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How Can They Argue with Two Billion Downloads?

I’m quite sure that the news that downloads from the App Store have exceeded the two billion mark a little over 14 months after opening day did not come as a surprise to most Mac users. Nor should it come as a surprise that there are 85,000 apps available, and thousands more are going up every single week.

Certainly, Apple helped make it easier to navigate through this incredible repository with improved search and “Genius” recommendations in iPhone 3.1. With over 50 million potential customers, you can bet that tons of developers are wishing and hoping for big paydays.

Obviously Apple’s competitors are struggling to spin the news in their favor without much success. Microsoft, for example, claims that developers can’t profit from their products on the App Store, since so many are available for very cheap prices — or free for that matter. What the Microsoft drone fails to comprehend is the fact that the developers set their own prices, and they clearly feel that selling 10,000 copies at 99 cents each is better than selling 1,000 copies at $4.99. It’s the basic math that eludes Microsoft.

Indeed, Microsoft’s efforts to duplicate Apple’s success include dinging developers $100 for every single app submitted, regardless of whether it’s approved. Indeed, if Microsoft asks for a change, the developer cannot submit the new version without paying the fee. Talk of gouging in the first degree. How does that encourage them to jump ship or add support for a new mobile platform if they have to face extra upfront costs? Does Microsoft truly believe the fiction that they will somehow match or exceed Apple’s success in 14 months, or even 14 years?

Now you have to understand that the competition is certainly going to want to toot their own horns. The growth of Apple, Research in Motion and Google’s Android platform has, combined, taken a huge bite out of Microsoft and the market share for Windows Mobile. They’re now promising to have 600 apps available for the release of the next version of their mobile operating system. Even if that projection was to be believed, and it’s hard to take anything they say seriously, the number would seem pathetic compared to what Apple is offering.

Indeed, it wasn’t so long ago that the world’s most famous irrational CEO, Steve Ballmer, was explaining how stupid it was for Apple to want to enter the saturated mobile phone space. How wrong he was, but is that anything unusual?

Palm’s response is a Web-based app system for their Pre smartphone. But let’s not forget how Apple suffered from severe criticisms over their attempts to take a similar approach with the iPhone. That went nowhere, and it no doubt helped persuade Apple to move quickly to get its iPhone SDK out and create the App Store. So how can Palm expect us to believe that they will succeed, even though they’re selling a fraction of the number of units Apple is now shipping?

Indeed the App Store has become a game changer not just for smartphone makers. The gaming industry is looking carefully too, which is one huge change as far as the Apple universe is concerned. Macs have always played a poor second fiddle to Windows when it comes to getting the latest and greatest games. Even when they are ported to the Mac, performance rarely matches the Windows version, simply because publishers won’t make the investment to optimize the app for another platform. That Apple is now using the same processors as Windows boxes helps to a large degree, but it doesn’t bridge the gap completely.

Now to the surprise of many, the iPhone and iPod touch have become serious gaming platforms. There are over 21,000 games available for these gadgets, an inventory far larger than all dedicated portable gaming devices, combined, can offer. Sure, not all of them are as full featured, but the major publishers are regularly releasing product for the App Store at a price far less than what you’d pay on those other systems.

You also have to wonder if the recent price cuts on gaming consoles are in anticipation — or the fear — that Apple might actually deliver a full-bore dedicated gaming device in the near future. Certainly there are candidates. Apple TV, for example, might be a potential contender for bundled gaming features. The rumored Apple Tablet, iTablet or iPad might suit as well, but even your iPhone and iPod touch can be connected to a regular TV to expand the gaming experience.

How this all might play out is anyone’s guess. Certainly Apple knows, and they surely have a long range vision that they expect to play out in the coming months or years. Meantime, the other companies can only watch with fearful anticipation what Apple might deliver.

Whether Apple’s gaming strategy continues to play out strictly in the tiny portable computer arena, or expands to Apple TV and perhaps a tablet computer, doesn’t matter. In each case, being able to play games will only be one of the available functions. So you will want to buy them for other reasons even if games aren’t in the picture. At the same time, if Apple can trump the game console makers with that approach, it’ll be yet another area where they will reign supreme. Microsoft’s worst fears may come true after all.