Jeff Schuster

Inside the App Economy—Beyond the goofy games is a world of useful programs that’s making fortunes and changing the rules of business

It’s easy to shrug off the kooky world of apps. The bite-size software programs people load onto their mobile phones or tap into on the Web seem mostly to be silly games and pointless novelties. But look past the beer-drinking apps and flatulence programs and you’ll see something significant taking shape: a bustling app economy that’s creating new fortunes for entrepreneurs and changing the way business gets done.

It’s happening with dizzying speed. Just two years ago, almost none of this existed. Apple’s (AAPL) App Store, the most popular destination for mobile-phone programs, was launched last summer. Now there are more than a dozen rival stores, and at least 100,000 apps have been created. Some startups that staked their claim in the app economy have become large, lucrative businesses in just a few months. Two-year-old Zynga, which makes popular game apps, is already profitable, with more than $100 million in revenues. By comparison, Google (GOOG) didn’t start making money until its third year—and still had less revenue.

There are serious business tools among the thousands of new apps. Salesforce.com’s (CRM) programs let executives manage customer relationships from an iPhone or BlackBerry. Oracle (ORCL) apps let managers check inventory or get a snapshot of a business unit’s performance. The computing that people used to do at their desks increasingly can be done on devices they can carry anywhere.

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Google Wave Screenshot

Google’s new collaboration tool, Wave, runs smoothly inside the iPhone’s Safari browser and feels like a native App Store program, thanks to the so-called “app mode” that kills Safari’s UI.

Google Wave, the new collaboration service that aims to re-invent email, runs inside the iPhone’s Safari browser in a borderless “app mode” that removes the browser’s UI controls and buttons entirely. As a result, the web-based application feels snappy and natural, almost like the native App Store program.

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Apple has introduced an in-app purchase feature for free iPhone apps that allow you to fulfill transactions within the iPhone applications themselves — no Apple App Store required. The feature was previously available for paid applications.

By enabling in-application transactions, Apple makes life easier for developers who no longer have to make “lite” or teaser versions of applications along with ones that cost iPhone owners money. If you like the free version of Ragdoll Blaster Lite and want to upgrade to the $1.99 full version, now you may have the option to upgrade within the application itself — no App Store needed.

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