Surplus, Scarcity and the iPhone App Store

George Gilder once pointed out that when the availability of a given resource shifts from scarcity to surplus, a lot of wealth is created. In the technology realm, one can think of processing power, storage and bandwidth as the great “wealth exponential-izers” of first the PC era, then the Internet era, and now, the Mobile Broadband era (as these resources went from scarcity to surplus items).

Beyond wealth creation for entrepreneurs, part of the miracle of surplus-powered markets is that they are generally a great boon for consumers as well, yielding them a greater diversity of offerings to choose from and democratizing markets by broadening accessibility and lower relative product costs.

By contrast, scarcity markets are kindred spirits of the toll road; they are all about pricing controls, and limiting both choice and access (think: cable/satellite TV, gas-powered cars, etc.).

While the entrenched incumbents understandably love scarcity markets, surplus markets are the proverbial rising tide that lifts all boats for consumers and upstarts alike.

iPhone Developer Success Stories: Not Everyone is Happy

It is with this backdrop, that I felt compelled to say, “Get a life” to some of the commenters to the post, ‘iPhone Developer Success Stories’ at MacRumors.com.

Why? The basic upshot of the piece was to share a couple of success stories of how small developers were/are creating multi-million dollar business successes on the backs of the iPhone 2.0 Platform (which powers both iPhone and iPod touch) and its tightly coupled App Store marketplace.

Consider the heartening story of Pangea, a long-time Mac developer, who was able to parlay several of their existing titles into popular iPhone apps, catalyzing a $5M business this year, and more income in just four and half months from iPhone apps alone than in 21 years of writing for the Mac…COMBINED!

Needless to say, Pangea’s Brian Greenstone is now dedicating his company fulltime to the iPhone, cheerfully noting, “Some kid in his bedroom can literally make a million bucks just by writing a little app."

Ah, but this story of true “overnight” success was treated with more than a trifle number of complainers about how such stories of "fools gold" would only lead to more crap apps (actually, that’s the Pull My Finger app), lowering the quality, increasing the noise, making it harder for the little guy to make a buck..wah, wah, wah, wah!

Get a Life, Okay?

So let’s agree that most iPhone App developers won't become millionaires from the App Store marketplace, just as most devotees of the eBay economy didn’t either, but let’s also get a clue. What was the better alternative before?

Do a deal with Verizon, AT&T and Sprint, and port your application to 27 different device platforms? Try and find consumers that you can lure to your web site at great marketing dollar costs, and hope against all logic that you could get them to give you their credit card?

Know this; my friends in the iPhone Developer universe that sell/sold their products through retail and other channels consider the iPhone App Store model to be manna from heaven in terms of margin, reach and control. To be clear, an imperfect channel, as all things are, but manna nonetheless.

After all, the current world sucks and the grass is always greener elsewhere, until you have had to live with the alternative, and then it doesn’t look as good in comparison.

The truth of this one is lain clear almost daily when my six year old wonders where are the good apps on my Blackberry 7130; you know, like the fun ones on my iPod touch.

Not a Paean to Apple, it’s a Salute to Surplus

The truth is that some developers will find the balance between compellingness and quality, and some won't. Some will gain (or already have) marketing savvy and some won't.

The best will build brands and become sizable businesses (as in: "Oh, I am going to grab the Freeverse bowling game instead of the SGN bowling game because I like their stuff and all of my account/social data is integrated").

Over time, more App Store variants will proliferate on other platforms (Blackberries, Apple TV, Playstations, XBoxes, Androids, Palms, etc.), growing the addressable market and driving competitive-factored innovation.

Give me a choice between surplus and scarcity, and I will choose surplus every day. Give me ample supply and better tools to filter out the crap or stuff that I am not interested in, and I will be happy.

It's the same story that played out with the PC (hello, crap apps!), the Web (hello, because Pet's can't drive!) and thankfully, will again play out in the Mobile Broadband realm (hello, Pull My Finger!).

Or, as one sage commenter puts it, “The App Store is like any other market and there is a difference between putting your app there and selling your app. Apple is not there to market your apps; it is there to distribute them. It is up to developers to find ways to market their apps.”

Amen, Brother!

Related Posts:

1. iPhone 2.0 - What it Means to be Mobile: a detailed summary of my experience to date with the iPhone 2.0 platform.
2. iPhone SDK - Mobile Reasons for Optimism: why the iPhone Universe is a big deal.
3. Apple's Mobile Gaming Gold Rush: don't understimate Apple's gaming play.