Apple's Platform Lacks Punch

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Like Facebook, the iPhone is just a toy.

Or at least it would seem that way. A new study from Pinch Media says that only 1% of users who download software from Apple's (Nasdaq: AAPL  ) iTunes App Store become long-term users, Computerworld reports. Only 20% use new iPhone software the day after downloading it.

Other findings from the study:

  • Top100-ranked applications attract 2.3 times more new daily users.
  • Users run free applications 6.6 times more often than paid programs.

Anyone else troubled by this? Impressive numbers touted by Apple -- 15,000 App Store applications, 500 million downloads -- suggested that the iPhone was a serious platform for mobile business. Legions of the on-the-go workers would be accessing Oracle (Nasdaq: ORCL  ) and (NYSE: CRM  ) from anywhere.

Pinch's report tells an entirely different story. In this tale, the iPhone is like, well, every other phone.

That may not be a fair characterization. I have an iPhone and, like most users, I have both free and paid applications loaded on it. I use the free stuff a lot more but, mostly, I use Apple's pre-loaded software -- Mail and Safari, primarily.

For me, they are business essentials. Mail has helped me to meet deadlines from the road. Safari is my anywhere, anytime research tool. I really don't need anything else from the App Store.

As a user, I appreciate that. As an investor? Not so much. The App Store was to be a blunt instrument in the iPhone's fight for market share against Research In Motion's (Nasdaq: RIMM  ) BlackBerry line, Nokia's (NYSE: NOK  ) N-series, and Palm's (Nasdaq: PALM  ) promising Pre. So far, it's winning without the help. I'm happy to see the gains, but you'll pardon me if I'm nervous about the streak continuing.

A platform isn't really a platform till users take full advantage of it. If Pinch's research is to be believed, the iPhone isn't one. Not yet, anyway.

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Fool contributor Tim Beyers had stock and options positions in Apple and stock positions in Nokia and Oracle at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy remembers rotary phones. Do you?

Read/Post Comments (7) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 24, 2009, at 2:52 PM, Aryamehr wrote:

    Apple had a two year lead that has substantially narrowed. With the introduction of the Palm Pre the iPhone will no longer be the leader and will need major innovation in lieu of shooting across the bow with possible lawsuits without any corroborating proof that any infringements have occured.

    What scares me most is that Apple rather than riposte its competition with innovation and creativity is parrying, indicating it has little to riposte with other than bravado and no substance. This is an indication that Apple is shaking at the knees with the impending launch of the Palm Pre.

  • Report this Comment On February 24, 2009, at 3:49 PM, MurphyMacdotCom wrote:

    I don't think there is anything that Palm could do to make Apple shake.

    It's not just the iPhone. It's iTunes too. And the Apple marketing might. Developers aren't going to rush out to develop for yet another so-called iPhone killer. Unless it proves itself to be an iPhone killer. And round and round it goes.

    You can discount the lead the iPhone has, but imho that would be a mistake. People don't buy cheaper mp3 players - even though they have a more open design and features like FM - because of the lead iTunes has. The same thing is going to happen with the iPhone.

  • Report this Comment On February 24, 2009, at 6:08 PM, csayre wrote:

    The problem, as I see it, with the "research" (now, granted, I haven't read the report, and I didn't see a link here to it), is that "long term users" isn't defined.

    And there's a lot to be read into "using it the day after."

    Let's compare it to a computer, shall we? Let's say the typical user is like me. I own Photoshop. I like the program and am pretty good with it (photography is my hobby). Do I use it every day? Not a chance! Does that mean that Adobe is going to go belly up because lots of people don't use it every day? Hardly.

    Not a realistic example, you cry? Fair enough. There ate lots of professionals out there that I'm sure fire up Photoshop on a daily basis.

    OK, let's go for a "non-professsional" program, shall we? A game. Let's say "Neverwinter Nights 2," or one of the expansion packs.

    I own these, too. All of them. I greatly enjoy this game series. Do I play it every day? No. I'm lucky if I manage some quiet time on the weekends to protect the world from evildoers.

    Also, let's look at music. I've purchased many songs from iTunes and Amazon for about a similar cost to the apps on the app store. Do I listen to them every day? No. Are there long stretches between my listening to them? Probably. Does that mean it's a death knell for online music sellers? Hardly.

    I have to wonder how many apps are downloaded and tried? Also,with most apps only costing a few bucks,I also have to wonder if many of them are, "Well, I'm here, waiting on my wife/husband/kid/groundhog/whatever. I wonder if there's something I could kill time doing on my phone?"

    I don't necessarily see this "research" as being anything surprising or revealing. I don't think that many people use applications EVERY DAY. I think that's an obviously poorly chosen benchmark for this study, if that's what they looked at.

  • Report this Comment On February 25, 2009, at 3:03 AM, quixel wrote:

    What a tool or fool hehe!! It is showing that a lot of the downloads that Apeel is touting is bull$hit..They do this to say heyy we got tons and tons of shittttt but really not much for lots of people to use.It is smoke and mirrors.I get it.Shoot look at google for a prime example..they made $$ hands over fist because of cheating way of counting clicks(overcharging customers) then it was found out that ots of it was BS and the stock took a hit awhile back.Crazy Eddy comes to mind....Smoke and mirrors.

  • Report this Comment On February 25, 2009, at 8:58 AM, MrSucrose wrote:

    Have you tried to use the App Store? It has gotta be on of the slowest web progams I have seen.

  • Report this Comment On February 25, 2009, at 12:44 PM, peterjlist wrote:

    Um, you do know that the average iPhone app is 99 cents or $1.99, or most often free, right? This is why it's okay. Jeez, mon.

  • Report this Comment On March 17, 2009, at 4:13 PM, graywilliams wrote:

    people that are too lazy, or aren't smart enough to find this on their own - but will comment on research before reading it - are amusing.

    There are 25k apps, not 15k. All apps are not equal. most suck, which explains the drop off rate. some are one size servings. some apps, like NYT, USAtoday, bloomberg, ISM, google, kindle, tweetie, youtube, bofa, etc... are highly functional and reusable.

    how do you value the fun people have of one-clicking a new app and playing with it for a sec into your aapl model of doom? a free app is zero risk. there are secondary benefits for putting a free app out.

    i think aapl articles get page views, which explains the author's motivation. aapl isn't going away anytime soon, and the toy business can be pretty profitable, particularly ones as functional as iphone.


    palm looks interesting. lets see if they can finally execute. hope your its stock doesn't riposte your portfolio after the squeeze is over.

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