Intel: Apple has online app sales exactly backwards

Hipsters mixing up hats and hammers says chip giant

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Apple may be having phenomenal success with its iOS App Store ecosystem, but Intel thinks it's going about online app sales in the wrong way.

As might be expected, Intel prefers its app-store-in-a-box AppUp program, which allows world+dog to create their own app stores using its software tools, then let Intel handle all the messy details such as collecting payments and delivering the software to customers, all for a 70/30 revenue split.

Intel's AppUp headman Peter Biddle sat down with reporters on Thursday in San Francisco to provide an update on the program, which was launched in September 2009, with a beta introduced in January 2010 and Intel's own AppUp store going live last September.

"AppUp is the world's largest app store that nobody's ever heard of," Biddle admitted – perhaps explaining why he had called us together to hear his thoughts on the program's plans and future focus.

From Biddle's point of view, monolithic app stores such as Apple's and Google's are based on an old retail model, which was bound by the need to ship physical objects to physical stores containing a wide variety of goods in expensive brick-and-mortar real estate.

"The current app marketplace is defined by 150 years of molecular thinking," he said, referring to those physical goods. "We're not thinking about electrons – electrons, for all intents and purposes, are free."

One central tenet of the AppUp model is that those freebie electrons can be sold through a wide variety of different stores, each catering to a different demographic.

"Hipsters want to shop at hipster stores," he said. "If you were looking for a hat, you don't want to trip over a hammer – you're looking for a hat. You go to a hat store for a hat."

Not that you're limited to hat stores in the real world – it's just that you can find better hats if they're not crowded out by other products. "You may go to Walmart for hats," he said, "but you know for a fact that they're basically going to have wool beanies, baseball caps, and maybe a couple of other hats. They're not going to have a thousand hats. And they're not going to have a thousand hats presented to you by people who are really, really into hats."

Moms versus fixies

It's not only the amount of targeted, easy-to-find content that makes multple online stores attractive, Biddle argues. It's also the ability to target different demographics.

"If you're a working mom who's looking for great educational titles for your kids," he said, "you don't want to be bumping into a bunch of hipsters talking about their fixies and bicycle polo."

Apple, for example, has one App Store that tries to be all things to all users. The AppUp model turns that idea on its head.

"We love the idea that there could be thousands of stores," said Biddle, "and each store can specialize in its own goods, its own merchandising, its own marketing, its own promotions, its own look and feel, its own user community based on [the] premise that people want to buy an appropriate array of digital goods that will simultaneously reinforce who they are, and also delight them with stuff. 'Wow, I didn't know about that. Now that I found it, I'm so glad that I came to your store, because you presented me with this thing that I never would have thought I liked, but now I do'."

He admitted that the AppUp program doesn't yet support this vision. "What we've built doesn't fulfill a majority of that reality," he said, "but it's built to."

One core difference between monolihtic app stores and the AppUp vision is that Intel's stores can be built inside websites that attract users for reasons other than mere shopping.

"Let's say you're a blog," he said. "If you did 'My favorite puzzle of the week' as a little store, that's awesome. It reinforces your brand, reinforces who you are, it cross-promotes between people who are looking for the apps you're curating, the experiences you're curating, as well as the rest of the things you're doing on the interwebs."

When asked if he thought that the internet could fuel a resurgence of "mom and pop" online merchandising, he replied: "We want there to be. Yes. We think it's the most effective way to move digital goods."

Help is on the way, mom and pop

The AppUp program is working on ways to help those moms and pops dig through the mountain of existing apps to find the ones that they'd like to offer to their particular niche customers.

"They need some tools to help them," he said, "so we're working on curation tools for mom and pops to be able to do sort of like a first pass."

With such tools to cut through the massive clutter of, say, a software universe as large as Apple's iOS App Store, Biddle believes that mom and pop stores could differentiate themselves from one another, and remain small and focused on specific user types.

"People who provide either goods or an ongoing service directly to users are going to be best at providing an ongoing service or goods to users," he said – tautologically though reasonably. "Mom and pop shops are going to be best at being mom and pop shops."

In the mobile world into which Intel is trying mightily to move its silicon, however, users are being trained to use monolithic stores such as Apple's App Store and the Android Market rather than to hunt out mom and pop software vendors.

When we asked Biddle when users might move from such mega online stores to mom and pop software botiques, he said: "Actually, I think it's already happening."

To illustrate how he believe that move is taking place, he said that when he's looking for, say puzzle games, he Googles "puzzle games", and finds blogs that recommend puzzle games, and follows their advice. If those blogs had AppUp elements where those games could be purchased, his search would be over.

Another advantage of a mom and pop app store affiliated with an ongoing online presence such as a blog, Biddle believes, is that users will visit the blog for the content and end up shopping as well, unlike monolithic app stores to which you have to go to specifically when you're looking for an app to buy.

"Everyone is looking for a way to increase the cadence, so that shopping is less of an intentional activity. You're not suddenly realizing, 'I haven't bought an app in six months, I wonder if there's anything interesting there'. You don't want to wait until your consumer has to think that way to be telling them that there's an interesting thing that they want to buy," he said.

"If I go to Geeks are Sexy every day, then Geeks are Sexy is where you ought to be catching me. And you ought to be catching me with my top ten favorite apps that are different for me as a Geeks are Sexy daily user than someone else."

Specifically targeting sexy geeks is one thing a monolithic app store may never do – unless, of course, it takes advantage of webcam face-recognition technology. ®

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