WINNING IN THE APPLE ECOSYSTEM

TECHNOLOGY GIANTS LIKE APPLE HAVE A MARKET GRIP SO TIGHT THAT REQUIRES COMPANIES NOT JUST TO BUILD VIRAL-WORTHY PRODUCTS TO SUCCEED BUT ALSO UNDERSTAND HOW TO NAVIGATE THEIR ECOSYSTEM

Some smartphone apps aren’t eye candy. Smartphone owners use applications to chat, access social media or play games. People pick up their smartphones multiple times a day and often many times an hour. That’s how pervasive and utilitarian they and their use has become. Users often access evergreen apps like email, chat apps and social media such as Facebook and Twitter. Most other enthusiastically downloaded apps, however, are just eye candy; they fade into obscurity, eventually to be deleted. This is the first reason why the odds are stacked against any app developer. Even if an app gets downloaded, user attention spans are short.

Also making it to the top of the charts, on Apple’s iStore or Google’s PlayStore, doesn’t guarantee success. An app is much like composing and recording a potential hit song; only a few are successful. Most never make it to the charts.The market grip of the technology giants is the second reason. However successful an app, it’s reliant on the platforms of two companies, Apple and Google’s Android, for its success. These two platforms are frequently changing the rules of engagement with app developers, and upgrade devices, which force developers to keep up and take a significant chunk of any revenue.

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Drawing Desk, launched in 2013, is unlike professional sketching apps because it is simple to use and is meant to appeal to a broad audience.

 

 

 

So the success of sketching app Drawing Desk, which for the iPad is consistently the most popular app in that category in most rich markets, isn’t a simple achievement. 4 Axis Solutions, the Colombo based company behind the app, has two versions, one for kids and the other for adults. Drawing Desk, launched in 2013, is unlike professional sketching apps because it is simple to use and is meant to appeal to a broad audience.

People use it for all types of drawing, doodling, sketching and coloring, which can be then exported as images. Its free app has been download to over 18 million devices since its launch. Over sixty percent of downloads are on iPads. Most of the rest are using it on an iPhone. Less than ten percent of Drawing Desk’s downloads are on Android. Seventy percent of its downloads are by users in the United States and Europe. 4 Axis has a second app, Colorgram, which was launched in 2017 to capitalise on the popularity wave for adult colouring books and apps. Colorgram has more competitors and contributes less than five percent of the company’s revenue.

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Platform companies, such as Apple and Google, are successful not because of their hardware but because of software, data, services and their tens of thousands of partners, of which 4 Axis is one. This tight grip on the ecosystem means platform companies can change the rules on what it means to be a partner, and command a premium share of the revenue for merely allowing access to the platform.

Kanankage, who started the company with three university friends while they were all undergraduates, in 2013, refuses to speculate. However, 4 Axis Solutions is probably the only Sri Lankan company to succeed in an ecosystem such as Apple’s, over which the platform giant has a tight grip.

The founders bootstrapped the company until it became cashflow positive. Its subscribers are spread across the weekly $3.99, monthly $6.99 and annual $20.99 plans, for Apple device users. These apps are free to download and perform their essential functions well. 4 Axis’s freemium business model asks users to subscribe to access better features. Its co-founder and Chief Executive Dumindu Kanankage says, tens of thousands of subscribers earned the company over a million dollars in revenue in 2018, and so far in 2019 revenue appears to have doubled. Apple’s ecosystem aided a pivot in 2016 when the company introduced a subscription model.

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Everything took off from then. Until then, revenue was earned by placing ads within the apps. While this income was just adequate to pay the teams and maintain the technology infrastructure, the company saw no great future with only that model.

Many developers are taking advantage of the Apple ecosystem to take the freemium path by using the basic app as a marketing tool. Successful apps, sometimes with millions of downloads, convince a portion of their most loyal fans to upgrade to access features unavailable in the free version. The best apps, instead of charging a one time fee for the paid version, run a subscription model. Only a fraction of App Store off erings has scaled a recurrent revenue model. Of revenue, developers receive around 70% from Apple.

“If you come up with something unique, something different, there is potential for the app to go viral,” agrees Kanankage who has been leading 4 Axis since 2013. Co-founder Minsara Madhawa is its Chief Operations Offi cer. Two other co-founders no longer hold executive positions.

While useful apps can expect to be discovered, Apple’s ecosystem changes are still challenging developers. It’s changing in several ways, including introducing new devices, regularly updating its operating systems, plus introducing a new programming language. Drawing Desk and Colorgram code were written in Objective-C, Apple’s own programming language for iOS and OSX (the mac operating system).

Tens of thousands of subscribers earned the company over a million dollars in revenue in 2018, and so far in 2019 revenue appears to have doubled

Th is codebase is about six years old, points out Kanankage, who with the team started writing the code before they graduated from the University of Moratuwa in 2013.

Apple’s proprietary programming language or ones used on Google’s Android platform aren’t all taught at colleges, as they aren’t widely used, and only a few graduates end up developing apps. Sri Lanka also has very few companies that demand coders specialized in developing for Apple or Android. As a result, finding high-quality programmers
is a bottleneck for 4 Axis Solutions. “We have that worry, and that’s actually the driving force,” admits Kanankage about the apprehension that a competitor able to roll out new functions for sketching apps faster may erode their dominance. “There are lots of other global competitors.”

Any competitor with enough new developers to build an identical product, and then roll out new features faster can take market share. “Five to ten apps are competing with us, and two of those are putting a lot of effort and money to catch us.” Then in 2014, Apple announced the launch of Swift. Th e new programming language was going to make it easier to write apps. “But the problem is that there aren’t a lot of developers available to escalate development with Swift. That’s the main problem. I haven’t seen many good developers who want to learn and adapt really quickly. We have to train them. We only have two developers doing the ‘drawing engine’ development so far.”

The drawing engine is the core software on which both of 4 Axis’ apps, Drawing Desk and Colorgram run. Converting into Swift should make these better performing and more stable. “Everything should be working better than the current version.”

Swift is critical to launching new features on Apple’s latest devices faster. Because its core is still running on the older Objective-C platform, 4 Axis is actually developing software on two fronts. With Objective-C, it’s finding workarounds to keep the current app codebase able to add new features and second, it’s developing the new Swift core at the same time. They have already spent two years developing a new Swift code core and Kanankage estimates completing it will take another year.

Programmers are keener to build apps for iOS before they turn to Android’s many versions. 4 Axis has just one Android developer. Android lacks Apple’s control over the operating system and the app store.

On the app store, an emerging challenge is the introduction of a Google keyword search type
advertising system. “Even though you are number one or two, they (Apple) will place an ad right on top of everything. So, you are not number one anymore. So, now we have to market to be competitive in the app store, and to be visible.”

In addition to 30% it pays for Apple’s share of sales, 4 Axis now spends the equivalent of another 20%-30% of revenue on marketing; spend aimed almost entirely to be at the top of search results on the app store. Apple thus takes more than half of the company’s revenue. An even more significant chunk of 4 Axis’ revenue growth will be captured by Apple through commissions and app store keywords search, now.

Just like search, Google’s cost of keyword search on the Apple story, which is a feature in some rich countries, is based on demand. “It’ll cost us more than 30% of revenue in the future to be competitive. But you still cannot guarantee that we will be number one always, there will be a lot of competition in the app store search engine.”

While many apps launch, survive for a while and fade, 4 Axis has created a winner with the Apple ecosystem. Once its new Swift core platform is ready, it plans to add more design-related apps that can share its platform. Its ability to scale will be even linked to how well it can then navigate the world of the mega-platforms.