GET RICH WITH APPS!

Your Guide to Reaching More Customers and Making Money NOWBy JESSE FEILER

The McGraw-Hill Companies, Inc.

Copyright © 2010 The McGraw-Hill Companies, Inc.
All right reserved.
ISBN: 978-0-07-170029-0

Contents

Chapter One

The Future of Apps 3.0 for You and Your Business

Apps 3.0 are surging like a gigantic wave. Are you waiting to be swamped, or are you preparing to ride the wave to personal profit and business growth?

The story of apps can be told in many ways. How many people do you know who will admit to not knowing about Facebook or iPhone, at least in general terms? “Create a Facebook Page” has been added to the to-do list for everyone from political advisors to realtors, large and small businesses, nonprofits, and individual users from teens to seniors. (Facebook has even developed a policy for handling the pages of people who have passed away.) On the iPhone side, “There’s an app for that” is listed in The Yale Book of Quotations (Fred R. Shapiro, editor) as the third most notable quotation of 2009.

Alongside the anecdotal stories of Apps 3.0, another one is told in numbers. Here are some that you’ll likely notice first:

* More than 50 million iPhones were sold in the product’s first two years.

* There are more than 350 million active Facebook users, half of them logging on every day.

* There are more than 140,000 third-party apps for iPhone and more than three billion downloads from Apple’s iTunes App Store.

* There are more than 350,000 third-party Facebook apps, and more than 70 percent of Facebook users use third-party apps each month. More than 250 third- party Facebook apps have more than one million monthly active users.

On the other side of the coin, not all statistics in the Apps 3.0 world involve large numbers:

* Facebook apps are free.

* iPhone apps are free or relatively inexpensive, with common price points of $4.99 and $9.99, although some cost $29.99 or more.

* The estimated cost to develop a sophisticated iPhone or Facebook app, such as Twitterific (iPhone) or those used by the Obama Campaign, can be anywhere from $10,000 to $150,000. Basic apps can cost a tenth of that—or even less.

* Developers commonly charge hourly rates of $50 to $150.

Finally, you may see these numbers:

* The Facebook app for iPhone is consistently one of the most downloaded free apps.

* People who access Facebook from mobile devices are almost 50 percent more active on Facebook than nonmobile users.

With so many users and such a relatively low developmental cost, opportunities for making money with these apps abound. Finding out what they are and how you can participate in this gigantic and rapidly evolving market is what this book is all about. This chapter will give you an introduction to this exciting new world. It will answer three immediate questions right away:

1. What are apps?

2. What do they mean for you and your business?

3. How can you monetize them?

What Are Apps?

Everyone talks about apps, but what exactly are they? So many people talk so fluently about apps that sometimes it is a little hard to muster the courage to ask what they are and how they can work for you. Well, here’s your answer.

App Architecture

App is an abbreviation for application, as in application program. For example, your personal computer–based word processor or spreadsheet is an application. The office management software that runs your office and unites your staff is an application. But today, app is more than just an abbreviation—the word has taken on a very specific meaning, reflecting the evolution of software over the last half century.

There have been three generations of applications. Although they have evolved over time, all three still exist and are in widespread use. Here’s a brief description of how applications have evolved over the years:

* First-generation applications: These are applications that run on individual computers—a personal computer or a corporate mainframe.

* Second-generation applications: These applications are networked with multiple simultaneous users using a single application program, such as a corporate database or office billing system. Many of them are still in use today, and their basic architecture is the same as that used to develop them originally—often in the 1960s and often for minicomputers that no longer exist today.

* Current-generation apps: Apps, which are referred to as Apps 3.0 if you want to be specific, are an advance on the second-generation applications. There is still a networking component in most cases and, very often, a shared database. Instead of the user interface being implemented in HTML on the Web or in a programming language running on a local computer, the user interface itself has two components. A framework defined by an application program interface (API) is used and reused for many different applications. A very specific piece of code—an app—is inserted into that framework for each task that is needed. The framework provides much more than just an interface; it is able to perform sophisticated tasks that are unique to that framework and its environment. For example, in the case of Facebook, those tasks allow the app to request a list of the current user’s friends; in the case of iPhone, the app can find the device’s location.

In this book, the word environment is used to describe this common framework or other API—the environment into which the app is placed and in which it runs. We use this specific term because other terms specify programming techniques. A framework, for example, can be used to implement either an app or its environment; similarly, an API can implement the environment or the app.

Apps 3.0 represent an evolution of software architecture in many ways. For years, the idea of building reusable application environments and having a task-specific application has been something of a holy grail. What is different in Apps 3.0 is that the environment not only provides the basics of the user interface, but it often contains a very specific set of interface elements such as those for iPhone or Facebook. Note: The iPhone environment (technically referred to as the iPhone operating system, or iPhone OS) powers Apple’s new iPad. Almost all iPhone apps run on iPad. Unless otherwise noted, references to iPhone apps include iPad apps.

This new architecture is not limited to Facebook and iPhone, but they are the first two major players in this area. Google is now releasing comparable environments, and other companies such as Palm are also positioning themselves for this new future. By looking at the early players this field, this book will help you understand expected developments and how you and your business can become another player in this exciting and growing field.

Doing It Another Way

Both Facebook and iPhone provide alternative architectures in addition to apps. Both let third-party developers write software that links deep into the structure of the environment.

On iPhone, Apple calls them iPhone Web apps. These are Web pages that you build in exactly the same way you would any other Web page. When the pages are displayed in iPhone’s browser, they can access certain features of iPhone directly. In the Facebook world, this alternative architecture is provided by Facebook Connect. You build a Web page just as you normally would, but that Web page incorporates some special JavaScript code that lets your Web page visitors log into their Facebook accounts. After that, your special Web page can use that connection to interact with Facebook.

These alternative architectures provide users with similar experiences to those that apps provide, but there are significant differences. Most important, these Web pages are under your control. People navigate to them in the normal way. Users must have a Face-book user name and password, and on iPhone they must be using the built-in Safari browser. There are no downloads or installs of Facebook Connect Web pages or iPhone Web apps other than the normal behavior of Web pages, as you will see in the following section. This can make these alternatives easier for you to develop and for users to use.

What Do Apps Mean for You and Your Business?

When thinking about Apps 3.0 and how to leverage this technology to either benefit your business or make money directly from applications, you should consider these points:

* App development can be inexpensive. Because apps do not have to implement (or reimplement) environmental functions, they are smaller and less expensive to produce. For the user, that translates into a lower cost—sometimes none.

* Facebook and iPhone are your partners. On iPhone, third-party developers create apps, and users buy them from Apple’s iTunes App Store. On Facebook, apps are free, but users install them in their Facebook account using Facebook itself. For both iPhone and Facebook, part of the user experience includes having directories of third-party apps.

* Users have to use iPhone or Facebook to use your app. Because the primary interaction is with the environment, if a user wants to use an app that runs on Facebook, he or she must join Facebook. If the user wants to run an app that runs on iPhone, he or she needs an iPhone. Thus, Facebook and Apple are encouraging third-party apps to increase their own user base.

* Apps are often easy to use. Apps are often easier to use than traditional stand-alone applications not only because the environment provides functionality to the apps but also because that functionality is provided in specific ways that users have to learn only once.

For an app developer, this architecture has other implications. A developer’s perspective is different than a user’s, so there are a few additional points to think about:

* You need to cultivate your relationship with the environment. In the case of Facebook, you need to become a developer, which entails no cost. It does, however, require you to agree to additional terms and conditions beyond those that bind users of Facebook who will not be developing apps. For iPhone and iPad, becoming a developer gives you access to documentation and the App Store, which costs $99 a year.

* On both iPhone and Facebook, your app must be approved by Apple or Facebook, respectively, before it is listed on the site. (Other models being discussed on other platforms omit this step.)

* Your app must be distributed through the iTunes App Store or through Facebook. If you use the alternative architectures (iPhone Web apps or Facebook Connect), you bypass this step.

How Can You Monetize Apps?

Where’s the monetization? In the old days (a few years ago), the phrase “Where’s the money?” was a common theme. Great ideas abounded, but the question was how to pay for them. (Unfortunately, the phrase has also been used all too frequently in the sense of “Where did the money go?”) In today’s world of Apps 3.0, the question is “Where’s the monetization?”

Monetization has traditionally been defined as the process of agreeing that a certain amount of a precious metal will stand for a specific monetary value, but the term is now also used to indicate the more general process of converting any identifiable object or—more often—action into a monetary value. It is more than just another way of saying, “How can we make money from it?” It is the process of figuring out what the components of any project or product are and which of those components can be moneymakers.

Here are the basic ways apps can be monetized:

* Sell your app directly to users. iPhone apps are all available through the iTunes App Store, even if they are free. A mechanism allows users to select apps, download them, and automatically install them on an iPhone.

* Sell your app once. If you are skilled at developing apps, you can sell your expertise to people who want to develop their own apps. If your skills are in a specific area, such as marketing consumer products or managing complicated projects, that experience can be valuable to someone with developmental expertise and a vague idea for an app in that area.

* Promote your existing business. Use your app as an entrée to your existing website or business. Let people browse your goods and even try out your services with an app. Both Facebook and iPhone now support purchases directly from inside your app through Facebook Credits and iPhone’s In App Purchase. These purchases are centered on items that can be delivered electronically either as enhanced content to an app, subscriptions to information, or virtual gifts. Real gifts and donations to causes are now available through Facebook Credits, and there is no doubt that these trends will continue and expand.

* Sell advertising. Many of the people who are most interested in the world of apps come from the world of advertising. That is where the extraordinarily large numbers of Facebook and iPhone users carry the most weight. As you will see in more detail in Chapter 12, not only are there many users, but there is a lot of information about them. If your app is of interest to people who are interested in quilting, for example, you have a perfect platform for advertisers who want to reach quilters. The cost of developing a quilters’ app is much less than the cost of developing a quilters’ magazine or television channel (or even a quilters’ website). While your advertising revenues might be fairly low, the low cost of development and distribution can let you make much more money than you would in a more traditional environment.

* Expand your customer base. Both Facebook and iPhone are at the heart of the social media world in its new incarnations, as well as in more traditional forms such as phone calls and text messages. Having an app can be part of an image update for your organization. Just having a Facebook or iPhone app can set you apart from the competition. It’s great to have a map of your business location on a menu in the local diner or even on your website. But with an iPhone app, you can provide directions to your business from the exact spot where the potential customer is at the moment (using the built-in GPS and mapping tools). You have to make certain that your app provides value to Facebook and iPhone users, of course; otherwise, the whole process can backfire. Done right, there is nothing more efficient for opening doors to new customers than the world of apps.

The final point about monetization is one that was stressed previously: the cost of developing an app and of entering into this world is not just relatively reasonable; it is low. (How low depends on exactly what you plan to do with the app; you will find more information about the different types of options and costs throughout this book.) The cost of moving into the world of apps is higher for an international enterprise than for a small regional business, but within each business size, the app world represents a much lower cost than many traditional means of promotion. The cost of experimenting with apps is so low and the potential benefits are so great that you can afford to experiment a great deal to find your way to larger profits.

How to Make Money with New Technologies

Before continuing with the specific issues of apps, let’s consider a few points that apply to new technologies and have done so for a long time—centuries, in fact. The people who succeed with new developments embrace them fully. The temptation is to consider each new technology in terms of its predecessors and, all too often, as a negative implementation of its immediate predecessor. Consider radio, first known in many places as the “wireless” because it did away with the need for telegraph wires. Cars were “horseless carriages.” Even computers have seen this type of characterization: desktop computers were so called to distinguish them from their predecessors, which often took up a special room with its own air conditioning and a raised floor under which cables could easily be run. Those antediluvian computers were not called “room-size computers”—they were just computers, and the name of the newfangled personal versions had to carry the distinction. Every time you think of how to do something with an app that you can do in another environment, go through a mental checklist to see if the activity could actually be done differently in what is a very different type of communication and computing environment. Simply moving an existing process into the world of apps is often not the game-changer that is most successful.

You need look no further than spreadsheets to see how this recognition of a new type of device can capture the imagination of throngs of people. The first applications on personal computers were stripped-down versions of mainframe applications or those for minicomputers and even word processors. No one had seen a spreadsheet program before VisiCalc arrived on the first Apple computer. VisiCalc did something new; it wasn’t just a word processing application implemented on a personal computer instead of a dedicated or networked word processor.

Likewise, Photoshop created a new way of working. Although designers and graphic artists were accustomed to using airbrushing and other methods to touch up photographs and other images, the move to digital manipulation as exemplified by Photoshop truly turned it into a new operation.

Merely making an older technology faster sometimes transforms it into something new (computer games are a great example of this), and sometimes it just makes the old technology … faster. Until someone comes along with a transformative idea.

The pitfalls come when you are trapped in an old way of doing things or in doing old things. Keep your eye focused not on the next big thing, but on the next, next big thing.

Introduce Yourself

There are people today who have not only used computers all their lives, but used modern computers and software all their lives. Many people can remember the first time they used the Internet or the Web, but for others, these things have always been present.

The most recent upheaval in the Internet world occurred within the last decade, and it is one of the most critical, because it has changed the way in which people interact with the Internet itself and with other people on the Internet. It is the use of real names. Face-book was a major player in this area, coming on the heels of earlier but smaller real-name sites such as LinkedIn.

(Continues…)

Excerpted from GET RICH WITH APPS!by JESSE FEILER Copyright © 2010 by The McGraw-Hill Companies, Inc.. Excerpted by permission of The McGraw-Hill Companies, Inc.. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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