Who’s Going to Profit from the iPhone SDK?

Now that the 3G iphone is no longer an urban legend but impending reality and the long-awaited app store is on its way, I’ve been thinking about what kind of business opportunities await the lucky iPhone SDK developer. I don’t think we’ll be seeing a “gold rush” more like a “rush” unless you mean it more literally as in a real gold rush where everyone scurries for gold, some get lucky, while others sift sand for the rest of their days and others like Levi Strauss see the bigger picture and profit beyond the rush.


Games will no doubt be the crown jewel in terms of profiting exclusively from the iphone. I’ve been playing with jail broken apps of various sorts for a while and at the end of the day, despite how innovative and well done the ipod touch/iphone is as a gadget, you get bored. At the end of the day I mainly go back to movies and music because the content is fresh and entertaining. Games will be a strong force in the app store and the Apple people are smart in pursuing game makers ahead of the official release.

If you want a taste on the jail-broken front check out THTouch. The graphics are brilliant and more amazing when you consider that the developer doesn’t even own a mac! That being said, we’re talking about a limited market for distribution (until all ipods migrate to a touch interface) and lack of tactile controls. So you’re basically limited to card games, strategy games, action games controlled by touch gestures and/or the accelerometer, and role playing games. That being said, you get networking functionality more or less free.

The people who stand to profit are no doubt the companies with a large library of games ready to port. Unlike the rest of the gaming platforms aside from desktop pcs, the barrier to entry is shockingly low. Platforms like the PlayStation, XBox, Wii, etc. will cost you a couple hundred thousand dollars just to BUY a SDK then you’ll have to hire a developer and then share a significant chunk of your profits with whoever owns the platform and be tied to a restrictive contractual agreement. Contrast this to the fact that the price of entry to the iPhone gaming platform is to buy a mac (well under $1000 if you choose the mini), download the free SDK, and pay the $99 application fee.

Most games are developed in a mixture of C, C++, C# to gain the most from close to the metal performance. Game houses with a large library could even invest in developing their own SDK tailored to the iPhone with common libraries and modules for rapid development of new titles.

We’ll have to see how it pans out but it could very well be the gateway drug for more game publishers to make games for the mac platform itself.

Web Service Accessory Apps

Social networks will probably be at the forefront of bringing native apps to the iphone, especially the smaller ones trying to dent the market. Location-based social networks in particular could potentially put themselves on the map by providing users with the “real deal” in a truly interactive offering. Location/geographic awareness and peer-to-peer networking are powerful incentives. Of course, these operations are also battery intensive so it’ll take some creativity balancing interactivity and resource consumption.

The smart web services will no doubt provide users with posting functionality to help add more content and keep their service fresh. The challenge will be to keep users coming back to the web provided that it would be hard to monetize iphone traffic itself despite the fact that it consumes bandwidth and other resources just the same.

The Enterprise

The enterprise will no doubt be the “other” major driving force. You probably wont see these apps in the app store but they could be the single most profitable area. Imagine a sales force equipped with iphones installed with a powerful sales tracking application. The sales force get more productivity by being able to spend more time on sales activities and less time filing paperwork. The company can better develop strategy by analyzing and tracking sales real-time by sales person, geographic location, etc. Would companies be willing to pay a good price for such a product? I think so. Of course, you’d have to have cross-platform integration and bridges to other legacy apps.

Productivity Apps

Call this “enterprise lite”. I think more people would be willing to pay for various productivity apps more than any other segment. A GTD suite maybe? Integration with various web services? People in the market for productivity apps are more or less conscious of the value of their time and would be willing to pay a reasonable fee if the app is truly useful.

Content Distribution

The fact that there’s a built in media player that can be integrated into your application with no more than a couple lines of code, content providers could easily build a “content player app” for paid subscribers. Unfortunately, Apple does not look kindly upon adult content so there goes the best market segment for such an arrangement. Of course, budding web video services can try to knock YouTube out its throne by giving users a way to upload, view, and comment on videos from the comfort of their iphone.

And the Winner Is…

I have no idea. Apple is obviously concerned with the quality of applications forming the first wave of offerings. At $99 a pop, not many casual hobbyists are going to be entering the field unlike the jail break world. The approval process is more luck than anything unless you’re one of the lucky developers personally approached by Apple to develop apps (I’m sure they were helpful with advice too). I’m sure this price will eventually come down to provide a more staggered entry model to attract more developers (like $10 to apply $99 after your distribution hits 10,000). The big question is whether Apple will be able to really shut out the jail breakers or whether we’ll see the app store version of jail broken apps coming to the iphone for all hell to break loose.

Flash coming to the iphone platform (don’t see a real future without it) is probably the other “big if”. With Flash, a lot of the trivial “dollar a pop” apps could easily be displaced. If Adobe was smart they’d probably build an SDK that could repackage Flash applications as independent iphone apps.

At the end of the day, the iphone application market is relatively new, small and growing. Battery life and communication costs (bandwidth charges for the cellular component) are limiting factors as well. However, there is a lot of potential not to mention the “coolness factor” of being given a larger mind share in the geek market.

We’ll have to see.

Apple – iPhone – Features – App Store