Why the App Stores Takes a 30% Commission

Why do both the Apple App Store and Google Play stores take a 30% cut from apps they sell?

The answer is simple. When the Apple App Store launched in 2008, the going revenue share comission for content delivered to mobile phones was about 50%, give or take a few percent depending on the mobile network.

Back then, a 99¢ ring tone or $1.99 wallpaper, delivered over-the-air for mobile phone consumption, would net the developer about half of the price paid by the cell phone subscriber. The other 50% went to the mobile network provider. These charges would show up on a subscriber's phone bill as a premium SMS (PSMS).

In 2008, the PSMS market was worth about $5B/year. So, Apple's 30% take was a welcome 40% savings compared to PSMS.  

Yesterday, I called 911 – it was a mistake.

Yesterday, I was at Balboa Park during a parade which had a couple hundred thousand attendees. Whenever that many people get squeezed into a tight venue, such as a stadium, cell phone connectivity becomes an issue – and yesterday was no exception.

At one point, I launched an app on my iPhone which was taking a long time to open up since it needed Internet access. Just as I closed the app it popped up three modal dialog windows in a row. The app was closed, but the modal windows blocked all other iOS interactions as if the phone was frozen.

Restarting the iPhone

To restart the iPhone, all I needed to do was press the volume up, volume down, and then the sleep/wake button. This brings up a slider at the top of the screen, "slide to power off." But, the problem was this slider was blocked by the modal window.

I tried pressing all three buttons and holding them down. Unfortunately, this activated the phone's emergency mode which dialed 911 and then sent out SOS text messages to my emergency contacts with a map of my location. The police called me back with an automated message stating that they received a hangup call but couldn't pinpoint my location. However, even though my phone had location services turned off, it seems the phone was able to know my location and sent a pin-drop to my emergency contacts along with an SOS message.

Force Restarting the iPhone

What I needed to do was force restart my iPhone, but I didn't know how. Luckily, my buddy had his iPhone (also with spotty connectivity) and we did a Google search. A force restart is similar to a typical restart, except you hold down the sleep/wake button until you see the Apple logo:

1. Press the volume up button.

2. Press the volume down button.

3. Hold down the sleep/wake button until you see the Apple logo (5-10 seconds).

Two Apps I'd Love to See

In the 1990s, I witnessed the dot com boom. The Web was clearly the way of the future. Thousands of dot com companies popped up, trying to replace market inefficiencies with Internet based technologies. Some companies did well, other's, I joked, lost money on every transaction but tried to make it up with volume.

After the dot com bubble burst, Web 2.0 came along with user generated content and dynamic web pages. This was followed by the dominance of social media which killed print media as it connected more people on both personal and professional levels.

Today, the cutting edge trends are seen in mobile apps. ForeFlight has revolutionized the cockpit as much as Uber's changed the car service industry. Twitter and Facebook have seen increased growth after moving from desktop to mobile. Mobile, "always with you" Internet connectivity, along with GPS, creates a lot of opportunities.

Here are two mobile apps that I'd like to see, and I wonder when they will come.

Bluetooth Beacon Heat Maps

Why is it I can see rush hour traffic on my map apps but I can't see how many people are at a restaurant, bar, or nightclub? Map apps have been displaying real-time traffic for more than a decade. These apps don't require crowdsourcing the data. Sure, Waze can help, but the DOT has cameras set up on roads and highways; they have all the data they need. So, what's stopping the same kind of heat map for a Yelp venue where our Bluetooth enabled phones provide the source of the data?

Ideally, I'd love to see a wireless provider anonymously license its subscriber GPS data so I could see how empty or packed a bar was. Even better would be if they could include simple demographics such as age and gender. But, I realize this might be a bridge too far, not to mention that people would consider it creepy.

Having patrons check in at a venue won't work. An alternative solution would be to have Bluetooth beacons ping patrons' smartphones. Let's call it a beacon cookie. The beacon cookie doesn't even need to connect to a person's phone. All the beacon needs to do is ping a person's phone for their Bluetooth address (BD_ADDR). Discovery mode is ideal for this, but not practical. Perhaps a passive discovery mode? Over time, people's Bluetooth addresses could be matched to profiles much like DoubleClick with anonymous cookies. Now we'd have interesting demographic data to use, even if it's only for a venue heat map. Google knows a lot about me in the virtual world (that's why, when I search for something on Amazon, I see related ads in my Facebook feed), why not apply that same data to brick and mortar stores via Bluetooth beacons?

One Meal, One Transaction

In this day and age, I'm surprised that restaurants still need to process a customer's transaction twice. First, for the full price of the meal, and second for the tip. This is a different situation than a gas station which needs to run an authorization, to see if you have enough credit, before pumping the gas. At a restaurant, the customer has already eaten the meal by the time they're presented with their check.

How should the restaurant payment process work? Instead of the food server bringing over a paper receipt, s/he could simply present a QR code with a UUID for the receipt. The customer would scan the code and see their detailed meal receipt with tip and payment options. At this point, the receipt is linked to the customer (much like Uber). Even better, why wait until the end of the meal to scan the meal receipt's QR code. The QR code could be presented by the food server at the beginning of the meal. As the customer orders more food, it shows up in real-time on their phone. At any point, the customer could walk out and, like Lyft, they could complete the payment anytime within 24 hours, otherwise it would automatically be processed with a default tip (say 18%). What's more is that everyone at the table could scan the same QR code and then, at the end of the meal, they could choose what they ate and split the check so that everyone pays for only their food.

I'm sure there are apps that do something similar to what I'm describing, but I'm not aware of any that are mainstream. These apps wouldn't have to be created by a single company if a public API is developed for secure data interchange. We only need one holistic system to make it work.

QR Code Marketing Fad?

I think QR codes, in display ads, will end up being a short lived fad like the :CueCat. Advertisers who use this new barcode format are shutting out everyone else who doesn't have a device, in hand, with a camera and QR code reader application.

Short URLs would be a much better alternative. Perhaps, putting the short URL next to the QR code would be a good way to include people who don't have a QR code reading device.

Part of the problem is that, when your average non-techie comes across a QR code, they won't even know where to begin to figure out what it is. How many times have people wondered what that U inside a circle means on food condiments?

I tried out the QR code in this ad (circled in red) for The Dragonfly Effect and the experience wasn't so hot. For starters, this QR code lead me to a landscape video that would only play in portrait mode inside the QR app; and, when the video ended, there was no where to go from there (i.e., no further call to action). I think that this experience will probably get better over time, but so far, it's lacking.

On the other hand, I think QR codes have a perfect place in the off line world since each QR code can contain over 4,000 characters. Imagine being able to scan a shipping container in the middle of the desert, without any network connectivity, and the QR code reporting back the container's inventory since it's all encoded in that bar code. I can see the QR code being popular with the military.

What would it take for these marketing QR codes to catch on with consumers? Integrating QR code in the OS or camera driver is key. Now that would give it a fighting chance.

The unbundling of content is going mobile

As I went for a run this past weekend I got to thinking about how we, as consumers, have more say in the content we purchase. In other words, we can only pay for what we want.

Remember the old days when you had to buy the entire album for just one song? Sure, you could buy the 45 rpm, but that only worked if the song you wanted was a hit or the b-side. Today, you can purchase almost any song as an individual track for about a buck.

This trend started about ten years ago with news on the Internet and I think it has accelerated in the past few years with MP3 players and smart phones.

I wrote up the details in this SDNN piece.

Apple's Worst Security Breach: 114,000 iPad Owners Exposed

I just saw the Apple's Worst Security Breach: 114,000 iPad Owners Exposed post on Valleywag. It sounds like this is an AT&T SNAFU, but, even if it is, it won't bode well for Apple.

Key points from the article

– AT&T exposed a very large and valuable cache of email addresses, VIP and otherwise. This is going to hurt the telecommunications company's already poor image with iPhone and iPad customers, and complicate its very profitable relationship with Apple.

– Then there's the question of whether any damage can be done using the ICC IDs. The Goatse Security member who contacted us was concerned that recent holes discovered in the GSM cell phone standard mean that it might be possible to spoof a device on the network or even intercept traffic using the ICC ID. Two other security experts we contacted were less confident in that assessment. Mobile security consultant and Nokia veteran Emmanuel Gadaix told us that while there have been "vulnerabilities in GSM crypto discovered over the years, none of them involve the ICC ID... as far as I know, there are no vulnerability or exploit methods involving the ICC ID."

State of Mobile Apps Before the iPhone

iPhone too closed?

Before complaining about the iPhone being too closed, keep in mind what the state of mobile phone apps was like before the iPhone.

A $1.99 ring tone, wallpaper, or app delivered "over-the-air" would earn the developer less than 50%. About 95¢–$1.10 went to the wireless carrier and about 10¢–15¢ went to the short code provider (SMS aggregator) - not to mention the 2.5¢–5.5¢/SMS sent.

Each purchase required at least two SMS text messages to be sent to the buyer in order to meet the carrier's double opt-in requirements. Additionally, the wireless carriers would only allow content to be sold which could be "consumed by the phone". In other words, none of the carriers would allow you to walk up to a vending machine and make a purchase that would show up on your phone bill.

Also, every developer had to negotiate a deal with each wireless carrier in order to get them to support your SMS short code. If a carrier didn't approve your short code application then no wireless subscribers on that carrier's network could access your service.

Short codes are expensive (the short code, SMS aggregator, etc. typically costs more than $2000+/month) resulting in a $15K-$30K per year expense not including the costs of sending each SMS.

It has been less than three years since the iPhone's introduction and how quickly we forget what it used to be like.

You can see the details in this two year old SMS white paper.

East African Cell Phones

When I was living in Nairobi, Kenya, a few years ago, I was amazed at the state of their mobile phone networks. There I was, in one of the poorest countries in the world, and everyone had a cell phone. Not only that, but cell phone coverage was nearly ubiquitous and the features built into their networks impressed me - even on my bottom-of-the-line Nokia cell phone that I used in Kenya.

Since the Internet isn't very common there, their cell phones were the most sophisticated piece of technology which they used for communications. Texting was widespread.

There are four features that their cell phone networks had, which we still don't have here, in the US.

1. Business Cards

Have you ever needed to give someone a phone number that's in your phone's address book? Ten years ago, I could beam it to another person on my Palm Pilot. Today, I can't even do that with my iPhone - via Bluetooth or otherwise. In Kenya, there was a "B card" option on the phone's menu. Simply choose a person from your address book whose number that you wanted to share and then choose the recipient. Within a minute, the recipient receives a text message asking them to review the contact information and then choose to either accept or reject it.

2. Busy Signal Call Back

When calling a number that was busy I could tell the phone system to keep trying the number, then I'd hang up and wait for the phone to ring back once the number wasn't busy. This reminds me of a circa 1980s technology (Demon Dialer) that would dial a number, automatically, until the line was no longer busy. I'm sure phones have this feature, here in the U.S., but it's neither common nor basic.

3. Missed Calls

I could turn off my phone and when I turned it back on the system would tell me which calls I missed. Can't do that in the U.S. I only get to see missed calls if my phone was on when the call came through or if the caller left a voicemail.

4. Text Message Payments

This feature still blows me away. Kenyans, like most Africans, are unbanked. They live payday to payday (at least they don't have to worry about the sub-prime mess) and, for the most part, they don't use: banks, computers, e-mail, iPods, etc. The two key technologies they use are cell phones and faxes – and they Kenyans were fantastic at filing and retrieving paperwork; never losing a page.

While we rely on computers, printers, and the Internet; they have substituted the cell phone, fax, and the wireless carrier's network. In place of PayPal and charge cards, they simply used their cell phones.

I'll never forget the moment when my driver told me about Safaricom's Sambaza, which launched the month I arrived in Kenya, as a simple way to share cell phone minutes. I was truly amazed, thinking, "Why can they do that here and we can't do it back in the U.S.?"

Unlike cell phone contracts and subscriptions plans we use here in the U.S., the Kenyans primarily use a pre-paid payment plan. In order to add, say $10 worth of minutes (or, more accurately, 10 KSh [Kenyan Shillings]), you'd simply buy a scratch-off card with that face value, scratch off the number, and enter it into your cell phone. This works exactly like pre-paid cell phones in the U.S. No need to worry about subscription fees (but the minutes do expire, just like here, if not used within a certain time.)

The one thing you can't do here that you could do there is transfer your minutes to each other. This became an instant form of electronic currency. For example, people who grew up in a village would move to Nairobi to find a job. They'd take a portion of their paycheck, purchase a pre-paid card, and add minutes to their cell phone. Then, they'd text some of their minutes to their mother living hundreds of miles away, in a rural village - yes, mom has a pre-paid phone with network coverage in the boonies. Mom would go to the local market and text some of her minutes to the grocer at the market to pay for food. Very elegant electronic barter.

Sambaza soon evolved into M-PESA that transferred actual money which, obviously, is a much better feature if you're looking to pull cash out of the system at some point.

The only hitch with Safaricom's system is that the sender and receiver had to use the same wireless carrier (different carriers are incompatible in a way similar to a Visa credit card's incompatibility with American Express). In Kenya, which only has two wireless carriers (Safaricom and Celltel), this wasn't much of a problem. However, there are even better ways to make this system carrier agnostic just like PayPal doesn't care which bank, credit card, or Internet service provider you use. What's the hold up here in the U.S.? Simply put: the Patriot Act.

AT&T iPhone Activation Down for 12+ Hours

Get a new iPhone today, come back tomorrow to activate it. That's a tad disappointing.

On a side note, Phil Schiller was in the Apple Store, today, while we were picking up the phone. Most of the employees definitely did not recognize him.

click to enlarge


[ digg this ]

SMS Pal

We're getting ready to launch a new Web site this weekend and it looks like two blogs have already picked up the same article here and here,

iPhone Prediction

Here's a great iPhone/AT&T prediction I ran heard today:

iPhone will lose its AT&T Mobility exclusivity in the U.S. Not due so much to the hackers unlocking the iPhone to be used by other carriers, but Apple will realize the five-year exclusivity window is too long to forego potential revenue from non-AT&T customers stuck in the middle of their service contracts. A substantial payment from Apple to AT&T and things will loosen up.

Faulty Cell Sends 4,700 Text Messages

A faulty cell phone sent 4,700 text messages on New Year's Eve. The total charges came to $42. Obviously, since the bill was less than $700, it wasn't a mobile phone in the U.S.:

http://www.cellular-news.com/story/28572.php?source=rss

Is that iTunes on Verizon's New Phone?

Nope, that's not iTunes. The similarity is just an amazing coincidence.

iPhone SMS Mailbox Almost Full????

How can an iPhone, with gigabytes of free memory, complain that the SMS mailbox is almost full? Give me a break, it's SMS for goodness sake!

We're talking bytes, individual bytes - as in eight bits to a byte. What is this, 1983, when 16K was a virtue? Are the other 17,179,869,184 free bits in my iPhone too good to store plain old bytes that represent ASCII text? How snobbish.

I sure would love to archive the SMSes before I delete them off the phone.

Wireless Keyboard & Mouse Companion

I hate battery operated devices that don't have rechargeable batteries. I tried getting by with devices which took AA batteries by using rechargeable AA batteries, but it was a pain since they have about 1/4 the life span of non-rechargeable batteries plus you need to keep the recharger handy.

So, when I heard about the USB Cell on a Podcast, I had to get it. It's a simple rechargeable AA battery which can be recharged by plugging it into a USB port. Brilliant!




I keep one battery in my wireless mouse and the other battery is plugged into one of my computer's USB hubs. Low battery warning from the mouse? ...no problem, just swap the batteries.

After using this handy device for several months I'm sold on it. (I no affiliation with this company other than being a satisfied customer.)

[ digg this ]

Unlocking the iPhone Could be Impossible

Unlike mobile phones made by traditional GSM handset manufactures such as Motorola and Nokia, the iPhone could prove to be very difficult or virtually impossible to unlock from AT&T's network.

My thinking is that Apple designed the current iPhone model to work specifically (and only) with AT&T Mobility (formerly Cingular). Other handset manufactures generally design a handset to work on any GSM network - after all GSM is a global standard - then they put in a software lock which can be unlocked with a code.

What if Apple put a digitally signed hardware lock into the iPhone's ROM?

Literally an iPhone Hearing

During today's House Subcommittee hearing on Telecommunications and the Internet, Rep. Ed Markey (D-MA) used an iPhone, as a prop, in his remarks. His comments hit the nail on the head when he asked that the same conditions that applied to the 1968 Carterfone ruling also be applied today to the US wireless carriers (in other words, the right to attach any device to a wireless carrier's network as long as it does no harm).

Charge iPhone Using FireWire

I put my old FireWire wall charger to good use - it's sitting on my night stand charging my iPhone while I sleep. After all, I'd hate to be more than a few feet away from it.

iPhone IM Chat w/o Logging Into 3rd Party App

Just a quick reminder. You can instant message between iChat/AIM and the iPhone (or any SMS capable phone) by starting an iChat conversation with any US/Canada cell phone number (+1-xxx-xxx-xxxx). Response time is amazingly fast.

In iChat, click the + at the bottom left of your buddy list and then click the New Person button. Simply add their phone number (with the +1) as their Instant Messaging user name and your all set.



The phone number must appear in your buddy list with the leading "+":

Tales of Buying the First iPhone

I was debating whether I was going to wait on line for hours to get an iPhone today. On my way to a lunch meeting in San Jose I stopped by the local Cingular/AT&T store (one of only two in all of Santa Cruz county) and I saw that there were only about 15 people on line. I called Laura and told her to grab a spot on line for a couple hours until I could relieve her after my meeting. Just before noon I visited an Apple retail store in San Jose and the line had a couple hundred people already queued up so I figured that it was probably a bad bet to wait at an Apple retail store.

Laura was on line by 11:30 am and I showed up at 2:30 pm to take her spot to await the 6 pm "witching hour" when they iPhone sales' would commence. Guess what? Ms. Impatient wouldn't give up her spot! She was actually enjoying it! Laura was about 25th in line and there were about 20 people behind her so she told me to go to the end of the line – that way we could buy two iPhones since it was one per person at the AT&T stores (at the Apple retail stores it was two per person).



So, I queued up at the end of the line. There were plenty of people walking by who didn't know why there was a crowd camped out in the middle of the mall (we refer to them as "civilians") - when they asked me what all the fuss was about I told them that Paris Hilton was in one of the stores signing autographs.

The geek factor, of the people on the line, wasn't too bad. One group near the front of the line had a video projector and played Star Wars - in its entirety - by projecting it on the ceiling.


Click image to enlarge
At 6 pm the AT&T store reopened and the first batch of seven customers dashed in. It seemed to take forever until the first, ecstatic, iPhone owner emerged. I couldn't understand what took so long since the only thing that needed to be done was to pay for the phone. Activating the phone is done at home through iTunes. Finally, after 15 minutes the first customer pranced out of the store to a round of cheers.

After waiting for an hour after the store reopened it was Laura's turn. She literally darted into the store – a distance of about six feet.

So, at this point, we knew that one us was about to become an iPhone owner. As I neared the door to the store the AT&T manager came out and announced, "At this point, I only have nine units remaining."
Panic choked everyone around me. I quickly counted nine - exactly nine - people in front of me. As I counted, people started dissecting the manager's announcement with follow up questions, "Does that nine include the people in the store or is it in addition to the people in the store?"
He said he wasn't exactly sure because the inventory was moving so fast.

BP 160 over 110, pulse 170 and rising with tunnel vision.

Laura emerged with her iPhone in hand. I whispered to her, "They going to run out right around me!"
There was only one person in front of me, at this point, and he asked Laura how much he could pay her for her iPhone if they ran out. But, a moment later, he was invited in. A few minutes later another employee emerged. I thought it was to make a follow up announcement, but, instead, he walked over to me and introduced himself as Dave as he escorted me into the store - with Laura in tow.
"Do you have any 8 GB left in stock?", I exclaimed.
Just as I said that, another sales rep picked up an unopened 8 GB iPhone and started to bring it to the back of the store. Dave called to her and grabbed it as he told me, "This is the last one."

I couldn't believe it - I just made it! After waiting for more than five hours I was the last one to receive an 8 GB iPhone. Whew! Had one more person been in line my only option would have been to place a backorder which would have been shipped to my house. The backorder option would have been a faster alternative than waiting for the store's resupply stock.

The Apple online store reports a 2 - 4 week lead time for orders placed through the company's Web site.

Had Laura not gone to wait on line at 11:30 this morning neither of us would have an iPhone. Thanks, honey!