Evgeny Tchebotarev

@tchebotarev

A World Of Difference: How Mobile App Distribution Is Shaping Up In Asia

When a startup in California wants to work on a new mobile app, a group of guys get together and start working. When it’s time to release a newly baked app, the means are always the same — launch it on Product Hunt, maybe do an AMA on Reddit, and hopefully get a TechCrunch or Recode coverage to boost the downloads.

After this is done, there is some hope and pray (and some growth hacking) involved to ensure the app is viral enough to get organic downloads. That’s about it.

Both Google Play and Apple App Store are walled gardens. The effect of a walled garden has created some new types of agencies, focusing on ASO (App Store Optimization). Just like more traditional SEO shops, but without clear rules of engagement, both stores change how their treat those “optimizations” from time to time, moving apps in ranking depending on title spamming, keyword spamming, and so on.

To understand why we are here today, we need to go back in time. The change from telecom-owned market to a software-owned market happened in the last 10 years. Telecoms lost their ability to control what they can place on a consumer phone (it often was nothing), while Google and Apple were able to force their rules of engagement onto the market. The walled garden was erected, first by Apple and later by Google, and left everyone else out.

High profile breakups, like throwing Google Maps out of the Apple Store, affect a lot of smaller players too. For example, 500px was kicked out of App Store for a week. And some apps were banned or removed altogether, like F.lux, as an example of walled garden approach.

This scared a lot of big app developers, including Facebook and WeChat. So they are building their own app stores within their apps, like games and gifs for Messenger, and mini programs for WeChat.

Of course, big players aren’t afraid to be kicked out from App Store, but rather they understand that the app discovery is utterly broken, and needs to be moved to a place where people can potentially discover new things — by chatting and sharing them more naturally. It’s a step to end the dominance of existing kingmakers, Google and Apple.

However, in China, along with South East Asia, the things aren’t done the same way. For starters, there are several app stores serving as an alternative to Google Play, which is available in a very limited form in Mainland China.

The names of these Chinese app stores will sound familiar: Baidu App Store, Tencent App Gem, Xiaomi App Store, Huawei App Store, Wandoujia, and so on.

The names of these Chinese app stores will sound familiar: Baidu App Store, Tencent App Gem, Xiaomi App Store, Huawei App Store, Wandoujia, and so on.

The reason for multiple App Stores is twofold. First, Android is free, and becoming a commodity, so manufacturers are forced to fork a version of Android and supplement it with own App Store to improve their diminishing margins from selling hardware. Generally, other than Apple and Samsung, the rest of the industry is losing money on hardware. Having own App Stores allows phone makers to make money in two main ways: paid apps, with a revenue split, and pre-installs, pushing specific apps to handsets directly.

For smaller players, like India’s Micromax or Indonesia’s Advan, operating own app stores is expensive (and using Open Handset Alliance original Android means non-existing margins on hardware with zero upside on services), so they turned to third-party Android makers, who would do three-way revenue share — with app makers, smartphone manufacturers, and themselves.

I first got a wind of this around 2012 when a big smartphone maker approached 500px to work on the pre-install deal of 20 million phones. We turned down the offer, but I didn’t realize that it was just the tip of the iceberg — manufacturers are now starting to act as kingmakers, promoting apps to hundreds of millions handsets at the same time.

This approach is like turning Silicon Valley on it’s head — instead of spending $1–5 per download (mileage can vary) to acquire a user, these companies do revenue share deals, but don’t have to spend upfront capital to gain millions of users, effectively crushing competition before they can realize what happened.

As more Chinese handset makers start expanding into developing markets, like Indonesia, India, Brazil, Russia and so on, we’ll see more localized approach to controlling App Stores, app distribution, and the making of kings through aggressive distribution deals.

Evgeny Tchebotarev is a founder of 9m+ strong community 500px, and currently does these five things to help companies succeed. He is based in Taipei, Taiwan. You can email him at e@e15v.com.

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