The App Store after the gold rush

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Three months past its launch, Apple's App Store is proving its staying power, generating more than $1 million in downloads a day and boasting more than 4,000 iPhone applications in all. But the growing volume of applications is posing an increasing challenge for developers: According to a recent BusinessWeek feature, the flood of new games, productivity tools and related iPhone software is making it difficult for the vast majority of apps to crack the consumer consciousness. A number of developers are slashing their prices to remain competitive, but it appears that the gold rush that followed on the heels of the App Store's July 10 grand opening is already over, and the get-rich-quick stories of developers like Steve Demeter--who reportedly raked in $250,000 in just two months for his iPhone game Trism--have already passed into coder lore.

Technology research firm Rubicon Consulting reports that about 90 percent of iPhone applications are now free, and that percentage could go even higher later this month when Google premieres its rival Android Market, which at launch will offer nothing but free applications. That's all well and good for Apple, which will continue making money on iPhone sales even if its 30 percent cut of App Store download revenues translates to virtually nothing. But it's a different story for developers, who must now scramble for alternative revenue sources. Mobile advertising seems to offer the most viable option, but even Google has said it doesn't anticipate significant mobile ad revenues until years down the road--moreover, few iPhone applications have achieved the mass-market scale necessary to command advertiser interest. Another possibility: Offering free, simplified versions of apps to drive user interest in the full-fledged, premium download. No matter what, it looks like developers must once again channel the creativity and innovation that produced their iPhone apps, only this time to figure out how to monetize them. -Jason

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