The virtual mega-mart: Apple's oversized App Store

By all definitions, Apple's iTunes App Store is a massive success, with sales numbers that would make McDonald's franchisees green with envy. Two billion applications -- half a billion in the last quarter alone -- have been downloaded since the store went live just over 14 months ago. With over 85,000 apps, it puts every mobile platform competitor to shame. The 125,000-strong iPhone Developer Program and successive evolutions of iPhone and iPod touch devices should keep driving growth for a while.

This is all obviously good for Apple, because a vibrant online App Store naturally drives demand for its high-margin hardware. And in the case of the iPhone, AT&T and other partner-carriers benefit from carrying a device whose sales are driven not only by desirable hardware, but by the ability to easily turn the device into pretty much anything the end user wants. The paltry few-thousand choices on Research In Motion's BlackBerry App World, or Palm App Catalog's even paltrier few dozen apps, end up serving as inadvertent advertisements for the iPhone.

When numbers overwhelm

The real issue for software developers is whether any of this is good for them. While all of them would likely give their eye teeth to develop for the hottest platform, there is such thing as being too hot. At a certain point, hugely popular ecosystems like Apple's App Store become a liability for developers who don't want to get lost in the crowd.

Precisely where that point lies is a great unknown. Was it at 25,000 apps? Or will Apple cross the threshold at 200,000 titles? No one really knows, but in the still solidifying world of online software sales and delivery, I'll venture that at some point, too much success for the hardware/online app store vendor translates into weaker prospects for the little guys just trying to get their piece of the action.

A quick comparison with traditional retailers might help. In the typical big-box retail store, shelf space is everything. Vendors fight tooth-and-nail to get as much visibility as possible, brutally negotiating for every linear foot of exposure. In this ultra-competitive landscape, physical positioning drives sales numbers. Large store footprints offer more opportunities for large vendors to display their wares. Lose the battle and you're shunted to the bottom shelves. Or worse.

Clawing for space and visibility

While the strategy of clawing away for space and visibility scales rather nicely in any physical retail space of any size, it tends to fall apart when you try to transition it to the virtual space of app stores. There on the palm-sized screens of smartphones, there's a finite limit to the amount of visibility any one product can have. Customers will only scroll through so many screens before they elect either to buy or bail out.

So as Apple's download numbers soar toward that magic three billion mark, the customer's ability to find the one app that he needs becomes a hit-and-miss proposition. And if you're the developer of that one app, you come to realize that as the app store customer base scales up, the ratio of misses to hits scales with it.

An approval process that can be charitably described as opaque, or not-so-charitably called unfair and glacially slow, doesn't help. While it's a safe bet that Apple has beefed up the teams handling the crush of inbound app submissions, it's also clear that the company is far from quelling the chorus of complaints and making the process as streamlined as it needs to be. Even if the wildest optimists among us believe that the company will soon address every last complaint, the sad truth for developers is that it's harder to stand aside from the crowd when you're selling yet another GPS-enabled local business finder into an App Store that already counts two dozen similarly featured offerings.

Apple's App Store may be desirable because it has tons of traffic, but its interface leaves much to be desired when you're trying to figure out which one of these near-identical choices is the right one for you. It's one thing when they're free, as you can simply download them all and try them before making a final choice. But commercial apps don't always offer a free trial. So you cross your fingers and hope you've made the right call.

Going the way of the shopping mall?

Dilemmas like these may cause some developers to rethink whether they want to be in the busiest virtual space at all. As many real-world retailers have discovered, the local mall -- once revered as the temple of retailing -- is under threat. Relatively high rental costs, often restrictive limits on what vendors can and cannot do with their stores, and a gradual shift away from one-stop-shopping toward distinct, more specialized big box retailers, have turned many malls into gap-toothed shadows of their former selves. The mall model, once touted as inviolable, is now obsolete.

As some online app store competitors offer developers better deals than Apple's 70/30 split, and as they move to make their approval processes faster and more transparent, Apple risks becoming characterized as the modern counterpart to the arrogant mall owners of the 1970s. These people once believed there would never be an alternative to their ultra-busy centers of suburban retail life -- they named their malls with words like "Village" and "City" because that's what they thought they were building.

As their experience has proven, nothing lasts forever, especially in the fickle world of consumerism. More ominously for dominant players like Apple, a less-than-ideal deal for developer-retailers hardly compensates for the hoops they often have to jump through to go to market. At some point, some developers may become unhappy with the deal they're forced to take, and may start looking to competing platforms' app stores to fulfill their marketing needs.

In such cases, their relatively small size could be seen as an advantage.

The current numbers obviously don't show a torrent of defections just yet. But the bigger and more distant Apple becomes, the easier it becomes for the seeds of doubt to be planted. As competing mobile vendors watch Apple run away with the app store prize, it's their best hope to remain in the game. As developers continue to wonder whether a compromised deal with Apple -- in a store whose overwhelming size makes it ever more difficult to break through and connect with buyers -- is worth it, alternative delivery channels offer similar hope that they won't get lost in the crowd.

Carmi Levy is a Canadian-based independent technology analyst and journalist still trying to live down his past life leading help desks and managing projects for large financial services organizations. He comments extensively in a wide range of media, and works closely with clients to help them leverage technology and social media tools and processes to drive their business.