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Application development means big business

August 17, 2009 13:25 IST

App storeA 24-year-old, self-confessed gaming addict, Rohan Dighe, quit his job a year ago to cash in on the opportunity that Apple Inc was creating by opening its AppStore for developers across the world.

"I was anyways building small applications for social networking portals such as Facebook and Orkut. But when Apple announced the opening of its AppStore for the iPhone, I could see an opportunity as it had a compelling revenue model," said Dighe, the founder of Social Web Factory that came into existence in February 2008.

Other than developing applications for the iPhone and porting the same to the AppStore, Dighe's firm also provides services to third-party players who want to create games or applications.

"We've already developed applications for several companies and currently have five applications in various stages of production," said Dighe, whose firm reported a revenue of Rs 20 lakh (Rs 2 million) in March this year.

Interestingly, he added, 80 per cent of the revenue came from applications made for mobile stores.

Social Web Factory is not the only firm doing this business. In fact, there are hundreds of firms in India, including early start-ups and small and medium software firms, that are active in this space.

While Apple whipped up a flurry of activity among application developers by opening the AppStore in July 2008, Nokia added to the frenzy by unveiling its own application store Ovi, followed by Google's operating system Android and Blackberry's Blackberry App World that came into being this year.

Though the exact number of application developers in India is not available, the number of successful applications on these stores tells the story of how users are latching on to them. AppStore today boasts about 100,000 developers globally and over 65,000 applications. Since its launch, the store has registered 1.5 billion downloads across 77 countries.

As for Nokia's Ovi, the store is not far behind. While the number of Indian developers on Ovi are around 60, Forum Nokia -- a platform for third-party developers -- claims to have 180,000 developers from India alone. Ovi has around 3,500 content items. Blackberry has close to 2,000 applications while Google's Android boasts about having over 6,000.

So what is making these platforms such a compelling proposition for entrepreneurs? It's the business model. Most of the app stores have a 30:70 revenue-sharing mechanism in place under which a lion's share of 70 per cent goes to the application developer.

The platform providers, such as Apple, Nokia and Blackberry, keep the rest 30 per cent of the revenue. For many application developers, this means not much spending on marketing and two, they get access to global markets.

Take the case of Bangalore-based Sourcebits, a software development company that started providing applications for Mac but now also caters to iPhone, Android and other web platforms. While its revenue from web-based services saw a dip due to the current slowdown, its product offerings on these app stores saved the day.

Sourcebits has seen its revenue growing 10 times in a year's time from Rs 50 lakh (Rs 5 million) to Rs 5 crore (Rs 50 million) last year. And, now the company is expecting its revenue to touch Rs 15 crore (Rs 150 million) this financial year as it has started developing applications for mobile

stores. Sourcebits has created over 100 applications for iPhone, some of which have actually recorded four-million downloads.

"If iPhone had not been around, we would have to be dependent on the Mac platform. With mobile platforms coming into play, our growth prospects have got a huge impetus," said Rohit Singal, chief executive officer of Sourcebits.

Karnataka-based Robosoft Technologies is another instance. The firm has grown from just being a software developer for the Mac platform to providing applications for iPhone, Android, Blackberry and Palm.

"Our products not only get to the consumers, but we also get feedback from them. Besides, we continue to update our applications with newer versions. We have developed 35-40 applications for the iPhone and are in the final stages of delivery of some apps to Blackberry as well," said Robosoft managing director and CEO Rohith Bhat.

Robosoft has seen a growth of 25 per cent after the launch of the AppStore. Its applications have seen 300,000 downloads, generating revenues of $150,000 for the company.

For small firms that are grappling with issues of scale and mapping the global market, these app stores provide an apt platform. "The ecosystem that these platforms have formed helps entrepreneurs create a successful business. I would not be surprised to see if our revenues from app stores surpass that from other business segments.

As of now, we are getting Rs 10 lakh (Rs 1 million) per month from these applications, which get downloaded at least 200-300 times a day," said Nitish Mittersain, the founder and CEO of Nazara Technologies.

Kamlesh Bhatia, principal research analyst, Gartner, felt that this was a web2.0 phenomenon wherein you would have lots of innovations. As far as having dedicated stores were concerned, it was more because of business need.

"I think application stores are a global phenomenon with both device vendors and telecom carriers trying to have a presence. For the device vendors, having an application store means not being dependent on the network provider to be connected with subscribers. For the telecom carriers, setting up an app store means increasing their revenue-share from VAS. Most of the carriers realise that going forward, revenues will come from VAS," added Bhatia.

As for the success or failure rate, Bhatia said that this business was still at a nascent stage in India.

But yes, there are challenges. One of them is of scaling and coming out with innovations that make a user to come back. Besides, getting onto the AppStore is tough.

"You need to have a Mac system. And, if you want to use the applications for another platform, you will have to tweak it. A single Mac system would cost you around Rs 55,000-60,000," said Dighe.

On the other hand, while applications for Ovi, Blackberry and Android can be created on Windows, porting a single application will still need time and effort.

"In case of taking the same application from Android to Blackberry will still have 40 per cent of work," pointed out Dighe. For a start-up, that's huge time and cost as well.

But as of now, developers are taking the business with gung-ho zeal. Mohit Kapoor founder of Goolel, felt that in a country like India where mobile usage was much more than PC penetration, the next big success would be on mobile phones. Goolel, Kapoor said, would change the way people interact on cellphones.

Shivani Shinde in Mumbai