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App-plying Company Resources

January 31, 2011

There’s a good article in the Wall St. Journal this morning about Google putting more internal resources on developing applications for their Android OS.  This is in response to the continued growth of both revenue from application downloads for phones and the lead Apple has in the category.

World-wide, revenue from mobile apps is expected to triple this year to $15.1 billion, including paid downloads and advertising revenue generated by free apps, according to research firm Gartner Inc. Besides the potential of making money directly from such creations, more and better apps can help devices powered by Google’s Android operating system continue to gain ground on Apple’s iPhones and iPads.

For comparison… PC (and just PC) game (and just game) revenue for 2009 was $13.1B.  And if you dig into that, very few companies actually reported real net gain in the market.  I picked that one because I knew the market, but there area boatload of other compairisons you could make to properly size the opportunity.  But the comparison works in the dynamics of the market.  There will be one or two big players that will look to actually make revenue, and many small players who try to become big and/or just do it for the geek recognition.

For Google– and employees who participate in the effort — the rewards are pretty obvious:

Apple, which has developed a handful of apps along with other software that comes on its devices, takes a 30% cut of app-store revenue. So does Google. Apps developed by Google’s new lab are expected to be free and might have ads that would generate revenue, the people familiar with the matter said.

Google has been pitching its apps lab as an opportunity for recruits to have a high degree of autonomy while enjoying the benefits of a large company—including a salary and advice from seasoned professionals, the people familiar with the matter said.

Hey, having some job autonomy to go play in software is a tenent of Google’s employment.  Doing it for a living would seem interesting to quite a few people, I’d guess.  Of course, turning a hobby into a job sometimes makes neither interesting, but that’s a different post…

I think this is a decent strategic move by Google, and I would imagine that they’ll get some traction.  I don’t think it’ll be enough to catch up to Apple anytime soon, since a lot of the work there is based on the quasi-religion of the i-xxx.  Really, the opportinity comes with volume, and volume comes with time.  Apple is not generally a shipper of volume products, they prefer to skim the cream off the market.  Changing that changes the face of Apple, and I’m not sure the company wants to do that.  So Google has an opportunity to grow over time, which should attract developers and generate revenue.

As a single move, this doesn’t seem all that significant.  As a tactical play in the context of a greater strategy, this will be one to watch for the results.

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