Although the launch of Windows 8/RT is still a month away the number of apps in the Windows Store (aka “Metro apps” aka “Windows RunTime Apps”) is a worry. There are somewhere around 2200 apps in the store now, probably an order of magnitude below where they need to be soon after launch. And two orders of magnitude below where they need to be by the end of Windows 8/RT’s first year on the market. Of course it didn’t have to be this way. Both iPad and Android tablets benefited, and continue to benefit, by their ability to run smartphone apps on tablets. That gave them decent sized application libraries out of the gate. Then as the tablets gained traction, developers came up with tablet-optimized or tablet-specific versions of their apps.
Microsoft could have had most of the 107,000 Windows Phone 7.5 apps running on Windows 8 on day one. It would have been a fairly (read VERY) easy thing for them to do. It seems like arrogance on the part of Microsoft Windows Division President Steven Sinofsky is all that kept this from happening. And it could prove to be a fatal mistake on his part. But that isn’t what this posting is about. Despite Microsoft’s possible missteps, developers would be quite foolish to ignore Windows 8/RT’s new “Windows Store” applications.
First let me address why I think the number of Windows Store apps is so low at this point, and it is quite simply because of how successful Windows has been in the past. This is impacting developers on two fronts, coverage and business model. Let’s start with coverage.
I have no idea what Microsoft’s expectations are, but I think all external observers believe that Windows 8 will represent the overwhelming majority of shipments in the first year of the Windows 8/Windows RT two-sided coin. And Windows 8 can run all the legacy “Desktop” applications. So how urgent is it for The New York Times to have a Windows Store app when you can always install the Times Reader 2.0 desktop app on your Windows 8 tablet? Ditto for Sonos. Ditto for Pandora. Ditto for…just about everyone. Sure those apps aren’t touch-optimized, but perhaps they are good enough for developers to take a wait and see attitude towards Windows 8 tablets. Maybe developers will even tweak them to be more touch-friendly, without going the full Windows Store app route.
The second factor here is business model. Despite its drawbacks most software developers have an existing business model built around Microsoft Windows. They have a way to promote, sell, collect payment on, distribute, install, update, etc. their Windows desktop apps. They might not have the reach of the Windows Store, its business model simplicity, its security and platform cleanliness, or its end-user friendliness. But it works adequately enough. They have to maintain it for Windows 7 (and earlier) anyway. And, for paid apps, they sit at a premium price point compared to where they’ll have to be with a Windows Store app. They may even need to continue to offer new versions of the desktop app for enterprise and power users of Windows 8. For many app developers doing a Windows Store app represents both an increase in costs and a potential decrease in revenue. So the business guys must be taking a very close look at the potential rewards of a Windows Store app. I think what they are seeing is that in the long run having a Windows Store app will be a big win. But in the short run it is a lot of pain for little gain.
The problem with app developers taking the position that they can wait on a Windows Store app is that this is going to be another land-grab. Windows 8 is going to grow like a field of weeds. And I’m not even talking about Steve Ballmer’s 400 million Windows 8/Windows Phone 8 devices in a year claim. Yes Steve, Microsoft may indeed sell a few hundred million Windows 8 devices, but they come with downgrade rights to use Windows 7 and that is what most businesses will actually run. Still, it is good to get some perspective.
Some 16 million devices out there are running preview editions of Windows 8. To put that in perspective that is slightly more than the number of iPad 1s that Apple sold. Yes Apple is now selling that many iPads a quarter, but again this is preview editions of Windows 8 running on older hardware vs a third-generation refined tablet. What’s going to happen when real Windows 8 hardware hits the market next month? Even in a worst case scenario Windows 8 will blow by Apple’s non-smartphone platforms right out of the gate. Combined iPad + Mac sales are running a little over 20 million per quarter. The ill-fated, much hated, Windows Vista sold 20 million units in the first month. In another metric, it took the iPad about 27 months to sell 100 million units. Microsoft’s Windows 7 did that in 6 months.
This is important enough to repeat. Even if Windows 8 is as poorly received as Windows Vista, it will blow the crap out of Apple’s non-smartphone sales volumes. And Windows 8, the controversy over dropping the desktop Start menu aside, is no Windows Vista. It is a fast reliable operating system that works well on a broad array of both legacy and state-of-the-art hardware, has great app compatibility, and lots of user added-value. None of that was true for Vista.
I’ll take it one step further. Even in a Windows Vista-like debacle Windows 8 will blow away combined Apple and Android non-smartphone unit volumes. Let that sink in.
Of course the place where having a Windows Store app matters most is in the narrower category of “tablets” rather than the broader market that includes classic PC form factors. Here we have far less data to go on, but I won’t be going out too far on a limb by claiming that Windows 8 will almost immediately blow by Android to take the number two position in tablets with screen sizes of 9″ or more. I’ll justify that prediction in a moment. I also think it isn’t far-fetched for Microsoft to take the number two position in tablets overall (which I’ll categorize as anything from 7″ up in order to leave “phablets” out of the discussion) within a year. And it is plausible for Microsoft to challenge Apple for the number one position.
The reason for my apparent optimism is simple, I believe there is great pent-up demand for so-called convertible or hybrid tablets. These have been around since the dawn of the Tablet PC a decade ago, but have always required too many tradeoffs to achieve significant usage. Of course the biggest issue in the past was that Windows and Windows Apps weren’t really designed for tablets, a problem solved by Windows 8. But the hardware was also just not up to snuff. Now look at the excitement surrounding the Microsoft Surface and how much of that is focused on the Touch and Type covers. These are pure tablets rather than convertible/hybrid tablets, yet Microsoft has struck a nerve by providing a notebook-like input/navigation capability on a tablet capable of running full Microsoft Office (as well as, in the Surface Pro, all desktop apps).
Last week one of my cousins, a national sales manager for a large distributor, mentioned that he was growing to hate his iPad. On further investigation it turns out that he finds himself forced to carry his notebook around with him everywhere in addition to the iPad since he can’t get his work done on the iPad. But he does like the convenience of watching movies, etc. on the iPad when he is on the train, flying, etc. He was totally unaware of what is happening with Windows 8. I described the Surface Pro, HP Envy x2, and similar devices. He asked me if they ran the full version of Microsoft Excel and I said yes, resulting in an immediate response of “that’s my next computer”. Anecdotal sure, but I see his exact scenario everywhere I look. I still see far more notebooks than iPads in Starbucks. I still see business travelers carrying a tablet and a notebook (and sometimes an eReader too). I still run into a lot of people who classify the iPad as a toy (even if a very good toy) and, like my cousin, could be wooed to a merged tablet/notebook device. Satisfying this pent-up demand could easily result in quarterly sales volumes that exceed those of the iPad.
You may observe that many of these aren’t really driven by tablet usage scenarios, they are primarily driven by notebook usage scenarios and thus will be satisfied by desktop apps. I think its more of a 50/50 split over which is the primary usage scenario but let’s not quibble over the exact percentages. These devices will all be used as tablets part of the time, and the tablet experience will be the long-term driver of customer satisfaction.
Because of the convertible/hybrid scenarios there are quickly going to be tens to hundreds of millions of devices in which Windows Store apps make a lot of sense. There will be hundreds of millions more Windows 8 devices where the suitability of Windows Store apps is far more debatable, but they dramatically increase the Total Available Market for an app developer. Back to the convertibles/hybrids, when someone goes to use the device as a tablet they are going to be looking for apps that are truly optimized for that tablet. Desktop apps aren’t going to cut it in most cases, though tablet-optimized versions of those apps could be made available. If they are using a enterprise-managed device they may find (that for security purposes) they aren’t allowed to install arbitrary desktop apps but are allowed to install Windows Store apps. With tens to hundreds of millions of people searching for good Windows Store apps a land grab will indeed be under way.
Let me use another anecdote. A few weeks ago I received mail from a friend saying he was done with Pandora and had signed up for Spotify’s Premium service. Why? He got tired of waiting for Pandora to release an app for his Windows Phone. Now Pandora can be forgiven for not wanting to spend its resources helping Microsoft solve the chicken and egg problem of Windows Phone’s small sales volume. But they lost a paying customer who used Pandora across a wide-set of devices because they didn’t support one important to him. My patience with Pandora is running out too. Guess what, Spotify works with my Sonos just like Pandora. It works with my Windows 7 desktops just like Pandora. It works with my wife’s iPad and iPhone just like Pandora. But it also works with my Windows Phone. And once I switch to Spotify, does Pandora really have any leverage to get me back?
Extend the Pandora/Spotify situation to Windows 8 and it’s tremendously higher volumes and you find failure to support Windows 8 could have more dire consequences for app developers. Now I have no idea what Pandora and Spotify’s plans are around Windows Store apps, so I’m not saying that this scenario is going to play out specifically for them. I’m saying that for any app developer there is great risk that by failing to jump on the Windows Store app bandwagon they will very quickly find themselves losing customers to those who do. And as previously claimed, Windows 8 volumes are going to be so staggering so quickly that being left behind could be fatal.
We have examples from the past that are instructive. Most of the leading app vendors in the MS-DOS era lost their market share and became irrelevant precisely because they did not jump on the Windows GUI bandwagon quickly enough. Sure you could run the MS-DOS versions of Lotus 1-2-3 and Wordperfect on Windows, but Microsoft’s native Windows versions of Excel and Word eclipsed the competitor’s MS-DOS products and established a leadership position on the new platform that Lotus and Wordperfect couldn’t dislodge when they finally launched Windows products. Keep in mind that this wasn’t some scheme by Microsoft to give Excel and Word an advantage over the competitors. Microsoft was urging competitors to support the Windows platform, and but they took a wait and see attitude towards the new platform. Seeing any eery parallels to today’s situation with Windows Store apps?
I am positive that within the first few months of Windows 8 GA I will make a decision on a new primary financial app to use. That is, some app for tracking my investments, getting financial news, etc. Not only will it become my long-term preference simply due to familiarity, once I go through all the trouble of entering portfolio information there will be strong incentive not to go through that again. Basically as soon as I find a Windows Store app that meets my needs they will “own” me as a customer for a long time. I can repeat this kind of example for at least a dozen apps that matter to me.
Another example, I use both Yelp and Trip Advisor pretty heavily but I write lots of reviews for the former and few for the latter. Windows Store apps, or lack thereof, for those two services could either increase my participation on Yelp (i.e., if they have a good Windows Store app) or shift more of my attention to Trip Advisor (i.e., if they have a good Windows Store app but Yelp doesn’t). I scan multiple (digital) newspapers on a regular basis, but already find I most frequently read those with good support for my devices. I pay for both the Wall Street Journal and The New York Times digital subscriptions. Not only would lack of Windows Store apps change my reading habits (and thus the advertising potential) amongst various (paid and free digital) newspapers, but it will affect my willingness to pay for subscriptions as well. Neither the WSJ or NYT are cheap, and if I find myself not making adequate use of the subscriptions well then…. I also get a few magazines digitally through Zinio. The lack of a Zinio Windows Store application would either lead me to an alternative (if available) or even to drop subscriptions to the lower priority magazines.
And what of Windows RT? It more obviously succeeds or fails on the basis of the quantity and quality of Windows Store apps, and in particular on consumer excitement over the new platform. It doesn’t get much, if any, boost out of the Windows legacy. They shouldn’t have even given it a Windows family name. So I don’t see Windows RT as being a near-term primary justification for a Windows Store app. But I do see it as a place where the land grab will be even more dramatic, because no one can fall back to their desktop app. So for the first year or so consider sales of apps on Windows RT as a bonus. Sure once the app library is big enough Windows RT volumes will explode and, particularly for consumer entertainment-oriented apps, it could become a huge focus. But in the first year I think that the Windows 8 convertible/hybrid market is the real revenue driver for Windows Store apps.
The bottom line for me is simple, it is perilous for application developers to ignore or take a wait and see attitude towards Windows 8 and particularly Windows Store applications. The volumes of Windows 8 devices will be staggering by any standard, even in what most people would consider a failure scenario. Land will be grabbed. Leadership will be established. Entire cross-platform ecosystems will rise and fall on the basis of how well they support Windows 8. Betting against Windows 8 is simply foolish.