A big topic here at D2D Headquarters is exploring ways for app developers to get paid. So first, credit where credit is due. Smartphones have opened up a huge market for developers and redefined the software industry.  The trouble is that it has now become almost too easy to write an app. There are probably close to a million apps in both Apple and Android’s app stores (even after Google culled 60,000 scam apps last week).  This makes it very hard for any individual app to stand out and get noticed.

In a very short time, we have gone from a world where distribution was too hard to one where it is too easy.

A key point here is that the goal of all iOS developers is to get highly ranked within the App Store. If you are not in the Top 50 of some particular category your downloads are pretty slim. So a company that gives away your app can help boost your downloads. No one is exactly sure how Apple compiles its Top 50 lists or its “Feature” and “What’s Hot” apps, but it is pretty clear that the raw nunber of downloads is a key metric.  Having lots of downloads drives more downloads.

A number of companies have sprung up to address this problem, and this subject was very much in the news last week. Since all iOS and almost all Android apps go through an app store, developers need to find ways to best make use of those marketplaces. Sitting next to the app universe is the amerging App Store Optimizaiton industry (ASO). This term is a derivative of Search Engine Optimization (SEO) , which seeks to improve the ranking of a web site in a Google search. Name aside, this ASO market has several distinct strains some of which are not seen in SEO.

The first form of ASO is key word tagging, a direct off shoot of SEO. In this, companies make sure all the text in their app title and description hit on areas that are likely to get them ranked in the app store. This required some SEO expertiese and the goal is to essentially hack the algorithm used to power app store searches. The iOS App Store is surprisignly unsophisticated, and some very small changes to text can have big results. Google’s Play is even more surprisingly poor. Although Team Android has made some improvements, it remains a great irony that the world’s best search engine utilizes such a poor search algorithm in its content store. To this day, if you search google.com for a popular app you are just as likely to get a link to the Apple App Store as to Google Play.

The next step in ASO goes much further and brings us into some controversial territory. There are many companies that can help boost an app’s ranking. For many years, there were companies that would use automated ‘bots’ to inflate download numbers and write oddly worded but very positive reviews. Apple cracked down on these, but the industry continued to evolve.  The next step got the ad networks involved. App A would run ads for App B. App B’s developer would pay App developer A for this, and App Developer A would offer some incentive inside App A to encourage the download of App B. For instance, games would offer bonus levels of play if the user agreed to download some other app. Privately-held Tapjoy rose to prominene on this model. Then Apple cracked down again, and essentially drove Tapjoy out of iOS.

The latest version of ASO to hit the headlines are app recommendation sites. In particular, Apple last week removed AppGratis from the App Store. AppGratis, as the name implies, promotes certain apps usually by giving them away for free.

It is still unclear how AppGratis ran afoul of Apple’s Terms of Service, Apple actually approved their iPad app two weeks ago. It seems likely that Apple objected to AppGratis’ practice of taking payments for recommending a particular app. It is one thing to offer reviews and app fan sites, apparently it is another matter to rig the game in favor of AppGratis’ paying advertisers.

Here’s why it matters

There are two issues at stake here. First, is that the process of App Discovery is very important to developer economics, and in a semi-free market like the app universe, there will be a constant tension between the gatekeeper and companies seeking to find some edge. We should also be clear, there are plenty of legitimate app recommendation companies. Apple bought one of the first, Chomp, to improve its own app suggestions. We would also recommend Xyologic and App Annie, which have done a lot of work on understanding the app store dynamics.

The second issue is that two companies control app distribution. Most people would agree this is a vast improvement of the days of shrink-wrapped software that came on ‘discs’ in ‘boxes’ sold in ‘physical stores’. That idea now looks like something from a distant past  No, the real issue here is not that two companies, Google and Apple, control distribution. The issue is that they do a really poor job of it

Take Apple. Until they acquired Chomp, the App Store would often recommend apps a user already owned. Apple’s recommendation engine remains generally poor at predicting most users’ interests, relying on very basic search categories.  If it sees that you downloaded Chess it will recommend other ‘strategy’ games, most of which involve cartoon characters that have nothing in common with chess. In all fairness, this is a complex problem, something that falls in the category of ‘Big Data’, and here again Apple fails at such tasks (see the preceding article on location data). Apparently the team that runs the app store is a different building than the team that runs Apple’s databases, and that second team is not quite at the cutting edge of data science. (Again, in all fairness, few companies have sorted this out. We know a prominent gaming company  that has incredible data skills but still handles this kind of analysis by hand in Excel. And we are working with a number of companies on building some very basic data analytics structures where Excel is a big step forward.) Suffice it to say that Apple still has a long way to go on this front. And as our earlier comments should make clear, so does Google. And all the others.

We think this problem is only going to be come more acute as the app stores grow. There is a growing sense that consumers’ love affair with apps may be waning. We plan to address this topic in our next D2D installment. For now, if that fading interest turns out to be real, then developers will soon start to feel the pain. Our guess is that they are already feeling it, but are afraid to say so. This is hugely important to Apple. One of the key advantages they still maintain over Android is the quality of iOS apps. If developers find less interest in maintaining their work on iOS then Apple risks losing its edge.