Skip to main content

Why App Store Ecosystems are Strategic Assets


Mobile networking service providers are good at providing basic connectivity, but they typically fail to deliver value-added services (VAS) that their own subscribers need or want. According to the latest market study by Informa Telecoms & Media, mobile network operators will see their share of mobile content and commerce-related revenue drop from 44 percent in 2011 to 31 percent in 2016 globally.

The telecom service provider market share will shrink in areas such as mobile music, mobile games, mobile TV or video, mobile messaging, location-based services and chat or social networking over the next five years. These new services will increasingly be provided over the top (OTT) by third parties that specialize in these creative offerings.

According to Informa's assessment, this fall in market share would be more precipitous if it wasn't for the growing role that operators will play in mobile app payments.

The app stores have unseated the operators from their former dominance in the mobile content space, but carrier billing -- app-download and in-app payments charged to mobile phone bills -- will allow savvy operators to claim an increasing share of revenues over the coming years.

Although most operators have been excluded from the creative mobile apps ecosystem, all the other players that have jumped on the mobile apps bandwagon -- including Google, Microsoft, Nokia, RIM and Samsung -- need carrier billing to get paid for downloads from their app stores.

Only Apple benefited from the precedent, through iTunes, of having a direct billing relationship with millions of digital media users. It was able to convince network operators that they had no choice, and should look elsewhere for profit. Apple is masterful at manipulating inept "partners" into accepting their terms and conditions.

The Apparent Mobile Service Provider Dilemma

So, what's the market outlook, and where's the upside potential?

"Operators could miss out on the opportunity afforded by carrier billing if they don’t make it more affordable and accessible to app-store owners and developers, and if they do not introduce more efficient and flexible systems than the clunky and unreliable PSMS," says Guillermo Escofet, senior analyst at Informa Telecoms & Media.

According to Informa, more compelling alternatives are already appearing in countries such as Russia, where instant-payment terminals in streets allow users to turn cash into e-money to spend on digital goods.

The slice of app revenues going to operators will grow from 10 percent in 2011 to 17 percent in 2016. Not because operators will increasingly act as a direct retail channel for apps, but due to the fact that they will increasingly act as enablers of paid-app downloads on third-party stores.

The need for carrier billing is becoming all the more pressing as app stores push further into emerging markets, where bank accounts and plastic money are rare, and premium SMS is for most the only means of paying for digital goods on phones.

Emerging markets make up the majority of mobile subscribers globally, and that proportion is constantly growing. The app stores that that have embraced carrier billing are the most relevant to emerging markets, such as Nokia Store, Google Play (formerly Android Market) and BlackBerry App World.

Informa predicts mobile content revenues (total data revenues minus Internet access and P2P messaging) to grow from $40.7 billion in 2011 to $131 billion in 2016. Informa's forecasts only take into account direct end-user revenues -- i.e., money paid by users for content and services -- and do not include indirect revenue sources, such as advertising.

Popular posts from this blog

How Savvy Pioneers Lead the Future of Work

Hybrid and fully remote work are inevitable in the Global Networked Economy where high-performance talent demands flexibility from employers. To enable these progressive work models, organizations are investing in a wide range of technologies to support more agile types of employment.  According to the latest worldwide market study by International Data Corporation (IDC), leading organizations will spend nearly $1 billion on the Future of Work (FoW) in 2023 -- that's an increase of 18.8 percent over 2022. Future of Work Market Development "Work models continue to evolve, but 37 percent of decision-makers in a recent global survey note that Remote and Hybrid work models will be an embedded part of accepted work practices, supported by a continued shift to the cloud, increasingly instrumented and interconnected physical workplaces, and intelligent digital workspaces," said Holly Muscolino, group vice president at IDC . According to the IDC assessment, organizations must mak

Human Resource Transformation Enabled by IT

Many senior executives are taking a proactive approach to digital business transformation in order to achieve their strategic goals. Delivering revenue growth and profitability is now imperative for every function, including Human Resources (HR). The top 3 priority HR technologies this year are skills management, learning experience platforms, and internal talent marketplaces, according to the latest worldwide market study by Gartner. "With a tumultuous global economy, HR technology leaders face a balancing act in 2023," said Sam Grinter, director at Gartner . "Leaders must anticipate greater levels of accountability and demand for measurable outcomes to justify new technology investments." HR Transformation Market Development Forty-four percent of HR leaders report driving better business outcomes is their number one strategic priority for HR technology transformation over the next three years. Growth in headcount and skills (26 percent) and cost optimization (17 p

Virtual Reality Market Set to Reach $100 Billion

Virtual Reality (VR) market growth is now finally coming to fruition. Thanks to current actions and market momentum, VR is approaching what can be considered critical mass. And, not a moment too soon. This growth momentum comes from new hardware and content releases, accelerating enterprise value recognition, and a significant metaverse wild card that could potentially lift adoption and usage. According to the latest worldwide market study by ABI Research, over 85 million VR Head Mounted Displays (HMDs) will be shipped in 2027 across consumer and enterprise segments, creating a $100 billion VR market that includes hardware, software, and services. Virtual Reality Market Development "Expectations have been high in VR for years, and even decades, without notable growth to show. That growth is finally coming over the next five years," said Eric Abbruzzese, research director at ABI Research . The barrier to entry is lower than ever, all while content performance and user experien