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Equity Magazine April 2018

FINANCE 0 th Apple’s

FINANCE 0 th Apple’s wildly successful App Store turns a decade old this year By Varun Godinho h(APP)y anniversary Unlock your smartphone and inspect its contents. There are probably a dozen apps including WhatsApp, Careem, YouTube, Facebook and a personal banking app, at the very least. To imagine a world without apps is to time warp yourself into an era without ATMs or photocopying machines or even cell phones for that matter – yes, people existed and the world didn’t stop turning, but then again you really wonder how the world got by back then. A BRIEF HISTORY OF THE APP STORE Back in 1983, Steve Jobs predicted that one day there would be a software-distribution centre which would allow software to be purchased via the phone lines. The oracle of Cupertino was predicting the birth of the App Store two-and-ahalf decades before it came into being. Jobs unveiled the iPhone in 2007, though it didn’t yet have an App Store. Instead, it relied on a little over a dozen built-in apps. In fact, Jobs was hostile to the idea of allowing thirdparty apps onto the iPhone. He encouraged developers to create web apps that would operate on Safari instead. By the fall of 2007, Apple started shipping devices that had a new app on it – iTunes. The iTunes app was a game changer when you consider that it showed that Apple could take a desktop e-commerce platform and transition it to mobile. It gave them the confidence to explore the idea of introducing an app store. By the end of 2007, Jobs unveiled the iPhone SDK (software developer’s kit) which essentially gave developers the tools they require to start building their own apps. In July 2008, Apple launched the App Store in 62 countries, with around 500 apps on it. Facebook, Shazam, and Yelp were among the first 500 apps on the App Store. With it, the prolific tech company now had a unified, secure and centralised place where users could get apps vetted by Apple and primed for their mobile devices. TURNING POINTS IN ITS EVOLUTION In the first weekend that the App Store was introduced, there were 10 million downloads. In the first three months, that number skyrocketed to 100 million downloads. It took less than ten months, for Apple to hit the one billion download mark which it did in April 2009. With the insatiable appetite for apps, developers around the world began furiously designing apps for the App Store. By June 2009, less than a year since the inception of the store, there were 50,000 apps – a 9,900 per cent increase. The phenomenal growth of the App Store didn’t come without its own set of problems. For example, it didn’t allow for demos or trial versions of apps, which meant that customers were forced to buy an app merely on the recommendation of others or on the marketing material used to promote the app. Developers were compelled to price their apps at rockbottom prices to encourage sceptics to download their app. Cleverly though, Apple introduced the concept of in-app purchases for 22 EQUITY

FINANCE free apps – a model that has become a hit with the mobile gaming industry. By 2010, Apple introduced the iPad, creating a further opportunity for app developers who began to design apps specifically for iPads. By 2011, the App Store had recorded 10 billion downloads. With the explosion in the number of apps, Apple brought in two small, yet significant, innovations. The first was the concept of folders to place the dozens of apps that each user would download on their phone, and the second was the ability for apps to multitask on the Apple devices. For example, you could play music off one app and simultaneously browse the internet. By January 2012, over $4billion had been paid out to developers and by March that year Apple said that it had hit 25 billion downloads from its store which was by then operational in 155 countries. By 2015, the Apple Watch launch meant one more canvas for developers to unveil a whole host of apps specific to the wearable device, with many of them focused on health and well-being. Last year, Apple gave the App Store a much-needed aesthetic overhaul. Reportedly, the App Store is now home to over two million apps and there are around 498,000 app publishers developing content for the repository. Worldwide, there were 23.4 app downloads in Q4 2017, 7.3 billion of which were from the App Store and 16.1 billion from Google Play. WhatsApp, YouTube, Facebook, Messenger and Instagram are some of the most downloaded apps. The biggest challenge for app developers today isn’t designing them in as much as monetising them. The App Store revenue model is based on four categories: Free Model that includes apps which are completely free to download and use; Freemium Model where users download an app for free, but are then charged an additional fee for premium features or services which block adverts on the app. Popular gaming apps operate using this in-app purchase model and now accounts for 80 per cent of the total spend in app stores. Apart from the Paid Apps model that requires you to pay an upfront fee to download the app, there’s also the Subscription Model, with an auto-renewable option and a Paymium Model too which is a hybrid between the Paid and Freemium Model. to over $110 billion. China is the market that Apple is watching the closest – it is the top market for iOS consumer spend, having overtaken the US in 2016. The predictions are that by 2020, there will be 5 million apps in the App Store. Even though the number of apps in the App Store will shoot up exponentially, it’s also becoming a more crowded space where people are being far pickier than they were earlier and only downloading apps they absolutely need. The new wave of apps integrates machinelearning, big data, AI and more. For example, the San Francisco health-tracking company Cardiogram has developed an app that can be loaded onto an Apple Watch and uses its machine-learning model called DeepHeart to predict with 97 per cent accuracy abnormal heart rhythms, sleep apnea with 90 per cent accuracy, hypertension with 82 per cent accuracy and diabetes with 85 per cent accuracy. The App Store, figuratively and literally, is a lifesaver. THE FUTURE OF APPS Market research firm App Annie has predicted that in 2018, worldwide consumer App Store spend will grow 30 per cent year-on-year 23 EQUITY

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