Billions of people use it everyday, applications on their smartphone. We have got many different kind of applications on our smartphone, for every kind of situation. However, it has not always been that every kind of application could be downloaded and placed on our mobile devices. In this blog we will focus on of of the most widely used platform businesses: the smartphone application market.
This market is a platform business, which brings together producers and consumers in high-value exchanges (Van Alstyne, Parker & Choudary, 2016). Their chief assets are information and interactions, which together are also the source of the value they create and their competitive advantage. The introduction of mobile app stores, such as the Apple store and Google Play store disrupted the smartphone industry (Merithew, 2009), which will be elaborated on in this blog.
Before the introduction of mobile app stores in 2008, mobile phones came with standard apps and software, which were incorporated into the smartphone. The cell carriers allowed a limited number of companies to develop apps and software for their mobile phones. In terms of openness of the market, cell carriers controlled the market and kept it relatively closed. The bargaining power of consumers was relatively low to medium with respect to the choice of apps on their smartphone, since they had little choice of app supplier. In contrast, these suppliers had relatively high bargaining power to choose what kind of apps they would allow on their smartphone.
Everything changed when mobile app stores became available in 2008. The introduction of the Apple App Store is an excellent example of how Apple became a Pipeline, by selling handset’s, and a Platform, by providing an app store that would connect developers and end-users, at the same time. Due to the introduction of mobile app stores, a two-sided market, connecting developers and consumers, was born. The smartphone market got disrupted due to the removal of intermediate companies that incorporated smartphone apps into their phones. Developers were able to connect to consumers, whereby value was created for both sides (Ranger, 2015). When both groups increased in number, more value was created, as it argued by network effects.
New business models emerged, whereby new strategies had to be implemented. The freemium strategy was applied to the smartphone app market and smartphones were not only mobile phones anymore, but became more like personal computers. What actually happened is that the mobile app stores did not only affect the smartphone industry, but almost every retail and business industry. Companies could make mobile apps to reach customers, which were initially bounded by geographical limitations. With the mobile app store, geographical boundaries were removed and collected into one single platform.
If we look in the future of the smartphone application market, we see some threats and opportunities. Allowing devices to run apps without directly downloading them forms a threat to mobile app stores. As downloading is time consuming, and with limited data plans also costly, the usage of HTML5 might be desired by consumers. HTML5 offers a clean start for developers, making it easier to connect to customers by avoiding the large amount of apps available in the app stores. As the mobile gaming market is expected to grow to 81 billion dollars in 2020, the introduction of HTML5 for games will be the future.
References
Eisenman, T., Parker, G., & Van Alstyne, M. (2008). Opening Platforms: How, When and Why? Harvard: Havard Business School.
Merithew, J. (2009). Top 7 Disruptions of the Year. Retrieved on September 27th, 2017, van Wired: https://www.wired.com/2009/12/top-7-disruptions-of-the-year/
Ranger, S. (2015). iOS versus Android. Apple App Store versus Google Play: Here comes the next battle in the app wars. Retrieved on October 10th, 2017, van ZDnet: http://www.zdnet.com/article/ios-versus-android-apple-app-store-versus-google-play-here-comes-the-next-battle-in-the-app-wars/
Van Alstyne, M., Parker, G., & Choudary, S. (2016). Pipelines, Platforms, and the New Rules of Strategy. Harvard Business Review.
