The new Mac App Store

On Wednesday of this week, Apple announced that it is going to open a new Mac App Store, similar to the iPhone App Store. The new App Store will undoubtedly be a huge deal, and the implications of it will be far reaching, and not just to Mac users. There has never been anything like this on a desktop OS before. Only nerds currently install desktop software, but that is not true on iOS. The average iPhone has installed 40 third party apps. It makes it so easy to download, update, and pay for software (without giving unknown companies your credit card number) that regular people do it. This means that there is more software that becomes available, the pricing goes down, and it is better for both users and developers, in aggregate. This will certainly have an effect on the desktop app market, which is relatively small, especially for the non-big software companies.

One question that immediately comes to mind is exactly who will put their products in the store and who will not? It seems certain that independent developers that can relatively easily conform to the guidelines will put their apps in the store. There is simply too much opportunity for them to pass up. What about the big players, Adobe and Microsoft? My first instinct was that Adobe and Microsoft products wouldn’t put their apps on the App Store. They like to install things in weird locations, they pocket 100% of the proceeds instead of 70% in the store, they already have their own update mechanisms to keep people up to date, and their licensing is different (licensing on the Mac App Store will be just like iOS, where you can install it for free on all your Macs, legally).

But, the App Store is the first thing you’ll see when you get a new Mac. What happens if you open the App Store, and you don’t see Microsoft Office, but you do see Pages for $20, and it works for all your computers? The alternative is to find Office which is not on the store at all, costs $200 and only runs on one computer. Many are going to take the risk and try to get by without Office (and most will easily be able to do so). There’s little question that Microsoft will take a big hit in this scenario. It turns out that Microsoft only really makes profit on two things: Windows and Office. And, a lot of that money is on Office for Mac. This article from 2007 indicates that 20% of Office purchases are Office for Mac. I don’t have updated numbers on that, but according to the latest figures from the keynote on Wednesday, in the last 16 quarters, Mac growth has outpaced all other PC growth. Among all the Windows to Mac switchers, a reasonable percentage of those are buying Office for Mac. Not having Office on the App Store would be a real danger to their profit. I think eventually this will force Microsoft’s hand and they’ll go into the store.

I suspect the same will be true with Photoshop, and other Adobe products. At first they may resist putting their apps in the store because they don’t want to give any money to Apple, and they don’t seem to like pleasant install/update experiences. But then users will see Acorn or some other, almost as powerful for most people, not as well-known, and far cheaper alternative for $30 in the store.

The bottom line is that if an app is not in the store, and there is an alternative that is, the one that is not is in trouble. I see this as being a massive change in the desktop world as it evens the playing field between small and big app makers. It’s already the case on iOS but not anywhere on a desktop.

The hypothetical future Windows App Store

With this precedent, it seems almost certain that Microsoft will eventually do the very same thing and build their own Windows App Store. I’m not sure how good a job Microsoft will be able to do on a store because of worse problems of backwards comparability, other companies bringing their own drivers, etc. But if they do a good job, it could be even more important than on the Mac. I don’t have any numbers on this, but I suspect that on Windows, the small app makers are making even less than on the Mac (likely as a percentage of the total software bought on that platform, but perhaps even overall). Most people on Windows turn only to the web browser as alternatives instead of native apps. The big names make money, but I don’t think there is currently much money for independent developers.

From the perspective of Apple, a Windows App Store could hurt Apple if it creates a rejuvenated “Windows lock-in effect”. Apple has benefited from the turn from native Windows apps to the browser, as that can occur just as easily on a Mac. It’s easier than ever to switch to a Mac.

What about Apple’s products for Windows? Even if iTunes does not end up in the Windows App Store, I doubt that would have any impact as I suspect most people who use iTunes are people who have already bought a piece of Apple hardware such as an iPod, and will search out the software just so they can use their hardware, and because it’s free. I think there is little risk here for Apple. Apple makes money on hardware, but not much on software.