Most iPhone Apps Are Failing To Leverage The Network Effect

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Daily Crunch: Smash or Trash Edition

I’m seeing a trend as I continue to download and test many of the 1,500+ and growing iPhone applications currently available on iTunes: Few of them are really taking advantage of the network effect to build any kind of competitive barrier to entry.

Some apps are safe because they are simply iPhone versions of their normal web service. Google and Yelp are two examples out of hundreds of applications that are simply marking their territory for now.

But most applications are unaffiliated with an established website, which means they need to be able to build a sustainable business on the iPhone alone unless they’re just there for fun. Already we’re seeing applications that are effectively identical to others. There are two chess games for example (Chess Classics and Caissa Chess), both priced at $9.99. There are at least three movie theater apps (Movies.app, OneTap Movies and Box Office). Etc.

There are few feature differences between the applications, which can be quickly updated to match what competitors offer. Those that are trying to charge for their applications are at an extreme disadvantage when they have comparable free alternatives. There’s a march towards free with these apps, and it’s unclear they’ll be able to make money via advertising or other channels.

Take Advantage Of The Network Effect

Without a compelling existing brand or a really innovative product with protectable intellectual property (some of the games fall into this category), the only chance these apps have for long term success is to start thinking about ways to have users interact with each other in order to build network value.

I’ve long argued that social networking on the iPhone is a huge opportunity, and the fact that the big guys are ignoring it for now leaves the door open for a newcomer to get long term market share.

But there are endless other opportunities as well. Take those chess applications as an example. Neither support multiplayer games on different devices. I can play against a friend if he’s here with me, but I can’t have my dad download the application to his phone and play a game of chess with me asynchronously from two states away. The functionality is available to developers, they simply didn’t build it. If they did, there would be a big incentive for chess lovers to flock to that particular application, and it would then be hard for the others to compete. The same thing goes for other games like Scrabble, etc.

My guess is the first breakout hit on the iPhone will be a multiplayer game that is played real time or asynchronously, with each user installing the app on their own phone. I’ve played too many games of Halo on Xbox Live against people who live God Knows Where to not understand the power of distributed game playing to drive software, hardware and subscription sales.

If you are building this kind of application, we want to hear all about it. Someone is going to do this right, and then a flood of copycats will enter the market. Don’t be second to market. And stop treating the iPhone like it isn’t connected to every other iPhone and iPhone user out there in the world.

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