100,000 Apps? You Ain't Seen Nothing Yet
The App Store has grown 900 percent over the last year in terms of available titles, and Apple looks set to remain the king of the mobile app world for some time to come. Some entrepreneurs are taking app innovation to new levels, like Twitter cofounder Jack Dorsey, who came up with a new way to process credit card payments. Meanwhile, it's still anyone's guess which U.S. carrier, if any, might be next on iPhone's list.
Dec 9, 2009 4:00 AM PT
It's been a week of good news for Apple. IDC expects its iTunes App Store, already the clear leader in the mobile app wars with more than 100,000 apps, to grow even more.
Then there's Twitter cofounder Jack Dorsey, who is offering a new app/dongle combo for the iPhone that could do away with the expensive merchant card processing systems that bedevil businesses -- if enough businesses like it.
Separately, the suggestion has been raised that Apple may be better off opting for T-Mobile as a second carrier for the iPhone in the United States because it's a big player internationally.
Wall Street seems to like Apple well enough. Trading in Apple stocks was fast and furious, and, at press time, its shares stood at $189.87, up just under a dollar from Monday's close. Notably, it made the gains during a generally down day, when all three major markets -- the Dow, the NASDAQ and the S&P 500 -- lost ground.
Telling is the fact that more than 23 million Apple shares changed hands during the day's trading. Trading levels fell off after their Nov. 2 high of just over 24 million shares, and was generally well below the 20 million share mark throughout November. It hovered below the 11 million share mark several times during this period.
So we're looking at a company in which investors are regaining interest, possibly selling off to reap quick profits; where the prospects look good; and which has bucked the downward trend of the major stock market indexes.
Adding Up the Apps
Currently, there are more than 100,000 mobile apps in Apple's iTunes store. That makes it the clear leader in this market, with none of the other players -- Android; Microsoft; Nokia; Verizon and a zillion others -- coming anywhere near that figure. For example, there are now about 10,000 applications for the Android, according to Frank Gens, a senior vice president at IDC.
In IDC's report for 2010, Gens pointed out that the number of apps in the iTunes App Store grew by 900 percent annually, from 10,000 a year ago to more than 100,000 now. There will be at least 300,000 iPhone apps by the end of 2010, he predicted. Many of these will come from well-known Global 2,000 business and consumer brands. This will attract even more consumers and businesspeople to the iPhone, Gens said.
That means stronger penetration of enterprises by the iPhone. That could equal more iPhone sales. That might drive up Apple's share prices.
To be fair, Android will be a relatively strong competitor, with the number of Android apps will growing from 10,000 to between 50,000 and 75,000 by the end of 2010, Gens predicted. Still, the iTunes app store is sitting pretty, and it looks as if it will continue to do so for quite a while.
That said, the iPod touch may be a surprise platform for apps, contended Carl Howe, director of anywhere consumer research at the Yankee Group. "The iPod touch is rapidly becoming a very popular building block device for new applications," Howe told MacNewsWorld.
The iPod touch is networkable, programmable and extensible, Howe pointed out. "These three characteristics are like gasoline for the fire of innovation," he said. "I think we're going to see a whole lot of new applications and companies built on the iPod touch as well as on the iPhone."
If he's right, iPod touch sales could also go up, further boosting Apple's profits.
Squaring Off Against Payment Card Processors
Twitter cofounder Jack Dorsey is leading a start-up called "Square" that combines a magnetic card-reading dongle with software so people can process credit card payments directly from iPods and iPhones without going through payment card processors.
There are already several mobile payment tools in the market for the iPhone, the BlackBerry and other mobile devices, so what's new here?
Well, Square gives businesses an alternative to the usual payment card processors. The user swipes a credit card through the dongle, and that data is converted to audio and input through the headphone jack, where it is encrypted and transmitted to Square for processing. The purchaser signs for the transaction with a finger on the iPhone's touchscreen. Square will send the purchaser a link to a receipt for the transaction.
This approach means data is not stored on some payment processing terminal or in a store's computers where it can be hijacked. It adds another level of security because users can associate a photo with their Square profiles to prevent identity theft. It also means businesses won't have to pay payment card processor fees.
As the payment card system usually works, a business has to lease or buy a card processing terminal, which costs several hundred dollars. Then it has to open an account with the processor, pay a monthly fee which can be a percentage of the transactions processed depending on volume, and pay a percentage of each transaction to the processor. Payment card processors can, and do, raise their fees, cutting into a business's profit margins.
"The payment card industry today is dominated by the banking world, from card issuance to the banking switch to merchant processing," Conrad Sheehan, the founder and CEO of mPayy, told MacNewsWorld. Security is often poor in the payment processing system and in banks, Sheehan said. He should know -- he was a vice president at JPMorganChase.
Square will probably, like mPayy, use the Automated Clearing House (ACH) system. "With ACH you don't have to ask permission from the bank to move money, you just send a file," Sheehan explained.
The importance of Square is that it's a new and less costly way of performing card transactions. If businesses like the Square system and adopt it, especially with pressure from iPhone users, that might lead to more demand for iPhones.
Is T-Mobile a Player?
The dissatisfaction of iPhone users with AT&T's service is well known. The wireless carrier on Tuesday released "AT&T Mark the Spot," a free iPhone app that lets users provide feedback immediately when they have problems on its network.
Though the suggestions may help AT&T decide where to build new towers eventually, current users are already showing their discontent with service. The carrier ranked last among U.S. wireless providers in a Consumer Reports survey recently, and many users wonder when Apple might strike a deal with a second U.S. carrier. Verizon Wireless has shown little interest -- in fact, ads for its flagship Droid phone mock the iPhone directly. Thomas Weisel analyst Doug Reid recently suggested Apple look at T-Mobile instead.
"This year, we rapidly strengthened and grew our 3G network, and will reach approximately two-thirds of the U.S. population by the end of the year," Tom Harlin, senior manager of corporate communications at T-Mobile, told MacNewsWorld. By the end of the year, the carrier will have deployed its HSPA 7.2 standard, which could increase throughput sharply.
T-Mobile USA has 33.4 million customers. It is the U.S. wireless operation of Deutsche Telekom, one of the world's largest mobile operators with more than 150 million customers in Europe and the U.S. That gives it clout in the West.
Apple's not going to move to T-Mobile, according to Brian Marshall, an analyst at Broadpoint AmTech. "Apple wants to partner with leaders that have the most postpaid subscriber bases and network coverage," he told MacNewsWorld. "That means Verizon. The goal isn't to go downstream from AT&T to T-Mobile and Sprint, but upstream to Verizon."