App stores abound at Mobile World Congress

BARCELONA--If imitation is the sincerest form of flattery, then Apple's biggest competitors are laying on the love a little thick.

It seems like handset makers aren't just trying to match Apple in terms of developing cool new touch screen devices, but now they're all clamoring to develop their own version of an application storefront, where users can easily discover and download applications for their smartphones and developers can easily create and monetize those apps.

Rumors have been flying around that Nokia, the largest handset maker in the world, will unveil its plans for its own application store at its press conference here at the GSMA Mobile World Congress on Monday morning.

But Nokia isn't the only company getting into the app store game. The Wall Street Journal recently reported that Microsoft is also readying its own application "bazaar," which some people expect will be announced here this week. U.S. software firm Amdocs, which provides software and services for wireless operators, is also planning to announce a "white label" application store at MWC that will allow carriers to offer an application store with their own brand.

The application marketplace frenzy follows the big success of Apple's App Store, which provides applications for the iPhone and iPod Touch. The storefront, which works in conjunction with Apple's iTunes music and multimedia online store, launched last summer.

The mobile marketplace has been wildly successful with thousands of developers creating new applications and adding them to the site everyday. Apple said last month that there are a total of 15,000 applications available through the App Store. And downloads from users has hit more than 500 million in just more than six months.

Soon after Apple announced the App Store, other smartphone companies started jumping on the bandwagon. In October, when T-Mobile introduced the G1, Google announced that it was also creating an online application store for all its Android phones. BlackBerry maker Research In Motion, followed suit with its own application store announcement.

The worldwide recession has hurt the sale of new cell phones. In fact, IDC recently reported that that for the fourth quarter of 2008 sales were down some 12.6 percent. But smartphone sales were up about 22.5 percent in the fourth quarter. What makes these phones appealing are all the cool applications that can run on them. And as smartphones grow more popular, experts believe that applications that run on those phones will also be in high demand.

So it makes sense that companies looking to sell these sophisticated devices would want to give their customers cool applications to use on them. But replicating Apple's success will be tough.

Apple already had a very successful distribution mechanism through the iTunes music store when it first launched the App Store. But in addition to its distribution, Apple seems to have gotten right two other key pieces of the puzzle. First, the company has nailed the hardware design of the device. And consumers love it. Second, the iPhone's software, which is by no means perfect, works pretty well and provides a lot of advanced functionality. And because it's based on Apple's computer operating system software, it's also somewhat familiar to developers, which makes creating iPhone applications a little easier, as well.

So far, none of Apple's competitors can match the company in all three areas. For example, Nokia has developed solid hardware. There's no question the company can build a phone. But building a phone with slick software that can do a whole bunch of other things other than make phone calls has been trickier for the company. What's more, the company lacks a strong distribution channel for its applications and services. For over a year, it's been building the Ovi platform. And it's launched its music store. But the company still lags far behind Apple in either of those areas.

Microsoft has the software expertise and knows how to distribute it. The company has been successful distributing games and other content through its with Xbox Live service. But Microsoft lacks its own built and designed handset. Instead, it has licensed its software to several other hardware makers, none of which has come up with a truly compelling device to take on the iPhone.

There is no question that the battle for the smartphone market is far from over. In fact, it's only just the beginning. But my prediction is that it will take more than copy-cat application stores to match the excitement of the iPhone.