Application Stores: How Operators Can Create a Winning Case

WHITEPAPER

Application Stores:How Operators Can Create a Winning Case

With the overwhelming success of application stores, this whitepaper provide Operators insight on how to launch their very own application store to increase ARPU.

It presents the strategy for Operators to embrace to succeed in the application store arena and offer best-in-class experience to subscribers as well as content developers.

Application Stores: How Operators Can Create a Winning Case

WHITEPAPER

Executive Summary

The Application Store Sensation

The Evolution of VAS

The Winning Application Store Strategy

Embark on the Application Store Journey Today!

References

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Contents


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Executive Summary

It is widely acknowledged that Apple has created a phenomenon with the overwhelming success of its App Store. However, followers of this trend would know that the concept of application stores originated from the need to offer value-added services (VAS) and has been in existence since the early days of dot-com bubble in 1998. Since then the VAS industry has fast evolved due to changes in the delivery methods and the interest shown by other stakeholders in the ecosystem. Today, VAS are commonly delivered through application stores.

The application store is not a fad. Instead, industry experts forecast application stores to become a billion dollar industry, with revenues expected to exceed $25 billion by 2014!

This worldwide phenomenon has drawn the interest of more device vendors such as Nokia and RIM as well as platform owners like Symbian and Android to venture into their own version of application stores, while Operators are expected to provide connectivity, as well as marketing and customer care.

Judging from how lucrative the application store has performed over the last 15 months (since the birth of App Store in July 2008) and how small a piece of the revenue pie they received, Operators are looking at adopting the model themselves to gain full control over their revenue and subscriber base.

Although Operators are willing to embrace this shift, the challenge remains in how can they do this successfully, and in a way that provides meaningful differentiation in an increasingly competitive application store market? The next big question is, how can Operators launch their own application store without having to re-engineer existing processes/systems or straining resources?

This whitepaper discusses a cost effective strategy that will propel Operators in their mission of serving contemporary and cutting-edge services. The strategy includes leveraging on existing strengths of the Operator for a faster time-to-market.


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The Application Store Sensation

Since its launch over 2 years ago, Apple’s App Store is rede�ning the way users are using the Internet. In fact, the application store sensation has been credited to jump-start the mobile internet trend, leaving Operators around the world with steep surges in data consumption. Figure 1 below illustrates the tremendous percentage of increase in mobile data in Q2 of 2009, across 3 regions.

Figure 1: Quarterly Data Growth in Q2 2009

Source: Alott Communications, Global Mobile Broadband Traffic Report, Q2/2009)

GLOBAL MEAN

40%

35%

30%

25%

20%

15%

10%

5%

0%APAC

Quarterly growth in mobile data

EMEAAmericas

Decline in ARPU

While many would hope that the increase in data traf�c yields similar returns in ARPU, in reality, worldwide ARPU has been on a steady decline. In other words, while Operators’ networks are being used to download and access applications, they are not bene�tting accordingly. If this pattern continues, Operators may �nd that slowly but surely, future pro�tability will be threatened. Their competition

landscape has now shifted from a local and niche turf to the global arena, competing with device manufacturers and application store owners. Operators need to realize that extending connectivity alone cannot keep them a�oat. Instead they require software, device and service strategies that can add value and at the same time differentiate them from competition.


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The Evolution of VAS

Value-added service is not a new term in the industry and refers to a telecommunication company’s non-core service; which means anything beyond the standard voice calls and fax transmissions that are largely used to promote main businesses are considered as a value added service. These services may range from SMS to Internet-based services like games and infotainment push services.

The concept of VAS began when (VAS) owners began to promote services via the World Wide Web and the channel was known as Publisher Stores. Next, On Device Portals (ODP) made an appearance to enable subscribers to browse and purchase value added services in a more consistent way. However, ODP served only targeted brands of devices, particularly mobile phones. As more and more next generation Internet-enabled devices were introduced into the market, service delivery through these portals could no longer meet the needs of subscribers.

When the iPhone was launched, it changed the way subscribers browsed, purchased and installed applications. Although the concept of VAS did not change, Apple had successfully re-engineered a user’s purchase experience through its App Store. The trick was to make it convenient for users to �nd, download and buy applications and at the same time, make it easier for application developers to reach users. Following Apple’s successful App Store launch, the Mobile Stores fad began with device manufacturers such as Google Android, Sony Ericsson and RIM introducing their own application stores.

Not wanting to lose out on the gold mine and encouraged by the fact that users are hungry for pushed applications, some Operators have jumped on the bandwagon. This marked the start of Carrier ShopFronts trend led by Operators such as China Mobile1 (Mobile Market), South Korea Telecom2 (T-store), T-mobile3 (T-Mobile web2go) and Orange (Orange Application Shop).

As a result of the above evolution, there are 4 different categories of application store providers:1. Platform vendors - Google Android, Microsoft Mobile2. Device Manufacturers - Apple, Nokia (Ovi), RIM, Sony, Nintendo, Microsoft Xbox3. (Independent) Mobile Storefronts - Getjar, Handango4. Operators - Vodafone (Live), OrangeWorld, O2 Active

1http://www.pcworld.com/article/1634852http://www.electronista.com/articles/09/04/14/sk.telecom.app.store.due/3http://mobile.slashdot.org/article.pl?sid=08/08/09/1349208


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Within a short span of time, the telecommunication industry has been stirred up with new promises of how application stores can pave the way for increasing ARPU.

Industry experts seem to spell out application stores as a billion dollar industry. Juniper Research estimates by 2011 that the majority of all applications-related revenue will originate from applications delivered via applications stores.

The forecast also revealed that mobile applications’ direct and indirect revenues are expected to exceed $25 billion by 2014 as shown in Figure 3.

This trend will continue to grow, contributed to by 4G penetration (both WiMAX and LTE) which gives subscribers the opportunity to experience better mobile voice and data services, especially those through application stores.

ApplicationWarehouses

• As more and more apps stores are built, warehouses for apps might replace traditional app stores

• Warehouses: Gets supplies of applications from developers (suppliers)

• Retailers: Operator stores or software stores picks up

• Eg: Nokia Horizon

CarrierShopFronts

• Telcos started to join into the Appstore game after the iPhone showed telcos how hungry users are for pushed apps

• Joint Innocation initiatives between telcos such as with Verizon, Softbank and China Mobile has begun to surface

MobileStores

• Qualcomm (Brew), Handango, Nokia Download!, Apple Appstore, Google Android Market, Microsoft, RIM application center and Samsung application store (beta)

On DevicePortals (ODP)

• Offer a Browser Experience for users to buy apps to buy apps from a Operator Portal (not successful)

• Remember iMode?

PublisherStore

• Users buy applications from publisher stores

Figure 2: Evolution of The Application Store Industry

1998

2000

2008

2009 onwards


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Outcome of The VAS Evolution

The evolution of VAS is contributed by several factors, primarily the change in delivery methods and the interest shown by other stakeholders in the ecosystem. This has created different business models in the industry, with varying revenue-share models.

In the device-dominated model (for example, Apple and RIM) and platform-dominated model (for example, Symbian and Android), bulk of the revenue from application sales is reaped by the device manufacturer/platform owner and content developers. Operators on the other hand only earn from user access fee and a margin from device sales.

However, this trend is gradually changing. Lured by the potential ARPU gains offered by the application store, Operators advocate the idea of owning one themselves. This model gives Operators full control over the value chain in order to provide the best user experience through a walled garden.

Subscribers are given equal opportunity to enjoy applications as the application store is built to be device and platform independent, while content developers reach a wider audience. And the best news - Operators bene�t from a larger piece of the revenue pie, contributed to by application sales and connectivity (user access fee).

In short, the application store indeed looks very promising for Operators. The challenge however lies in how Operators can ensure that subscribers will purchase applications from them? How does an Operator add value compared to its competitors, device and platform vendors?

Figure 3: Total Market for Mobile Applications and VAS Revenues

Source: Juniper Mobile Applications & Apps Stores Business Models, Opportunities & Forecasts 2009-2014


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The Winning Application Store Strategy

Following the bold step of Operators such as T-Mobile and China Mobile, some others have started to launch their own branded application store.

On the other hand, it may cross the minds of many – if this market has many existing players at this point of time, what does it take for an Operator to succeed then?

The good news is, Operators have existing assets that will support their goal of launching an application store.

By using the right avenues to tap on these assets, Operators can fast track their venture into this space. There are 7 key factors that determine a winning application store strategy for Operators.

Figure 4: Key Factors That Determine a Winning Application Store Strategy for Operators

Winning

Strategy for

Operators

Connectivity

Fair Game for

Developers

Multi

End User

Device & OS

Support

Location-

based

Content

Focal

Point of

Access

Integrated

Ecosystem

Hassle Free

Billing

Mechanism

Connectivity

Simply said, connectivity is the fuel required to transport any application to subscribers. Though often over-shadowed by apparently more important aspects within the application store ecosystem, Operators have been playing a very important role in the ecosystem right from the birth of application stores. Sadly, this role has been marginalized, resulting in Operators not gaining any monetary bene�t from sharing precious bandwidth.

Connectivity forms the very foundation, without which any application store, regardless of how cool or entertaining it is, cannot operate. Operators must realize that they are in possession of an essential sector of the application store, and this sets them on the right path to owning an application store. Since connectivity belongs to the Operator, why wouldn’t they also own an application store and enjoy signi�cant revenue gains?


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Integrated Ecosystem (Applications Management, Billing & CRM)

A successful application store should place emphasis on both the front-end and back-end mechanisms, particularly the applications management, billing and CRM.

CRM Capabilities

On the front end, the system serves as a platform to push applications to subscribers. It serves as an online shopping mall that hosts various types of applications and it is the very place subscribers interface with the Operator’s application store. Hence, the front end should be managed carefully to meet the demands of subscribers, failing which, Operators might end up in a situation where their value-added services are not discovered by the right audience.

This is where the Operator has an advantage as they are they only entity within the ecosystem with a holistic view of subscribers’ lifestyle patterns based on their pro�le and purchase history. The Operator’s CRM system provides an abundance of subscriber data which would assist in channeling the right applications to the right subscribers, at the right time.

It’s important for the application store system to be equipped with arti�cial intelligence that integrates with the Operator’s CRM system to leverage on the wealth of subscribers’ behavioural information. Based on this information, Operators have the opportunity to make compelling recommendations to subscribers and meet their demands for personalized content.

Aside from CRM resources, the front end needs to hold a strong visual and experiential appeal to subscribers. Hence, it is important that the interface is designed to be dynamic and captivating. Additionally, subscribers’ end-to-end experience must be focused on convenience and simplicity for a smooth purchase process – from browsing to purchase, installation, usage and updates.

Ready Billing Mechanism

Another advantage that Operators have is a ready billing system, which includes options for prepaid and postpaid payments as well as �exibility in offering interesting rebate packages. This factor enables Operators to differentiate from other players such as Apple, which typically have less feasible or preferred billing options.

The application store system should easily integrate with Operator’s existing billing system, allowing a single point of access to manage billing.

Applications Management

At the back end, the application store system should be built to support an automated cycle of certifying an application. The right �ows should be implemented to ensure applications submitted by content developers are properly scrutinized and tested before releasing to subscribers.

This relieves Operators from the manual process of managing applications, and at the same time ensure all deserving applications are made available to subscribers.

In short, deploying an application store is about creating a whole ecosystem to support, develop and provision applications both online and at the device level.


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Focal Point of Access

Though once upon a time content was regarded as king, today it is no longer the anchoring factor. On the contrary, effective content aggregation and communication sit on the throne.

Many Operators today offer value-added services to subscribers, which extends beyond connectivity.

Unfortunately, the issue with the current mechanism is the existence of too many distribution channels (see Figure 5). This leads to a fragmented structure that does not complement each other. Subscribers are faced with a multitude of touch points which ultimately leads to poor end-user experience and low purchases.

A successful application store must consolidate all value-added services and applications within a single platform, hence subscribers bene�t from a focal point of access. Distance to purchase must be

reduced and free previews should be made available so that subscribers are given an opportunity to evaluate an application prior to purchase.

Mobile games

Applicationdownload portal Mobile store

Call-in buy(purchase through

Operator’scustomer hotline)

On-demanddownloads(SMS buys)

WallpapersCaller

ringtones

Sportsupdates

TouchPoint

Application/Service

Hassle Free Billing System

Operators have an established and trusted billing relationship with their subscribers, which presents a hassle free billing and payment system for the latter. With prepaid and postpaid payment options, credit cards no longer need to be the settlement medium.

This enables all subscribers to enjoy applications without worrying about security and fraudulent risks, which is one of the main factors that deter

them from shopping online. Application purchases can be charged directly to the subscriber’s scheduled (eg. monthly) bill.

Meanwhile, having a direct billing relationship with the Operator puts the subscriber at ease. In the event of issues arising from the purchase of applications, subscribers are able to reach the Operator for assistance and settlement.

Figure 5: Fragmented Distribution Channels to Access Applications


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Location-based Content

Next, Operators can offer more localization compared to application stores owned by device manufacturers or operating system vendors as the former understands the local market and subscriber demands. With this service differentiation, Operator-owned application stores would generate more demand for applications and keeps the ecosystem healthy.

According to a research conducted by ComScore, the number of people who sought local information on a mobile device grew 51% within just one year (from March 2008 to March 2009). ComScore de�nes local content as "searching for information on maps, movies, business directories or restaurants."

Among the various local content categories, the number of people accessing online directories has seen the greatest increase during the past year, at 73%, followed by restaurants at 70%, maps with 63%, and movies with 60%. This further strengthens the need for localized contents.

Usage of applications like coverage maps, traf�c updates, and restaurant recommendation not only enhances a subscriber’s everyday life, but keeps them coming back for more, thus driving demand for the entire application ecosystem.

Multi End User Device & OS Support

Operators are faced with the daunting expectation to provide applications/services that can be supported by multiple devices, across all platforms with a consistent user experience. This gives all subscribers an opportunity to indulge in the application store regardless of the device or operating system used. For example, Apple’s App Store is only con�ned to iPhone users. Do subscribers need to purchase an iPhone to enjoy applications?

Operators can now break this monopoly and offer a similar experience to all subscribers via the Operator-owned application store.

Synchronization capabilities between multiple devices further enriches user experience as they are not restricted to one device, for example a smart phone. Instead, they can extend similar experience to other devices such as a laptop of desktop computer.

Aside from subscribers, a cross-platform application store is a stronger incentive for content developers as they are assured that their master pieces reach a wider target audience.

Fair Game for Developers

It is widely expressed that the visibility of applications residing in Apple’s App Store has been a great disappointment to content developers. Apple’s practice of ranking applications by price drowns premium applications, while cheap and free titles receive a more preferable placement.

Hence, with thousands of applications out there, an effective application marketing mechanism needs to be in place to give all applications a favourable selling ground. Applications should have the opportunity to compete in its own space, ranging from popularity, rarity, uniqueness and pricing. This mechanism should give deserving content developers the visibility they deserve.


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Embark on the Application Store Journey Today!

Operators may have different strategies in implementing their own application store. Some might prefer to build an extensive ecosystem that allows content developers to upload application to maximize returns. On the other hand, some might prefer to be cautious and start small by promoting existing applications.

Whichever the desired strategy, Green Packet provides the ideal services management platform to help kick start an Operator’s application store. This innovative solution, In�nit Services Management Platform (ISMP) is specially designed to start up an application store by leveraging on the existing strengths of the Operator for a winning case. Hence, it enables Operators to launch an application store within a short span of time for a faster time-to-market.

ISMP is based on a client-server architecture model which can be customized to re�ect Operators’ branding and campaign needs.

Free Consultation

If you would like a free consultation on how to launch your own application store, please contact us at [email protected] (kindly quote the reference code, WPIAH09 when you contact us).


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• Juniper Mobile Applications & Apps Stores Business Models, Opportunities & Forecasts, 2009-2014

• Airwidesolution’s Understanding how Operators will utilize the App Store Phenomenon

• Alott Communications. “Global Mobile Broadband Traffic Report, Q2/2009”, July 2009

• Your very own App Store by John Tanner, Telecom Asia, January/February 2009

References


Green Packet Solutions, part of the Green Packet Berhad group of companies, is a leading developer of Next Generation Mobile Broadband and Networking Solutions. Our mission is to provide seamless and uni�ed platforms for the delivery of user-centric multimedia communications services regardless of the nature and availability of backbone infrastructures. Founded in San Francisco’s Silicon Valley in 2000, Green Packet Solutions has expanded its global footprint to Kuala Lumpur (Headquarters), Singapore, Shanghai, Taiwan, Australia, Bahrain and Bangkok.

Green Packet Solutions empowers Operators to improve ARPU via leading edge carrier-grade connectivity solutions, services management platforms and interoperability-tested WiMAX Modems. Green Packet Solutions’ products offer best-in-class performance and are of the highest quality, ensuring our customers are ALWAYS BEST CONNECTED!

With R&D centres located in USA, Shanghai, and Taiwan, we are on the edge of new developments in 4G (particularly WiMAX and LTE), as well as software advancement. Green Packet Solutions’ presence around the world shouts our global capabilities and localization abilities. Furthermore, fellow symbiotic players can leverage on Green Packet Solutions’ strategic alliances in the telecommunications industry to strengthen one’s stake in the ecosystem.

For more information, visit www.greenpacket.com

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Application Stores: How Operators Can Create a Winning Case