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

Digital Transformation Investment at $3.4 Trillion

Business technology leadership matters. Across the globe, more leaders have been pursuing bold Digital Transformation (DX) initiatives with the goal of creating new sources of business value through digital products, services, and experiences. As an additional benefit, the COVID-19 pandemic revealed that digital transformation efforts improve an organization's resilience against global market disruptions. Global DX investment is forecast to reach $3.4 trillion in 2026 with a five-year compound annual growth rate (CAGR) of 16.3 percent, according to the latest worldwide market study by International Data Corporation (IDC). Digital Transformation Market Development "Despite strong headwinds from global supply chain constraints, soaring inflation, political uncertainty, and an impending recession, investment in digital transformation is expected to remain robust," said Craig Simpson, senior research manager at IDC . The benefits of investing in DX technology -- including aut

Artificial Intelligence for National Border Security

National border protection agencies are under pressure to provide the highest level of security in the face of growing threats, such as increasing illegal migration and international terrorism. Now, government agencies are embracing advanced border security technologies to aid in effectively and reliably securing national borders. These solutions look to detect and identify potential threats and prevent them from escalating to a point that may jeopardize security. Security Surveillance Market Development Traditional border security patrols and Closed-circuit Television (CCTV) surveillance systems aren't adequate protection, and agencies must increasingly deploy new solutions to stay ahead of criminals and other potential threats to ensure the safety of a country’s borders. According to the latest market study by Juniper Research, the value of the border security technology market will exceed $70 billion globally in 2027 -- that's rising from $48 billion in 2022. Growing by 47 p

How to Apply Sustainability to Drive Value Creation

Global climate change policy initiatives have been an emerging topic for CEOs and their leadership teams, as they look to the future. Many organizations are preparing to play their part and help reduce carbon emissions. Eighty-seven percent of business leaders expect to increase their organization’s investment in sustainability over the next two years, according to the latest worldwide market study by Gartner. Customers are the stakeholder group creating pressure for these organizations to invest or act on sustainability issues -- selected by 80 percent of executives, followed by investors (60 percent) and regulators (55 percent). Sustainability Market Development "Sustainability enables businesses to cope with disruption," said Kristin Moyer, VP analyst at Gartner . "Economic uncertainty, geopolitical conflict and escalating materials and energy costs are forcing businesses to reexamine all forms of expenditure." According to Gartner, this focus on essentialism --