What can we learn about the iPhone app ecosystem from the Facebook app ecosystem?

Comments (Archived):

1. I think the iPhone app store can really be divided into two categories: the highly networked apps like Loopt or Paypal and standalone apps like Sketchup or Super Monkey Ball. The networked apps will likely exist in zero-sum markets where the winner takes the lions share of revenue and there is a significant first-mover advantage/network effects. The non-networked apps have a lot more potential to fragment as the only viral loop available is prominent placement in the App store (and where an ‘upcoming’ section could allow for new entrants to disrupt established leaders).I think it is going to be particularly interesting to see what happens when the networked apps start competing with non-networked apps. The iPhone has tremendous potential for creating social games, and collaborative apps in categories that have traditionally been solitary (productivity particularly). Will the most sharable to-do list take over the market? Will there be a de facto standard in poker games? Only time will tell.

2. neither facebook nor anything made by crapple is open enough. iphone is overpriced, exclusivity with at&treason….c’mon now, that type of pseudo-openness is just insulting. facebook required registration and does the whole “you cant register with a fake name or pimp out your profile page” type thing. not really a huge deal, but is symptomatic of how facebook, like crapple, is too “bundled” — trying to do too much, not specialized enough. this is helping both facebook and crapple get nice products out the door quickly, but is ultimately going to stifle the size of the ecosystem and the innovative capabilities of the companies. the unbundled company revolution goes hand in hand with the open ecosystem revolution.i’m excited about your portfolio company bug labs. now that looks like a winner!

   1. Blackberry was built to professional use and bought because of that. How many people you know that bought IPhone for professional reasons? They bought it BECAUSE it was cool.Even so, i think professionals are one natural target group while iPhone is in the early stages and it doesn’t reach masses, since apps will find a more sustainable pricing model.The iPhone may be well positioned to casual and enterprise due to it cool factor driving adoption, and casual apps will have a say.I dont see enterprise making a living by selling downloads but on engaging their SaS services trough a new channel, therefore “giving away” the app for free.Considering advertisement by looking at the internet is wrong since mobiles don’t have much screen space available and tend to have less. Mobile apps need to be better designed and UI restrictions make advertisement a challenge. That’s why i would not be surprised if a new advertisement paradigm appears: mobile advertisement can only be mainstream if that happens, and i am betting on it.Free, ad-supported apps will see in my opinion shorter products life cycles meaning either death or adaptation to new pricing models (or a new wave in advertisement paradigms to create more options). User capitalization will not be as relevant for the app value in iPhone as it is in Facebook, due to the lack of viral effect of Facebook. Users tought, are more mature and valuable than the ones in Facebook

3. Fred – I don’t think that you’re characterizing the Facebook ecosystem correctly. While what you’re saying may have been true a few months ago, today, the landscape seems to be much more fragmented than you’d think. If you look at the top 50 applications in terms of daily active users, you’ll see that 18 of them are true games (meaning that the user thinks of the app as a game). While Zynga and Playfish both have three games in the top 18, the remaining 12 are owned by 12 different companies. Zynga does have the Facebook poker market locked up with Texas Hold ‘Em; however, I think that you will see the landscape continued to be fragmented on Facebook.

4. Lesson for Apple from Facebook – virality is all well and good but be careful not to allow app fatigue to set in from frivolous apps spamming users with useless notifications.Interestingly I went the other way in a blog post last night asking what lessons Facebook could learn from the iPhone app store. Taken from that post: “… what if Facebook had enabled apps to be sold for $0.99 per install? For one thing I think users would install fewer frivolous apps and only useful apps would get bought. This would in turn mean less spam notifications to friends and perhaps there wouldn’t be so much talk of Facebook app fatigue. Developers would of course have a clear means of monetisation as would Facebook itself by charging a commission on each purchase. Facebook would also have the useful apps it hoped but has failed to achieve by launching the platform in the first place.”

5. so want to try the new iphone 2.0 after having been addicted to jailbroken 1.4 …. as per my understanding jail broken 2.0 would not be able to dowload these apps right ?

   1. If you have an EDGE iPhone (not a 3G iPhone) then you will be able to use the jailbreaking app to get a jailbroken/unlocked phone that can both use the App Store as well as Installer/Cydia packages. If you get an iPhone 3G then you will have to wait to see if jailbreaking is a possiblity.

6. I think assuming first mover is important in either of these marketplaces might be a bit premature. The facebook app platform has been out for a minute and the Apple app platform is even newer. It’s like saying AOL will rule the internet world in 1996.First mover might be important for the next few months, but over the long term best trumps first anytime.

7. Fred,Given your and your audience’s interest in Social Media/Networking, I can understand people’s tendency to see “game changing” events (such as the iPhone/App Store) through those lenses.However, I believe that Apple’s primary strategic interest in supporting 3rd party developers is in Enterprise applications. That is how they will compete against Blackberry and crack into Corporate IT markets.There is a only slight viral aspect of the adoption curve of Enterprise software, whereby end-users adopt applications before they are sanction by the Corporate IT fellows. Basically, some influential early-adopter uses an application, brings it into the IT environment, advocates its utility, and then “infects” (for a lack of a better word) the rest of the staff.Therefore, I’m not sure first-mover advantage is as strong here for Enterprise apps. It really comes down to solid Product Management – building features and functionality that solve real pain in the Enterprise/SMB market. For example, if SalesForce.com releases a solid iPhone app, it’ll be a winner regardless if they ship it after other people.As an aside, I find it interesting that Apple wants to enter into the Corporate IT market and BlackBerry (from the tone of some TV commercials that I’ve been seeing lately) wants to position their products for the consumer market. Is the grass always greener on the other side? Or just building out market share.I’m still very bullish on Apple. They are doing all of the right things now, even outside of the iPhone. They are more than happy to let Microsoft/Yahoo/Google try to slug it out for online eyeballs while continuing to cleanly execute a well focused strategy.

   1. I have to agree. Apple is doing some very smart things. I just wish they’dopen up the iPhone for any carrier in any market. Then they’d beunstoppable. They may be anyway.

      1. Maybe I should have waited a little time before gushing.I have a dead iPhone in front of me because I did the upgrade to 2.0 and I’m having the same problem as everyone completing the upgrade due to capacity problems @ iTunes. My phone is dead and I hope it comes back to life – without any data loss – when I can connect to iTunes.I’d be betting that some people are getting fired today in Cupertino.*grumble*

         1. Scalability and reliability are not easy problems to solve

      2. Bingo, Fred. In trying to limit the universe and control it, they’re not only giving pause to a great many of us who would’ve bought the phone and ditched our other GSM devices but also hurting themselves over time as Google’s phone initiatives , if they’re as open as promised, start to come in. Ultimately, the Microsoft-like strategy of control will, I believe, lose out to a more open, networked strategy.And don’t get me started on the lack of flexibilty in using the iPhone internationally….

   2. Apple won’t have any success for native installed enterprise applications if the cost of entry is 30% of the sale. The marketing and sales costs are way too high to make those sales happen cost-effectively. And, for the most part, enterprise sales are handled via invoices and payments outside of the credit card system anyway. The iPhone is not set up to handle this kind of sale at all.A company like SalesForce.com could do it because it is a local version of a web application and requires a connection to the Internet in order to be used. In other words, they would give it to anyone who has subscribed knowing it is worthless if they stop subscribing. But that’s a different kind of enterprise sale, which really makes the iPhone add-on a freebie on top of the SalesForce.com enterprise sale.This is a web-connected strategy that I think Apple is definitely opening up. That’s very exciting.

      1. I believe I read in one of the debriefs from the iPhone Enterprise Roadmap event that Apple would create Enterprise only app stores where employees of a certain Enterprise would be able to download the Enterprise specific apps for free inside the Enterprise App Store most likely on an Enterprise Intranet.Anyone else hear that?

8. The Enterprise market for iPhone does not exist yet, therefore not many enterprise app are available. A friend of mine who is CTO with a Fortune 100 company is starting to hear that senior execs are requesting IT support for their Macs and iPhones. This was unheard of as little as 1 year ago. Over the next year IT managers will start to experiment with the iPhone. So for the time being, games and small individual productivity app will garner the lion’s share. Slowly, we will see real enterprise apps in what is now a very green field.

9. I hope I am not breaking any appropriate blog comment edicate by including a link. I have been a software developer in the mobile space since 1997 so have a lot to say about this subject. I started to write a response but it got so long that I decided to move it instead to my own blog. You can see why I think you are making the wrong comparison here:http://mobilesuccess.infini…

   1. Links are gladly accepted!I will take a look at our post and let you know what I thinkfred

10. I think the power of Apple as a an ‘applications curator’ is important, but it’s not total, and will likely evolve accomodating demands from developers.It surely is a powerful message to be recommended, almost bundled-in and endorsed by Apple.But remember once the dust settles, what matters most is recommendations from friends and family, so Apple will most likely play a benevolent stewardship role from there on.They will still have control over the floodgates, and that’s still a lot of power, but power will be balanced over time with the vote of those who picked the most successful apps without Apple having promoted them. It then becomes important to Apple to acknowledge this reality and continue to make customers happy, it’s only in their best interest.The Facebook platform is nothing like Apple’s Appstore, Facebook don’t really provide any technology nor development environment to create your applications, only the glue to make it run atop their social graph.(Marc Andressen has discussed this before, segmenting Social Networks in Levels 1, 2 and 3)Apple provide the full solution, from conception, hardware, software, development tools, implementation, to distribution, payment, deployment and then some marketing too.It’s simply amazing. Every other platform has been put to shame.Apple is so far ahead of everybody else we won’t see any comparable product from anyone else in a 1-to-2 years timeframe AT LEAST.

11. I’d have to agree that the key to the iPhone’s future in the smartphone market will be the library of utility-focused business/enterprise/productivity apps. Games and entertainment are great, but one thing I find disappointing about the Faceboook ecosystem is the lack of good apps that focus on practical utility. Maybe Facebook has the wrong audience for this (although I would argue the contrary), but if Apple wants to increase market share it should focus adequately on the utility apps (both personal and business-oriented). The iPhone has the potential to be the 360-degree mobile solution for the consumer in personal and work life. The challenge for Apple in my mind lies in proving the viability of the iPhone beyond entertainment.

12. Fred: I think you make a critical point about distribution and the importance of screen real estate on the Appstore. Apple, like Yahoo, has tremendous distribution power with their homepages (including Itunes) and their list pages (top Podcasts). I think you will see a cottage industry spring up to lobby and sell to Apple’s merchandisers in their various retail industries. Think of it as a blend between PR and Retail sales. That screen real estate is far from exclusively automated. Merchandisers have a lot of control

    1. Which is why it would great if you could bypass appstore and do a web install like blackberry doesMaybe that’s possible with iphone apps too. At least I think it should beYou don’t have to go through apple’s store to get music on the ipodFred

       1. Well, if Apple doesn’t allow this it would be a regression to the Apple of the eighties and nineties. Should they be entitled to their toll for appsales or should they focus on getting people more and more excited about iphones. There’s a long way to go between 6mm users and the billion or more people with cell phones.Aaron

13. I think another similarity may be that both PLATFORMS will come out ahead through first mover advantage in their respective categories.From a developer perspective, Facebook has completely DOMINATED the social platform process. I remember how back when we first heard of Open Social there was so much talk/hype (on the tech blogs not among developers as much) and then we’d hear announcements that other social networks were ready to roll out their platforms, etc.What ended up happening is that it’s already July, and no one has yet rolled out a platform that is as awesome as the Facebook platform to develop on. Open Social is a joke. Bebo is awful with no incentive to improve after the AOL buy. MySpace is doing ok, but not yet there. Hi5 doesn’t have the easily monetizable US users, etc. The point is that every time we see an announcement on TechCrunch that such and such social network is rolling out a platform it’s usually an extra 3 months before the actions follow the announcement.I don’t think anyone is going to roll out a mobile platform that can catch up to Apple and I don’t think anyone is going to have a social platform that can catch up to Facebook.I remember your post about returns in the venture business. You said something to the effect of: you don’t make money following, you make money by leading rounds.

    1. I am hoping that twitter open platform for social messaging is also going to benefit from that first mover advantage. Clearly they have to continue the scaling efforts they’ve been working on and provide the reliability that the developer community expects. But if they do, I think they could be in a similar spotGood observation!

       1. It’s not just the developer community that expects reliability, us “normals” too 😉

14. One potential killer feature of the enterprise-ready iPhone is the ability for a person to just have one phone that works for both personal and business use. Unless IT departments have a way to lock down what is installable on corporate iPhones (I don’t think that is possible right now, but I might be wrong), people will finally be able to stop carrying around their Blackberry for work, their personal phone and iPod. I think having your Salesforce app, your Facebook app, and your music on the same phone is pretty attractive.

15. If I were a developer, I think the iPhone app store is a much more interesting revenue generating activity. While the absolute opportunity might be smaller (10ish of million iPhones versus 100ish million people on Facebook), the user behavior is such that people (I think) will be much more willing to transact directly with a developer and pay – you won’t have to rely on indirect monetization schemes to build a business. For those looking to bootstrap and build things that look like traditional software businesses (you build something, you ship it, and people pay you cash to use it), the iPhone platform strikes me as more interesting.I think first movers will have the advantage that they always do – they’ll learn what works a lot faster than folks who are not on the platform. A few of them might become “must have” apps that everyone installs as a matter of course as they get an iPhone – too early to tell on that part, though.

16. Ever since I bought my iPhone i’ve been excited about using it as a gaming platform. I’ve been a gamer for years and years and it’s hard to give me a handheld device that I *don’t* want to play games on (ironically, Nokia managed this with the NGAGE).I think that we’ll see a dual dominance of the iPhone app platform: apps that suppliment obvious but missing features in the iPhone (todo lists, VOIP) and apps that are for entertainment (super monkey ball, enigmo, bomberman).Also, and this is completely unrelated, but I really dislike the way the comment link in your RSS feed takes me to the Disqus page instead of your blog page. I usually decide if I’m going to comment on a post by the first couple of lines and like to click through to read the whole post. I keep abandoning your posts and consequently my comments when Disqus hijacks the link :/

17. I spent two years at CNET’s Download.com, a more seasoned marketplace than either Facebook or iPhone. I spoke with hundreds of application developers, and the terrific (yet unknown) success stories of that site run well into the hundreds (perhaps thousands) of titles, among what I would estimate to be ~40,000 unique software titles on the site — it dwarfs FB & iPhone.I would say that first-mover advantage makes no difference, if Fred is thinking about Zynga and the longer-term perspective expressed in prior posts. The marketplace, if vibrant, will offer the chance for hundreds of companies to do really, really well. VC’s will distinguish between “venture-backed returns” and “nice-but-small businesses,” and I’ll leave that to their distinctions. What I’m saying is that WinZip had tens-of-millions in annual revenue, and they competed among dozens of similar (if not better) applications in file compression, but differentiated on (perceived) brand value and savvy/online marketing in a pre-Google world, but by no means were they first-to-market.I currently work for a mobile company who looked hard at iPhone’s SDK, saw Apple’s execution of the SDK’s communication and update-of-the-week shit-show, and sat out this round until we could see things firsthand. Apple (unlike Facebook) delivered a cumbersome and opaque experience to developers, who were unsure (i) why Cocoa was the language-of-choice and (ii) whether their apps would be “approved” by Apple. The upgrade path debacle followed this shit-show to a “T.”

    1. ChrisThis is a really helpful comment. Download.com is indeed an importantexample to look at and study. Your experience working there gives you agreat perspective to look at all of this.Fred

18. And here’s why Facebook is different from iPhone:http://disruptivewireless.b…

19. Such an interesting set of questions to consider.My guess is first-mover will not be as important. Later FB apps suffered from over-supply and under-attention. Too easy to develop/distribute, too easy to ignore, too many w/o enough value. High noise to signal ratio and an immense # of users to quickly give first mover apps a long head start. I doubt that will be the case with the App Store:1. # of web apps easily ported and built on FB vs # of Cocoa/Objective C apps that will be developed.2. Apple will be a much more stringent gatekeeper.3. Apps will not spread as virally or prolifically (and that may be a good thing in this case). 4. We’ll use a much smaller set of apps. We will download the best ones for a relatively few specific use cases and move fairly quickly if something better comes along.5. Mobile is a less mature space than web apps. More room for rapid innovation, improvement and change. How much more will we be able to do on FB a year or two from now? How much more will we be able to do with mobile apps as time goes by? Much easier to displace a first mover if the game changes.I also think the App Store is a more important game changer than the FB platform – that Apple incredibly beat the mobile industry to the so critical point of deploying a mobile platform that will move third party mobile apps from the early adopters to the masses.

20. i like that this post was picked up by Alley Insider and they used the same comment thread that i have running on my blog. that’s excellent – one discussion instead of two.

    1. I was just thinking of this point … do you know of any way for a commenter to also get alerted when there’s a reply to one of his/her comments?

       1. Just register for disqus (create a profile) and it happens automaticallyGive it a try, it’s why I use disqus on this blog

          1. Et, voila

21. Fred,the question you ask yourself makes a lot of sense and is one of the many that turns up as the introduction of the iPhone has certainly accelerated all the moves around mobile internet, mobile web -or whatever people want to call it-..However, there is a lot more than the iPhone when you go into the mobile space. You mentioned the bberry, of amazing success in a traditional brands domintaed mobile device market. There is also Nokia selling 4 out of every 10 mobile phones sold in the wolrd.I guess that when you go into app distribution business, the market size you can reach is a relevant factor. And, as of today, iPhone – and particularly 3G iPhone, where true high-speed connection can be achived- is very reduced compared to other devices and other mobile OS.What cannot be discussed is the ability of apple to get the light on the them, both in the media -they are getting millions of EUR and USD in free TV, newspaper and spaces, and their product is being positioned as truly aspirational- and in the industry experts -that are focusing the mobile internet debate just on the iPhone.-I think that’s one of the big lessons to be learnt from this story.

22. Hi Fred,I have been in mobile content for some time dealing with carriers and handset companies. I recently sold my mobile small publishing company a software firm. While investors and entrepreneurs have been hoping for successful investments in mobile, there have been few. I believe there are several reasons for this1) Ad supported will winWhile i can’t comment on games and music , i can talk about mobile applications. Over the last 4 years, paid apps in the US market (ESPN sports, Fox Sports, Movies, ) have fallen into three sales categories – sub 10,000 users, 35-50K user, 100K users. There has been 1 app that broke this rule – myspace on ATT with over 500K subs.The ESPN paid app had over 100K subs at one point. By contrast the ESPN free WAP service has 10M users and over 100M pageviews. Myspace just announced that their free wap service has 1.7M users in the US and 2.5B pageviews. Mocospace another free service has 2M plus users.2) Complete lack of controlThe single biggest issue facing any app developer is that you have to do a lot of work, with little or no way to calculate the ROI. You have no way to know how may users will buy your app. Furthermore ff the data costs for some apps start to grow (ie streaming), then guess what will happen? The rev share will quickly become 50%. ATT will force this to happen due to network costs or limit apps. They do this to us today.3) DiscoverablityIn the last five years – no one has figure out how to get users to discover and consume more mobile content. The overall adoption numbers for games and apps have been terrible (3-10%). Today as it was five years ago 40-50% of a developers sales comes from being in the “whats new” or “what’s hot category” – ie. being on the front screen is the difference between making money or struggling. There has never been any real logic behind how this work from the carriers – the top spots tend to be based on relationship, launch of a movie, a large content brand – Everything else relies on the user doing work to find the content.I view Apple’s new iphone app store as similar to what other carriers have done, i tend to think there will be some hype on this for about 6 months and then the developers will look at their ROI and start to go to an ad supported free model.

    1. EteshThanks for the comment. I am with on free vs paid. That’s what has happenedon the web, and that’s what I think will happen on mobile which is lookingmore and more like the web every day. That’s why our first mobile apprelated investment is in Pinch Media which develops analytics andmonetization systems for app developers.The discoverability issue is big. We should look there for an investment Ithink.Fred

       1. hi fred – can i you my perspective/idea on discoverability?