Image: Screenshot from Apple's App Store
Suzanne Choney
Apple's App Store for its iPhone has been a huge success, with more than 500 million downloads of free and paid programs for the phone since the online storefront began last July.
updated 3/19/2009 9:03:20 AM ET 2009-03-19T13:03:20

Research In Motion, Microsoft and Nokia are getting ready to launch online “app” stores for their mobile phones, attempting to play catch-up with Apple’s hugely successful “App Store” for the iPhone. With a tough economy, will consumers be willing to spend tightly held dollars on software programs for their phones?

Most in the industry believe they will. “While buying a car or house may be out of the question for many people, a 99-cent or $2.99 application may be in the budget,” said Allen Nogee, In-Stat wireless infrastructure and technology analyst.

“And with many people canceling their wired-line phones, Internet or cable so they can keep their mobile phones, now is the perfect time for an app store.”

Apple raised the app store bar this week with the announcement that software developers will be able to create iPhone programs that let users sign up for subscriptions and players buy “levels” for games using their devices.

Paid programs for the iPhone start at 99 cents. RIM, which makes BlackBerry smartphones, plans to unveil its “App World” online storefront in the coming weeks, and will have free as well as paid programs, which will start at $2.99. There are devoted legions of BlackBerry users, just as there are iPhone fans, so App World will likely have much appeal.

“There’s tremendous value in connecting (software) developers with BlackBerry users. I don’t see the economy as a factor in this launch,” said Alan Brenner, RIM’s senior vice president of the BlackBerry platform.

Mobile apps' draw
Microsoft, which plans its online Windows Mobile Marketplace this fall, agrees. ( is a joint venture of Microsoft and NBC Universal.)

“Whether we’re in very spare or prosperous times, the opportunity for someone to be able to go and enjoy either a free application download that gives their phone a new capability or a reasonably priced application download that gives their phone a new capability — that opportunity will be welcomed in all economic times,” said Daniel Bouie, senior planner for Windows Marketplace for Mobile.

Like its competitors, Windows Marketplace for Mobile will feature both free and paid programs.

“The thing about mobile applications is that a ton of them are available for free, or are at least available at a low price,” said Ramon T. Llamas, senior research analyst for IDC Mobile Technology and Trends.

“Take a look at the difference: I can spend roughly $60 for a new game on a Nintendo Wii that stays attached at home to a large-screen TV, or I can spend $3 or $5 or $10 on an app running on an iPhone which I take everywhere.”

Avi Greengart, Current Analysis’ research director for consumer devices, said RIM’s $2.99 is “awfully expensive for relatively simple apps. But setting the floor now does not preclude making changes later” by RIM to lower prices.

“In my opinion, $2.99 is too much to pay for many applications,” said Nogee. “I know it sounds strange, but 99 cents and $2.99 are worlds apart in the mobile application world, like the difference between $49 and $149 is in the PC world.”

Apple’s App Store, launched last July, has had more than 500 million downloads of software programs for the iPhone. The App Store, part of the larger online iTunes Store for music, TV and movies, now has more than 25,000 programs, both free and paid.

All an iPhone user has to do is touch the App Store icon on the phone’s screen to get to the store to view and buy the programs that are available. Apple uses iTunes for billing customers’ credit cards, with customers required to set up an account before they start using the service.

The simplicity of the process has been one of the draws of the App Store, and will help Apple “lock in” iPhone customers for the future, analysts say.

“Apple has done a terrific job in getting the market to think of their iPhones not just as communication tools,” said Llamas. “When you look at the Apple commercials showing how easy it is to use an application to find a restaurant and movie times, I think people will want this more and more” with other smartphones as well.

RIM to use PayPal
RIM, Apple’s larger competitor in the smartphone market, will use PayPal for program purchases, requiring some extra steps.

“PayPal is a respected and trusted brand with a broad global reach,” said Brenner of RIM. “They have mechanisms in place for dealing with a wide variety of currencies and we are excited to work with them to bring applications to BlackBerry smartphone users.”

In addition, Greengart said, PayPal “provides a way for consumers who are using corporate-billed BlackBerrys to buy applications and pay for them without involving their employer.”

Using a company like PayPal also avoids other technical problems associated with managing phone purchases worldwide, especially with more than 300 carriers selling BlackBerrys, he said.

Bouie of Microsoft said pricing of Windows Mobile applications in the Marketplace will be determined by developers, but will also include free programs. The method of payment will vary, depending on the country, he said, although he declined to go into detail.

Other app stores
Google’s Android Market, which right now serves T-Mobile customers who use the only phone in the United States with Android open-source software, has had a slow start.

In part that’s because of the limited audience, which should expand with more Android phone choices coming.

“There’s not much in the form of actual handsets yet, but the potential is enormous,” said Kevin Burden of ABI Research.

So far, more than 2,300 programs are available in the Android Market. Programs were offered for free when the phone launched last fall, but as of last month, developers were allowed to start charging for programs.

Nokia, which dominates the global, but not United States, smartphone market, plans an app store later this spring. It will be part of its Ovi store for music downloads.

Palm lets users buy and download applications through PocketGear’s Web site, which sells mobile phone programs.

“Consumers are increasingly looking at smartphones as (an) investment that increases in value over time as applications are added,” said Greengart.

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