble. Even though the base of smartphones has been growing, and the platforms themselves have become more powerful, the market barriers have been growing even faster. So attractiveness has been dropping.

Now add in mobile web development:



Based on what I'm hearing from mobile developers, the lines just crossed. The business advantages of mobile web development outweigh its technical limitations. More importantly, if you look at where the lines are going, the advantage of mobile web is going to grow rapidly in the future.

I'm not saying all native mobile development is dead. In fact, we're about to see the release of Apple's native development tools for the iPhone, and as Chris Dunphy just pointed out to me, they are sure to result in a surge of native development for that platform. But I think even a rapidly-growing base of iPhones can't compare to the weight of the whole mobile phone market getting onto a consistent base of browsers.


What it all means

If you're a mobile developer, you should consider stopping native app development and shifting to a mobile-optimized website. That's what Elia did, and he said it's amazing how much easier it is to get things done. Even mobile game developers, who you'd think would be the last to abandon native development, are looking at web distribution (link; thanks to Mike Rowehl for pointing it out).

See if you can create a dumbed-down version of your application that will run over the mobile web. If the answer is yes, do it. If the answer is no, try to figure out what technology changes would let you move to the web, and watch for those changes to happen.

There are exceptions to any rule, and I think it makes sense to keep doing native development if your app can't work effectively over the web, and it's a vertical application so popular that you can get about $50 or more in revenue per copy. In that situation, you probably have enough resources to stay native for the time being. But even you should be monitoring the situation to see when you can switch to the web, because it will cut your expenses.

If you're a mobile customer, make sure your next smartphone has a fully functional browser that can display standard web pages. And get the best deal you can on a flat-rate data plan; you'll need it.

If you're an operator or a handset vendor, get used to life as a dumb pipe. By trying to control your customers and make sure you extract most of the revenue from mobile data, all you've done is drive developers to the Web, which is even harder to control. You could have had a middle ground in which you and mobile developers worked together to share the profits, but instead you've handed the game to the Google crowd.

Congratulations.


Oh, about that obituary...

In loving memory of the mobile applications business. Adoring child of Java, Psion, Palm OS and Windows Mobile; doting parent of Symbian, Access Linux Platform, and S60; constant companion of Handango and Motricity. Scared the crap out of Microsoft in 2000. Passed away from strangulation at the hands of the mobile industry in 2008. Awaiting resurrection as a web service in 2009. In lieu of flowers, the family asks that you make a donation to the Yahoo takeover defense fund.

95 comments:

Anonymous said...

You point out a number of difficulties.

All I see are opportunities.

Dan Lavender said...

I think another issue is that North American Operators/Vendors have stifled the industry with their pricing structures.

In Canada phones that are about 3-5 years behind Europe are sold at full price and only marginally subsidized with 3 year contracts.

Therefore only a small percentage of the Canadian population has a top-of-the-mark smartphone. There's no audience for an industry stifled by the greed of the big network operators. I suggest some of the decline is due to that.

I worked in Oslo for a few weeks in 2005 and their mobile application / games industry was booming, based on the fact most Europeans have smartphones and access to webportals where you could download games.

Orange in the UK, for example, has a mobile web portal where you can download Java/FlashLite games for about £5 each, which is simply billed to your account. This has been available for at least 5 years.

However, the cat is out of the bag... why pay £5 per download when you can just access a web portal outside the "walled garden" with free games on it?

The time for making serious money has probably gone as Google will fill the void left by self-interested phone operators.

Chris Dunphy said...

"The problem wasn't just limited to Palm; the level of developer activity and creativity that we saw in the glory days of Palm OS hasn't reappeared on any mobile platform since."

There was a brief flash of incredible energy and creativity pouring into iPhone native development last Fall. It felt for a moment like the glory days of PalmOS app development again. I wrote about it here:
http://radven.livejournal.com/108282.html

All that energy and enthusiasm came crashing to a halt when Apple but the breaks on unofficial development, and told people to wait for the "official" SDK. That SDK is due out in 1-3 weeks, depending on which rumors you believe.

If Apple does the right thing by building an ecosystem into iTunes, they have the potential to make the ipHone one hell of a last hurrah for native applications.

But only the iPhone (and maybe Android) has much potential to turn the tide. The trend you've pointed out is pretty overwhelming.

The mobile industry has only itself to blame. It is such a shame to see so much potential wasted over the past five years.

- Chris Dunphy // www.twostepsbeyond.com

Michael Mace said...

Anonymous wrote:

>>All I see are opportunities.

Sounds good to me. I didn't name this weblog by accident ;-)


Dan wrote:

>>I worked in Oslo for a few weeks in 2005 and their mobile application / games industry was booming,

Good point, the situation varies a lot from country to country. Most of Asia is completely different.

But I've heard many of the same concerns from mobile developers in the US and Europe, so I think it's more than a North American issue.

I'd be very interested to get comments from developers in other parts of the world.

Albuquerque realtor said...

Anonymous, you definitely hit the nail on the head. Although things are changing, that creates different opportunities in place of the old ones.

Anonymous said...

Michael,

you are right on it. but for more reasons than you think. there is also the consumer aspect. from what i see all around me not only mobile but on PC too. people do not want to purchase, download, and own applications. they want browse over too and visit websites that entertain or do useful things. this is especially true if we take away the corporate market for a moment and concentrate on the consumer end. it is even more true if we look at what people want to do 'on the run' as opposed to at home on there PC.

but there is still some future for native run apps. but they will be downloaded for each use and run in something like flash inside the browser.

as data networks finally get built out to the needed specs. the negative issues will start to go away. but i agree there will be struggle here. not the least because the is no time for patience on a mobile device. we want what we want and we want now with no waiting.

there is another inevitable outcome concerning mobile data. this one is complex because the technology is not ready for it; but the consumer demand will be such that it must happen. that is the widespread proliferation of unlimited open access high speed data for laptops. within the next few years this will replace both DSL/Cable and hotspots as the most popular way to access the internet in high speed. it may be over cellular networks or it may be a widespread WiMAX deployment; but it will happen.

following that we will see a very different kind of mobile device come to life. it will not be revolutionary but evolutionary. it will be the full featured laptops we know growing smaller and lighter while still operating on the same platform. i would not be surprised to see a return to devices that look a lot like the original psion device but running the full blown current release of windows. and of course with built in high speed wireless; but perhaps these will not be sold through cellular carriers but rather have the capabilities to add a third part data only subscription.

David Beers said...

This is one of the few posts you've written where I felt you were really off the mark, Mike. I agree that the old business models for mobile computing have been under tough pressure, but the opportunity for new, successful models seems huge to me. There are plenty of great jobs out there for mobile devs right now and I see a number of reasons to be hopeful that things will be even better in the next couple of years. We've got mobile payment systems on the horizon, the first really good multimodal UIs (touch and voice), near-field radios and camera-phone code readers that can turn almost anything in the physical world into a hyperlink you can click with your mobile, LBS finally starting to find its legs....

I don't mean to sound unsympathetic, but I've never been more busy or excited in the seven years I've been developing for mobile devices. And just about all of the really exciting opportunities involve applications with native access to hardware features. How many people are making a living writing web apps for mobile phones?

So, the market got saturated with all the old kinds of apps people used to buy for their PDAs. So, there are more operating systems out there than you can shake a stick at. Are we not technologists? If the difficulties you list are big enough to stop what I see as the coming Golden Age of mobile software from happening and force us all back to the browser, which has no concept of the user's physical environment aside from what they poke into it, then it's not native software that's dead: it's innovation itself.

Michael Mace said...

Thanks for the comments, gang.

Anonymous wrote:

>> there is another inevitable outcome concerning mobile data....that is the widespread proliferation of unlimited open access high speed data for laptops

That's a really interesting one. Dean Bubley over in the UK has been getting very hot on this issue. It's one of the few areas where the US wireless market has been ahead of most of the world for a while -- some of the US wireless vendors have been offering PC cards and flat-rate data for several years, and if you can afford them they're great. Not perfect, because the coverage isn't broad enough, but they're much better than searching for a WiFi hot spot.

I may get hammered by some folks for this, but at the present time I think the most useful thing you can do with a 3G connection is hook a laptop to the web.


It looks like this post is going to drive some discussion, both here and on some other sites. Blogger takes forever to automatically generate external links, so here are three commentaries I've spotted this afternoon...

--Stefan at IntoMobile made a nice tombstone graphic, but says that native mobile applications may not be as dead as I said they are. He cites the intermediate platforms, like Silverlight, Adobe Air, and TrollTech, as technologies that could enable semi-native applications.

I hope you're right, Stefan. I'm a big fan of the layers, but right now I don't see any of them becoming ubiquitous enough to solve the fragmentation problem. I would be glad to be wrong, though.

--Patrick at Just Another Mobile Monday says the post is depressing. That's interesting. I think I've been living with mobile data problems so long that I've gotten used to the depressing bit and don't really notice it any more. But I think I should have realized that a post with an obituary and using words like "strangled" would come across as depressing ;-)

For what it's worth, my feeling about the situation is more like, "get on with it." The native mobile apps thing was a great vision, and I bought into it as much as anybody. Web apps for mobile will be a lot less elegant, especially at first, but if we can free up the developers to innovate without handcuffs, it'll be better for almost everyone in the long run.

--Pocketnow has started a thread discussing whether people agree or disagree with the post, and asking users what they want. Nice idea.

Michael Mace said...

David wrote:

>>I agree that the old business models for mobile computing have been under tough pressure, but the opportunity for new, successful models seems huge to me.

I'd be delighted if you turn out to be right, David.

But I don't think the browser is quite the innovation dead end you describe it as. We've managed to get extremely rapid innovation in web apps on the PC (faster than native apps).

I personally think it'll be easier to get APIs that give a mobile web app information about the user's physical environment than it will be to fix all that's wrong with the business model for native mobile apps.


>>How many people are making a living writing web apps for mobile phones?

I don't know, but I expect that the number is small today -- as I said, the switch is just beginning.

How many people are making a living writing native mobile software? How does that number compare to eight years ago?

I don't actually know the answer to that, but I'd be interested if anyone has the data.

Chan said...

Yeah, surely, all of these are opportunities.

This a partly due to the same fact that we blame MS for it's monopoly, if it had free ride for a lifetime.

The Windows monopoly did actually solved many of these problems for the ending era, seemed to me that it prevented the innovation in one part, but still let someone like Apple to emerge out of the dust while it let the application developers to stay healthy.

Actually Palm could have made this resolved if they did play their cards differently, or rather if they simply copied the MS business model as you say in the golden days. That never happened cos there was a unseen middle man (the operator) who messed it up when Palm moved their beloved PDA to the Treonauts clan.

Still with the iPods' success story behind Apple did make this paradigm shift for good.

I am happy if they will never include Flash in iPhone nor they released a SDK so the Google and the clan can reinvent the model for the mobile world.

Gaming is a problem for the moment I know, but may be people will get used to lived with Bejeweled online for the moment.

Sure, this will all happen Micheal, the problem is as consumers it's little dizzy at the moment to see where are we are belong...

May be we can be happy with our beloved Treos and eat the Apple pie for the moment...

Michael Mace said...

Here's another related article, found via a link on Symbian Guru:

S60 Blog has a discussion on what it's like to use only the browser to run apps on a mobile phone. Be sure to read the comments as well -- they add a lot to the discussion.

Anonymous said...

Another nicely insightful, (but depressing) post Mike.

While I agree that may things can be done over the web, there are some things that can’t (and probably shouldn’t). Smartphones depend on Native apps, and vice versa. If you don’t have local apps, what you really have is a feature phone with a good browser (WebTV anyone?). As both a consumer and developer myself, I see major factors on both sides of the Native Apps debate: Local Data; Environment Fragmentation; and Consumer awareness.

I love SplashID, I have clients and friends who love SplashID. It's one of the apps that makes my 650p so useful. I will not, nor will most of them, use a web based Password manager. That data is local, period; and there are quite a number of things I don’t care to access remotely. Anything that you need to have locally, especially when you don’t have network coverage falls into this category.

Environment Fragmentation as you pointed out is a major problem, the more environments the more the development hassle and investment. Yes you can design apps and compile to multiple platforms, but there are always problems. I think the things like Silverlight, Adobe Air, and Trolltech have major potential. Sun, Microsoft, and palm have all dropped the ball here; Google’s android and iphone can make major gains in this realm simply because they are based (loosely) on Linux and Unix which seems to be where every non-MS phone is going. Developers on those platforms will probably have a much easier time porting their apps to other platforms, but porting apps to them will be the tricky bit. Access did one incredibly smart thing, and that is the Garnet VM, which should help them leverage all the legacy Palm apps, assuming they can find a manufacturer (again palm drops the ball). The name of the game is unified environment. Java could have had it, .Net could have had it, we’ll see if Apple wises up to it.

The biggest concern though, is Consumer Awareness. I can’t count how many times I’ve gone out looking for an app only to either not find it, or find 80 of them. On the other hand, there are a large number of users who don’t even realize that the CAN install things on their phones. If it doesn’t do it out of the box, they live with it. A friend of mine recently discovered that he could get new widgets for his blackberry and he’s been a kid in a candy store ever since, it only took him a year and me telling him to get Google maps.

I think the bottom line is, if the native app ecosystem collapses, then the whole purpose of a smartphone goes out the window. What’s the point of being able to install software if there isn’t any? Well, here’s to internet pipes, uh… mobile carriers.


Miguel Castaned

Dean Bubley said...

Hi Michael

Great post, and I've written my own response referring to it:

http://disruptivewireless.blogspot.com/2008/02/standalone-mobile-apps-vs-web-apps-on.html

I broadly agree with you, although I reckon there's a reasonably "long tail" of use cases for native or VM applications rather than the web. I'd also perhaps make a distinction between customers' main "real phone" and any other mobile devices they might have.

I also think there's a long wait before the majority of users get flatrate & mobile data, especially the billions of prepay users that make up the bulk of consumers outside the US.

I always want my main mobile voice device to be relatively basic (ie ideally not a smartphone but instead a fast & reliable high-end featurephone). But I also carry a smarter data device (and/or a laptop+modem) that I'm happier playing around with.

Cheers

Dean

Anonymous said...

A scary conclusion for smartphone ISV's. What I found particularly interesting was that that the developer in question was selling vertical apps, not consumer-targetted ones. Business-oriented apps have always been the steady money-makers, with that failing too, the end surely must be near....

Two things, bot about fragmentation. The market might be fragmented, but there is (or should be) one very large fragment, which is the S60/Symbian market. I (and everybody else) would love to hear about the market conditions in that fragment.

Secondly, divide and conquer. ISV's in the smartphone market are probably the only people in the mobile phone biz not talking to each other on a regular basis (unlike the operators, device manufacturers, and everybody else). If they were able to combine their efforts to represent their common interests better, they can at least try to increase their slice of the pie.

Antoine said...

Great article (and resulting discussion) Mike. I've been touting hybird (RIA) apps for the Bible readers that visit one of sites because of the issues with UI, licensing, and UX across the plethora of mobile platforms.

The biggest issue there is connectivity, but when a web app is built with low end and rich high end connectivity in mind, what you speak of as the future of mobile apps is right there for the taking. And this is the area I believe Apple got it right when they announced mobile web apps before native ones.

Chris Dunphy said...

"I love SplashID, I have clients and friends who love SplashID. It's one of the apps that makes my 650p so useful. I will not, nor will most of them, use a web based Password manager. That data is local, period; "

I also used to consider SplashID to be one of my most essential apps. Even after I had an iPhone, I actually kept my Treo around for SplashID use.

But now I've moved to OnePassword on the iPhone. It is a browser based application, but it does something incredibly clever -- the entire application and the encrypted data are stored inside a bookmark. This means it can run while offline, and none of my data is in the cloud.

And because the iPhone syncs bookmarks to the desktop - I get synchronization too.

I never would have imagined this would be possible using nothing but a bookmark. It is one of the most clever (and useful) ideas I have run across.

While I do still have hope for native apps - having a great mobile browser can do lots more than those who have gotten used to the typical crap mobile browsers can imagine.

I find it particularly interesting to note that the iPhone has the best mobile experience for browser-based apps right now, and I think Apple will likely soon be home to the most innovative native app development.

Every other company in the mobile space should be ashamed that it took an outsider like Apple to come in and show them how it should be done.

- Chris Dunphy // www.twostepsbeyond.com

Anonymous said...

I strongly would recommend mobile application developers to not overprice simple and useless applications. Consumers are not buying into "higher the price means better quality", this sort of marketing and image building has got to be avoided.

And I really think this article is off the mark. It's relatively too simple and fast for the author to suggest the death of an immature industry with obstacles to overcome.

We have only witnessed the beginning of the mobile application industry growth. Advancing hardware in mobiles are going to provide fantastic opportunities for "only" innovative software developers.

Lance said...

wow, confessions of this order are rare and to summarize the big picture so simply and elegantly..... thank you! Lance Irby

Anonymous said...

Hey Chris, I took a look at OnePassword and I think it represents exactly the sort of inovation that's possible, even on a 'Feature' Phone. At the same time, I think it also highlights all of the problems.

I agree that it's incredible they got that much functionality out of a bookmark, but at the same time, it's MAC only and only fills in forms/passwords. I use SplahID for far more than that. It's also interesting to note that while it's a browser based app, it's still local data.

As I said before, I expect that with the Apple's release of an SDK for the iPhone/Touch, they will soon be the dominate smartphone platform. The have the most capable (and elegant) OS, a ready (almost rabid) developer base, and the customer demand is there.

I think the release of the iPhone/Touch SDK itself may be the best argument against Mike's premise. Steve Jobs may claim that the SDK was always in the works, but the reality is that Apple too thought that native apps were dead and that the browser was the new application layer; then the public screamed bloody murder. It may be that the SDk is nothing more than a sandboxed plugin envirnment for Safari enabling locally hosted Web apps and Data, but the key is still that it requires an API to so, and developers to program for it. In the end isn't that the definition of a native App?

Miguel Castaneda

David Beers said...

Mike wrote: "I personally think it'll be easier to get APIs that give a mobile web app information about the user's physical environment than it will be to fix all that's wrong with the business model for native mobile apps."

Yes. And every device will have different browser APIs to do this. And the carriers will require web developers to present certification credentials for these APIs to work in the browser. And we'll have a "mature" mobile web market that looks very much like the standalone app market we have today.

The reason mobile web apps are given the freedom they have today is because they don't try to encroach very much on the device features and services that the carriers are trying to monetize. That wonderful mobile web business model can be taken away by the carriers at their sole discretion, and will be as soon as they think they can extract their pound of flesh from it.

Which makes this a discussion not about mobile web vs standalone, but about what the market has in store for wireless carriers that continue to behave in this manner. That's what I'd like to hear your thoughts on, Mike, because this topic is, I think, a red herring.

Craig said...

I have to agree with you for the most part, Michael.

I think what has happened is that the mobile device and OS manufacturers have given the carriers more influence than they deserve. Their greed and paranoia has created systems that are all but impossible to create 3rd party apps for, unless you're one of the very few who has an app or a game that ships on the phone. There are thousands of others of us who are all but locked out of many platforms.

What if Microsoft had allowed IBM, Compaq, Dell, Gateway, and Toshiba to insist that all Windows apps had to be sold through their proprietary stores, and that they had to approve each app in advance? I don't care how efficient the distribution channels were, it would have a strangling effect on software sales and innovation.

The shift from PDAs to smartphones and the resulting invitation to the carriers to come to the table has crushed the mobile software market. Even Apple's much-hyped SDK won't save the day, if iTunes is the only distribution channel. Not only does it create a bottle-neck through which only a select few applications will pass, it will most likely have limitations that will keep certain types of applications from efficiently passing. I have to wonder if distributing apps and doing desktop database synchronization through an application designed to download music files to a glorified digital audio player is going to be even possible, let alone practical.

The cell phone carriers are the problem here. They're old-world technology companies mucking up what was turning out to be a very nice new-world technology market. We were at the point where we were going to have two or three main OS players just like any other healthy industry. ISVs could develop for the biggest one, the biggest two, or all three and be able to make money. Now as you say there are millions of platforms, none of which support a healthy software economy.

Web apps are OK but we're still very much on the left side of the curve. And again we're counting on the carriers to offer not only unlimited, cheap data but ubiquitous connectivity. There's no pay-off for the carriers to make sure *everyone* in Dubuque, IA or even Dallas, TX *always* has a data connection, yet that's what we'd be depending on if we transitioned to Web apps. I'm not saying we're not doing it, but one of our top complaints from customers is "I don't have a connection at location x, so I can't use your app."

Very insightful. It's always nice to have even bad news confirmed by an outside observer. This is something we've been seeing in real-life sales numbers for 3-4 years now.

C. Enrique Ortiz said...

Yes, consider mobile web apps. Consider text apps. Consider voice apps. Consider local apps. What to choose based on your target audience. It is not one vs. the other or RIP per this post. Simple content deliver: mobile web. Richer clients use local. There is money to make in ALL the above.

ceo

Giff Gfroerer, i2SMS said...

All too true. Yet again remember folks in the States don't like to download anything or work with applications they have to "think" to use. They want something that is familiar that simply "works".

Mobile Browser based environments are already understood by the public and no downloads or sets of instructions are needed. Simple. Effective. Understood.

Now, all that is demanded is the understanding that the mobile web is not the Internet and a site should be designed with content kept to a minimum and relevant information quick and easy to find. Possibly easier then building a native app...

Rafe said...

I think its more about mobile development has evolved. There are a lot more options than just native. I see it as a continuum with native at one end and web at the other. You choose the technology that best fits (I wrote a bit about his on All About Symbian).

I also think that it depends how agile a mobile developer is and which market they are in.

I don't buy the fragmentation argument that much. Current platforms are bigger than the whole market was 10 years ago.

Marketing and distribution are an issue for web runtimes too. I think the problem facing 3rd party mobile software and services revolve around discovery (and partly consumer awareness) and they are universal for all mobile development methods.

Anonymous said...

what consumers want on there phone and what is of most use in a transient mobile environment is google. they than want to click on anyone of the web pages listed by the google search and have it work.

this is exactly what the iphone is so good at and what the future of mobile data will be dominated by.

Anonymous said...

Funny. You're saying that native development is dead while for the last three years I've had consistent work and record profits.

I just don't see your points. Web applications just don't work. Sorry. They are limiting, inflexible, performance is terrible, users don't get anything familiar (unless you bloat it with downloaded graphics) ... and what if you're in a disconnected area? Even been to the mid-west where modem dialup is still popular?

You've also got two (well three if you count AOL) new mobile platforms to consider for Native app development announced just this year. Why? Because even Apple, who's amazing at building high-performance UIs, couldn't get web development to play on the iPhone because of .... performance problems.

So please, I encourage you to go off and develop for the web. Be happy creating 12 different versions of your app to support all the different mobile web browser versions out there!

Just don't write about it like this. It just adds to the bad image this platform has been getting for years because it's "just too hard".

You know, if it were easy, everyone would be doing it.

Anyway, it just makes room for those who know how to deal these issues you suggest are the death of a native apps. I'm still going to build compelling, high-performance, highly content driven apps that do what the client needs.

Smart clients will never die. Fat clients maybe ... smart clients no.

Nick said...

It was fun to see another commenter say:

> there are a large number of users who don’t even realize that they CAN install things on their phones. If it doesn’t do it out of the box, they live with it.

It would help a great deal if people in this industry could, say, chat to a few normal people from time to time, after which they'd see that this is the norm: normal people have pretty much zero interest in downloading, adding or trying new things. The main reason for this is that once they get it going, out of the box, they're scared to do anything new to it in case doing so breaks or changes something. And the reason why they're scared is that the interface is still, to them, a big fat load of techno-gibberish, that does and says unintelligible stuff at every turn. Until you solve that - forget any market for apps, mobile or local.

Also I greatly enjoyed reading this comment:

> We have only witnessed the beginning of the mobile application industry growth

Funny thing is, I've been attending Symbian's big Developer-focused annual bash (the "Smartphone Show") since shortly after leaving said company in 99, and without fail they promised, year after year, that the market was just taking off and in 18-36 months suddenly everyone and her husband would be downloading apps to their smartphones like there was no tomorrow. It was and is nonsense - users don't want to, and the carriers never let the apps get out there anyway.

My only tiny quibble with the article is that the red line should've been flat, and (no matter what the scale of the Y-axis) both red and blue lines should have been shown right down next to the X-axis, ISTM.

All this arguing over "which has the best future, mobile apps or local apps" is like two bald men fighting over a comb.

(IMHO :-)

Mark Dennehy said...

The problem with believing that fragmentation will prevent native application development for phones whilst also believing that the mobile web will permit web-based application development for phones boils down to having to forget three things:

1) Mobile browsers are basicly acting as wrappers around different hardware on different phones - and J2ME does precisely the same thing, but for native phone apps. Hence Opera Mini - which is ironic really, a native app which is required before a web app can be run... which invalidates your thesis immediately.

2) Moore's law, and whatever its mobile equivalent for convergence is, because these point to increasingly powerful mobile devices rather than merely phones. Contrast the Treo or iPhone with the entry-model phones; and then run forward a few years with pervasive bluetooth and 3G/4G networking and cloud computing and distributed storage. You're already seeing the start of it with amazon's S3 and cloud computing services - but inside a decade, you're going to be looking at a mobile device for which the web/native divide will be an irrelevant and nonsensical question.

3) While everyone's griping about fragmentation, few seem to have copped to the fact that there actually isn't that much of a problem with fragmentation out there. There's a near-identical UI across all models of phone, there's a near-identical set of hardware on all phones (in terms of functionality at least); compare the current state of the market to the beginnings of the personal computer market in the 1970s. It's nowhere near that fragmented. When your problem is that your webpages are rendered slightly differently on each of thousands of different models of phone, you don't have a fragmentation problem, you have minor glitches - a fragmentation problem would be if one phone could grok HTML, another only SGML, another only PDF, another only DOC and so on and so forth.

Nathan said...

I'm pretty naive when it comes to mobile development, but getting more and more interested.

A talk by OliveTree's Stephen Johnson illuminated me to the issues with so many platforms:
http://www.bibletechconference.com/schedule.htm

I think higher level tools like Flash Lite could help there, or depending on the product, just focus on a single platform. Point people to similar products on other platforms and try to share user data if possible. In some cases that may not work. Though a smaller market is more feasible for solo developers and small teams.

The licensing/certification issues are another story. Thanks for making us aware of the issues, though I'm still holding out to see what distribution method(s) Apple's native SDK supports.

Celso Pinto said...

@Dean, actually, depending on what you may call the long-tail, it may be better served by webapps than installable ones. I'm thinking about stuff like expenses reports, etc. It's mostly a text exchange.

If you need to capture media, something so popular with the social web, then the best option is to go with an installable application.

I've written a small post regarding this, hope you find it interesting: http://blog.cpinto.net/2008/02/are-mobile-webapps-really-future.html

Philipp Schumann said...

> Anonymous said...
> You point out a number of
> difficulties.
> All I see are opportunities.

Yes, but (how) do you act on them?

Steve said...

I think you are off the mark.

The American market is strangled by phone companies.

That has strangled innovation and technology of the phons that are available - up to 5 years behind the rest of the world by some estimates.

That, in turn, has strangled the American consumer. Most Americans still think their phones are only for making phone calls :-D Most have no idea just how powerful 'smart' phones have become. Most have no intention of paying more than $50 for a phone. Most have no idea they can buy advanced devices, *unlocked* from eBay and other places. Most have no clue that it is actually to purchase a phone without automatically getting locked into a new 2 year contract.

Then there's Flash. It has millions of developers across the world. At the moment the latest Flash player is only available to a few devices, with rumours of a Flash player for the iPhone growing stronger.

But let;s go back to what I just said.

There a re MILLIONS of Flash developers across the world. Most are young, trendy, designer types who drool and dribble over the iPhone and other similar devices. Give them one sniff of a remotely ubiquitous Flash player for mobile devices and there WILL be an explosion of mobile software innovation.

Anonymous said...

Yep, I couldn't agree me, the variety of different OSes / platforms has rendered it uneconomically to develop native mobile apps. The funny thing is though, if there is a dominant platform like Windows for PCs for mobile, you can get sue (repeatedly) for anti-trust. We basically want it both ways and bitch about the other way when we are on one end.

Developing for mobile web is no panacea either. Web browsers are so crippled it's a joke to develop for. It's like a different browser for each platform just like a web developer has to make sure that their web app works on both FF and IE. So much for that interoperability.

Malcolm Lithgow said...

Michael,

Your analysis would be more convincing if it weren't for two realities:

1) No-one is making money off mobile web apps, either. In fact, hardly anyone is making money off web apps full stop (most of the money makers, such as Google, have a model that won't transfer well to mobile -- Google search, for example, relies far too heavily on a big screen and the intelligent focus of the end user for it to work well on the phone, not to mention its advertising being unacceptably intrusive on a tiny screen, which is why it's not successful there).

2) The web is almost as fragmented a platform as the mobile devices. After all, the web isn't some magical software platform running in the sky -- it's implemented by browsers and ancilliary software running on those selfsame mobile phones. And that stuff is very fragmented. The discussion on "OnePassword" above makes that obvious (it's an iPhone-only web app). Add the incredible clunkiness of the resulting software (see my own blog for some analysis) and it's hardly a strong story!

That doesn't mean that Mobile App's are not on life-support (speaking as a developer of such). But this has more to do with user-education than anything else. (And that can be blamed on the channels, ie. operators, doing such a terrible job -- throughout the world.)

Eric said...

Great post. One question (and it may be a dumb one): if everything goes mobile Web, what will that do to an already not-so-great latency problem? Not to mention the prices of flat data plans.

g said...
This comment has been removed by the author.
g said...

@malcolm lithgow

Re:"No-one is making money off mobile web apps."- People actually are money Malcolm.

There are many "mobile centric" companies / services that use services such as AdMob to monetize their traffic and page-views. It's very similar to the Ad-Sense model, and it's working out pretty well.

Michael Mace said...

Thanks very much for all the thoughtful comments. I wasn't expecting this much diversity of opinion, but considering how diverse the mobile and Web industries are, I probably shouldn't be surprised.

Most of the comments fit into three categories:

1. Native mobile apps are actually doing well (or will do well in the near future).

2. Mobile apps are not doing well, and web apps will take over.

3. Both native mobile apps and mobile web apps have huge problems and neither will prosper anytime soon.

For the folks in the first group, I hope you're right. It's really interesting to me that we could have some people saying the market is great while others say with equal passion that it's terrible. For what it's worth, most of the developers I talk with are closer to the second group. But this is one prediction that I'd be very happy to be wrong about.

For the folks in the third group, I agree with you that mobile web apps aren't a great environment today. But I think the path to fix their problems is a lot more straightforward, and therefore likely to be fixed in the reasonably near future. In particular, I think the quality of the browser on the iPhone is going to force a lot of the other mobile handset companies to ship higher-quality browsers. Do not underestimate the shock effect of the iPhone on the other mobile hardware companies, or the huge pressure on them to copy it. Unlike the iPhone's touch UI, the browser is one of the things the competition can copy. And so I think they will.

But yeah, there is still a ton of work needed to make the mobile web a really good development environment, and it's very possible the effort could fail.


I don't have time tonight to respond to every comment, but I wanted to touch on a few of them...


Miguel wrote:

>>If you don’t have local apps, what you really have is a feature phone with a good browser

Ahhh, you touched a nerve. Of all the artificial market categories the mobile industry has created for itself, I think "smartphone" vs. "featurephone" is probably the most useless. Most customers do not know the difference, nor do they care. And the vast majority of phones that are officially labeled "smartphones" are actually used only as feature phones.

In the end, what customers care about is getting stuff done. If they can easily find and install native apps that do things they want, then they'll use native apps. If they find that stuff more easily through a browser, they'll use that. Which is exactly what's already happening with apps on the PC.

So don't sweat the smartphone vs. featurephone thing. In the end it'll just be "my phone." (Or "my cell," or "my mobile," or "my handy," or whatever term they use in your country.)


Anonymous wrote:

>>There is (or should be) one very large fragment, which is the S60/Symbian market. I (and everybody else) would love to hear about the market conditions in that fragment.

Market conditions vary a lot from country to country, but I hear many of the same complaints from the S60 crowd that I hear from other mobile developers. That is NOT to say that S60 app development isn't happening at all. There is a lot of activity. But you don't get the sense that a lot of developers are turning profitable yet, unless Nokia happens to buy them. Development is fragmented between Java, Flash, and native. Nokia has also been saying positive things about Air. The TrollTech acquisition adds to the potential confusion, although it might also turn out to be the single unifying platform for all of Nokia.

I tried to get an answer from a friend at Nokia on that last question, but haven't received a reply yet. If I do, and it's on the record, I will pass it along.


David wrote:

>>Every device will have different browser APIs to do this. And the carriers will require web developers to present certification credentials for these APIs to work in the browser. And we'll have a "mature" mobile web market that looks very much like the standalone app market we have today.

That's a definite possibility. But the web crowd has been pretty good at setting standards when they really need to. It will be interesting to see how they operate in the mobile world.


>>Which makes this a discussion not about mobile web vs standalone, but about what the market has in store for wireless carriers that continue to behave in this manner.

I think they lost control when the iPhone showed how much data traffic a full browser on a mobile device could drive. Pandora's box is open. Competitive forces will force the rest of the companies to offer open browsing, in my opinion.


Anonymous wrote:

>>Funny. You're saying that native development is dead while for the last three years I've had consistent work and record profits.

Dude, please don't post that sort of thing anonymously. Step up and introduce yourself. A lot of other developers want to learn from you.


Steve wrote:

>>There a re MILLIONS of Flash developers across the world. Most are young, trendy, designer types who drool and dribble over the iPhone and other similar devices. Give them one sniff of a remotely ubiquitous Flash player for mobile devices and there WILL be an explosion of mobile software innovation.

Cool! But I bet that those flash apps will be accessed the way they are on the PC -- through the browser. Kongregate for mobile phones would be a form of heaven for entertainment users.

Maybe we're just arguing definitions, but I'd call those things web apps.


Malcolm wrote:

>>Hardly anyone is making money off web apps full stop

Malcolm, I disagree with you on that. There are a lot of web app companies making money -- enough to support their development teams, grow the company, and make a nice profit. Almost none of them are growing into the next Aldus or Adobe, but I think that's in the nature of web app development; you don't need a huge team.

Most of the mobile developers I know would be happy to have a nice small reliably profitable company like that.

Will PC web business models transfer well to tiny screens? Many probably won't, but I am more interested in the new business models that mobile developers will create if we turn them loose on a platform that lets them experiment without artificial limits. And I think the mobile web, for all its problems, is more likely to remove those limits.


>>The web is almost as fragmented a platform as the mobile devices.

I agree that's a serious problem, but I believe competition from Nokia and Apple will force the other mobile vendors to get in line pretty quickly. I think we'll see a future where users won't accept an incompatible browser on a high-end mobile device, just as they would not accept a phone that couldn't receive SMS messages.


Eric wrote:

>>if everything goes mobile Web, what will that do to an already not-so-great latency problem? Not to mention the prices of flat data plans.

Most mobile devices get used in short spurts, so I don't think web apps would overpower the network. But there's definitely a risk. That's one of the scary things about being an operator -- you desperately hope people will use your network, but at the same time you're terrified that they might actually use it.

At a conference once, I heard someone compare the operators to the owners of a health club -- what they really wanted was for everyone to buy a membership and then never use it. That's unkind, but there's a nugget of reality in there.

Malcolm Lithgow said...

I'm interested in how different my (admittedly skeptical) perspective on the profitability of web app companies is, vs. some others' (including Michael's) ideas.

So I did a tiny bit of research.

AdMob sounds like a successful company (though not a Web Apps company). Looking at their stats (2 billion ads a month!) they're certainly making some money. It's interesting that their T's and C's for publishers (people who derive income from publishing their ads) leave the net revenue share amount completely up to AdMob's discretion. There are also, notably, no stats on revenues that publishers can expect to derive. Furthermore, looking carefully at their stats (including the types of phones, the carriers, the regions, and what sorts of events affect the stats) it seems clear that the VAST bulk of publishing is content, not apps.

In fact, without something like Google's deep (and invasive) access to a user's content in order to target ads (and AdMob clearly doesn't do this, since the publisher is the one who chooses the "Channels and Category"), it's hard to imagine how a web app would present ads that were compelling (which usually means related to what the user was already thinking about, or is of interest to them in some other way). This problem doesn't exist for content, of course. (And I guess it doesn't exist for some types of web app that have a very narrow focus of functionality, like a vertical app, for example.)

So, I'd be interested to hear of people who have AdMob delivering significant revenue on mobile web apps, since AdMob isn't boasting of it.

In another direction, I thought I'd have a quick peek at the Web Apps game. Perhaps the best "pure play" example is Salesforce.com, who derive revenue from their actual software, as opposed to a huge portal serving as a framework for advertising (a la Google and Yahoo!).

When I looked up Saleforce.com's gross profits, they were US$400,000 for the nine months to the end of Oct (new results coming out tomorrow). Not too shabby. That's off a tad under 40,000 customers (so $10 each for the nine months, although not all 40,000 were on board all nine months, so they might manage $20 per person per annum).

However, Salesforce.com is SERIOUS software. They have 2500 full-time employees. After all of their expenses, net income was a measly $6000!

Given the competitiveness of their market, I don't see them being able to do a Microsoft and sit back and make huge amounts of money for quite some time yet.

Now, I repeat my assertion, virtually no-one is making money out of web apps.

I'd be happy to be proven wrong.

Malcolm Lithgow said...

Oops. The $6000 income for Salesforce.com was for the three months to end of October. Over the nine months before that, they made $10,000.

That's still far less than a dollar per customer. They may manage a dollar per customer over the whole year, but I doubt it. (And 40,000 customers isn't really a huge number: 16 customers per employee, no wonder they make so little.)

Hartley said...

Can you imagine a PC with just browser applications and no native applications. The way I see it, there is space for the two, both browser app's and native app's. There are some companies that are specializing in the fragmentation problem, its rapidly becoming easier to create mobile app's.
In my opinion billing and deployment are bigger problems.

Anonymous said...


Dude, please don't post that sort of thing anonymously. Step up and introduce yourself. A lot of other developers want to learn from you.


Unfortunately, stepping forward now feels wrong. Maybe someday, but not right now. I just don't feel it's important to attach a name to something to give it more credibility. All I can say is that I am for real and I think my writing backs that up.

First, I've been at mobile development since college (early 90s). I started writing code as in intern for Psion handhelds (the HC, Organizer, etc). The HC OS ran the EPOC32 OS and its dev tools were written for C/C++ developers. OPL existed too, but I personally don't like BASIC-like languages. Anyway, these devices were threaded, had tons of accessories (wands, printers, radios) and were 3 meter drop tested.

Some of you may known this OS better in a later revision if you write code for Symbian devices. Psion was one of the original members of this group that developed this platform.

Heh, things that were been done in warehouses in the early 90s blow the doors off some of the crap that I'm seeing today. Sorry. I'm just so disappointed at some of the apps I've seen making headlines lately.

Anyway, fast forward to today and I've moved to developing for Windows Mobile (since it came out in '97) and some Palm stuff (mostly ports).

What's different? Nothing really. Companies still need to go mobile and they still need talent to deliver apps that just work.

The hardest part to being successful in this space is that you have to deliver. Period. You can't deliver some of the crap that's out there and you can't deliver it in a web browser.

The business process of some of these firms just don't allow for it. Native development is the only way to guarantee that you'll be able to take what that firm is doing on paper and convert it to a mobile solution that meets their expectations.

Performance is HUGE. I don't care what anyone says. From execs to coders, we're an On Demand nation now. They don't want to wait for your screen to paint. They don't want to wait for your complex SQL query to run. They want to tap the screen, or navigate on the phone and have their data that they had already at the ready on paper there, in front of them, when they want it.

The solution needs to do it better than before. If you can't see the solution improving a process during the design phase, then be honest and address it with your client. Don't plow ahead and just take their money. Not only is that bad business but it's bad for our market image.

Anyway, perhaps some of you can hunt this link down as I can't remember where I read it but a recent survey of IT executives showed something like 75% of them thought mobility firms just weren't delivering what they needed.

I wonder why that is? As a small firm I certainly can't compete with some of these bigger consulting firms who land gigs with the companies these execs work for, but I can tell you that .NETCF won't solve everything, nor does a web solution. Sometimes you need to ask for a little more money and time to develop a native mobile solution that will actually make the firm money once they deploy.

The last thing I will I say is this. Mobility is not something anyone can just pick up and do. It's hard. From interacting with existing desktop databases to writing the communications that move data to/from a device to how you organize and store that data on the device to the choices you make when you create the UI.

Every single step requires careful consideration and that's what my clients pay me for. That's why the last three years have been great. They get what they pay for.

Michael Mace said...

Malcolm wrote:

>>Salesforce.com is SERIOUS software. They have 2500 full-time employees. After all of their expenses, net income was a measly $6000!

I'm sorry, Malcolm. I don't want to be argumentative, but I can't reproduce your numbers. Salesforce's latest quarterly earnings report (link), for Q3 of 2008, shows net income of $6.6 million, up from $3.7 million the quarter before. They just raised their sales forecast and expect to be at over a billion in revenue in FY 2009.


>>40,000 customers isn't really a huge number

I think when Salesforce says "customer," they mean company. 40,000 companies is a huge customer base for an enterprise firm. Their total number of users is something they call "subscribers," and the total is way higher than 40k. I could not find a current figure, but it was over 500k in 2006 (link). Also, check out the discussion here.

No, they are not at Microsoft profitability levels, but they are solidly profitable. And keep in mind that they are investing right now in order to drive as much growth as possible, so their profits are intentionally held down. That seems to be working nicely, and it's exactly the same way I'd be managing the company.


Most web app companies are much smaller than Salesforce, of course, and are not even funded by VCs, let alone publicly traded, because they don't need that much investment. As a result, it is almost impossible to find public information on their overall profitability. All I can tell you is that I talk to a lot of those folks in Silicon Valley, and they are indeed making money. They wouldn't be in business if they weren't, since most of them have no VC money to rely on.

I have yet to find the ultimate description of the economics of doing a web app, but there's a pretty good discussion here, written by Ryan Carson and posted on the 37 Signals weblog (link). Be sure you read through the comments as well. The costs cited by Ryan sound high to me -- companies leveraging the Amazon infrastructure seem to be able to come to market for a total cost in the tens of thousands of dollars. But the overall point is that you can often get a competent web app to market for a very low investment, allowing you to bootstrap a company to profitability with a small staff and very low overhead.

What makes web apps profitable is their low cost structure, not their high revenue.

Another great way to get more info is to go to one of Carson Systems Future of Web Apps conferences and talk to the people there (link). The next one is in Miami, starting in two days (!). Unfortunately, as you're in Australia I doubt you can get over to it. But if anyone reading this is in the Miami area, or can get down to Miami, I recommend that conference highly.


Anonymous wrote:

>>Unfortunately, stepping forward now feels wrong. Maybe someday, but not right now. I just don't feel it's important to attach a name to something to give it more credibility.

All I wanted to do was congratulate you, but that's fine. Besides, I was most interested in the details on how you're making money, so folks can learn from your experience.

It sounds like you're doing contract programming. What parts of the mobile market are doing best? Is most of the work enterprise or consumer apps? And how much is custom (single customer) development vs. commercial? I'm interested in understanding which parts of the market are doing well. That may help to account for why you and I have different impressions of how things are going.

Thanks for sharing the information. It's very interesting.

Anonymous said...

It sounds like you're doing contract programming. What parts of the mobile market are doing best? Is most of the work enterprise or consumer apps? And how much is custom (single customer) development vs. commercial?

Yes, lots and lots of consulting work. I used to also be into product development, but that just never became profitable.

Vertical markets are and will always be hot. I've been working in many different areas too. automative, healthcare, food, inspection, etc. Saleforce.com has been used a couple of times ... I think they're hot because they are more data focused, not app focused, which is exactly where I'm headed myself. Access to business data and the ability collect and dispense it is key to these companies. And of course, they want it yesterday.

As I said before, all I see is OnDemand execs. I've even been called an "OnDemand kinda guy" by my real-estate agent when my wife and I were shopping for a home a couple years ago. I laughed, because he was right and he's not even technical.

So anyway, I reread your post. I reread again after that. It clearly starts at the top. It's funny because someone is making money or these devices wouldn't exist.

I've always been surprised that some of the leading mobility developers have not unified and formed a consortium that bans together and stands up to these guys. There are clearly talented people reading this site ... where's the love for mobile computing gone?

Seriously, carriers and device manufacturers still need software to make their phones compelling. If they are going to compete with the iPhones of the world, they need talented folks who get the the graphics, the threading, the low level stuff that gives a device its crunchy goodness too (and pay them properly for it too). I'd put the worries aside and consider stirring things up. Heck, if I had the influence - I'd do it.

By the way, call me Tom.

David Beers said...

I agree with Tom that vertical mobile applications are a profitable market. The only trick is that to grow a good business for custom applications you need to try to land customers where the software development cost will be spread over a large number of users. In my experience those companies are either startups with big product plans and funding, or medium- to large-size corporations. The qualified start-ups that pay well are great but hard to find. The corporate customers that have the big projects often have commensurately big organizations with internal policies and politics can crush a small vendor unless you're good at getting in there and figuring out how they work.

Aside from vertical apps, another good opportunity is to hitch your star to an established consumer software or Internet company with a good brand and new plans for mobile. Seems like these opportunities have been popping up all over in the last year.

Marc from Ilium Software said...

As always Michael, excellent article. I think you make a lot of valid points about the mobile software market.

By way of introduction, my name is Marc and I'm the Senior Product Manager with Ilium Software. We've been working this market for over 10 years now and we're still going strong.

I agree that "business as usual" won't cut it in the modern market for mobile applications. In fact I'm a firm believer that in today's market "business as usual" is the same as "going out of business." At the same time, I am not as convinced of the death of on-device applications as you seem to be OR of the grail-like promise of web application development.

As most people know we're already in the web app arena. Our web application has proven very successful, but I believe that abandoning our on-device applications for a pure web approach would be suicide. As lots of folks have pointed out, the web, while very exciting, still has LOTS of limits...everything from connection issues to the same platform-to-function fracturing present in on-device development (we know this first hand!)

My personal belief is that success requires a wide reaching approach that embraces the advantages each option offers. On-device applications have certain strengths while web apps have their own, and neither approach is mutually exclusive. Success, as I see it, will result from embracing the many ways people work when mobile rather than focusing in on one way of working mobile to the exclusion of all others.

As for the greatest problem with the on-device app industry? Consumer ignorance (and I mean that in the literal sense, not perjoratively). As one person pointed out, users just don't know that they can even install software on their devices. Even if they figure it out, the process of getting (What version do I need? What platform do I have? What do you mean my (Nokia) Smartphone won't run (Windows) Smartphone software - they're both smartphones?) and installing (I need to connect? Where do I put the file? How do I run it once it is there?) is so unbelievably difficult that many just give up.

And while there are things a developer can do to ease the pain (we've done a lot!), in the end the small, independent developer doesn't have the resources to teach the masses about the existence of mobile software. Nor do we have the means, in the fractured market you've described, to fix the problems with getting the software (and the right version) onto the device.

Personally, I'm extremely interested to see what Apple does with their SDK. Will it be an afterthought plagued by all the issues we face on other platforms? Or will it bring applications to the masses in an easy, useful, and compelling way, solving the problems we face with the other mobile platforms?

Bob Chew said...

A very thought provoking article Mike.

However, we just did a "proof of concept" experiment running Palm OS applications on an iPod Touch (which works on the iPhone as well) and posted a video of it on the web to get some user feedback.

In just a few days, the video has been viewed over half a million times and we've been flooded with requests for us to release a product.

Since the only thing that our product does is enable people to run applications on their devices rather than on the web, the need for native applications seems far from dead.

I would agree with you, however, that the existing business and delivery models are inadequate.

Doesn't this just spell opportunity for someone ? We think so.

BTW, in case anyone is interested, you can see our video at
http://www.viddler.com/styletap/videos/1

Steve said...

Me: >>There a re MILLIONS of Flash developers across the world. Most are young, trendy, designer types who drool and dribble over the iPhone and other similar devices. Give them one sniff of a remotely ubiquitous Flash player for mobile devices and there WILL be an explosion of mobile software innovation.

Malcolm: >Cool! But I bet that those flash apps will be accessed the way they are on the PC -- through the browser. Kongregate for mobile phones would be a form of heaven for entertainment users.

> Maybe we're just arguing definitions, but I'd call those things web apps.

Look at Adobe AIR. Desktop apps, Flash based.

Now picture the same the same technology coming to devices. These are desktops applications that can access the web and the local device. They do not run in the browser.

There's no device equivalent to AIR yet, but Adobe appears to be making noises about Flex and AIR in devices. Watch this space. I think the potential here is HUGE.

Michael Mace said...

Today's batch of comments was excellent. I think it's very useful when we explain our perspectives and compare notes. Thanks very much, gang. A couple of thoughts...


Anonymous wrote:

>>Lots and lots of consulting work. I used to also be into product development, but that just never became profitable. Vertical markets are and will always be hot. I've been working in many different areas too. automative, healthcare, food, inspection, etc.

Okay, this is helping me understand why we have such different perspectives. Most of the developers I talk with are folks who do commercial apps, especially ones focused on end-users. I think I don't have good visibility into the vertical consulting side. So thanks for pushing back -- I was missing a part of the market.

And by the way, I'm delighted to hear that the vertical consulting is going well. There were times in the early days at Palm when that business was not growing well, because so many IT managers were resisting or in denial about mobile devices.


>>I've always been surprised that some of the leading mobility developers have not unified and formed a consortium that bans together and stands up to these guys. There are clearly talented people reading this site ... where's the love for mobile computing gone?

It's been tried before -- I vividly remember a developer revolt against PalmGear about four years ago. "We should make our own store that promotes apps well and doesn't take half our revenue." I don't know why, but they always seem to peter out without anything happening.

PalmSource had a program to work this issue at one time. It was one of the first things Access killed, because no licensees were asking for it.

So I'd love to see someone do something about this, but I have developed an unhealthy level of skepticism about whether it'll actually happen. Don't let that stop anyone, though. It could work.


>>By the way, call me Tom.

Hi, Tom. Thanks for posting the comments, and keep it up.


David wrote:

>>Aside from vertical apps, another good opportunity is to hitch your star to an established consumer software or Internet company with a good brand and new plans for mobile. Seems like these opportunities have been popping up all over in the last year.

Good point, and another exception to my perspective on the market. Those companies are typically doing extensions to their existing businesses and are not very sensitive to actually making money from them. For example, Facebook doesn't care if they can't make money from a mobile instance of Facebook -- for them, it's a customer loyalty play.


Marc wrote:

>> I'm a firm believer that in today's market "business as usual" is the same as "going out of business." At the same time, I am not as convinced of the death of on-device applications as you seem to be OR of the grail-like promise of web application development.

Fair enough.


>> I'm extremely interested to see what Apple does with their SDK. Will it be an afterthought plagued by all the issues we face on other platforms? Or will it bring applications to the masses in an easy, useful, and compelling way, solving the problems we face with the other mobile platforms?

All good points, and I'm very anxious to see the announcement. Even a great Apple program would not solve the fragmentation problem, though, unless Apple does a runtime that works on a broad range of phones. Otherwise it'll be a very nicely furnished hothouse in a frozen wilderness.

Still, it would be delightful if Apple stimulated the rest of the industry to solve its app problems. I'm personally kind of tired of waiting for Prince Charming, but hey, we'll find out soon.


Bob wrote:

>>In just a few days, the video has been viewed over half a million times and we've been flooded with requests for us to release a product.

So, are you teasing us or are you going to ship the product? Feel free to announce it right here ;-)


Steve wrote:

>>There's no device equivalent to AIR yet, but Adobe appears to be making noises about Flex and AIR in devices. Watch this space. I think the potential here is HUGE.

I agree about the potential for Air (see my comments here), but Adobe needs to move much faster if it wants to drive a standard as opposed to creating yet another little fragmented sub-platform in the mobile market. Key move: it needs to stop charging for the runtime. The reason PC-based Flash and Acrobat became standards is because the runtimes were free.

Same issue applies to you, Bob. As long as you're charging a bunch of money for the runtime, you won't become ubiquitous enough to set a standard and resolve the app problem. Find a way to fund your company from shared revenue with the developers and I think you'll have a shot. Otherwise it's another ski chalet in Antarctica.

felix said...

I believe you're wrong on this one for a few reasons. First, I think it is wrong to think of web development and native app development as an either/or proposition. I think that there are strengths in a web app and there are it's weaknesses. It is similar to web apps vs. native on desktop applications. I doubt that web apps will replace native ones anytime soon on either platform, there are simply things that web apps can not do and many things that they can not do well especially given the variety of browsers available to the mobile world.

How could the lines have crossed when there's exactly one reasonable browser (mobile safari) that even makes development of sophisticated web applications possible at all?

I also believe that native app development has stagnated because the smartphone market stagnated. Palm's OS is old and crufty and has been losing momentum for years. The Windows platform has been coasting along trying to find significant traction. On the other hand, look at the proliferation of native apps for the iPhone, clearly not as many as Palm OS or Windows, but given the hurdles and lack of even an SDK/documentation, is evidence that provided a proper SDK there would be a thriving ecosystem for the device.

Anonymous said...

Long-time mobile veteran here...I agree %100.

There are indeed some people making LOTS of money in mobile applications. These are the ones that were able to link up rock solid distribution agreements with carriers--usually financed by large bricks of coke and hookers. Some are just plain lucky to have content on the deck. But even those I know who lucked out are looking for an exit--luck isn't a great foundation for a business.

Carriers never took the downloadable application market seriously. Ringtones and wallpapers are easier to manage and make more money. Reflecting these priorities, you'll find most carriers (even the largest) in the US have a handful (1-3) of people in charge of the entire deck.

These people want to go home at 5. Thus, every content provider they have to deal with cuts into their commute time. Naturally, deals are going to be restricted to a half dozen major players. Content flows in, money is made, and banker's hours are kept. This command economy stifles the rest of the industry.

It doesn't help that the platform providers utterly failed to create a stable and consistent platform. Even amongst their own devices! No two JavaME VMs are alike--every BREW device has it's own set of unique bugs and quirks. Not to mention all the flavors of Smartphone OSes out there--many of which do not have any workable distribution model attached.

I do believe browser based applications (even in the form of native client apps such as Flash) that are downloaded or run via the browser are the future.

The thing is, FlashLite is DOA. Adobe failed to create a business model when they created the platform. And there are already a bewildering amount of FlashLite variations with phone and carrier-specific restrictions.

Perhaps Google and other industry leaders could develop a Mobile Web 2.0 standard. But then you'd have the same fragmentation problem--depending on the browser companies to adhere to a standard.

I think that the eventual commoditization of smartphones and the open flat rate web access associated with them will create their own solutions the carriers can't control.

Thus, the carriers may lose out on the revenue generated in this next generation of mobile applications (web or otherwise)

Steve said...

" agree about the potential for Air but Adobe needs to move much faster if it wants to drive a standard as opposed to creating yet another little fragmented sub-platform in the mobile market. Key move: it needs to stop charging for the runtime. The reason PC-based Flash and Acrobat became standards is because the runtimes were free."


So far as I know, they stopped charging for Flash Lite with Flash Lite 1.1. Flash Lite 2, 2.1 and 3 are all preinstalled on devices - with the exception, so far as I know, of the inclusion of Flash Lite 3 on the latest N95 8Gb ROM update. There are 'developer' versions of these too.

I also heard rumours of a free download of the Flash Lite 3 player for any device that *could* support Flash Lite 3, but I've not seen it yet.

AIR is a different kettle of chicken wings. There is no charge for the AIR runtime on desktop (with PC, Mac available today and Linux flavour on the way) and I see no reason why they would elect to charge for the mobile runtime.

Steve said...

A thousand apologies on the 'charging for the runtime' comments I just made.

Macromedia did charge *the consumer* for Flash Lite 1.1 on some devices ($10 I think) but not for any later versions.

Adobe do still charge the device manufacturers a license fee for preinstalling the player. So far as I know, it's a relatively trifling sum, like $1 or something ... sure it adds up if you sell a million devices, but it's a relatively insignificant bump to the consumer.

andy said...

I don't know if I agree that future of mobile app is dead and will go thru browser. The problem with that is precisely what you have pointed out... that is mobile screen is much smaller. I don't think mobile processors have the power (yet) to handle an ajax like layer on top of mini browsers...

I just think the future of mobile apps will be designed to enhance mobile web experience. Look at a number of Google mobile products (GMap Mobile, Youtube for S60) or even Yahoo GO 3.0, these are powerful mini applications/widgets for various smartphones.

Now, how do we make money off of them, thats a different story.

Anonymous said...

Don't agree at all.
Why Google would spend $10M for the best mobile application created for Android??

http://www.dailymotion.com/relevance/search/android%2Bgoogle/video/x3gvh0_google-android-la-demonstration

Malcolm Lithgow said...

G'day Michael,

I don't want to be argumentative, either, but I think this is an important point.

If you follow the link you gave (which was my source), and read the "Condensed Consolidated Statement of Operations" at the bottom (ie. the "numbers"), then go down to the line "Net income (loss)" and across to the column for 9 months to October 31 2007, you'll see the figure $10,977. It seems you're confusing net revenue with net income. (We now have their full year's results here and can see that their annual net income was $18,356 -- not much more.)

Now, Americans may not measure a company by its profits, but I'm pretty sure that's how (a) most of the world does and (b) how reality (eventually) does. Non-profit organisations are supposed to have no profits, not companies.

Salesforce.com are in a reasonably secure position for the moment, in the sense that they are funding their own development. My point is that they HAVE to do that to maintain their competitive position. Whether they can ever become profitable is still an unresolved question.

And so long as they HAVE to spend as much money as they're making, they cannot, by definition, be considered a profitable business (they're not making any profits).

So, given that Salesforce.com is one of the MOST profitable web app companies (this assumption is the greatest weakness in this argument, BTW), and they basically make zero profit, this leads to my conclusion that hardly anyone is making any money off web apps.

There is certainly plenty of employment provided by the industry, but that's different from making money off the business of making web apps. Do you see my point?

Michael Mace said...

Malcolm wrote:


>> It seems you're confusing net revenue with net income.

I don't think so.


>>If you follow the link you gave (which was my source), and read the "Condensed Consolidated Statement of Operations" at the bottom (ie. the "numbers"), then go down to the line "Net income (loss)" and across to the column for 9 months to October 31 2007, you'll see the figure $10,977.

Thanks for the explanation, and now I think I understand where the disconnect is. Salesforce.com's release is written in thousands of dollars. So when they write "$10,977" what they mean is "$10,977,000."

This is indicated about three lines up from the number you pointed me to, where the document says "in thousands"

But even if Salesforce's nine-month profit really were only $11k, as opposed to $11 million, I'd still feel they were doing the right thing by re-investing all of their profits in order to grow faster. You don't often get a growth rate as high as theirs, and you want to take as much advantage of it as you can.

I'm sure I'm not going to change your opinion of web apps, Malcolm, and that's okay. But for the benefit of other folks reading this: I do a lot of consulting for tech companies in the Valley. The ones that aren't directly involved in the web apps world are often unaware of how rapidly web apps are evolving, and how very efficient the companies are in terms of their use of resources. It's a very different business model, and although it's by no means perfect, there are a lot of lessons in it that any tech company can leverage. You really owe it to yourself to dig into it and understand it thoroughly.


felix wrote:

>>How could the lines have crossed when there's exactly one reasonable browser (mobile safari) that even makes development of sophisticated web applications possible at all?

That's more a measure of how bad I think the situation is for most of the native apps world. Besides, Nokia's browser gets pretty good marks from a lot of people as well.


Steve wrote:

>>Adobe do still charge the device manufacturers a license fee for preinstalling the player. So far as I know, it's a relatively trifling sum, like $1 or something

It may be a trifling sum to a consumer, but it is a huge issue to the phone manufacturers, who are willing to sell their grandmothers to cut ten cents from the cost of a phone. A buck a phone is a very major expense to them, and it results in Flash not being installed on a lot of phones. And so it's not a mobile standard.

I agree with you that Adobe should not charge for the mobile runtime of Air, but every time I have asked them if that is their plan, I've gotten a charmingly evasive answer.

Which means they want to find a way to have their cake and eat it too.

Adobe has to decide if it's willing to sacrifice short-term profit to set a very powerful mobile standard in the long run. Although I am making it sound like an easy decision, it is not at all easy for a publicly-traded company that is viewed by investors as a mature stock.

I know what Salesforce.com would do, though ;-)


Anonymous wrote:

>>Why Google would spend $10M for the best mobile application created for Android??

Because they can.

Anne Baker said...

You stirred up quite a controversy with this interesting post. As someone who works for a mobile application platform company, Action Engine, I can assure you that the mobile application business is not only alive but thriving.

In the past year alone Action Engine has announced the creation of cross-platform mobile applications for MSNBC.com, TiVo, the Wall Street Journal, Barron's.com, MarketWatch.com, and AOL and we have over a dozen more top tier brands that we will be launching mobile applications for this year. The big brands realize that:
1. To achieve high levels of interaction and personalization features for consumers they need to move beyond the mobile web and deliver the type of user experience that can only be achieved with mobile applications.
2. Caching and rotating ads in offline mobile application screens can drive greater advertising impressions than by forcing consumers to wait for ads to download onto an online mobile web page.
3. To achieve reach for these ads and their content they have to work with mobile companies that have the technology to easily and rapidly build, deploy and manage mobile applications that run cross-platform to address the fragmentation issue you described.

Judging by the number of RFPs we have received in the past 6 months (up 650% compared to last year at this time) I can attest to the fact that it will be the big brand media and content companies who drive the mobile application market's continued success and it will be in-application mobile advertising revenues that fuel its ongoing growth.

Anonymous said...

No offense Michael, but your article is flawed. Palm themselves killed device hosted mobile app development by allowing Palm OS to stagnate for 6-7 years ... and it's only today with the iPhone/iPod touch and Google's Android that I've seen the same level of excitement since. The web may make sense for some apps, but it certainly doesn't for others. Part of the "Zen of Palm" that you so often like to refer to was that is was easy for developers to part-time throw together an app they knew they'd use themselves ... and if the rest of the world wanted to use it, even better. Maybe throw in a license key system, and if you got $10 every once in a while, that's great! The best apps became popular and the business model took off from there. Those same people aren't going to go to the costs and Internet security woes of hosting an Internet website for thousands of non-paying users. If anything, your "Mobile applications, RIP" article is a few years too late ... the new excitement among developers for device hosted apps is just beginning again. Businesses heeding your words may find themselves on the wrong end of the curve.

I'll also add that inevitably, good design will likely triumph. For some apps, it makes sense of them to be web-based, for others, it makes sense for them to be device-hosted. If salesman Joe gets out in the field and it's more difficult for him to sell his widgets because there's no/limited wireless service in his sales area ... somebody screwed up.

As for mobile applications, the excitement's back ... catch the ride!

Malcolm Lithgow said...

G'day Michael,

Thanks for the correction, it does make more sense of their statements (I guess I was too keen to jump to bad conclusions).

I, like others, believe that a combination of web services and local clients, along with full-blown web apps and full local clients is likely the best way to go. Web apps will ALWAYS have certain limitations compared to client apps (see my blog for a careful analysis -- more careful than my analysis of Salesforce.com's finances) but for some things, maybe even many, this will be acceptable.

Certainly Salesforce.com do show that web apps CAN make money. Let's hope that more can do so.

Dan Lavender said...

As I'm working mainly with Flash/Flex these days, it suddenly dawned on me...

If Adobe release a mobile version of AIR, then the best of both worlds is available. I'm sure that's not going to happen for at least 12 months as FlashLite is still using Actionscript 2.

But certainly a natively run wireless web app is the eutopia we all seek?

Anonymous said...

I do not agree at all. Disappointed by the Java fragmentation we focused only on BlackBerry and the business has been increasing at a whooping 120% year on year from 2005 until now.
The users who visit websites on their mobile browsers do not pay for software. We experimented with this so I know what I am talking about. Forget about webapps some things will never be on-line as people do not want to share their private data on-line.

Anonymous said...

I am a developer of a popular native app for the Palm OS. This is my full time business. I am also not doing well as I was previously, but it is mostly due to Motricity and Handango taking more than 50% for the commissions. At one point, last year, I asked Handango to stop selling my software wirelessly, because they were taking 60-70% in commisions. Since the price of handheld software on Palm Handhelds is about $20, I now need to sell a lot more copies, which is also not happening.

Andrew said...

Great analysis. One small comment; you wrote: "See if you can create a dumbed-down version of your application that will run over the mobile web"

Or, see if you can observe your customers when they're not sitting at their desks, then design a mobile web application that complements (or replaces) your primary application that's also optimized for those other contexts. What I want from your app as I'm leaving the office at 6pm on a Friday isn't a "dumbed-down" version at all--it's a version that's thoughtfully designed for this context. What I want from your app while I'm killing time waiting for a bus next to noisy traffic might be something else, but also shouldn't be a "dumbed-down" version of it.

Christopher Fahey said...

A platform that is technically flawed but has a good business model will always beat a platform that is elegant but has a poor business model.

Depends on what you mean by "beat". If you aim to be very profitable targeting a small audience with a quality niche product, you may do your company -- and your investors -- a bigger favor than trying to reach a huge audience with a crappy product. If you think that Microsoft "beats" Apple simply because it sells more product, then I suppose this logic makes sense. The millions of people who are happy and wealthy making high-quality, low-volume products, however, would probably disagree with you.

The flaw in your article is that you are only speaking to developers whose only strategy idea is to carpetbomb the market with crappy products. And I don't doubt that this business model also works quite well (you correctly cite Windows as an example). I think, however, if you make a great native mobile app for a niche audience, one that exploits the platform better than web apps can, enough people in the audience will pay for it to make the developer quite rich and happy. If your only goal is to reach the largest number of phones with the crappiest possible product, your success will be based almost only on your ability to market your product and trick people into buying it.

This user experience cycle -- buying a crappy product, becoming unhappy with it, and they giving up on mobile apps altogether -- may be the real reason why the mobile app market is so stagnant right now.

Michael Mace said...

Anne wrote:

>>In the past year alone Action Engine has announced the creation of cross-platform mobile applications for MSNBC.com, TiVo, the Wall Street Journal, Barron's.com, MarketWatch.com, and AOL

Congratulations! And thanks for posting. I think I generalized too broadly about the mobile software business. I was thinking primarily of developers creating stand-alone applications, for sale by their own companies, aimed at end-users, and expecting to make a profit at it. Several developers who are doing enterprise applications, or contract development like yours, have written in to say that their businesses are doing just fine.

Which is wonderful.


>> Judging by the number of RFPs we have received in the past 6 months (up 650% compared to last year at this time) I can attest to the fact that it will be the big brand media and content companies who drive the mobile application market's continued success

That's pretty depressing to me. I'm very happy for your company's success, but I think it's the little guys who do the most innovative software. If the fate of native mobile development is to be a delivery tool for big media companies, then I say bring on the web apps.


>>it will be in-application mobile advertising revenues that fuel its ongoing growth.

Now that's intriguing. If you're still reading this thread, please come back and say more -- how are the ads structured, and what sorts of revenue can you get per user? I am intensely interested in understanding how the advertising model on mobiles can work.


Anonymous wrote

>>Those same people aren't going to go to the costs and Internet security woes of hosting an Internet website for thousands of non-paying users.

Uh, as if that ever stopped any of the PC web app developers. It's incredibly cheap to set up a web app, and using things like Amazon Web Services you can scale your expenses to the popularity of your app. The web app model actually works very nicely for a small developer.


>>If salesman Joe gets out in the field and it's more difficult for him to sell his widgets because there's no/limited wireless service in his sales area ... somebody screwed up.

Yeah, I used to give that same speech to the press all the time when I worked at Palm. And it's true. But if developer Jane can't get the application to salesman Joe in the first place, no amount of elegant on-device architecture is going to help. I think we'll get better wireless coverage before we solve all the problems with mobile app distribution.


Andrew wrote:

>>What I want from your app as I'm leaving the office at 6pm on a Friday isn't a "dumbed-down" version at all--it's a version that's thoughtfully designed for this context.

Ouch! You're completely right -- bad word choice on my part.


Christopher wrote:

>>A platform that is technically flawed but has a good business model will always beat a platform that is elegant but has a poor business model...If you think that Microsoft "beats" Apple simply because it sells more product, then I suppose this logic makes sense.

Christopher, I was at Apple for ten years, and for a good part of that time I was the main Mac vs. Windows marketing guy. Our goal was to be the leading computer in the personal computer industry, not to rule a little niche of enthusiasts and graphic artists. We failed.

Microsoft beat us because:

1. We stupidly gave them a license to copy our software.
2. We accepted a situation in which they were able to align hundreds of companies against us. We had to fight on far too many fronts at once.
3. Because of points 1 and 2, we had to innovate almost perfectly in order to win. We didn't do it.

The recovery of Apple is a tribute to the vision and execution of Steve Jobs and the people working for him. But it's also a tribute to the fact that Jobs changed Apple's strategy, seeking out markets (like the iPod) where it could use its systems design skills to gain a dominant position. That's good business model + elegant products, the most powerful combination.


>> you are only speaking to developers whose only strategy idea is to carpetbomb the market with crappy products.

No, that's not correct.


>>I think, however, if you make a great native mobile app for a niche audience, one that exploits the platform better than web apps can, enough people in the audience will pay for it to make the developer quite rich and happy.

Only if you can reach customers with that product, and only if you actually receive the money they pay for it. I know lots of mobile developers who are astonishing artists who would be delighted to be successful with little niche companies that create specialty products. In fact, most of the mobile developer base thinks that way. But those are exactly the people who are being strangled by current conditions in the mobile market.

srini said...

web 2.0 is going to rule the mobile world brothers and sisters.

if you take my advice you won't be sorry:

1) register a new metanotes account in your firefox browser (safari and opera ok too): http://www.metanotes.com

2) surf your blazer to http://timelog.metanotes.com and log in.

it's a private twitter people, a place for you to jot anything down - ideas, reminders, memories, shopping lists, whatever. after we get tagging in there and add further features (we're just getting started) you can bet we are going to render the on-board memos function and all such other products yesterday's news.

i mean much respect to everyone developing software, but NOTHING STUCK !!!! i used a palm for years and frankly spent hundreds of dollars on sw i never use. it didn't suck, but you should see this time log thing. we can't wait to not see what you do with it !!! :)

-srini kumar
ceo
metanotes.com

Dave Haupert said...

I'm so glad someone chose to tackle this topic on a blog and that the masses have chimed in with their comments. Long overdue!

Many good points have been raised, but one that I haven't seen, and which I believe is a large factor is this- open source and freeware software. Back when Palm OS was just starting there was a very short period of free software innovation and within 6 months, a community of shareware and then evolving into commercial apps happened. People were more than willing to pay 10-15 bucks for little utilities, and developers were able to make a small living as the platform grew. When sales really took off, developers were quitting their day jobs and able to make a full time living, and this culminated in what you described (Mike) at PalmSource when it felt like we were sitting amongst the future of the software industry.

What I have noticed over the years, is that besides all you mentioned, there is a willingness of developers to write applications and pool together with other open source developers to create compelling applications and release them as open source or even just Freeware. These apps often exceed their commercial counterparts in power, speed, or flexibility. And while I understand that these developers did so because they believed in free software, I believe it's this this movement that has diminished the sweet spot for small native apps development companies.

A quick example- there is a site called Giveaway of the Day where one shareware or commercial application is given away free for the duration of a single day. The idea was that it would create exposure for the company and that by giving away a lite version they could potentially sell a full version to those users interested. Sounds great in theory, but every day when there is a nice looking commercial app being given away the comments on the site are flooded with 'you should just use app xxx- it's open source, better, and available free every day of the year'. When I see those I find myself thinking I won't download the app and if I ever need that type of tool, I'll just grab the free one later.

I think we've commoditized simpler, smaller applications, and to some degree even full fledged ones, and so the entire software industry has this chasm building between the free software and the big native applications from large development houses. That chasm used to be bridged by smaller software houses, but I feel is eroding away.

Our main application HanDBase, is available on most every mobile platform, and that was a lot of work. I feel that is our achilles heel but also our only source of stability as who would want to go and develop a database client for every mobile platform as well as create all the synchronization conduits, conversion tools and needed addons (reporting tools, ODBC drivers, etc). This gives us some sense of stability in an otherwise shrinking market. So in a sense, it's this fragmentation that has kept competition from entering the same waters as us and while the overall sales of applications are down, we can become a bigger fish in a small pond, rather than the opposite.

Anonymous said...

Without taking any side, here is just some marketing info about what happened in my country (Bulgaria) after iPhone appeared.
Around Christmas 2007 there was a big boom of the "unofficial" iPhone sales. This created a market opportunity for the small phone shops which can afford to sell sort of illegal phones. What they did - they imported by some way locked iPhones, unlocked them and sold them at a price about 600 Euro.
Since I am known as a "mobile" guy, at that time I was asked by many proud iPhone owners to install some games and software on their bricks. My experience was that the people were a little disappointed by the lack of software. Everybody just wanted this simple single icon which will bring in no time their favorite game or office program.
Anyway, I also found that to have native application on the phone was actually not very important (at least for that people who can afford 600 Euro for a phone). For example, nobody threw his iPhone because of the lack of good office application...

Cheers,
Iliya

MikeTeeVee said...

Google Gears to the rescue?

http://googlemobile.blogspot.com/2008/03/shifting-google-gears-to-mobile.html

Anonymous said...

Guys stop all this. This is about the same as usual. The first 3rd party mob developer that is able to design a mobile app will win and then the mobile users dont really care if they will need to go through a downloading process that is difficult or if the developer needs to get whitelisted. It is about developing something that is of so strong need by the users that no one in the whole ecosystem can cut it out. Of course this killer app would need to take revenue generation of all the stakeholders into the picture and all this - and we have a winner. Who is going to develop this first will be a independant company, not the established players, as they are stuck in their own mindsets. This happens all the time in industries with such a massive fuel of growth - in a similiar way as Skype got there.

Steve said...

"For example, nobody threw his iPhone because of the lack of good office application... "

Because the iPhone is BLING first, and a tool second.

Paul Golding said...

I said mobile apps were dying a while back.

The inability to update mobiles in the field has been a major contributor to the fragmentation problem.

Anonymous said...

I agree with your statement that "Vertical and native mobile application development is suffering due to poor business model syndrome. With the market widely fragmented and no solution in sight to ease the challenges of marketing individual applications, mobile content developers are shifting to the Web" Our company has realised the problems content sellers are having therefore we have created a revolutionary online payment processing service for digital downloads, called OneTouch Online Purchasing™.

™. The OneTouch Online Purchasing™ service enables consumers to purchase digital content (such as music, ring tones, games, video clips, wallpapers etc.), via their computer or their mobile handset, and charge their purchase directly to a billing account with any telecom service provider, bank, or ISP of their choice.

"Think about it: If you're creating a website, you don't have to get permission from a carrier. You don't have to get anything certified by anyone. You don't have to beg for placement on the deck, and you don't have to pay half your revenue to a reseller. In fact, the operator, handset vendor, and OS vendor probably won't even be aware that you exist. It'll just be you and the user, communicating directly." Yes we agree therefore by using a D2C payment model, you get a much higher revenue share as high as 77%!

Worth checking out www.onetouchpurchasing.com

Markus Spiering said...

Great article and interesting comments.

I have been running a major Palm OS software distribution site in Europe for many years and I remember all the excitement when the Palm OS platform was flying with doubling revenues for both sides: the hundreds of developers and us. We teamed up with PalmSource, our Windows Mobile sister portal teamed up with Microsoft - an incredible time!
After seeing the revenue streams not increasing that much as in the past more and more restrictions have been introduced across all major sites. Developers had to change their software to point customers only back to the original download site, email addresses have not being shared with developers anymore and for customers it got more and more difficult to find excellent freeware applications. The relation between distribution channels and the development community got poisoned in many cases and I believe from today's perspective that besides the fall-down of the Palm OS platform this also affected the ecosystem quite a bit. There was not much difference left between restrictions from a carrier and the restrictions that the sites have put on developers shoulders with exception that the carrier has more potential customers, an easier way of getting the customers money but with very less percentage left for the small development company.

We had the vision of being the marketing voice for the developer community and to explain the world why it is so great to have a handheld device and explain all the amazing things that are possible with 3rd party software. We did a good job in the first years, spending hundreds of thousands of Euros for marketing, tradeshows and investments in user groups but we all turned into normal software stores with very less marketing innovations for the reasons mentioned above.

Native applications vs. Mobile Web sites: Why not both?

Mobile web applications gained a lot of attraction with the iPhone launch and a few iPhone web apps are really outstanding: Take Facebook or Bejeweled (yeah - old Palm times :) ) as examples. However- everything that requires a deeper integration fails when it needs to run in a browser. Monetization is basically possible (if you think to sell your web application) but I'm not sure if the iPhone dictionary web apps really have been successful. It will be different with the AppStore but this brings us back to native applications (theoretically web apps could also be sold using the AppStore) and to the need for development for many different operation systems.

Given this I like the approach Yahoo! is doing with the Blueprint platform. The platform got announced just a couple of weeks ago and the language and the environment is in Beta but from a conceptional view this platform could solve many of the problems that have been raised in the article.
An application (aka widget) written in Blueprint can basically be seen as an standalone mobile app (when Blueprint support is natively integrated in the OS), running inside a client environment or in almost any of the mobile browsers available. The developer does not have to change the code - the platform takes care of this.

Blueprint applications/widgets can basically run in the following environments across multiple platforms and hundreds of devices:
- Running inside Yahoo's mobile client application: Yahoo! Go 3.0 (available for a wide range of devices across multiple platforms).
- In the mobile web by accessing Yahoo's mobile web presence, currently http://beta.m.yahoo.com
- Directly on devices that have native integrations with Blueprint

Depending on the device and platform the widget is running it will have access to certain features and will presented in the best possible way. A Blueprint app running in Go 3 will be able to access location information for example while this is not possible when the same widget runs in a xHTML browser. Still: The developer has one code and the widget will run across multiple platforms. At the same point the developer can profit from the platforms openness and the huge distribution range that Y! covers with their mobile products.

Take a look at: http://mobile.yahoo.com/developers

Drop me a note if you have any questions or thoughts - my email is in my profile.

Markus
(PM Yahoo! Mobile)

Anonymous said...

No way users will put up with the deficiences and drawbacks of mobile web. and the consumer demand for what gave rise to the Palm revolution will not go away--no way.

The industry will have to adapt, not consumers.

Reda E said...

I'm kind of late on this but just wanted to give my two cents. It's true that every aspect of our life is becoming more and more Internet-centric; the more this will happen the more the internet experience will improve, costs will go down and opportunities increase in every business. However, my personal short comment is that mobile applications are here to stay for a long time, perhaps changed in scope and presence, but they will surely stay. An analogy could be high street shops: are they destined to close down? After all you can get a better deal on line, can't you? Well, the reality is that they will complement the buying experience because they offer advantages that Internet will not be able to offer in the foreseeable future.

Q dub said...

Mobile applications make much more sense as a younger sibling to an already high-performing web-app. E.g., Facebook, Yahoo's all-in-one app, Google's suite. None of these apps need special promotional channels: people just go and download them or are redirected to the download when accessing the basic mobile-web versions.

I do hear you on the OS fragmentation - It's only going to get worse with Android and iPhone making strong strides against the already fragmented Windows-Java-Symbian-RIM landscape.

siancu said...

I am a Symbian applications developer and despite everybody predicting the death of native phone applications, I can still see a high (and well paid) demand for Symbian/Mobile applications developers.

It's true that you can't really become wealthy as a small/indie company from selling mobile applications though. But in the enterprise there is still a strong need for native mobile apps.

Carrie said...

I don't know, with websites like http://www.cascadamobile.com and http://www.breezeapps.com, it's making it easier for your average programmer to create mobile applications and games for a number of different platforms.

Anonymous said...

In Indonesia you'll find people transferring money over their mobile phones through text messaging. Buying goods through catalogs and text messaging them are also common. Buying prepaid rates, paying bills all kinds of bills are all done through mobile messaging. The more population, the more increase in mobile demand will be. People can't afford to line up to wait for something. People are getting impatient by the day. Quick Easy Fast Now it's what it's all about. I think different country has different practice. I know this when I used to fly back and forth from LA to Jakarta for the past 5 years, no one was using their smartphones/cellphones to do transaction in the U.S. but did in Indonesia. In Indonesia people line up on ATM machine expect 5 minutes or more. Teller in line haha expect more than 45 minutes to deposit your check. Mobile was the answer to this drag. Now even small business who wants to put their ads on a national newspaper does it through text messaging over their mobile phones. Everything is mobile in here people would shift from one carrier to the next every other months when these local giant wireless carriers keep on lowering their rates, whichever carrier services offer the best content and the cheapest way delivering it wins the competition.
When it comes to Mobile Web App, I agree with Mike. People want more Internet connection be that through WiFi 3G GPRS CDMA they want stuff on the Internet and well like yourself and I we all do stuff over the Internet and it's no brainer there are demands to couple phones with Internet as long as content can be access easily and I think Mobile Web App is the best candidate for it.

Rob said...

“If you're a mobile developer, you should consider stopping native app development and shifting to a mobile-optimized website.”

It is a good strategy however in my opinion native application development is not dead, not yet and this area is seeing some heavy duty innovation. Latest winner of Nokia Calling All Innovators contest (http://www.callingallinnovators.com) in Emerging Markets category developed something out of ordinary – this application allows farmers in India to establish remote contact with distant, modem-equipped electric irrigation pumps, to check on power supply and pump operation without the need to travel long distances.

So there is still some spark left in native app development and by the way Nokia Calling All Innovators contest is back this year. So let’s hope to see some more innovative applications.

Anonymous said...

I support what Rob has said...and about the calling All Innovators contest it is helping in bringing out the best from mobile application developers

Wireless2020 said...

While I agree that mobile applications have lot of barriers, I see difficulty for any serious application using mobile web browser as its platform. Mobile OS mfrs and OEMs are taking active part and atleast in the smartphone segment the control is shifting from operator to OEMs/OS vendors. I think the situation will sort itself out over the next few years.

Anonymous said...

I realize this post is old, and appears to pre-date the introduction of the App Store in summer '08, but WOW did the thesis prove to be wrong.

Thank you, Apple, for showing us the way...

John Turner said...

For anyone loking for more comprehnsive data on the mobile web space in the US you can download a report here -

http://ataresearch.alltheanalysts.com/JBB/The%20US%20Mobile%20Web%20Market.html

Anonymous said...

This is like reading a thesis on why cars won't be popular... post them taking off.

"Horses are with us stay!"

Want further proof... watch this video where Steve Jobs and Bill Gates agree that mobile web is not the way to go.. Yet.. Native Apps have to be the way now.

http://www.youtube.com/watch?v=cCvLTlQWT6A&feature=related

Anonymous said...

The prediction explained by this article is now 100% proof to be fail. hahaha, it's just maybe true for PALM (of their mobile native app now RIP).

My office develop many android and apple and blackberry native Apps, last year alone entirely 3 millions apps were download and installed. Just from the advertising only, i could afford my self the most pricetag porsche now in my garage.

The fact is that, both the mobile native and mobile web kit + html5 + ccs3 have of their own best fit scenario.

memento said...

I completely disagree with the content of this article.

You failed (deliberately maybe?) to mention the successful iTunes AppStore business model. Many INDIE iPhone developers have made millions out of their apps, even the crappy ones.

There's also Blackberry's AppWorld and Nokia's Ovi which are following Apple's lead and using the same business model for the app stores. We don't know if they'll succeed or not, but they look promising. There's also Android which is quickly catching up to Apple with the same business model.

See it's not always black and white plus you're only looking at the empty part of the glass.
True, some developers failed to make profit. True, the market is fragmented. True, it is very hard to make an app that works everywhere exactly the same (even Web fails here btw...).

And by the way, statistics published by both apple's itunes appstore and nokia's ovi store shows that GAMES remain the most downloaded paid apps on their stores. Most games CANNOT be moved to web, that's just impossible. Flash is going to hell.

Michael Mace said...

Memento, I'm sorry your comment didn't get published earlier. It was hung up in the spam filter and I missed it.

Wanted to let you know that I didn't ignore anything; I wrote this before the App Store was launched (you can see the date of the post in the URL above).

And yeah, the App Store worked out a lot better than I expected it to.

Having said that, most app developers I talk with describe their businesses as something like playing the lottery. It's hard for them to do their best work when they don't have confidence that they control their own success.

Given the rise of multiple smartphone platforms, I'm seeing another wave of interest in cross-platform tools, and HTML 5 as an app platform. I am hopeful, but we've all been been disappointed in this area before.

As for Flash, you should try the Kongregate app on Android. It works pretty darn nicely, and it's Flash-based. The biggest drawback is that most of the games need to be re-imagined for touchscreen. But that's a developer issue, not a Flash issue.

Vassilios said...

The mobile application business is one of the fastest growing industries in modern history. It has turned into a billion dollar industry in just a matter of years. Mobile applications have changed the way we play, search, learn, interact, manage tasks, and so much more. They have become an extension of ourselves.

lucy marx mobile said...

I'm kind of late on this but just wanted to give my two cents.. I am a Symbian applications developer and despite everybody predicting the death of native phone applications, I can still see a high (and well paid) demand for Symbian/Mobile applications developers.

Robert Ferreras said...

I completely agree with the comments made in this article. I would also add that another factor that it moving mobile applications to the web is the ability to store data somewhere else. Many IT departments don't want to deal with the added costs/maintenance of hosting applications.

Hussein said...

If you drop native apps development and go web, wouldn't you lose the benefits of instant marketing from the AppStore? You are then left on your own to market and sell your app, aren't you?

askinakhan said...

I don't believe this is true. Why don't i believe it is true? Web based applications programmed in HTML5 are slow. Facebook recently switched from HTML5 to Objective C on their mobile application because of the lack of speed.

Another reason is because web applications require a different variety of mediums. The App store is a medium between the supplier and consumer which aggregates all applications onto one simple platform. People don't want to have to visit tons of different sites to use applications.

Not only this but web applications require internet connection whereas once you have downloaded a mobile application from the app store you can use it online or offline. 3G is not fast enough, to use mobile applications we need fibre optic for mobile!

Your figures don't prove that web applications are becoming more popular, they just prove that they are being supplied more. What are the reasons?

1. Because they are cheap to develop
2. Because they are easy to code
3. Because you don't require a developer account

But just because they are being developed more does not mean they are being demanded more.

Ash @ ApplicationCourse.net