iPhone App Entrepreneur

I just covered what I thought would happen to a lot of third-party apps once the App Store ecosystem becomes available in June, 2008. Essentially, I believe most people would switch over to legitimate programs because of the basic hassle involved in continually updating your cracked phone, and most developers will switch their attention to the legitimate platform because that is where the money will be.

However, questions about the how many phones are being sent overseas have come up with Apple’s recent iPhone shortage, and this has caused me to look more closely at the opportunities for third-party applications across the world.

I have covered my prediction for the future of iPhone hacking, but in this post I’ll cover why original jailbreakers are ahead of the game when it comes to official success

I still believe unofficial iPhone applications will become less and less popular as more official iPhone applications are developed. But for hackers who have already developed an unofficial application and want to make it legitimate, it’s obvious that a huge opportunity is coming their way.

Two recent articles cover the future of iPhone jailbreaking, with each taking a slightly different perspective. “iPhone hackers look to an uncertain future” suggests that as long as the approval process is easy and Apple continues to provide currently lacking functionality, the unofficial app market might dry up.  “Why the App Store won’t stop hackers” suggests that there will always be people ready and willing to hack the iPhone to provide added functionality.

I think this second article misses the point. Yes, there will always be hackers creating unofficial iPhone applications. What there might not be are consumers willing to jailbreak their phones to use those applications. For any business, consumers are where the money is. Sure, there’ll be fun hacks, and really good hacks, but the odds of making and gaining widespread adoption have grown substantially harder now that the App store is imminent.

Unless you need a hacked phone to work on a carrier or in a country that’s currently not supported, why put up with a phone that might stop working with every update when you can eliminate the hassle and go legit? Will the added functionality really be that great with unlocked apps? I doubt it.

The article forgets that apple can change the rules. If there ever is a killer unofficial app, Apple could just allow it. As long as it doesn’t substantially interfere with Apple or AT&T’s revenue stream, then why wouldn’t they provide that functionality? Not all iPhone developers are created equal. Apple may very well give a high profile company the opportunity to break the rules and do things (functioning in the background, using the dock connector) that it restricts from normal developers. Unfair? Yes. But likely.

There is one thing that could change my mind on this, and that’s the size of the unlocked iPhone market. The longer Apple takes in rolling out the iPhone across multiple countries, the larger the market on unlocked phones will grow. If you’ve already unlocked your iPhone to work on a carrier or in a country not supported by apple, then you won’t mind installing jailbroken applications. Essentially, if this market grows big enough to be self-sustaining, you’re going to have an underground app market that will attract some serious developers who can make some serious money.

While I disagree that most users will continue to hack their iPhones, I certainly suggest keeping a close eye on what direction unofficial iPhone apps take. I have no doubt that the unofficial market will continue to grow, and it provides substantial value to developers in terms of a large audience of early adopters willing to try out new things. I think as long as Apple doesn’t restrict dual development, the unofficial market will be a great place to beta test, offer promotions and try out new functionality. But the App store will always be where the real money is.

iPhoneWorld notes that Google has released GData Objective-C Client Library APIs that will allow iPhone developers to take advantage of Google APIs together with iPhones APIs.

IntoMobile has a good roundup of tidbits about the App Store’s digital signature requirements and FairPlay DRM. They also compare Apple’s revenue cut and developer costs for the iPhone platform to other companies and platforms, like Danger and Symbian. It appears that smaller developers will have lower costs and keep a greater percentage of revenue through the App Store.

We continue with Inc. columnist Timothy Faley as he provides insight into the process of business creation. Part 2 discusses how to analyze the feasibility of your business idea.

Stefanie Olsen from CNET News.com interviewed Matt Murphy from Kleiner Perkins about the iFund. If you’re an entrepreneur with big dreams, you might want to check out what potential they’re looking for, where they think the market is heading, and why they believe that the iPhone is going to be big.

Today we're featuring an article from Inc.com (the online website of Inc. Magazine) by columnist Timothy Faley, Ph.D. Dr. Faley provides insight into the process of business creation, or what steps an entrepreneur goes through in developing each business idea. The first column covers Phase 1: Discovery: the time to identify opportunities and shape them into business concepts.

This is a basic introduction to three ways to earn revenue with your iTunes App Store application.

App Store Sales Revenue: this is your basic model. You sell your application through the iTunes App Store, and when people buy it you receive the revenue, minus Apple’s 30% cut. This is the only revenue method that is wholly contained within the iTunes App Store.

Subscriptions: people purchase your application or download it for free from the iTunes App Store. In order to continue using it, the user has to pay an additional fee. This method is commonly used with online gaming, magazine, and newspaper subscriptions. Another variant is use-based fees, where a user pays a fee every time they utilize the application or receive information. Apple does not get a percentage of this revenue.

Advertising and marketed based models: a typical advertising method gives away the application for free and serves up advertising to the users, earning revenue based on typical advertising methods, such as CPM or CPC. An example of an advertising based model is Facebook.
Another method similar to this is where a company collects user information and sells it to advertisers and marketing companies. Credit card companies do this all the time.

Hybrids: generally, any of these methods could be combined together in different proportions.

What this means for the entrepreneur: first, you should investigate the opportunity for each of these methods when you’re thinking about how you will earn money with your application. Second, you should research what method your competitors are using, what your industry is using, and why they may not be using some methods. For instance, if your competitors charge for their services, can you steal market share by offering the same services supported by advertising? Does your industry support advertising models? If people are adverse to advertising, maybe you need to stick to earning revenue through basic or subscription methods. Or maybe you can find a way avoid a subscription by incorporating your revenue into your application’s price, reducing customer churn.

For anyone who's interested, if you price your application on the iTunes App Store at $.99, you need to sell 143 copies to make each $100.00.

Wall Street Journal Business Technology blogger Nick Wingfield suggests in his post "Going Native, or Not, on the iPhone" that not everyone will be jumping on the native iPhone application development bandwagon. With the hype of native apps, it still appears some people will not be developing them.

How is this relevant to entrepreneurs?  Often we get caught up in the hype along with everyone else, and sometimes its better if we take a step back and revaluate what our business is really about. The question may not be "how many people are on iPhones," but "how many of my potential customers are on iPhones?" Someone developing a small game, for instance, might choose the iPhone as their only development platform. But someone with a small productivity application might find better value in developing a web based application, like the blog suggests. If you doubt many of your customers will be using iPhones, then why put in the energy of developing for it? You might be better off developing for the mobile space in general until you have a better idea of how many of your customers are switching.

Yes, you may be wondering why this advice on a weblog intended for iPhone entrepreneurs? Because being an entrepreneur means adjusting to the reality of your business world, not necessarily to what you might want that world to look like.

I was just reading the MacRumors news story about an article entitled “How Apple Just Made All Other Mobile Platforms Irrelevant” by  Blake from iPodHacks.com. I composed this essay in response, because I believe he is mistaken when he declares that the iPhone will make all other platforms irrelevant.