Thursday, January 7, 2010

Why I'm a fan of the App Economy, even though I don't own an iPhone

I just finished reading this article on the "app economy." The gist of the article is that apps are big business.

"App," by the way, is short for application, not Apple...although I've often pondered the question: if Apple were called something else, would we call apps something else? Unfortunately, I've failed to come up with another fruit and digital term that start the same way. Yet another reason why I'm in accounting and not marketing.

I do not own an iPhone for a few very basic reasons: 1.) I'm currently with Verizon and don't feel the need to switch carriers just for a fancy phone; 2.) The exclusive deal between Apple and AT&T will eventually end, and then, in theory, other carriers will start to sell the iPhone; 3.) I work for another cell phone company, through which I also have a cell phone; and 4.) I've been reading about the huge shortages of bandwidth that AT&T has been suffering, and I would really prefer not to pay $100+ a month for a service that may, or may not have connectivity.

At this point, I should also preface this rant by saying that I've never actually used an app. I'm pretty sure app makers aren't too concerned about this, since I'm sure I'm not the target audience of most of their apps, namely someone boring, uncool, and cheap. On the other hand, there are a number of free apps that I would love to try out if and when I get an iPhone.

One is the Amazon Mobile app. You use this app to compare a price in a store to the price on Amazon's website. But, you have to have connectivity to do this, which is why Amazon doesn't need to charge for this app: if the price of the item is cheaper on their site, a customer can just order it right then and there from the iPhone. Bingo! Amazon still makes money.

But that's not the full reason I'm all in favor of an "App Economy." I'm a capitalist at heart. I've heard the arguments about how there's really no such thing as the "free market economy," and I even understand, in theory, why socialism is a nice ideal, even though it will never work. In general, capitalism says, you work hard, you get ahead. Now, we all know that isn't always true, and it's hardly a fool-proof model, but as far as I can tell, it's the best economic model humans have come up with yet.

On the other hand, I'm a hopeful, albeit hessitant, environmentalist. An economy based on the buying and selling of stuff creates a lot of waste, and a cycle of needing more stuff. (A short side-rant: it drives me crazy that it's actually cheaper for my husband and me to buy a DVD than to see the movie in the theater. We don't want to own it--we just want to watch it once! It's a good thing I like the library).

Apps, on the other hand, aren't stuff. They're services. And many will argue that to create both a sustainable and profitable economy, we need to move away from one based on the manufacturing of stuff and towards one based on services.

Case in point: the app game Farmville, which is also available on Facebook. My understanding is that Farmville is actually free to play. Whenever I see someone's Farmville status on Facebook, I think, you've got to be kidding me! Go out to your backyard and plant something! But Farmville earns it's parent company, Zynga, money because people will actually buy virtual farm-related items from them. For example, recently Zynga added sweet potato seeds to it's offerings for $5 a packet. Who would spend $5 for a packet of virtual seeds? Apparently 80,000 people, because it "pulled in more than $400,000 in three days." For a virtual item, that once the code is written, costs nothing to duplicate!

Additionally, apps have a lot of flexibility: programmers can get immediate feedback from users, so they can continue to tweak the app to enable the best experience.

Yes, some waste is created: people will probably go out and upgrade their phones, and the developers need computers, etc on which to work, and the cell phone companies will need to continue to develop their bandwidth as more and more people switch to smart phones. However, cell phones and computers are recyclable (and people would continue to buy and upgrade them even without the apps), and cell phone companies would have to build out their bandwidth anyway (and while we're talking about it, the cell phone industry is already a service industry).

In conclusion, based on my highly-scientific, and completely mathematically-based argument, an "app economy" will both generate a lot of revenue for companies, while at the same time act as a relatively environmentally friendly business model.

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