Apple Watch lifts hopes of app makers hungry for growth

Bloomberg

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Long-time iPhone developers now have a new market to chase: Apple Watch wearers.
Announced today, Apple Inc. (AAPL)’s line of watches is a chance for software makers to create a new class of apps -- an opportunity not seen since the company last unveiled a new product category in 2010 with the iPad. Apple Watch, which only works in conjunction with an iPhone, can collect data on the wearer through an accelerometer and built-in heart rate sensor, and includes voice commands and text-message notifications.
Developers are betting that Apple’s track record of building new markets will continue, creating a leg of growth on top of the $35 billion a year consumers already spend on purchases of mobile apps and virtual goods. The company also introduced WatchKit, which will give developers new tools to help extend their apps to Apple Watch.
“It’s a new transformational device, and there’s more opportunity,” Roger Entner, an analyst at Recon Analytics LLC, said in an interview. “It’s going to be another gold rush, and some of the little guys have a chance at winning.”
In addition to health and fitness applications, the device could be used by the hospitality industry as a hotel-room key or by the airline industry to notify customers of flight delays. Warehouses could track Watch-wearing workers’ body motions to teach them how to avoid injuries. The gadget could also potentially be useful for remote monitoring of vital signs of patients with chronic illnesses.

Activity app
Apple Watch can track your movements and the number of calories burned with the built-in Activity app, and then the included Workout app will set running or other fitness goals.
While the features give developers more capabilities to work with, the built-in apps for health and fitness could cut into the demand for existing third-party apps like MapMyRun or RunKeeper. Plus, developers won’t be able to build fully-native apps designed specifically for Apple Watch until later next year, after the $349 devices goes on sale earlier in 2015, Apple said today.
Christopher Glode, who heads Under Armour Inc.’s fitness app efforts, which make apps like MapMyRun and MapMyHike, said he isn’t concerned about the built-in fitness apps crimping his business. Athletes were among the first adopters of wearable devices, and Apple is only going to help spread their use to more consumers, he said.
“As an open platform, we are very excited about the Apple Watch and plan to deliver our experience in a deep and meaningful way on the device,” Glode said today. “The more options that consumers have in terms of devices and sensors, the more experiences we can provide via our product interaction and engagement.”

Scary, exciting
Apple’s proclamation that health and fitness is an important business opportunity is “both scary and exciting,” according to Jason Jacobs, chief executive officer of startup FitnessKeeper Inc., which owns running app RunKeeper.
“Scary because it means the innovation bar is very high, but exciting because Apple commits to a category only when it is poised to become truly mainstream,” Jacobs said today. “It will be great for the market-leading companies like RunKeeper.”
Facing an increasingly competitive market for the iPhone and the iPad, where half of iOS apps earn less than $500 a month, developers may be willing to gamble that they can create the next breakout financial success for Apple Watch. Think of the way Rovio Entertainment Oy’s Angry Birds games took off, or how photo-sharing app Instagram Inc.’s popularity led to a $1 billion acquisition by Facebook Inc.
Who’s buying?


At stake are billions of dollars in fees from apps downloaded onto wearable devices, as well as from iPhone apps designed to also work with wearables like the Apple Watch.
About 25 percent of U.S. online adults expect to buy a wearable device in the next year, and 42 percent are interested in wearing it on their wrist -- assuming it’s useful and offered by a trusted brand, according to Forrester Research.
“I expect it to grow quite rapidly,” Brian Blau, an analyst at Gartner Inc., said in an interview.
In five years, consumers may spend hundreds of millions of dollars, if not billions of dollars, per year downloading wearable apps, he said. That’s still a fraction of the mobile apps and virtual goods market, which Gartner projects will reach $75 billion globally in 2017, up from $35 billion this year.
“A lot of the developers really want to understand where the market is going before they commit resources,” William Stofega, program director at market researcher IDC, said in a phone interview. “It’s an opportunity, but not this mega opportunity that everyone is talking about.”
Price point
The touch-screen device starts at $349, making it far pricier than most other wearable fitness monitors. Considering that you have to have an iPhone for it to work, the price is “pretty high” and is more like $800 to get up and running, according to Roger Kay, president of Endpoint Technologies Associates, a market research firm.
That could be an impediment for developers looking for as many users as possible to download a new program designed just for Apple Watch.
“The watch’s price and complexity, its unfamiliarity, may be stumbling blocks to widespread adoption,” Kay said. “Of course, the fans will still go for it.”
Shipments could still be in the millions worldwide during the first year, he estimated.
Morgan Stanley said in a July research note that Apple may sell 30 million to 60 million wrist devices in the first 12 months.
BMW app
With Apple joining the fray, the number of apps for wearable devices may reach the low thousands next year, up from just the low hundreds today, Daniel Matte, an analyst at researcher Canalys, said in an interview.
Apple Watch will have some third-party apps already available, including Facebook and Twitter, which will be able to send notifications to users on the watch. BMW will also have an app that helps the user find where the car is parked.
Apps for wearable devices may also prove more lucrative, if run-tracking app RunKeeper is any guide. Only 2 percent to 3 percent of RunKeeper’s 35 million users pay for a subscription of $10 a month or $40 a year, said Jacobs. For the users who track their heart rates, more than 20 percent pay the subscription fees, he said.
“The people who use wearables have the highest propensity to pay,” he said. That’s why RunKeeper has been focused on making its software work with Android-based wearable devices, such as Samsung Gear watch models, as well as smartwatches like Pebble. The Apple Watch will be next, he said.
“We’ll absolutely be there, and we’ll be committed to making it great,” Jacobs said.

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