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Microsoft's Kinder, Gentler App Store Is a Sign of Weakness


Microsoft wants to kill Apple's app momentum with good old-fashioned kindness.

With its upcoming Windows 8 operating system, Microsoft (MSFT) will be making a bigger jump into the wild world of apps -- with an approach that's far kinder and gentler than that of key rival Apple (AAPL).

At an event yesterday in San Francisco, Microsoft pushed the Windows Store, which will be integrated directly into Windows 8.

The biggest headline-generator regarding the Windows Store is the revenue split with developers. Microsoft will take 30% of app revenues flowing through the store, but after $25,000 in revenue, its cut will fall to 20%. Apple's piece of the pie is 30% across the board.

On a hypothetical $100,000 in revenue, a developer would receive $77,500 from Microsoft versus $70,000 from Apple -- an increase of about 11%.

Microsoft is also promoting a clear and transparent app approval process, a clear knock at Apple, which has been criticized for its somewhat arbitrary app-approval policies. In addition, Microsoft will be far more flexible than Apple when it comes to payment methods and advertising. For example, sellers of subscription-based products can use apps to send customers to external websites to make payments.

Now one key detail to note is that the Windows store will only sell apps using the touch-centric Metro interface, while big-dollar traditional desktop programs like Adobe (ADBE) Photoshop will not be sold in the store. Rather, developers will be able to direct customers interested in those types of products to other online points of purchase.

Note that in Windows 8, Metro can be disabled, which reverts the system back to a Windows-7 style interface. Should users do this en masse, the addressable market for Metro apps instantly shrinks. Another negative is that Windows apps carry a higher minimum pricing of $1.49 vs. Apple's 99 cents. We also can't ignore (AMZN) here, which hands out free Google (GOOG) Android apps every day.

I applaud Microsoft's friendly policies and generous payouts, but really, what do they say about the big picture?

If you think about it, they're an admission on Microsoft's part that it is way behind Apple in the booming app market.

Apple's been happy to play the bully role, and Microsoft's strategy is to place the nice guy? My, my, how times have changed.

The key here is that Apple's got a huge advantage in terms of customer stickiness by way of how well its products -- including the Mac, iPhone, and iPad lines -- work together with iTunes and the Apple Store (see Why iPhone Killers Must Target iTunes) to keep customers inside its walled garden.

Microsoft's Windows Store doesn't have a prayer of breaking that chain and easing the slide in Windows' market share.

There's just not much appeal for consumers that are in love with their Apple and Android devices -- especially those that have already poured dollars into proprietary apps for those ecosystems.

Twitter: @MichaelComeau

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