Market for full catalog app stores has reached its limit. Consolidation has begun

GERMANY: The year 2011 marked the beginning of a shake-out in the app store market. In order to be successful, new entrants will either have to concentrate on new technologies (Web apps) or target niche segments (e.g. business app stores).

These findings are part of research2guidance’s latest report “Smartphone App Market Monitor Vol.5 2011”.

The year 2010 was a watershed year for app store openings – more than 30 – with many MNOs and OEMs aiming to provide app stores with a full range of native apps. Only a few of those new entrants in 2010, however, have since managed to attract enough developer attention.

In 2011 the app store market for full catalogue stores largely settled, with only a few new entrants (excluding the market for niche stores). Some stores, which may have looked promising in 2010, succumbed to market pressures and closed, combined their offerings, or were slowly fizzling out at the close of 2011.

The Apple App Store and the Android Market (now Google Play), however, continued to gain momentum during 2011. They both added a significant amount of content and attracted increasing numbers of downloads – more than 1 billion per month each by Q4 2011.

Looking ahead, 2012 will likely see more consolidation:

The app store “duopoly” is growing: The Apple App Store and Google Play (Android Marketplace) show no signs of slowing as the number of apps, users and download numbers continue to snowball.
More stores will exit the market: Microsoft has already announced it will shut down the Windows Store for Mobile altogether in May to focus on the Windows Marketplace. Other stores – e.g. Mobihand – have appeared to be under financial duress and are looking for new monetization strategies or to be acquired.

At this point, any new market entrant will need to provide something fundamentally different to what Apple and Google are offering, or invest a significant amount of money (e.g. Microsoft’s investment in the development of the Window’s Phone Marketplace).

One possibility for new entrants is to target niche segments of the market. Niche app stores blossomed in 2011, numbering near 100 by the end of the year. The focus of these stores range from OS-specific, to quality curation, to consumer groups like Enterprises.

Another possibility for entrants may be through web apps stores facilitated by the development of mobile browsers. As of late February, Mozilla opened its platform independent “Mozilla Marketplace” to developer submissions of HTML5 web apps.

While this store will essentially compete with Google’s Chrome Web Store, it also complements Mozilla’s planned release of its own smartphone based on its “Boot to Gecko” (B2G) web engine. As the entire phone's native device capabilities will be accessible using HTML5, web apps will not lack functionality.

At this point, the release of the Mozilla phone is planned for regions where existing smartphones are largely too expensive. However, depending on the capabilities and success of the phone as well as Mozilla’s ability to have B2G technologies standardized by the World Wide Web Consortium (the primary international standards organization for the world wide web), the “Mozilla Marketplace” (and possibly Google’s Chrome Web Store) could become a considerable force in the app store market.