This is a continuation of the earlier post on Why Apps Stores are important for Operator Lifelines
The Operator abilities to do the Apps stores will define their existence going into the future. However, it is not as easy as just creating a Apps Store. There are considerations that need to be factored in before any operator gets into a data and revenue based strategy around the Apps Store models.
A few pointers to the Operator Apps Store strategy is as detailed below:
1. Mobile operators can shore up their position in the mobile applications space by taking a series of definitive measures. Operators need to decide on the extent of activities that they would want to undertake in the application store segment. While global players with a large captive customer base might want to build end-to-end capabilities in the space, smaller players might decide to undertake only select activities in-house, relying extensively on third-parties for the technology platform.
2. A critical component of operator strategy to compete in the space would be their support of device-agnostic platforms. This will allow operators to support a much wider device portfolio through their storefront, while simultaneously reducing porting efforts, and hence costs and time-to-market for the developers. Additionally, platform-agnostic applications will allow a distinct positioning option for operators, thereby avoiding direct competition with vendor partners. Another option available to operators looking to encourage device-agnostic application creation would be to actively promote web-based applications.
3. Since the quality and reliability of the applications available on a storefront will be dependent on the strength of the developer community, it is imperative that operators provide the necessary incentives for the creation of exclusive applications for their storefronts. This will depend on aggressive revenue share arrangements, wherein operators allow developers to retain a higher share of the application revenues when compared to other storefronts, can help operators play the role of ‘disruptor’ and corner a higher market share. While a revenue share of at least 75% for the developers will be necessary to remain competitive, analysis indicates that by increasing developer share to 80%, operators can get incremental revenue uplift of around 11% points, resulting primarily from a greater market share of application downloads.
4. Operators should strive to develop pricing models which are optimized based on the nature of the application, with popularity, market potential and stickiness of an application being the defining criteria. For instance, typically applications in categories such as medical and finance are highly customized, resulting in a limited number of such applications. However, because of the utilitarian nature of these applications, the consumer willingness to pay is fairly high. As a result, these applications are very suitable for subscription pricing. Operators should also play an active role in formulating the monetization strategies of applications, to ensure the greatest returns from their storefronts.
5. Operators should launch application stores to retain their prominent position in mobile content distribution, as well as to benefit from new revenue streams through the sale of applications, provision of access services and rendering of additional services such as integrated billing and access to networks that application interfaces are supported on. While application stores provide operators with an opportunity to re-establish their position in the mobile content value chain, the opportunity requires a strong operational strategy for success. Operators need to leverage existing capabilities in this space so as to be able to create a robust offering for the consumers. The opportunity should be looked at from the perspective of a strategic imperative to reverse the present trend of disintermediation from the content ecosystem, rather than a pure revenue enhancement exercise. It can’t be left to Apple to pave the way anymore in the application store market. There is plenty of room for more.
A recent Report by Capgemini has estimated the 2009 annual revenues from mobile app downloads to be $3.8 Billion. Given that the Apps eco-system is still developing and growing and Operators and handset manufacturers are trying to establish their own Apps stores and the increasing smartphone penetration, the Apps store revenues are likely to Reach US$ 8.6 billion by 2013, a CAGR of 30% between 2010 and 2013. Driven by the proliferation of free and mass market applications, the average selling price (ASP) for applications is likely to drop – analyst estimates indicate a value of US$ 1.72 by 2014, as compared to US$ 3.83 in 2009.
Debating the necessity for Apps stores for Operators, the Capgemini reports remarks that:
Launching an application store will provide operators with an opportunity to augment their existing data services revenue. There are going to be primarily four revenue streams for operators, viz. revenue share from the sale of applications, mobile advertising revenue, incremental data usage revenue and payment gateway revenue. Relying on these revenue streams, our analysis indicates that a typical operator (based in Western Europe with a subscriber base of 50 million) can expect a data revenue uplift of 11% by 2013. Additionally, if an operator is successfully able to implement a strategy wherein they are able to push web-based applications which result in greater data consumption, the revenue upside can be as much as 17% with over 30%-40% of this uplift coming from increased data usage.
In addition to augmenting current data revenues, applications storefronts can also be instrumental in attracting and retaining subscribers with high-spend on mobile data services. High-value customers exhibit a greater proclivity to download and use mobile applications. Moreover, application stores are becoming increasingly important for operators to build and maintain a robust content ecosystem, something that is essential in today’s economic climate and competitive landscape.
Operators are threatened by the prospect of being rendered “bit-carriers” due to the expansion of online and device players across the value chain. The emergence of application stores as primary channels for mobile content distribution can further impact operators’ positioning in the value chain. Consequently, inaction in this space would not only undermine the competitive positioning of operators vis-à-vis other players who actively launch application Stores, but also the ability to drive data consumption amongst existing consumers.
Airtel Apps Central recently completed its first 4 months. It has flashed a very impressive set of numbers to emphasize the success of the Apps store format in India. Indeed, there are very interesting set of numbers and facts in 4 month results.
1. The number of apps offered tops 71K, a huge improvement over the 1250 apps it started off with initially.
2. The apps compatibility stands at 780 devices. It started with 550 devices, 4 months back.
3. 75% of the Apps featured are paid, the rest 25% are free.
4. The unique mode of payment, where the post of a paid application gets deducted from the Post paid bill or the Pre paid balance has made acquisition of these apps easier for the consumer.
5. The 71K applications have been categorized under 25 categories
13 million downloads at the rate of 1.2 downloads per second in four months. (That just proves the opportunity for Apps stores in India)
6. More than 32% of the apps downloaded are paid.
7. Tier 2 cities in India made the bigger contributions in terms of downloads (in line with the internet consumption habits of India). The top 5 cities being Surat, Udaipur, Pune, Mangalore and Thiruvananthapuram.
8. The top 5 category of downloads are Social Networking, lifestyle, Books, Entertainment and Games.
Airtel is now working on a downloadable version of App Central so that one won’t need to access it through a web browser but through an icon on the menu. App Central is also aiming to offer local and regional apps for customers across the country.
Two things that will determine the success of the app stores would be
1. Relevance of Apps: As blogged about earlier, Apps would have to dig deeper than Astrology, Bollywood, Cricket and Devotion to establish itself firmly in the minds of consumers. The Mobile phone changed the way a lot of things were done by the Sec C and Sec D class of consumers. The same kind of relevance wil have to be built around these Apps stores
2. Delivery medium: English is the de-facto medium of delivery. This would have to change to Vernacular languages. English by itself has a 10% cut off in population reach. Theres a 90% market that the vernacular languages cover and this is a big opportunity yet again.
The Apps central model will possibly be perfected in India after which Airtel would want to take it to Africa which is the next biggest blossoming telecom market. The parallels and the modus operandi is just so obvious. For a change then, Airtel is making inroads with data traffic in India.Intereting space given that Vodafone and Reliance are already in and Aircel may jump in any given moment now.
ABI Research predicts that 2013 smartphone downloads via smartphones will peak. Last year, consumers downloaded 2.4 billion applications from application stores – a figure that’ll almost treble by 2013, when almost 7 billion apps will be downloaded. Growth will not be steady – 2010 will see a major jump in downloads over 2009. From there , growth will be predicted to be relatively steady through 2013. applications stores are not going away by 2013, but rather they will peak and the number of downloads by 2015 will have only decreased by 7 or 8 percent.
Apple’s App Store will remain the market leader until 2013 according to ABI’s report, despite pressure from Android and Symbian. This report however is handicapped by specifity of devices kept only to smartphones only and not taking into account feature phones.
Three main trends that seem to be emerging with the future of Apps stores going forward are
1. Carriers plan to launch their own application stores, which will extend the principle of downloadable applications to feature phones. This means access to newer and developing markets where smartphone penetration is lower.
2. Evolution of the mobile internet will then lead to consumers starting to head away from dedicated stores for their software applications. Total app downloads will probably continue to grow, although downloads via app stores are expected to fall. Users will download apps from the home sites.
3. In addition, more and more popular applications will be preloaded on mobile devices. Social networking apps in particular will be pre-loaded on new products.”
4. Platform Fragmentation will pose to be challenge for the Apps stores and the developers community.
5. With so many apps and so many stores, indexing the best Apps and increasing their discoverability for consumers is also going to be a critical piece for greater depth in terms of usage and greater width in terms of number of consumers.
Read Earlier posts about the Apps A to Z of Applications here. This is a repository of the kinds of action and stuff that could and would happen at the Apps front in the near future.
How Infosys powered Flypp platform for Mobile Apps would redefine MVNA/MVNE constructs
Days after Airtel announced its Apps store, Infosys, India’s 2nd largest IT services company announced its plan to roll out mobile application stores for 9 mobile operators across the globe. Infosys is already partnering with Aircel to build Aircel Pocket Apps. Infosys is working with 2 more Indian Carriers and has other operator partnerships in West Asia, Europe, Africa and North America. Infosys claims that it can deliver a full fledged apps store within 6-8 weeks, with its applications platform, Flypp. The Flypp platform allows Infosys to develop utility-based apps that can be used across mobile devices, regardless of the operating systems or hardware constraints. The apps featured include apps developed in-house as well as those developed by Apps Developers.
As part of Infosys’s new engagement models (NEMs), Flypp is offered to operators on a revenue-share basis. Flypp hosts 2,000 apps that can be directly deployed by mobile operators into an app store and we will grow the number to about 10,000 by mid-2010,
NEM strategy and its mobile application implementation at Infosys, is a critical business unit for the company. Flypp is able to provide operators a host of localized mobile apps that can differentiate one app store from another and drive data consumption at the customer end. Flypp provides independent software vendors a viable and attractive channel to showcase and monetize their proprietary applications across multiple geographies and service providers. App developers are not charged to host their apps; only when an app is downloaded by customers does the operator pay for the download and revenue is shared with the developer.
Infosys only began targeting the domestic telecom market during the past 12 months, having previously targeted its efforts towards North America and the UK. Already the mobile platform has helped the company to report good numbers from the telecom industry that contributes nearly 16 per cent to its revenues. For Infosys, Flypp allows it to price its services based on business level outcome against input based pricing or fixed price projects. Expected to be a critical focus area for the company, nearly 1/3rd of the company’s revenues are estimated to come from NEMs in the next 5-7 years. Currently, the non-linear initiatives contribute about 5 per cent to its revenues and the pie is expected to grow going forward. The Indian market’s contribution to Infosys’s revenue is a mere 1.2 per cent, and with initiatives such as these, the company wants to increase its domestic revenues.
Infosys with its global presence and IT experience should be able to re-define Mobile Virtual Network Enablers and Aggregators (MVNA/MVNE) in its true sense. With its platform approach, Infosys becomes the enabler for Mobile companies to leverage on Infosys’s IT development strengths. This also helps Operators to focus on their core business and leave the IT led apps development processes to the IT specialist.With its ability to pull the pool of Apps developers and giving them a larger canvas/market, Infosys could soon evolve into an aggregator as well. There are challenges in managing a eco-system, but Infosys has a formidable reputation to back it up. What goes unsaid is this move allows Infosys to have a very sound stepping stone into the Mobile Industry through the Apps route.
Bottomlines: The Flypp powered App store may be a success or failure for consumers or Telecom Carriers, but in the long run, it will be an ideal stepping stone and learning experience for Infosys in terms of Consumption of mobile apps and internet. The Insights could be leveraged in other ventures for Infosys
Yet another report by yet another survey agency has yet again concluded the usage disruption that the iPhone is bringing about in mobile computing. Morgan Stanley puts Apple in the pole position to control mobile internet computing. Not only that the study also concluded that the iPhone, iPod touch and iTunes platform has seen the fastest rate of adoption of any new technology in history.Though the iPhone and iPod touch represents just 17 percent of global smartphones, the two devices are responsible for 65 percent of handheld Web browsing, according to Net Applications, and half of all mobile app usage, according to AdMob. Compare that to Nokia’s Symbian platform, which has 45 percent of all mobile devices, but just 7 percent of the Web share.
The Morgan Stanley presentation goes on to define the future of the mobile Internet as the overlap between social networking and mobile devices (Haven’t we heard that before?).
Smartphones have been smartphones for a while, but Apple is perhaps the first device and platform which pioneered the internet on the handheld. The iPhone thus has become more than a device as it integrates internet, social networking, music and gaming into the handheld device helping people live out their “internet lives” seamlessly. The US markets are definitely swaying away to the iPhone and Apple.
In another report, by Comscore which measured the usages of smartphone and operating systems, Apple has upstaged Microsoft as the No.2 smartphone in US. The bad news for Microsoft is that there is Android in 2010, which is waiting to get past Microsoft. As reported earlier in a post, Android will ship through 50 or more devices in 2010 and it is only a matter of time before, Android pushes past Microsoft. Microsoft’s WinMo 6.5 has been a damp squib (it was supposed to be Microsoft’s answer to Android). Microsoft can only hope that WinMo 7 is able to work it out for them provided it is released before Microsoft is all and written off by the market. There is a dangerous trend building on that as well.