At this week's CTIA 2011 Wireless conference in Orlando, Florida, several industry execs sat down to discuss the ever-growing application ecosystem, and the challenges developers face, in a panel session entitled "The Secret Sauce for Application Storefronts." The session, moderated by ABI Research's Mark Beccue, and including Appcelerator's Scott Schwarzhoff, GetJar's Patrick Mork and Verizon Wireless's Todd Murphy, wasn't meant to detail what the so-called "secret sauce" was exactly, but was a forum for discussing the issues of fragmentation, discoverability and the more recent shift from paid applications to those using other types of monetization methods.

To give you a little background on the three panelists, Schwarzhoff is VP of Marketing at Appcelerator, makers of a cross-platform mobile development platform used by 130,000 developers. Mork is CMO of third-party mobile app store GetJar, which has seen 1.7 billion downloads of its hosted applications to date. And Murphy leads the Verizon development community and the carrier's VCAST App Store.

Is There a Shift from Paid Apps Underway?

The first topic up for discussion was the shift away from paid applications as the only way to monetize a developer's work. Now, new business models are enabling different types of revenue generation capabilities for apps, like freemium apps, ad-supported apps and those offering in-app purchases, subscriptions or virtual goods.

Schwarzhoff says that there are currently five or six different business models out there currently, and determining which one is right for developers is a matter of looking at how an app engages its audience, then mapping that to the appropriate business model. Before, he said, apps were paid because you were purchasing content. Now services, like cloud services, social networking or location-based services, are offering a different engagement model. That means a different business model makes more sense.

In Verizon's app store, Murphy said he was seeing more of a shift to freemium applications. Paid is sort of a barrier to trying a service, he said. You want to first get people into the service, and get them using it, then ask them to pay. However, he noted, paid apps are not going away entirely and there's still value in offering a premium application experience to customers.

Murphy also said that Verizon would like to see more apps with microtransactions enabled, because of the option to offer carrier billing. Verizon is working on such a system now, Murphy said, but needs to do it in the right way. It needs to be easy for the developers to implement, of course, but it also needs to be trustworthy from a customer standpoint. Verizon doesn't want to get into the same situation that Apple recently faced, where kids were using parents' phones and racking up big bills via in-app purchases.

GetJar's Mork agreed with the idea that apps need to be free to some extent, so consumers can sample them before buying. But a consumer's willingness to pay varies by region, he reminded the audience. Plus, different consumers want different business models. For example, some consumers just want the free app and are willing to use one with ads in order to not have to pay, while others would be willing to pay for the app to remove the ads.

But using a non-paid monetization model doesn't necessarily mean you're giving up on potential income, Mork said. He cited one well-established game development shop (who he could not name due to confidentiality reasons) as having seen its revenue increase by 4-5 times after implementing virtual goods.

Fragmentation Issues

Before discussing the fragmentation issues, Beccue cited ABI's research which found that the smartphone install base currently includes 815.3 million devices. By 2014, that will be 1.7 billion phones, he said. And there will also be 2.5 billion phones with a Web browser by 2014, up from 1.5 billion now.

Schwarzhoff began by saying that mobile isn't like the PC world, where there was just the one dominant player and dominant browser for years. It's much more diverse. But the fragmentation is now extending beyond the device and OS level to the services side. Various cloud-hosting platforms and providers of backend services are available today for developers to choose from.

But fragmentation is just something that's inherent to the industry. "Welcome to mobile," he joked. You have to accept it's going to be there and developers, especially brands and agencies, need to be educated about what it means and how to overcome it.

Brands need to understand first what they're trying to achieve, said Mork, continuing the thread. Do they want reach? A deep, engaging experience? These sorts of questions will help them determine what platform to develop for. In most cases, developers build apps for the leading two platforms (iPhone and Android) and then make determinations about if and how they will reach the rest of the mobile audience, whether that's through apps or the mobile Web.

Schwarzhoff also noted that having different apps for different platforms, which is seen as this fragmentation problem, actually makes sense because different devices and form factors invite different experiences. Instead of thinking about all these different apps that have to be built, think about it as a single use case being used throughout the day on different devices.

HTML5 "Vs.?" Apps

As the discussion veered into the more controversial HTML5 vs native apps territory, a perennial favorite topic among application developers, Murphy made a remark that the Internet is where the tablet market will eventually end up. Mork, however, disagreed, saying that what we're seeing now is a paradigm shift in how consumers engage with digital content. Instead of searching the Web and and clicking through on results, we're moving into an era of tapping apps. Apps provide immediate accessibility to content, and there's a sort of instant gratification that comes with that. Why would we not want to transfer that experience to other devices?

Schwarzhoff then detailed what he suggests to developers looking to create a mobile app strategy. First, think about the platform, the form factors that the app will run on, then think about the people you need to build that app, the tech involved (languages, SDKs), the code involved, the scalability and the repeatability of that operation.

So many customers have a myopic, 3-month view of mobile, Schwarzhoff said. They need to think beyond launching the iPhone app, take a step back and think about where they see their company over the next 2-3 years. With that long view in mind, they can develop the mobile strategy and determine whether or not that strategy should involve a mobile Web app.

All three agreed that the question of HTML5 vs. native apps is not an "either or"  issue, but a question what's the best way to provide the experience you want to give your customers.