POS App Stores Don’t Work, so Shut Up

23 May

Since the wild success of Apple and Google’s efforts, everybody and their dog wants an app store. It’s totally understandable – after all, Apple earns $6B from its app store. But there a lot of necessary ingredients to successfully pull it off.

First you need a process to accept, vet and support third party developers. Without the procedures to keep good apps in and bad apps out, the quality of your efforts will be seriously questioned. It’s not an easy task, and it’s why Apple gobbles 30% of app store revenue.

Second, you must be attractive to developers. Apple and Google have literal billions of users (i.e. prospective customers) between them. As a developer, even if I get a fraction of those users to convert, it’s serious money – whether it’s a paid app or in-app advertising in a free app is moot. I must be lured by the possibility of a (relatively) large outcome for my development efforts.

If you can’t provide a good process for third party onboarding and don’t offer a clear business proposition, why would I sign up? Yet this is where the majority of POS companies find themselves.

POS is a highly fragmented business. High levels of customer churn (25% annually), wide segmentation and very low barriers to entry mean there are tens of thousands of POS systems across multiple verticals. By its very nature this means that each POS company has a small number of merchants on its platform. Even a larger platform, like First Data’s Clover, or Poynt, has upwards of 50,000 very small merchants (i.e. their merchants won’t pay for much) but that’s still exponentially smaller than the user bases of Apple or Google. For tangible numbers, the Android user base is 30,000 times larger than that of Clover or Poynt.

Given their smaller footprints you’d expect POS companies to be more flexible in making their app stores work. Nope. NCR takes 40% of the revenue, 10% more than Apple. NCR also asks for $15,ooo per year just to participate, and charges additional fees for any extra work on their end.

The biggest distinction, however, is that businesses do not do self-discovery. At least not yet. I was in the same camp as everyone else: “App stores work great for consumers, why not businesses?” Turns out there’s a huge behavioral difference. As a consumer, I can peruse an app store in my underwear while watching college football on the couch. I’m not in a rush or on the clock. While at work something seems to change.

No POS company has accounted for this reality to help their third party developers sell their products. POS companies will not provide third parties with a list of their customers, nor will they actively sell third party products to their merchant base. At least Apple and Google have developed app store SEO and found ways to promote good apps. A healthy app store not only yields increased revenue for Apple and Google, it also means customers find increased value in buying an Apple or Google device. It’s a great cycle of fulfillment.

Unfortunately, POS companies expect developers to build apps for their app stores and pray something happens. I know numerous products that went through the trouble of participating in POS app stores only to still be sorely disappointed a full 12 months later.

My advice for all developers is to steer clear of POS app stores. Until the POS companies are honest with themselves and desire win-win partnerships, you’re drawing the short straw.