Managing the app store fragmentation

I've written in this space before about how I believe the app store phenomenon is actually causing more fragmentation in the industry. My thinking hasn't changed in the past few months.  If anything, as more app stores are announced and launched, my theory is proving true. 

Developers don't know which app stores to support (they need to commit to stores that will sell the most volume but right now it's difficult to know which ones will succeed).  Plus consumers are becoming increasingly confused about where they should purchase their content and applications. Do they buy from the handset app store, the OS store, the carrier deck or one of the many independent stores?

I recently talked with Alex Bloom, CEO of Handango, which independently distributes content via the Handango store and also powers the content distribution for several other firms such as Sony Ericsson and Verizon Wireless. Bloom says its important to differentiate between the app stores that have been announced vs. those that are actually up and running. "There have been more announcements than launches," he said. While his company is cognizant of the impending competition from these announced app stores, he believes there is growing opportunity for firms that can power app stores, similar to how Qualcomm's BREW platform provided all the behind-the-scenes glue for carriers who wanted to distribute mobile content to their subscribers. The Qualcomm platform was praised by developers for handling all the merchandising, the complicated revenue share deals, and perhaps most importantly, paying all the players promptly.

Bloom believes that right now every handset maker, operating system provider and carrier is investigating the app store model but many will need help to make it a reality. "It isn't as easy as it looks," Bloom says. "This is a hard business."

 And, just as we saw back in the early days of mobile content distribution (particularly in the off deck world), many companies will not succeed with their app store endeavors. "I also think there will eventually be consolidation or scaling back," Bloom says.

In the meantime, how do application developers decide where to sell their apps? Bloom says developers must evaluate the numbers carefully. "Download numbers are misleading because that doesn't necessarily mean revenue," he says. Instead, developers need to look at the store, make sure it has a mix of paid and free apps and, most importantly, make sure it offers a compelling user experience. Without that, no app store will succeed. -- Sue