Betting the Future of Commerce = Apps

appstore pie chartmobileTech Tuesday, by Steve Guengerich

Barely a week into the New Year, the American Dialect Society brushed away any doubt that 2010 was a watershed year for mobile technology by voting “app” the Word of the Year, as reported by NPR and other media outlets.

More interesting than the fact that it beat out “nom nom nom,” the cheery affirmation of cookie love by childhood favorite Sesame Street character Cookie Monster, was that the 1998 Word of the Year was the tech prefix “e” as in eCommerce. Just over a decade apart, these two linguistic milestones signaled fundamental transitions in the way commerce is done.

In the period between “e” and “app,” the term mCommerce, for mobile commerce, has served as the name for the sub-sector of eCommerce that is conducted via mobile (wireless) technologies.  However, with the speed at which the app has become a dominant method for value delivery, it’s easy to imagine eCommerce and commerce via apps becoming synonymous in the near future.

app - business modelBut exactly what business model companies adopt to exploit this opportunity is subject to a great deal of innovation, with the corresponding trial & error, in the coming months and years. An insightful, recent presentation on digitally-driven business models by Nick Demey of the Board of Innovation is a powerful testament to the variety of ways that companies are generating revenues.

Historically, revenues for apps have been derived either (a) pre-download, via a “purchase” price of the downloaded app, or (b) post-download, via ads, sponsorships, or other upgrade options (e.g., expanded features and functions). Up to this point, data from the Apple App Store indicates that two-thirds of all apps offered in the store are paid (i.e., “pre-download”) apps, with the remaining apps being free.

However, all indications are that this trend may completely flip in 2011 with free apps that derive post-download revenue becoming the dominant format. In effect, all apps in the future will be what are narrowly referred to as “freemium” apps today. Users will obtain them at no charge, with revenues kicking in based upon their usage, through a combination of any number of methods, including:

  • sponsorships, advertising and other forms of paid promotion
  • app subscription, requiring a monthly fee
  • transaction fees for facilitating the exchange of goods or services
  • margin on purchases of real and virtual goods (popular with games), either via in-app purchasing or via links to “mobilized” eCommerce websites

Other revenue generation options we expect to see grow, especially as apps become more mainstream in enterprise work settings, include software site licenses once a minimum threshold of users (or uses) of an app is reached, upgrade fees, maintenance and support fees, among others.

Not surprisingly, a number of Austin-based companies are among the mobile tech firms betting big on continued app innovation. An updated version of the Austin Mobile Scene shows a robust map of companies working on mobile commerce products and business models, at a number of different levels. (Thanks to C. Enrique Ortiz, Tom Parish and Ryan Gravelle among others for helping with revisions to the map.)

Among the commerce-centric firms in the latest map are companies like BypassLane and TabbedOut, which are betting that process-specific apps providing customers a speedier or more hassle-free experience will be big. Others like Unwired Nation and Mutual Mobile (via their Launchpad bundle) are offering platforms that facilitate mobile commerce. At Appconomy, we are betting on a tightly integrated suite of AppCommerce apps and underlying components we are developing focused on helping people be more productive in their work.

For now, terms like eCommerce and AppCommerce provide us with useful bridges to represent new ways of conducting business. However, just like we can foresee a day when there will no longer be the need to differentiate between clean energy and “non-clean” energy, because the two have become synonymous, we expect a similar future for mobile commerce and “non-mobile” – you won’t have one without the other… app-centric commerce will be assumed as the natural way we conduct business.

Betting the Future of Commerce = Apps

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