Today in Tech: Apple's Expectations Problem; A New Mantra for App Developers

Apple's Expectations Problem One of the first lessons you learn about equity markets is this. A company can do well, it can grow faster than its peers, make more money, expand its margins, exceed its own earnings guidance by a mile, and still, the market can send a stock on a downward spiral, if it doesn't meet market expectations. (Some, of course, learn this lesson early on - Tambrahm Rage.) Reading some of the reactions to iPhone 5 (Five out of Ten - Economist;  Apple's iPhone 5 bigger, faster but lacks "wow" - Reuters; Hey Apple, Where's the Bite? - Marco D'Souza) I couldn't help but think that's exactly what happened to Apple.

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Tables come with serious limitations, which is why many products that look great in a specifications chart end up doing badly in the market. Still, it's good to have a look at them. Here are two interesting tables, one from Mashable that compares iPhone 5 with its competitors and another from Engadget that compares it with iPhone 4.

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I am not sure how all these will reflect on sales. The expectations were huge before the launch. CNet reports that one analyst firm, Piper Jaffray is even more optimistic after seeing the product. It has revised its sales estimate upwards to 27.2 million iPhones in September quarter from the 22 million it originally predicted.

A New Mantra for App Developers
Here's a small exercise. Have a look at your phone or tablet, and count the number of paid apps, and divide it by the number of total apps. If you are a typical user, it's likely to be one in a ten. It's pretty much what Gartner found out. "Worldwide mobile app store downloads will surpass 45.6 billion in 2012, with free downloads accounting for 40.1 billion, and paid-for downloads totaling 5 billion," Gartner said.

It doesn't of course mean app developers make no money. There are ads. But, what's the best way to make people pay for your apps? In-app purchases, Gartner says. It's the good old freemium model. Build user base by offering it free, and try to convert some of them into paid users through premium features.

"In-app purchases will drive 41 percent of the store revenue in 2016. While the market is moving toward free and low-priced apps, in-app purchases will drive downloads as well as app store revenue. Gartner expects the number of downloads featuring in-app purchase will increase from 5 percent of total downloads in 2011 to 30 percent in 2016, and its contribution to the store revenue will increase from 10 to 41 percent in the same period," Gartner said.

Amazon, which recently launched the latest version of its tablet, is taking the In-app purchases to the next level - by letting developers sell physical goods inside their games. You only have to look at the huge merchandising opportunities that come along with digital goods - movies, games etc; and the well honed logistics capabilities of Amazon to see why this will be big.

Also of interest

• Infosys's New Plan: Source Deals: WSJ
• Infosys to Mull Returning Cash, Making More Acquisitions: Bloomberg
• Even Inside Microsoft, Users Rarely "Bing It": Fast Company
• If You're Interested In Influence, Social Scoring Is Of Historic Importance: Fast Company

The thoughts and opinions shared here are of the author.