The Real Problem with the App Store

Via MacStories

Via MacStories

On the latest episode ATP, the Accidental Three discussed a few of the problems facing the App Store and the reasons that Apple has failed to address them. I think that they generally hit the nail on the head when it comes to the technical and organizational challenges that might be preventing Apple from making substantial changes. However, there is a more fundamental problem blocking meaningful improvement.

Apple has sold more than 700 million iOS devices since 2007. The majority of those devices are almost certainly still active in one form or another, likely running some version of iOS 7 or iOS 6. The iPhone is available in more than 60 countries worldwide. The App Store has more than 1 million apps available for download. Almost 60 billion apps have been downloaded from the App Store since 2008. Those apps vary in price and quality. Some are paid up-front, while others are free to download and monetized through ads, in-app purchases, or both. 

Despite their differences in function, price, region, target customer, and the hardware and OS on which they run, all iOS apps are sold through the same marketplace. Good or bad, high-quality or low-quality, expensive or cheap, they all come to the end user through the same channel. While this situation is preferable to clogging phones with third-party app stores or side-loading, it has a significant flaw: one App Store has to serve the needs of every iOS user, despite the fact that iOS users have different wants, needs, and expectations from one another.

For most businesses, segmenting and targeting customer groups is an essential step in the marketing and product design process. Important factors to consider when segmenting include (but are not limited to) customer need, customer desire, ability to pay, and willingness to pay. Those aren't static variables. They change, year to year, day to day, hour to hour, depending on the customer. Because of the changing nature of these variables, it's less important to provide the best available product than it is to provide the best available product at the right price at the right moment in the right context to the right customer.

The best burger I ever had was the Black Label Burger at the Minetta Tavern in New York City. Nothing has ever come close. It was magnificent. It also cost $27. I was able to enjoy it because I was in New York, had the ability to pay $27 for a burger, and was willing to pay $27 for an exceptional burger.

McDonalds doesn't make $27 burgers. It makes $1 burgers. These burgers are objectively not as good as the one I had at the Minetta Tavern, but there are a lot of people who, at different moments, are more than willing to pay $1 for a burger than $27. McDonalds makes a killing selling $1 burgers, and within that particular market, they probably make about as good a $1 burger as they could make.

Same product category, but different customers, different needs, different wants, different places - and different establishments. No one can get a $27 burger at McDonalds, and no one can get a $1 burger at the Minetta Tavern. And you wouldn't expect to either, because those businesses are built around targeting very different customer segments, in the same way that Whole Foods and Walmart are targeting different customers in the grocery space. That's good business.

The problem with the App Store is that it's trying to sell both $27 burgers and $1 burgers to 700 million devices through one storefront. And when you've got 700 million devices coming through one storefront, and you have to try to meet the needs of all of your customers no matter what segment they might fall into, you're going to have to take some shortcuts. If everyone's going to have access to the App Store, then it makes some sense that the App Store experience would be built around some kind of democratic principle, that it would evolve not to meet the wants and needs of its best users, but rather those of the *most* users.

There are more people with bad taste than good taste. There are more people who want things for free than want to pay for them. There are more people who don't recognize quality than do. There are more people who will take what's in front of them than search for something better.

Why should we be surprised that the App Store experience is built to maximize its appeal to those people, of which there are more? Why are we shocked that Apple is trying to sell free burgers with in-app toppings? As long as it's selling to such enormous volumes of people through a single storefront, Apple has a strong incentive to continue this behavior.

I'm not saying it should. I would love to see a better App Store. But how many iOS users would even really know what that means? How many would run screaming if the model were fundamentally changed? How could you shield them from that shock?

ATP mentioned the idea of separating the App Store from the Game Store. I don't think this is necessarily the right line to divide the App Store on. The right line would separate regular users from power users - but how do you convince customers that such a move is right for them? How do you explain it? How do you police it? These are the kinds of questions to which there are no easy answers. They're also the questions that might have to be answered to move forward.

Apple is not going to appeal to the high end and low end of iOS users with the same App Store experience. There isn't an easy way to deliver different App Stores to different customer segments. And there are strong short-term incentives against dramatic reform. For all of the technical and organizational issues that may be keeping the App Store stuck in 2008, it's the simple challenge of segmentation that might be the biggest obstacle of all.