In the late-19th century, in the midst of recession and bank failures in the US, with millions losing their jobs or their savings as the railroad bubble burst, there seemed little hope of striking it rich. So it was no surprise that, on hearing news of a big gold discovery near the Klondike River, down-on-their-luck Americans, as well as prospectors from Britain and Australia, swarmed to Canada’s Yukon Territory. Among this contingent were surprising numbers of teachers, doctors, civil servants and other professionals who ditched their careers in the hope of a lucky strike.

And so it is again today as more than 50,000 entrepreneurs from all walks of life are being drawn to the new mother lode: mobile phone applications – apps. Lured by headlines of overnight wealth, a worldwide stampede of software developers, including hundreds of self-taught and novice programmers moonlighting in their spare hours, are staking their own claims to fortune by concocting apps for all manner of portable devices.


If Dawson City was the boom-and-bust epicentre of the original Klondike, then Apple’s App Store is ground zero for this digital gold rush. This online bazaar offers the 37 million current owners of Apple’s iPhones and iPod Touches a selection of more than 31,000 different apps with which to transform their smartphones into everything from a serene aquarium to a flatulent whoopee cushion. Withevery new month come another 4,000 new apps.


Whimsical or not, the instant popularity of these widget-like nuggets – many of them offered at little or no cost – has been nothing short of breathtaking. Nine months after launching, the App Store recorded its one-billionth download in April this year – making apps one of the fastest rising business segments since the internet took off. By comparison, it took Apple’s iTunes a full two years to sell one billion digital songs to the iPod generation. Such instant propulsion even caught Apple’s bullish CEO off-guard. “I’ve never seen anything like this in my career in software,” Steve Jobs professed to The Wall Street Journal last August, not long after the App Store opened up to this rush of third-party developers. “Who knows, maybe it will be a $1bn marketplace at some point in time.”


Indeed, investment analyst firm Piper Jaffray reckons the App Store will have generated more than $6oom (€420m) in revenue by the year-end. Certainly there are enough stories of newly minted App Store millionaires to keep encouraging new waves of bounty-hunters. Celebrated examples include Steve Demeter, whose Trism app – a $5 (€3.50) variation on the Tetris game that utilises iPhone’s accelerometer – earned him $250,000 (€175,000) in just two months. Even more impressive was the $600,000 (€420,000) made in just a single month by Ethan Nicholas with iShoot, a tank artillery game that was written while he cradled his one-year-old son with his free hand. But even his story is overshadowed by that of Lim Ding Wen, the Singapore national who created a painting app Doodle Kids for his younger sisters. Lim is only nine years old.


Even now, Apple is said to be generating $1m (€700,000) a day from app downloads. 70% of this bonanza goes back to the developers; Apple’s cut of 30% pays for the cost of running the App Store as essentially a break-even, buzz-building proposition. The arrangement has given rise to a surging cottage industry of small-time developers who in turn have helped perpetuate Apple brand’s cultish devotion and kept iPhone sales humming even in the jaws of a global downturn. For anyone with a computer, the barriers to entry are negligible since wannabe developers can download video lectures for free and learn the basic fundamentals and principles of coding for the iPhone. Eventual access to the App Store requires a one-time registration fee of $99 (€70) – the 21st-century equivalent of buying those picks, shovels and gold pans.


“The App Store is truly revolutionary for the independent developer” says Mark Terry, a British insurance professional who became one of the early pioneers of this new frontier with a top-selling suite of apps that turned iPhones into realistic musical instruments – or even an entire band. “There are no upfront costs at all. Apple handles distribution costs and support. International payments and currency exchanges are dealt with for you. If Apple likes your app then they will even advertise it for you via a ‘featured’ tile in iTunes. Once you submit that app, you can basically sit back and wait for the royalty cheque at the end of each month. Compare that to the costs of developing a console game, say, where the set-up fees are so large that only the large publishers can justify it, and then you’ve lost your free market.”


According to Terry, who named his company MooCowMusic, the commercial life for an app is similar to any product. There is an initial period of high sales followed by a gradual fall-off over several months as customers move onto other attractions. Every app requires a periodic update at which point sales see a renewed burst of life as the app becomes visible again on the App Store. Sales and chart position can vary substantially by territory. In MooCowMusic’s case, Japanese customers love ‘Bassist’, but Americans less so – although whether this reflects geographical guitar-playing preferences remains unfathomable to him.


When the App Store began carrying his apps last June, Terry was convinced he would have, at most, a couple of months of sales before the corporate giants waded in with their huge marketing budgets. If anything, the reverse has happened. “The big companies have stood back, unsure of this new market, while bedroom developers with nothing to lose were attracted by the early wild claims of fortunes to be made. It’s been a real Wild West era, and a side-effect is that prices crashed to an unsustainable level. An easy way to compete withestablished applications is to undercut them, and a hobby programmer is not really concerned with the bottom line and has an external income, so sees no problem at pricing at $0.99 [€0.70] if it increases the chances of winning the jackpot.”


Such commercial dynamics may all change this summer as a result of two potentially critical developments. The first is an important upgrade to the iPhone’s operating system that will allow developers to keep charging for additional services from within the app itself, as opposed to rely on just a one-off payment upfront. The second is that the App Store will no longer be the only game in town.


Every week sees the announcement of another competing storefront for mobile applications. Research in Motion (RIM), makers of the Blackberry, has just opened App World as an online gathering point for all its thousands of applications. While there is some direct overlap with Apple, RIM’s array of apps have a predictably utilitarian bent as they look to protect their lead in business-orientated phones. Among its offerings is a kidnapping safety app from New York’s Brickhouse Security that is aimed at businessmen in fear of being held for ransom. For $19.95 (€14) a month, the invisible app turns the smartphone into a covert GPS tracker at the press of an emergency panic button. Perfect for executives working in, say, Mexico or Somalia – so long as their cell phones still have juice.


RIM hopes to steal some of Apple’s thunder by offering developers a bigger share of the spoils – 80%. For its part, Nokia, the world’s largest mobile-phone maker with an installed based of 345 million devices, is using proprietary software as a hook for luring developers to an app platform known as Ovi. GPS sensors that will come with the Nokia N97 not only allows for real-time updates to social networking feeds but also ensures an intuitive selection of apps based around personal preferences, location and friends’ recommendations. “The Nokia N97 is the most powerful, multi-sensory mobile computer in existence,” insists Jonas Geust, the vice president in charge of the Nokia Nseries. “Together with Ovi, the Nokia N97 mobile computer adjusts to the world around us, helping stay connected to the people and things that matter most.”


Others looking to join the App Store frenzy include Verizon Wireless, Google’s Android platform, Microsoft, Australia’s Telstra, LG, China Mobile and Palm with this summer’s launch of its would-be iPhone-killer, the touch-screen Pre. Even internet-enabled television services are taking their conceptual cues from Apple: every media channel and service will be offered as an individual app.


Together, according to Juniper Research’s most recent projections, this will generate more than $25bn in direct and indirect revenues by 2014, “with growth fueled by a raft of store launches targeting both high-end and mass market handsets.” 


Creating viable businesses from such exponential growth will involve a tough balancing act. The same freewheeling spirit responsible for unleashing all this home-spun creativity may also give rise to anarchy and marketplace confusion. Already, with tens of thousands of apps to choose from, even entrepreneurial advocates such as Mark Terry are wondering whether more filters are needed.


“As a consumer, 
I used to wonder why there was a need 
for record companies, and why I couldn’t buy songs directly from the bands at a cheaper rate, and also get to discover all those ‘amazing’ bands that hadn’t been signed up by labels.” But, thanks to the App Store, Terry has had a glimpse of what would happen to the music industry if there were no record companies: music shops would be crammed full of huge numbers of CDs, only arranged in alphabetical order, by bands you’d never heard of. Although you could check out the cover, you’d likely have no opportunity to try-before-you-buy, and, of course, there would be no promotion of albums or bands to help with your decision. Every day there would be another 250 new albums, but no review site or radio station would be able to keep up with the volume of releases, and 99% of the albums would be, in all likelihood, rubbish. “Under those circumstances, considered consumer purchasing becomes very difficult,” adds Terry. “So perhaps the ‘point’ of record companies is merely to put a huge bottleneck on supply of new music so that the consumer has time to evaluate it. And the cost to get through that bottleneck is so high that only the songs that people have the most faith 
in will make it.” 


Indeed, opportunistic intermediaries are already positioning themselves as the equivalent of publishers and record labels. Flurry, a San Francisco-based mobile app analytics firm, has publicly compared itself to a seasoned A&R team that are deployed by record labels to help make or break a new musical act. It hopes to provide the production and promotion elements that are often missing when apps are rushed to market. Other ancillary businesses are also springing up looking to organise and siphon off this burgeoning sector. In this regard, history is simply repeating itself. The enduring beneficiaries of the Klondike were not the gold-seekers themselves, but rather all the services that sprang up around them. Most of those who dug for nuggets returned home broke; but those who transported these speculators or else sold them jeans, pans, booze and female company were assured of steady incomes. And in the process, the foundations for the entire economy of the American north-west were built. 

Content a la carte

For much of the last decade, newspapers have watched as search giant Google linked to their online content without sharing in the advertising bounty that came with those links. Now they want payback for their journalistic endeavours and they see in Apple’s iPhone the mechanism for realising a dream of publishers: charging for articles on a la carte basis.


Leading the fight is an unlikely champion of paid-for content. Having bullied his way to global dominance through print price wars, Rupert Murdoch is now looking to make mobile users “pay handsomely” for news items.


“We are now in the midst of an epochal debate over the value of content and it is clear to many newspapers that the current model is malfunctioning,” the News Corp chief said in May. This from the man who, after buying publisher Dow Jones for $5bn in 2007, turned The Wall Street Journal’s subscription-fed online edition into free, ad-supported service.


The WSJ is developing a system to charge small sums to occasional users who may not pay for a subscription. It will be activated once Apple launches an iPhone system this summer that enables mini-subscription menus.


News Corp is not alone. From Bloomberg to Thomson Reuters, companies have announced overhauls to their mobile apps for the iPhone and Blackberry. Others are eyeing Amazon’s Kindle, though Murdoch has baulked at the 30% cut being offered to content suppliers.


Just as Apple’s iTunes gave record labels a seductive way to sell online music, so its App Store may dig media companies out of their digital hole. And there’s a huge potential market: tech researcher Gartner says the world has three times as many active mobiles as PCs, with smartphones growing fastest. 


However, newspapers may need to learn a few tricks before they can mirror the appeal of their print versions. Recently, Apple banned the app for Murdoch’s The Sun newspaper because its topless Page 3 girls were “obscene.”