As iPhone Goes Global, App Makers Follow
As Apple Inc.'s iPhone sales explode overseas, apps are also starting to go global.
Shipments of the smartphone more than doubled in Apple's latest quarter, and the company attributed most of the growth to demand from Asia and Europe. Apple executives, in their earnings conference call last week, highlighted "incredible demand" for the device in newer markets like China and South Korea.
That has prompted developers of iPhone applications to consider opportunities outside the U.S. for the first time. Bart Decrem, chief executive of music game maker Tapulous Inc. in Palo Alto, Calif., said he is looking for a distribution partner outside of the U.S. to help tailor the firm's games—in which people tap the screen of their mobile device in tune to music—for overseas markets.
The effort comes as Tapulous's international sales recently reached 40% of the company's total business, up from 20% a year ago, he said, but declined to disclose revenue. Mr. Decrem, who is seeing strong growth in South Korea, China and Japan, said the company can't adapt the apps for other markets itself because the cultural differences can be significant.
"You want to make sure that the translation is accurate and the music is appropriate," he said.
That iPhone developers are pursuing international strategies is a sign of how Apple's App Store business—which offers games and productivity tools that can be downloaded onto the iPhone, iPad and iPod touch—is starting to mature, with some developers now having established enough domestic traction that they can turn their sights to broader opportunities. Apple currently has App Stores in 90 countries, though the U.S. accounts for the bulk of app downloads, which typically cost 99 cents or are free.
PopCap Games Inc., which makes games for computers and mobile devices, says the billing system on the App Store, which requires users to pay for items with prepaid cards or by charging it to their iTunes registered credit cards, makes it possible to increase sales in international markets that were difficult to penetrate in the past because of issues like piracy.
"We definitely have plans to get all our games localized," said Andrew Stein, PopCap's director of mobile business development. "We may see more than half of our sales come from outside of the U.S." PopCap's $2.99 "Plants vs. Zombies" tower defense game is currently No. 1 in China, according to App Store rankings.
Overall, the App Store now contains 200,000 apps, up from 25,000 a year ago, the company says. IPhone and iPod touch owners have downloaded four billion apps in that period, four times the year before, as Apple has doubled the number of iPhones in consumers' hands to 51 million and sales of the iPod touch have roughly tripled to about 35 million, estimates financial-services firm Kaufman Bros. Apple's recently launched iPad is expected to fuel more demand for apps. Kaufman Bros. estimates conservatively that the App Store generated roughly $2 billion in sales in the past year, with Apple taking 30%.
Overseas downloads have risen to about 15% of the total from 9% a year ago, according to ad exchange network Mobclix Inc., which tracks App Store use. Some companies are adapting quickly. Videogame publisher Electronic Arts Inc. sells a Monopoly app in six languages.
Developers say their going global is being prompted by ramped-up sales of iPhones in countries like Japan. While iPhone sales in Japan were relatively small a year ago, Apple said sales in the country nearly tripled in its latest quarter. That has prompted Aurora Feint Inc., which runs a social gaming network for iPhone games, to have discussions with its Japanese investor about entering the Japanese market for the first time, said Peter Relan, executive chairman of the Burlingame, Calif., company.
"It's not huge, but it moves the needle," said Mr. Relan, adding that part of the attraction is that Apple's Japanese App Store is less competitive than the U.S. version.
Other developers are approaching overseas markets more cautiously. Flixster Inc., which makes a movie-sharing social networking app, is looking "really hard" at expanding in Asia, said CEO Joe Greenstein. But it is first trying to ensure it can line up relevant data sources to provide accurate information about films in the new markets, he said.
"It's really easy to flip the switch," Mr. Greenstein said, "but it's quite another thing to build an application that is relevant and high quality."