4:00am. I find myself reading an interesting story covering Portfolio’s web site – on my iPhone. As sleep comes back, I reflexively reach for the "save" (for later reading) button that is on every iPhone news application. But I am reading from the magazine’s site, as opposed to running an app on my smartphone; web sites don’t have a save button. I just became aware of a new set of habits, barely conscious and now ingrained thoughts/actions created by reading news stories on an iPhone (or an iPod Touch). A good sign.

In the Monday Note, for quite a while, Jean-Louis and I have been discussing the development of news-related iPhone apps (our first story "Why Publishers should grab the iPhone" goes back to a year ago,
or follow the iPhone tag on the Note). Since then, several news organizations have developed specific applications (not just tailored websites) for the iPhone. In the last few weeks, a wide variety of newspapers such as the NY Times, the Wall Street Journal, USA Today or, in France, 20 Minutes or Le Monde have come up with new apps or major upgrades. Quickly, they created their own implicit but standardized navigation system. Some, such as the excellent TechCrunch app, provide efficient offline reading. That is a good idea since, let's face it, 3G or even Edge, is far from being available everywhere, therefore, asynchronous reading capability must become the de facto standard. See what Google does with on-line/off-line capabilities for apps such as Gmail and Docs.

Last week, Apple got plenty of free ink by reaching one billion downloads on its AppStore. This is now a proven and lively ecosystem. As Jean-Louis puts it in his recent column. The next leap will be the rollout of a micro-payment system potentially embedded in every application. This will become reality next Summer with the version 3.0 of the iPhone Operating System and the launch of the AppPurchase system. We'll be able to subscribe to news content, even for short period of time, and renew the subscription for a week or a month with a simple "yes" on a prompt. Payment will become seamless and transparent, especially if prices are set wisely.
Fluidity in the transaction process is critical. A few days ago, I was speaking before an audience of 150 media professionals. I asked how many had a PayPal account, required for the Blackberry AppWord, RIM’s equivalent of the AppStore. Five people in the room had one, and none of us, I’m including myself, could recall our sixteen meters long password. You get it: if, each time you want to download a €2.99 app (or content) you need to retrieve a long forgotten password, the business will be kind of slow. That's the first battle Apple won by making the App Store an integral part of the iTunes system with its smooth micro-payment system.

As a matter of fact, Apple won all over the line. Just consider this chart recently released by a new an remarkable website, Flurry.com, dedicated to analyzing the mobile applications business


In a nutshell, it shows how far ahead of its competition Apple stands:
-  87% in the consumer's choice
- 72% for the developers’ community (currently 50,000 developers are actively working on an app using the Software Development Kit)
- 64% in the application market.
As expected in this very religious industry, there is heated controversy, for instance in this story of the Read Write Web about the fact that Flurry's survey does not include Windows Mobile OS. WinMo has been here for a while, eight years, but is far from a compelling success on the applications front. Still, given the iPhone dominance and its superior monetization, it is the platform de rigueur to develop a news application – today. We’ll have to see when and how competitors catches up. Even though the Blackberry remains a fantastic platform for business use, RIM’s current market share should encourage publishers to wait a bit.

Now, how does the money, the business models look like? Pending the AppPurchase launch, publishers fall back on the advertising model. Unfortunately, old habits die hard. As for now, mobile advertising sucks. Take two websites I happen to be a faithful subscriber to: Le Monde and The Wall Street Journal. On each page of their excellent iPhone app, they embed a banner ad. First problem: size. Between all the toolbars, the useful size of an iPhone screen is roughly 55mm high. Then they impose an 8-10mm footer ad. To make things worse, the ad itself is poorly managed: on the WSJ for instance, it doesn't go away even if I click on it (bear with me: clicking on an advertising banner just to get rid of a visual annoyance is not exactly a marketing achievement). Recently, each time I read the WSJ, I was served an Oracle banner that would not go away. As for Le Monde, they bugged me with a Cartier ad that I was occasionally able to get rid of. I had to click on it – and click again to decline leaving the app to go to Cartier’s website. (Recently though, Le Monde made its Cartier footer sliding down after few seconds, as Bloomberg does.) I just want to tell both of them: Guys, I'm a long-term paid subscriber of your service; if you don't screw up, you have me for life. But please, since I already pay for my web subscription, grant me a modest premium treatment and don't serve ads on my iPhone.

Actually, even for free websites, the prospect of being able to differentiate readers through an iPhone application is quite appealing. Let's say I'm running a successful free website similar to Alley Insider
or UK's Register. On the web, I make a living from the usual ad flavors: banners, text ads, paid-for performance, etc. I know for a fact that, on the iPhone, my audience is way more motivated and captured -- more "engaged" in marketer's parlance. Therefore, I have the foundation for offering two choices. One is a free iPhone app and free subscription: basic service, some ads on their screen with all the risks associated with invasive pixels. Or, a premium app a for a ridicule $4.99, no distractive banners, added features (personalization, recommendation engine, save button, you name it) plus a tiny $1.99 per week after four weeks free -- or less, or more, you figure out and adjust along the way. I'm absolutely certain that, for such content, regular readers would go for the premium version (that's the TurboTax effect, in which the free version of the famous tax return software boosted the sales of the slightly better $59.95 DeLuxe version).

That is the beauty of this incredibly flexible system. As usual, the gaming community had been quicker to “grok” (their slang for “understand) it.
Game apps tend to have a very short life: three months or less. Hence the critical question: renewal. Some choose to release a new version (not always easy), others offers a stripped-down version engineered to trigger the sale of a full-features version. See this chart, again published by Flurry.com (read the story here)

The mobile applications business makes a textbook case argument for free as a powerful booster for the sale of services or software. As for news-related contents, this will be even easier since, in essence, the content of the app is the engine for the audience’s renewed (and renewal) interest.

In the newsmedia’s devastated landscape, both in Europe and in the United States, mobile applications do have life-saving potential for becoming a sustainable business. We are just at the beginning of a promising new era. We'll come back to this subject in the coming weeks by testing applications and tools relevant to our business and by evaluating business models. —FF

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