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Apple Dominates Mobile App Stores as Rivals Near

iPhone App Store
Apple's Steve Jobs to smartphone competitors: Catch us if you can.

Apple (NASDAQ: AAPL) today is crowing about the consumer phenomenon it created around the App Store for its iPhone and iPod Touch devices, announcing today that the service's downloads have topped 1.5 billion downloads -- a sizable achievement especially considering that the store is only one year old.

The App Store also continues growing at an incredible pace, with more than 65,000 apps and more than 100,000 developers enlisted in the iPhone Developer Program, according to the company.

"The App Store is like nothing the industry has ever seen before in both scale and quality," Apple CEO Steve Jobs, said in a statement. "With 1.5 billion apps downloaded, it is going to be very hard for others to catch up."

And it appears with recent enhancements to the iPhone -- like the debut of the iPhone 3GS and the new version 3.0 of its OS -- the app store will continue to do well.

That's especially true in the gaming category, one of the most popular app segments for Apple. Given its popularity, the App Store has attracted big-name players in games including Sega and Electronic Arts, as well as spurring startups such as Ngmoco.

And the appeal might not just be limited to the scale of the audience: iPhone OS 3.0 includes several game-friendly features, like a peer-to-peer function that will allow network gaming and an e-commerce tool for games, which will let players buy virtual goods.

"Developers who publish their applications on the App Store receive 70 percent of sales revenue, and do not have to pay any distribution costs for the application," Deepa Karthikeyan, senior analyst for wireless services at Current Analysis, wrote in a report on app stores. "The low-cost barriers and potentially high rewards allow small-scale developers to serve the market in exactly the same way as their larger counterparts, leveling the playing field for the first time. [iPhone OS 3.0] ... is designed to further encourage this system via some 1,000 new APIs allowing developers to offer things like subscriptions, additional game levels, and new content."

The challengers

As for the "others" to which Jobs referred, they've got high aspirations of their own -- and also appear to be making headway.

Competitors include rivals such as Research In Motion's (RIM) BlackBerry App Store, Palm's App Catalog for the Pre, Google's Android Market, Nokia's Ovi Store and Microsoft's Windows Mobile Marketplace.

RIM (NASDAQ:RIMM) appears to be chugging along, though the company has declined to release download figures. One factor that may help the BlackBerry App Store are reports circulating that RIM may launch a social network app called myBlackBerry for users to share popular apps, accessories and device tips.

Spokespeople from RIM declined to comment on the rumors.

RIM, unlike its competitors, has set a $2.99 minimum price for paid applications and a hefty $200 one-time developer fee. It also charges a $200 annual application fee for 10 listings in its application store.

In comparison, pricing for Apple's iPhone paid apps starts at $0.99, while 80 percent of its apps cost less than $1.99.

But RIM may have a few tricks in store.

"While developers may chafe at [RIM's] higher fees, they should appreciate higher minimum sale prices -- RIM claimed that it designed the policy from developer feedback," Karthikeyan wrote. "The higher costs will also keep less-desirable apps at bay, which competitors like iPhone have fallen prey to (e.g., the 'Me so holy' and 'Baby Shaker' apps)."

"Moreover, BlackBerry App World's revenue share is the best in the industry today, enabling developers to pocket 80 percent of the revenues earned from the app sales, which should help offset some of the high entry cost barriers."

Despite some "positive traits," the BlackBerry App world is still looking for its niche, as Apple's App store is the "innovator," and Android Marketplace is known for being an "open, unfettered and more importantly low-cost destination for developers and users," Karthikeyan added. Until April, everything in the Android store had been free, although Android's backers -- the Open Handset Alliance, led by Google (NASDAQ: GOOG) -- have more recently established a way for developers to charge for their applications.

Android is gaining momentum as a slew of smartphones are coming out from HTC, Samsung and Motorola, but has yet to grab headlines with the app marketplace. Android was recently updated to version 1.5, with 2.0, dubbed Donut, expected out within the next few months.

Still, Karthikeyan has some concerns. "Google's hope is that if it gets enough companies to build Android phones, someone will create a killer app for it. In many ways, Android's value proposition is more interesting for application developers than consumers. Promising an open development environment does not create a market for those applications, even if Google does deliver on its promises not to interfere with what types of applications reach the market."

Meanwhile, Palm (NASDAQ: PALM), with the release of its SDK coming in the next few months, may be poised to take off with its own apps.

The new Palm Pre operating system, webOS, uses familiar Web development tools, as opposed to the Apple mobile OS proprietary technology, which means it's easier and faster for developers to create apps and bring them to market.

Palm's newly installed CEO Jon Rubenstein recently said he believes there's room in the lucrative smartphone market for more than one top dog, and hinted that at a social media-type approach to its app store is in the works.

As if the competition wasn't hot enough, Microsoft (NASDAQ: MSFT) Windows Mobile Marketplace is expected to open with 600 apps this fall, with version 7.0 due out as well. And handset giant Nokia continues pressing ahead with its app strategy, despite some stumbles.

The world's largest phone maker was roundly criticized for the handling of its relaunched Ovi store two months ago, which suffered from navigation, download and server glitches.