Apple’s App Store: a way to go global

May 15, 2011 at 12:00a.m.

San Jose Mercury News

BEIJING

Lu Miao speaks very little English. He’s never traveled outside of Asia. He’s not a software engineer. But in a few short months, he became the founder of a successful software company selling apps in the United States and Europe.

In less than half a year, Rye Studio has sold one million downloads of traditional Chinese children’s stories apps at 99 cents each for the iPad and iPhone. Lu bought a courtyard home in the city’s tech hub Haidian District and converted it into a playful office with a giant replica of a Michelangelo painting and a bamboo garden. And he hired workers in three cities — Beijing, Shanghai and Chengdu — to develop software, video and music.

“The Apple App Store — this thing really made a big change in my career,” the 32-year-old Lu said. “Before this, I owned an advertisement company. We tried something new, and many clients came to us. The App Store helped us spread our products around the world.”

While China has long been viewed as the outsourcer to the world, a growing number of startups here are using the App Store to become global companies almost overnight, without spending a small fortune on marketing and advertising. App developers in other countries are doing that as well, but the possibilities are liberating in China, where budding entrepreneurs have long been hobbled by government regulations and no access to venture capital.

Those entrepreneurs are building original social games and other apps for iPhones and iPads, and hope to move on to Google’s Android devices in the future. They are aiming to do what so many other Chinese companies have failed to do — create business plans and products that cross cultural and market boundaries in other parts of the world.

For Apple, a flood of new Chinese app developers will in the long run make its iPhones and iPads even more attractive to Chinese consumers.

The company plans to roll out scores of new retail stores in China in coming months.

Last month, Apple reported that second-quarter revenue for Hong Kong, Taiwan and mainland China — which the company refers to as “Greater China” — were nearly $5 billion, about 10 percent of total sales. Just a couple of years ago, Greater China represented just 2 percent of total sales.

“The overall landscape has changed,” said Allen Hsieh, director of operations and client services for Mobile Now International, a Shanghai-based iPhone app developer that has published the games “King of Frogs” and “Super Ball Escape” under the brand PlayLithium. “The little guy can now actually do something.”

Last July, an independent Apple iOS app developers’ conference in the city’s trendy 798 Art District drew a thousand engineers. Bokan Technologies, a developer of iPhone and iPad game and education apps, has established an app developers’ academy in Beijing that has so far trained 400 engineers.

“The iOS opened a big window for everyone,” said Bokan Technologies CEO Bo Wang, who said his graduates can earn twice as much as other software engineers.

Whether a new class of global Chinese tech companies will emerge is unknown.

These entrepreneurs with global dreams still face many challenges to create apps that not only hit the cultural sweet spot of Americans but also meet the quality standards that Western consumers demand.

Still, the App Store has created a golden global opportunity for a nation brimming with young engineering talent.

“They see the iPhone and iPad as a channel that affords them a cheap way of distributing apps worldwide,” said Bertrand Schmitt, CEO of AppAnnie, a Beijing-based startup that provides sales and market analytics for App Store publishers. “They don’t have to have special relationships outside China.”

Chinese developers have plenty of incentives to create apps for the global market.

China has the world’s largest mobile market with more than 850 million users, but it’s dominated by state-owned carriers that call the shots, said Duncan Clark, chairman of BDA China, a Beijing-based investment and strategy advisory firm.

Many developers here try to mask the fact they are based in China, said Bjorn Stabell, who co-founded a software outsourcing company in Beijing 11 years ago and launched an apps startup in 2009. His company, Happylatte, created the game “High Noon,” which so far has sold nearly three million downloads.

Eventually, Chinese app developers will catch up to their Western counterparts, Schmitt said. And with the size of China’s mobile phone market, its culture will play greater importance on the world stage, he added.

“The global society is converging,” Schmitt said.

That’s the strategy pursued by Rye Studio, which sells Chinese children’s stories to a Western audience. Its book apps include fables such as “The Beast Nian” and “Little Tadpoles Searching for Mommy” created with traditional Chinese painting.

“The reason our products are succeeding is because Americans and Europeans haven’t seen them before,” founder Lu said. “Our company is very optimistic about the future. We are focusing on building our brand and our reputation — and making our platform bigger.”