App store play takes on Apple, Google
Last Updated: 18:11 March 28, 2012
BOULDER — Robert Reich is getting used to people telling him his latest ambition sounds a little crazy.
Reich is a Boulder entrepreneur and cofounder of OneRiot Inc., a Boulder-based marketing firm that develops media campaigns that rely on social media and mobile devices.
In March, Reich announced the formation of Openspace Store Inc., a company that is developing an online marketplace, www.openspacestore.com, that will sell mobile apps, music, books and movies for devices such as the Apple iPhone and iPad, smartphones equipped with Google Android and PCs.
Reich and Randy Watler are cofounders.
The website is scheduled to go live May 1, and Reich's not keeping his targets modest.
“The goal really is to build the world's biggest app and content store,” Reich said.
For Openspace to do that, it will take on competitors such as the Apple App Store, which has more than 350,000 apps available for download, the Android Marketplace, which according to Google has more than 150,000 apps, and online retail giant Amazon.com.
Reich acknowledges the idea is really ambitious.
“We think it's a multibillion-dollar business. It's not a small play, otherwise we wouldn't be doing it,” he said.
Openspace is starting lean, and its initial fundraising efforts brought in $500,000 from investors. Boulder is well represented, with the Foundry Group as the lead investor. Foundry Group managing director Jason Mendelson is a member of Openspace's board of directors. David Cohen, cofounder and managing director of TechStars, and Zelkova Ventures, a New York City-based venture capital firm, also are investors.
Reich said the ever-growing demand for apps means there will be enough space in the market for distributors to grow alongside incumbents like Apple and Google. Openspace cites market analysis from Gartner Inc. forecasting that by 2013 app downloads will surpass 21.6 billion, grossing more than $29 billion.
Taking on some of the biggest players in the industry isn't daunting Openspace's backers.
“All startups are tough plays, that's just the nature of startups. There are always tough incumbents,” Mendelson said. “Apple and Google were both startups, and people told them there was no way they'd surpass the incumbents.”
Openspace's selling point to consumers will be its ability to work across platforms. Currently, consumers are stuck buying multiple versions of apps for each device they wish to use it on.
“I don't need three different apps, and I want something I can buy once and use on three different devices,” Mendelson said. “For consumers this makes no sense.”
For consumers, Openspace will work like any other app store, with the site managing billing and vetting apps to make sure they meet quality and security standards. Openspace will sync the programs across a user's registered devices.
But before the store opens, Openspace is focused on attracting developers. Getting a critical mass of developers willing to sell through Openspace is a make or break issue.
“Initially it's all about developers, developers, developers,” Reich said. “We won't succeed if the developers don't come on board. It's that simple. If we start to get a lot of traction from developers, it will get really interesting.”
Openspace will not have the pre-existing base of iPhone and Android smartphone users that the App Store and Android Market rely on, so it is selling developers on the idea that they will have greater control over their product.
Currently the major stores that distribute apps set the rules on how apps can work and which ones they sell. Many developers chafe at the policies, which can seem opaque, Reich said.
To give developers more control, Openspace is establishing the Developers Cooperative, which will shape the policies and terms-of-service for the Openspace store.
The co-op's website features strident rhetoric.
“Thanks to platform specific applications and corporate rulemaking, the killer app you sweated blood over can be barred — or even removed from sale — for reasons that benefit the store and not you. And too often, we app developers have no say in the matter,” the co-op's website says.
“We're approaching it with a real open, somewhat rebellious philosophy that says this needs to be opened up,” Reich said. “It's about running a business from a community perspective, instead of just running it as a dictatorship.”
The co-operative and store won't be a free-for-all, Reich said. The voting members will be the top 10 developers that recommended the most active users to the store, and their votes will be counted in proportion to the number of users they bring. The voting developers will rotate, so the biggest developers will not be able to dominate the rule-making process. Openspace will maintain some veto rights.
Apps also will be marketed differently than they are by the major app market places. Reich believes it is hard for developers to make money from an app unless they make a store's top 100 list. Openspace is developing software, including an app and Web browser plug-in, that will recommend a variety of apps based on, among other things, a user's physical location or the website he or she is visiting.
When apps are sold, developers will get 70 percent of the money, and Openspace will keep 30 percent.
Reich believes these policies will be enough to entice developers to try Openspace. Developers also don't have much to lose — developers can still sell the same app at the App Store or Android Marketplace.
Through April 11, 70 developers representing a user base of 1.4 million users have signed up with the Developers Cooperative, Reich said.
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