Great article in the NY Times today about smartphones and apps and how they can enhance loyalty programs.

But…  I’m going to point out something that should be mentioned repeatedly to every small merchant on the planet — building an app is expensive and time consuming to do right.  There are a TON of “app builder” type companies who will “convert your website to an app” and all that good stuff.  Great.  Let’s not even start on how maintaining that is well beyond the time and scope of the average small to mid-sized merchant.  Or how the constant compatibility checks and bug reports and so on will drive you mad.

The real killer here is distribution.  Mobile device real estate is limited.  It’s small, requires swiping between multi screens (great if you are on the front page but not so great if you’re six swipes away) and doesn’t usually amount to much.  70% of apps that are downloaded never get used once.  NOT ONE TIME. The lucky ones who are used once don’t normally go on to see broad usage.  Unless you are Starbucks.  Or Sephora.

Oh wait – both Starbucks and Sephora (and REI, United Airlines, MajorLeagueBaseball, and Target to name a few others) ALSO leverage their stand-alone apps with Apple Passbook.   That’s right, giant companies do not rely on their own apps alone to get the job done.  Why not?  It comes back to real estate availability on those screens.

With Passbook, there’s no need to worry about uninstalling – it can’t happen.   Individual passes can be deleted (or deactivated by the merchant any time), but if someone has an iPhone that runs on iOS6 or later, they cannot delete the Passbook app.  And Apple does things for its’ native app that it does not do for third party apps – favorable things.  Notifications are available via Passbook that are not always available to stand alone installs.  Passbook always works.  It always looks good.  The functions are always there.  iBeacons will always work as long as Apple supports the iBeacon protocol (and given the number of new patents they’ve applied for, we have no reason to think otherwise).

What about Google Wallet?  That’s a more interesting case, but likely to move in the direction that Apple has taken.  The rumored purchase of Softcard by Google would give Wallet a chance to integrate the two platforms into a single app, and likely will lead to Wallet being pre-installed on new Android devices in nearly every case.  Some manufacturers may opt out of the install (if their contracts permit – Samsung comes to mind) but there will no longer be an entire group of major carriers (TMobile, ATT, Verizon) who don’t allow Wallet as OEM installs because they have a competing product.

We can’t make Wallet become interactive like Passbook, with the back of the pass click thru’s into Phone, Maps or Safari, but it’s entirely possible that Google may decide to upgrade the user experience in that direction.

What’s the takeaway here?  Merchants with limited budgets and limited time or technical knowledge should seriously reconsider creating a stand alone app.