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Free applications, or are they?

The era of the App Stores...
The development of the application stores for the various brands of smart-phones starting from the iTunes Store by Apple has induced a hight number of programmers to adopt the enabling technologies (objective-c and Xcode for Apple, Java and its SDK for Android) and start producing applications. Quite like at the beginning of the internet bubble of the early '90's, most of them give them away for free with the hope of becoming rich with the advertisement that will surely follow. Or some others consider the free app just as a booster for some obscure website that on its turn will collect its measure of advertisement.
... and the immutable laws of marketing
Anyone just slightly informed about market rules knows that the law of 80-20 rules here, as in many other environments: 80% of all advertisement will go to the 20% of the enterprises.
If you check what happened on the web through the turmoils of two decades, the only profitable businesses to make money with advertisement are just Google and Facebook – Yahoo wisely started selling the presence in its indices.
Of course, the free app developers might think: why will not I be able to become the Mark Zückerberg of the iPhone?
One answer is that Facebook is already on the iPhone and will be able to leverage its web presence to dispose anyone bordering its market interests to irrelevance: this month it was the turn of Foursquare pressed by the Facebook locations feature; the second reason, I would like here to explore, is the difference between web sites and smart-phone applications that would make a remarkable development like the one of Facebook all but impossible.
Are smart-phone servers in miniature?
The first issue regards the difference between computers and smart-phones in terms of memory.
As a matter of fact, since the first computers, their capabilities strictly follow the Moore rule by which any second year the capabilities of a device of a certain price double.
On the other hand the limited size of smart-phones and the peculiar technology used for the storage have brought a significant deviation from the Moore rule to the point the iPhone 4 came out two years after the 3GS with the same maximum memory – 32 GB.
Centralized and distributed intelligence
The second point regards the positioning of the applications: in fact websites host their “intelligence” in a rather central position, so being able to take advantage of an economy of scale when they want to augment the resources. When a site like Facebook wanted to increase the power of its platform, it increased the number and power of its machines and everyone would benefit from that. For such a thing to happen in the smart-phone world that would mean doubling the power of each device!
Consequently development needs to be much more careful putting a roof to the number of features an app may have without filling the memory or unbearably slowing the device.
Someone could answer that smart-phones will keep on becoming more powerful and then be eventually able to host all these developments. We cannot exclude that, but we bounce again into the app-web difference.
As said an increase of the power of the Facebook service had just minimal effects on the situation of the clients: even ten years old PCs can run a browser and execute Facebook. On the other hand just a minority of smart-phones will be the most recent ones and if a developer targets them she will consequently lose a majority of clients.
We have talked about features, now we would like to talk about access.
Advertisement on the web and on Smart-phones
And again we need to compare the situation of web servers. In that situation there were periods in which a certain technology attracted a high percentage of the web use: there was the time of Yahoo, the one of Google and now Facebook. An investor, or firm wanting to promote a product could have gone, and probably will continue to do it, to such big entities sure that their investment will have effects on the visibility of its product or on its return on investments. Can we think of some smart-phone application to be in the same situation?! Quite tell-telling on this regard the fact that even Facebook presently sports no adds neither in its mobile version or iPhone application!
We may wonder why. Simply because the screen is small, developers know how hard is it to fit all the features one envision in a page, and having a remarkable advertisement in it would render the available free estate even more challenging.
Timed advertisement: the messages that come before the opening of the application are already quite disturbing on the web; imagine on a little, weakly connected and used for few minutes at a time thing like a smart-phone: such a development would mean the user would most time just see the advertisement and never reach to the application!
The end-user point of view
Of course users are greedy of free applications: especially given most of their developers are still waiting (one would wander what) before making the application profitable by adding advertisements. Still they will also have to cope with the problem of the relative little capacity of memory of smart-phones and the high price of them. As a matter of fact each application installed in an iPhone has a cost that is very easy to calculate.
Assume an iPhone has 32GB (29.6 and even less when you subtract the system and the built-in applications) and costs about Euro 760: that would mean that each occupied megabyte costs 760Euro/28000 that amounts to 0.02 Euros: so a free application of 20 Megabyte would cost the user nearly half an euro just to have it installed; should the application have advertisements, those advertisements would also occupy memory, and the owner of the smart-phone would have to pay also for them!
Are the Free Apps a replay of the .Net or subprime bubbles?
Of course by this article we do not claim it makes no sense to make or invest into free applications. My only word of care is to have a very sound and timed business plan on how to make the application profitable: waiting for the future is meaningless as for quite a long time free applications viewing for profitability will keep on flooding the iTunes Store.
So whoever has a profitable business outside, could benefit greatly from a free presence on the smart-phones environment: those are the cases of Facebook, Ebay, the Yellow Pages, Virgin Active but I wonder how a free smart-phone only application could make money: of course there is no problem if a young developer develops and gives up for free a creation of his for generosity or to boost his ego; the problem is when very expensive teams are established with money perhaps coming from the same Agencies having burnt their finger first in the internet and then in the sub-prime bubbles and the poor investors that have committed their lifelong saving in such a risky adventure.