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iPhone App Store Gold Rush

By Jason Grigsby

Published on January 23rd, 2009


How do you know when a gold rush is happening? I’m sure economists have scientific measures, but I prefer to use my dinner party test.

During the boom days of the Internet, I hated telling people what I did at dinner parties. As soon as someone knew I developed web sites, I would spend the rest of the evening answering questions about how their business should go online, listening to their ideas for Internet startups, and what stocks they should invest in.

Shortly before the Internet bubble burst, my wife became a real estate agent. A couple years later, we would go to dinner parties and people would ask what we did.

I would say, “Web development.”

To which they would reply, “Oh that’s nice,” in the same tone that someone might might describe something as quaint.

My wife would tell them she was a Realtor. A large portion of the evening would then be spent talking about the local real estate market.

After the Obama iPhone application launched, the iPhone App Store officially passed my dinner party test.

In fact, it more than passed my dinner party test. Not only was I asked about iPhone applications at dinner parties, but I had people telling me their iPhone application ideas at basketball games, social gatherings, and even during a Sabbath meal.

For nearly two weeks after the Obama iPhone application launched, I had conversations on a daily basis with a new person who had an idea for an iPhone application and was looking for a way to create it.

Unfortunately, like the previous gold rushes, a lot of these ideas were not well thought out. The business plans rarely had more detail than:

  1. Build an iPhone application
  2. Publish it on the App Store
  3. Make lots of money

Don’t get me wrong. There are a lot of good applications being built based on solid business plans. And after evangelizing mobile for so long, I’m pleased that people are excited about the possibilities.

It’s just important to recognize that it is a gold rush. During a gold rush, there is a lot of money to be made.

But the part that makes it a rush is the irrational exuberance of the chase.


Kathleen McDade said:

So, supposedly the people who really made money during the Gold Rush were those who made and/or sold picks (and probably other supporting tools and equipment). What are the picks in the iPhone app business?

Dave Howell said:

There’s a lot of money to be made AFTER a gold rush too, assuming there’s really gold in them thar hills. It’s just that the post-rush money is made by those who struck gold and then built successful enterprises (i.e. mines) around it, and by the consolidators who let all the speculative prospectors kill themselves searching for gold, and then acquired the ones who both (a) struck it rich and (b) underestimate the value of their claim.

The iPhone app development ecosystem will consolidate. No doubt about it. But Apple has set up some very interesting constraints on apps that effectively prevent a Microsoft or Adobe from emerging from the chaos. Unlike the desktop software world, you can’t build a suite of iPhone apps and system components that work together and share media, settings, and data. Each app operates in an isolated silo. This puts a damper on the network effect that strengthens Microsoft Office’s supplier power in Apple’s desktop supply chain.

Sure, the Internet allows apps to share data, but that requires a web connection. iPhone apps can’t share Cloud data on an airplane.

Due to Apple’s clever ecosystem engineering, I think the consolidation in the iPhone world will tend to form strong, well-organized, nimble development teams, rather than the large IP portfolios and application suites we’ve seen come from desktop app consolidation.