Steve Jobs Did not See the App Store Value

It /4/seem hard to believe, but when Steve Jobs introduced the iPhone to the world, he was especially proud of the fact that it didn’t really support apps. With the App Store having subsequently taken its place as one of Apple’s most important strategic weapons and having just celebrated its sixth birthday yesterday, it’s fascinating to recall that it nearly never came to pass. Jobs told developers back in 2007 that they could build software for the iPhone if they wanted, they should just do it inside the web browser. “You’ve got everything you need if you know how to write apps using the most modern web standards to write amazing apps for the iPhone today,” he said.  ”We think we’ve got a very sweet story for you. You can begin building your iPhone apps today.”

Those web apps, though, had limitations in terms of performance and functionality. But they were the only game in town so many went ahead and built them, including Facebook and Google. Still, the frustration set in almost immediately and it didn’t take Jobs long to realize he’d been wrong. Maybe he’d even known it all along. As Walter Isaacson’s biography tells the story, recounted on Huffington Post, Jobs /4/just have been too busy getting the iPhone finished to worry about true third-party apps as well. “Apple board member Art Levinson told Isaacson that he phoned Jobs ‘half a dozen times to lobby for the potential of the apps,’ but, according to Isaacson, ‘Jobs at first quashed the discussion, partly because he felt his team did not have the bandwidth to figure out all the complexities that would be involved in policing third-party app developers.’ ”

Whether Jobs was resistant because he felt the idea wasn’t good or because he truly was concerned about how Apple would manage things, the company reversed course within months. In October of 2007, it announced it would be building a software development kit (SDK) that would allow for “native apps” that could run with better performance than those browser-based apps Jobs had touted earlier in the year. Developers would need patience though:

“It will take until February (2008) to release an SDK because were trying to do two diametrically opposed things at once: provide an advanced and open platform to developers while at the same time protect iPhone users from viruses, malware, privacy attacks, etc. This is no easy task.,” Jobs wrote on Apple’s Hot News page. “We think a few months of patience now will be rewarded by many years of great third party applications running on safe and reliable iPhones.”

Talk about understatement. By July of the next year, the App Store would open and while there would be some criticism of Apple taking a 30% cut of all sales through it, the truth was that figure compared favorably with other mobile app distribution methods of the day which charged even more. Developers apparently felt the same way as they started writing apps for the iPhone — and they never stopped.

By the next April, 1 billion apps had been downloaded. In the half decade that followed, 74 billion more downloads joined them. (The current rate is more than 2 billion apps per month.) And developers have become big winners. Apple paid out an estimated $10 billion to them over the past year for app sales, with Google paying another $5 billion on top of that from the proceeds of its own app store, Google Play. With 1.2 million apps currently available on iOS, not everyone selling on the App Store is a big winner, of course. But companies like King (the maker of Candy Crush) and Super Cell (of Clash of Clans fame) are among the billion-dollar-plus success stories. Not to mention companies like Instagram, whose free app was parlayed into $1 billion from Facebook, almost entirely thanks to its presence on Apple devices.

Apple users spend about four times as much as their Android counterparts buying apps and the App Store alone has bigger revenues than all of Facebook. It’s in part for these reasons that developers continue to prefer iOS over Android when deciding where to build first. Despite Apple’s much smaller overall market share, the iPhone is still the place to be for most new apps. There are a lot of reasons, including greater standardization of phone models, but mostly it’s about money.

That edge in getting the best apps first has become an important strategic weapon for Apple as it battles Google, whose Play store now has a greater total number of apps. One could reasonably argue that the cachet associated with the iPhone is inextricably tied up in that status as the leading-edge platform, and it’s important Apple not lose its position there. That’s food for thought when you remember that Jobs wasn’t keen on having native apps back when. But as with most of his worst decisions, he was able to go from being wrong to so right just like that. The App Store changed the software business 6 years ago. It also changed the fortunes of the iPhone and Apple.