Thursday, January 7, 2010

AT&T Wants to Get Into the App Business

AT&T announced that it's going to try to broaden it's smartphone business by adding Android phones and Palm devices. Seems like it's preparing for a future where it can't count on gouging iPhone users to keep it's profits high. Even if Apple hadn't been planning to break it's exclusive deal with AT&T next year, all the bad press in this one must have forced it's hand.

AT&T also showed its "leadership" by chasing after the latest business strategy flavor of the month, selling apps. Here's the press release:

Yeah, it takes a lot of leadership to rush in and say, "Me too." Apple proved there is huge money in selling iPhone apps, a business no one had a clue could be so profitable until Apple got into it. We can't blame AT&T for wanting a piece of that action, and sure, on some of the lower end phones, perhaps there's some low hanging money to be made by copying Apple's lead. Nothing wrong with providing some options to people who can't afford (thanks to AT&T's over pricing of monthly service) iPhones.

But how about a little humility? How can you mention with a straight face that AT&T customers have access to over 100,000 apps as if that is something AT&T had anything to do with? But only if they have the right handset? You mean, the iPhone, right? The iPhone sells more than 99% of all smart phone apps. Come on, stop it already. AT&T already did this "customers have 100,000 apps" bit in the Luke Wilson commercial. It's time to give it a rest or state the obvious: AT&T has exclusive rights to the iPhone and the iPhone has lots of apps.

While it's hard to blame AT&T for wanting to get into the apps business, it's going to fail miserably. According to this announcement, it looks like it's going to focus on selling apps to phones that really don't have the power to run them, and to customers who choose cheap phones because they don't have money to spend on apps. So it's really a marginal market even if some genius were to try to tackle it, and lately AT&T hasn't been showing it has a lot of genius people in positions of power.

What's amazing is that as much as AT&T would like to model Apple's success with the App Store, it appears to be so jealous and hating of the iPhone that it can't see the the real business model that it could succeed at. AT&T makes tons of profits on the iPhone, yet provides such lousy service iPhone customers are literally begging Apple to bring in other carriers. AT&T knows the iPhone is the best mobile platform out there, and yet can't bring itself to mention it's name in advertisements touting it's features.

That press release above is almost two thousand words. Guess what word isn't mentioned? iPhone. How can a company that makes huge profits thanks to the iPhone not mention the iPhone in a press release about apps? It's crazy.

The real business model for AT&T would be to develop or encourage good apps for the iPhone, at least initially. That's where the real market is, and there's tons of money being made in it. Why not make great apps (or buy them from developers) and offer them first on the iPhone, then port them to lower end phones?

AT&T currently offers only a few iPhone apps, and none of them are must haves, or even nice to haves. One, AT&T Navigator, outrageously wants you to pay a additional $10 monthly fee for some simple mapping features. Out of two thousand reviews on the Apple Apps Store page, over one thousand are 1 star and very negative. Customers, justifiably, are really pissed off AT&T has the nerve to try to add to it's already too high monthly bill for such a lame app. Whatever little money AT&T has gotten from this app, and I'm sure it isn't much, isn't worth the negative PR it's created for itself by looking greedy, once again. No wonder AT&T doesn't even mention it's own iPhone apps in a press release about… apps.

Let's imagine a different approach at a different kind of AT&T. Imagine it offered that same app, for free, with no monthly charges. But the catch is, you have to be an AT&T customer. So if Apple does allow the iPhone on other carriers next year, you'd loose that app. If it was a good app, that just might be enough to keep you at AT&T, even if other carriers offered lower rates. Now, if AT&T was smart, it would have taken advantage of it's lead time with the iPhone to develop a lot of free apps that are only available to AT&T customers.

Those same apps could then be ported to other AT&T phones that weren't iPhones. The development costs and ongoing support could be shared. And yes, it doesn't all have to be free. AT&T could offer premium versions of apps that cost a little bit more. And perhaps even monthly fees for some premium features.

But AT&T just doesn't get it. It is so addicted to the idea of gouging customers each month that it can't really even think about other ways to make money. Like building a loyal fan base first and then making money from them. Like offering things for free before you try to charge for extra services.

Meanwhile, as AT&T is trying to play follow the leader by chasing after Apple's App Store, it's missing out on chances to break into the next business model that hasn't been exploited yet. One of which Apple will probably create with it's upcoming touch pad coming out soon.

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