‘Cut the Rope’ for Free Helps GetJar to Challenge Google, Apple’s ITunes
GetJar Inc., the independent provider of mobile applications that has handled more than 2 billion downloads, aims to expand by giving software away in a market that may be worth more than $9 billion this year.
GetJar supplies free apps for more than 2,500 device models, competing with stores run by vendors such as Apple Inc. (AAPL) for the iPhone, and Google Inc. (GOOG) for the Android operating system, as well as phone operators. Last month, GetJar got the first-week exclusive for Android phones on Cut the Rope, a game developed by Moscow-based ZeptoLab that has topped charts on the iPhone.
“Less than half of apps developers are seeking immediate profits or even revenue at all,” Chief Executive Officer Ilja Laurs, 35, said in an interview from Vilnius, Lithuania. “Facebook isn’t trying to make revenue from their mobile application. Their objective is to dominate the world.”
GetJar, based in San Mateo, California, makes money by auctioning positions on its screens to application developers. Its investors include Accel Partners, which backed Facebook Inc., and hedge fund Tiger Global Management LLC, which has bought shares in Facebook and LinkedIn Corp.
Many “free” apps such as the version of Rovio Mobile Oy’s “Angry Birds” on GetJar make money for developers from tiny embedded ads, similar to those on Google sites. Such ads will provide less than 10 percent of application revenue that is expected to reach $9 billion this year from handset and Google stores alone, said Stephanie Baghdassarian, an analyst at Gartner Inc. in Paris.
Free Apps
Free applications will account for 86 percent of downloads from the stores of Google and handset makers this year and more than 88 percent in 2015, according to estimates by Gartner.
“We’re in favor of free and open systems in every way,” Laurs said in the phone interview. “We don’t think developers should have to pay a tax on downloads or future commerce through their apps, or accept restrictions.”
Other application stores such as Apple’s encourage developers to charge for downloads and then take 30 percent of the revenue. While saying this may be attractive for small developers who want help with marketing and revenue collection, Laurs called this a “tax.”
Many applications are mobile extensions of existing businesses that operate over the Web, such as airlines, banks, and communications and social networks such as Facebook and Twitter, Laurs said.
‘Angry Birds’
The free model is suitable for applications linked to existing businesses because the companies can then sell apps and other products to users without worrying about fees, he said. It is also a better model for users who don’t have a convenient method to make payments, he said. GetJar gave up on charging for apps in 2006.
GetJar won the first-week exclusive to release the full “Angry Birds” game on Android last October. It booked a million downloads on the first day, choking GetJar’s servers and motivating Rovio to open the game on Google’s store.
Apple’s application store is still the leader and claims more than 15 billion cumulative downloads and 425,000 apps. It has by far the most revenue, according to Gartner. Google’s Android Market is growing fast with 4.5 billion downloads of more than 200,000 available apps. GetJar says it has more than 2 billion cumulative downloads and 150,000 apps.
‘Uphill Struggle’
“Independent stores face an uphill struggle to compete against the platform stores,” said Nick Jones, a Gartner analyst. “There are definitely things they can do such as negotiating exclusive relationships for certain products, and stocking combinations of things you can’t find in other stores.”
GetJar already has some 55 partner agreements, including arrangements to supply apps to customers of AT&T Inc. and Virgin Mobile in India. Laurs, who commutes between GetJar’s Vilnius and San Mateo offices, said he’s constantly discussing deals and with top-tier phone companies and handset makers as well as Internet companies. Announcements are planned around the end of the current quarter, he said.
GetJar will fight Apple to keep using the term “app store” after receiving a cease-and-desist letter from the company last month, Laurs said.
“We launched this service in 2005, way before Apple’s iPhone,” he said.
A U.S. federal judge last week struck down Apple’s lawsuit to stop Amazon.com Inc. from using the term “Appstore.” Apple’s online store for mobile software opened in 2008.
To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net
To contact the editor responsible for this story: Kenneth Wong in Berlin at kwong11@bloomberg.net
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