Prediction: Good iPhone Apps Will Be Free and Apple Will Develop Ad Network

As I wait for my iPhone order to be filled (my local AT&T store says it will be anywhere from 10 to 21 days), I am researching the large number of iPhone apps I will have access to very soon. I’ve noticed that there seems to be many quality apps that cost money but also many quality apps that are free. What is the future of iPhone apps?

I’ll tell you. All the good iPhone apps will eventually be free. Furthermore (you heard it here first people), Apple is going to develop an iPhone ad network. I know what you’re thinking. I’m crazy. Why would Apple, a company that specializes in hardware and software, dive into the crowded advertising network market? Let’s discuss it further.

Good iPhone Apps Will Be Free

The real useful iPhone apps are ones that connect us with the rest of the world. While Super Monkey Ball might be fun, it’s just a game. Games get old fast. The best apps are the ones that connect us with our already existing web applications (like Pandora, Facebook, and AIM). Almost all, if not all, of these applications are free. That’s because these apps aren’t there to make money. They’re there to build the user base for those companies. The only monetizing that might come from these apps is advertising based.

So while in the present time you have every amateur entrepreneur trying to scrape some extra dollars from the iPhone folk, the public will get smart and stop paying for most of those apps after a while. And unless it’s a revolutionary app, some developer will code up a duplicate on a sleepless weekend and give it away for free. So let’s go to the next point.

Apple will develop an iPhone ad network

Thousands of apps have been downloaded from the app store. Many of them were paid for. The app store is a very large potential revenue stream for Apple. The problem is that most of the apps will be free (see above). That means there won’t be another money tree in the Apple garden…or will there? As more apps become free and lean towards advertising for revenue, Apple will get jealous. And you will eventually see the Apple iPhone Advertising Network.

This network will allow application developers to focus on building great applications and receive revenue from ads on the top or bottom of the screen as their app is displayed. Apple will take a cut from this revenue. Whether Apple teams up with an advertising leader for this (Google most likely) or build it on their own from scratch, you will see an Apple advertising network in the next 12-18 months. Just watch.

Apple in Control

I’ve gotten a lot of flack for my recent “iphone bashing” post. Opposed to what people thought I was saying, I was not bashing the iPhone at all. It is, by far, the best user experience for any mobile user. But my belief that Apple won’t take over the mobile world (specifically in the business sector) still stands. And to prove my point, check out this post by Erik Schonfeld over at Techcrunch.

Just yesterday, Michael Arrington at Techcrunch used a picture of a nuclear blast to infer that all Apple rivals in the mobile world will be obliterated. Only one day later, Erik Schonfeld explains that Apple is in control on whether Flash will be available on the iPhone. Why wouldn’t Apple allow Flash for the iPhone? It’s the same reason why you can’t install any app on your phone and must go through iTunes. Apple wants control. Everything has to meet up to their standards. This limits innovation and opens doors for competitors in the future. The iPhone is awesome but it’s not the best phone it could be. And if Apple doesn’t ease up, we’re going to see much better devices out in the wild in a few years.

Business Week and Michael Arrington are Wrong

Business Week and Michael Arrington have both predicted that any company competing in the smart phone market is in a lot of trouble this coming year. With the latest version of the iPhone coming out in July, both BW and Arrington think that Apple will dominate the space like they dominate the MP3 player industry with the iPod. I expect this from Business Week, whose analysis of the situation is based on Apple’s previous ability to come out with a revolutionary device and dominate the market. But I expect more foresight from Michael Arrington.

In the short term, yes, Apple will sell lots of iPhones. And yes, I will (eventually) be one of those buyers. But both BW and Arrington are missing the bigger picture. Apple’ s significant  achievement with the iPhone is the standards of services that users will expect from their smart phones. People want to organize their voicemail the way they see fit. People want to be able to install applications that others create for free. People want an easy way to see the web the way it was meant to be seen. These are all standards that other companies will adopt. With Google Android’s entrance into the marketplace, we’re going to see a lot of competitors to the iPhone in the next few years. All of which will provide those same high level of standards.

So let’s look 5 years down the line. Here are the potential options for businesses thinking about implementing a new smart phone service for all their employees:

Option A: Apple iPhone
Pros: It’s SO cool. The UI is gorgeous! I’ll be the cool one on the block. Web pages look great and the lack of keyboard is only annoying if I email a lot.

Cons: No QWERTY keyboard. It’s not focused solely on business.

Option B: RIM Blackberry
Pros: Device made just for business. Possibly cheaper than iPhone. Already have existing relationship with company. It’s got a QWERTY keyboard!

Cons: Not as cool as the iPhone. Web pages are viewed in mobile format.

Option C: Handset device with Google Android installed
Pros: Open system that allows companies to install company-related apps easily. Has many options for handsets depending on the user’s preference. Users can easily view web pages. Because of the many handset options, probably cheaper than the iPhone and Blackberry.

Cons: Handset and OS is coming from different companies. Not sure about others, but there will be a bunch.

With all these options, I think most businesses will go with B or C. The iPhone will be huge with consumers but Apple is going to have A LOT of competition in the business sector.

Another Bland Keynote from Steve Jobs

Yesterday, Steve Jobs gave his highly anticipated keynote speech at Macworld. At last year’s Macworld, Jobs announced the revolutionary iPhone. So the crowd was expecting another revolutionary product or product enhancement. And what did they get…not that. Let’s take a look at the 4 “big” announcements:

iPhone

Jobs announced a few new applications (nothing special really) for the iPhone and iPod Touch. This means nothing to a large portion of iPhone users who have hacked their iPhone galore and have dozens of applications that already perform the tasks that these new applications perform. What we really want to hear is about the upcoming SDK. How open will the iPhone be? Will it be what we hope? An iPhone that allows any third party to create an application for it? I highly doubt it. Apple has always been about keeping others out of their party. They make great products, and so they thrive even when against the trend of openness. Don’t expect them to change their stripes. I’ll give them credit for the SDK when I see it in action. Right now, this is just a bland update.

Movie Rentals

Apple has teamed up with almost all of the major studios to deliver movie rentals to your iTunes or Apple TV. Am I the only one tired of being told how many ways I can pay for renting movies? It is nice that Apple offers us the option, but I would like to see a Netflix payment model for renting movies. That would be a nice announcement.

Apple TV – Take 2

This was a load of crap. Jobs admits that they screwed up with Apple TV. It hasn’t been successful. So what does he do? He gives a software update that allows you to rent movies on your Apple TV without needing the connection to a computer. Who cares? The problem with Apple TV is that its use doesn’t justify its cost. It’s still just an easy way to get files from your computer to your TV. The same can be done with a wire. What should I pay for this feature? I don’t know, $50? Nope, it’s still really expensive. $229. That is WAY too much for this simple functionality. It wouldn’t take much to make this a killer product. All you need to do is add a much bigger hard drive (or the ability to add one yourself) and add DVR functionality (there are some great free Linux DVR operating systems). Oh, and an SDK for that would be nice as well but not required. Many people are paying $10 a month for sub-par DVR functionality. Just add DVR to this baby and everyone would buy one.

Macbook Air

Apple launched a new laptop called Macbook Air. The Macbook Air is an EXTREMELY thin and an EXTREMELY expensive laptop. Check out this comparison from Gizmodo. Very cool but very expensive. My question for Apple on this one is who are they targeting? If people are going to shell out 2 grand for a laptop, would they be able to settle for a device with such low specs. Maybe. I’m not expecting this to be a huge hit though. Nice to see some innovation here, but it’s nothing that will change the industry at all.

I know I’m pretty critical of Apple in this post. Apple has had a $20 price per share drop in their stock over the past 2 days so I guess I’m not alone.