www.hd-cg.com                              HD                    MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013...
MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013-          MOBILE APPS:                                          ...
MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013-          Operating system developer including            Extend...
MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013-       3. App Stores Developers Programs                      to...
MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013-          Mobile applications may be downloaded          5. Busi...
MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013-          operating system manufacturers (through         Mobile...
MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013-          Closed proprietary app store business           Leave ...
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MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW 2013

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Mobile applications are commonly made available through aggregators with online stores. However, due principally to the increased availability of smartphones and faster broadband on 3G mobile telecommunications networks, mobile applications are a major growth sector of the information and communications economy.
The mobile service business model has changed dramatically in recent years. In particular, the role of handset and OS providers has become more prominent, and the reliance of third-party developers on network operators for delivery of revenue streams has decreased.
Apps Stores revenue-sharing arrangements with developers, has led to other changes. They reshaped the revenue model with its 70/30 revenue split in favor of developers and the exclusion of network operators from revenue-sharing arrangements for mobile applications, attracting large numbers of new independents software developers (ISV).

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MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW 2013

  1. 1. www.hd-cg.com HD MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013- MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013- P age |1 H DHDCG © March 2013
  2. 2. MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013- MOBILE APPS: 1. Developers ACTORS Developers are creators of mobile applications programs who do not work directly for the app store, device & manufacturer or network service operator. There are several kinds of third-party BUSINESS developer: Hobbyists developing mobile applications in their spare time for recreation and profit MODEL REVIEW Professionals those developing mobile applications as a main source of income, either alone or as part of a business centered on mobile application Mobile applications are commonly made development available through aggregators with online stores. However, due principally to the Contractors developing mobile applications increased availability of smartphones and faster on behalf of another entity or individual. broadband on 3G mobile telecommunications networks, mobile applications are a major The number of third-party developers has growth sector of the information and increased significantly as the improved communications economy. revenue arrangements and increasing client base attract more developers to app stores. The mobile service business model has changed dramatically in recent years. In particular, the role of handset and OS providers has become more prominent, and the reliance of third-party 2. App Stores developers on network operators for delivery of revenue streams has decreased. Applications Stores are divided today in the following families: Apps Stores revenue-sharing arrangements with developers, has led to other changes. They Device manufacturers including Apple’s reshaped the revenue model with its 70/30 App Store, Nokia’s Ovi, and Blackberry’s revenue split in favor of developers and the App World. These stores can be used only exclusion of network operators from revenue- by consumers with the appropriate sharing arrangements for mobile applications, manufacturer’s device and proprietary attracting large numbers of new independents software. software developers (ISV).HDCG © March 2013 P age |2
  3. 3. MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013- Operating system developer including Extended value chains with multiple Android Market and Microsoft Windows players mobile applications delivered Mobile. These stores can be accessed by through various platforms complicate the consumers with devices from multiple supply chain to the end-user. The handset manufacturers via the proprietary responsibility for aspects of customer operating system software (OS). service can consequently fall across several different organizations or individuals. This increases the complexity of the relationship Mobile network operator including Telstra, between service providers and end-users. Verizon and Optus. These stores can only be accessed by consumers with service Global nature app stores are accessible contracts with the network operator. from smartphones and other devices Consumers can use multiple handset brands globally, and have a global consumer base, to access these stores. although most of the major market players have managing companies based in North Independent including app stores operated America (Apple, Google, Blackberry, as independent commercial concerns, or by Microsoft Windows and Palm). As a result, developers such as GetJar and Mobango. there are associated cross border and trans- Access to these stores is not dependent on jurisdictional market implications. the brand of device used, service provider or proprietary software. Unpredictable revenue the financial viability of mobile applications is variable. The mobile applications market exhibits a The top 10 per cent achieve about 75,000 number of common characteristics across downloads and there are huge successes, all app stores, including: such as Tap Tap Revenge’s reported Low barriers to entry: Apple, Android and revenue of $1 million per month. However, Blackberry all have development 50 per cent of mobile applications achieve registration schemes with software about 1,000 downloads and, after the app development kits (SDK) offered free or at store has taken its cut, developers may low prices with additional support expect to earn up to $2,500 on average. mechanisms. Mobile applications can be Most people agree that Apple’s opening of developed with SDK for low fixed costs. iPhone to third-party developers via the App Store in July 2008 was a key turning Strong competition: there are a large point in the adoption of smartphones and number of sellers and mobile applications the use of mobile applications. available to consumers (more than 300,000). By 2009, combined platform revenues were $4.2 billion; today, some analysts are expecting revenues to reach $29.5 billion by Low barriers to exit with few sunk costs, the end of 2013. developers may enter and leave the market quickly.HDCG © March 2013 P age |3
  4. 4. MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013- 3. App Stores Developers Programs to have a mobile application placed in the featured section in the Apple App Store. The majority of app stores provide programs and support to encourage third- party development in their platform. Third-party developers may also operate across more than one app store. This means There are a number of components to this that the mobile applications can either be support: written in the native code of each platform or written in a higher level software Distribution of revenue is weighted to language, which can run on all platforms favor developers the revenue split in the the developer is selling on. The choice of largest app stores is 70 per cent to the developing language is complicated by developer and 30 per cent to the store restrictions proprietary platforms may place There are no access restrictions or on using programming tools or controlling qualifications in place certain device features and by fragmentation across device platforms. Developer support includes access to SDK in the native code (software language) of their app store, developer forums, 4. Consumer Access Models developer guidelines and other support mechanisms The concept of online stores for consumers to download software applications is Start-up costs are low three of the largest continuing to expand. The devices used to app stores provide developer support access app stores vary, and the numbers programs for $200 and under21 and types of device used are increasing. App stores and other platforms can be Marketing information and user analytics considered access points that allow are also available consumers to obtain and use mobile applications, distributed by multiple app Secure payment mechanisms are provided developers. Pre-installed mobile applications can Access is provided to a ready-made increase the commercial viability of devices. customer base Pre-installation of mobile applications from other commercial entities method for Advertising of the app stores to consumers device manufacturers to defray production is provided by device manufacturers and, in cost, and increase the attractiveness of some instances, network service providers their device to consumers. It is also a useful method of creating additional revenue Advertising of individual mobile streams for carriers who preload the device applications in an app store is also available to consumers. for example; developers can pay a premiumHDCG © March 2013 P age |4
  5. 5. MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013- Mobile applications may be downloaded 5. Business Models and installed by consumers in several ways: Prior to the introduction of smartphones, Via the device, consumers can directly telecommunications network operators access the device manufacturer’s store were the main suppliers of mobile services through a menu on the device Access may (and fixed-line services). End-users’ choices be enabled through 3G or Wi were influenced predominantly by network coverage, pricing, provision of handsets and Via the internet, consumers can access the value-adding services (such as voicemail, device applicable, the network provider’s text, email and limited 2G web access via and then download and install mobile GPRS). Hardware and software component applications. Access to the internet may be suppliers had only an indirect relationship enabled through 3G networks or Wi with end-users, and third-party suppliers applications Smartphones Tablets Multiple provided complementary goods and access points for the mobile applications services. market While not all consumers directly obtained Mobile applications may be obtained by their handsets through their network end-users in two main forms as pre- operator, operators still controlled service installed applications or downloaded subscriptions. Further, with the initial applications. Pre-installed mobile introduction of web browsing and email applications are selected by device capabilities, network operators launched manufacturers and usually include: ‘walled garden’ application platforms to calendars, alarm clocks, camera/photo maintain their centrality in the value chain. apps) weather mobile applications, Google maps, a compass, a music, video, games) for It has also driven the proliferation of non- example, web browsers, texting and voice network operator app stores as handset installed mobile applications can increase manufacturers and OS providers seeking to the commercial viability of devices. capitalize on alternative revenue streams. The mobile applications from other Today network operators are no longer the commercial entities on devices are a primary source of revenue for app method for device manufacturers to defray developers, and consumers of mobile production cost, and increase the applications are not reliant on the walled attractiveness of their device to consumers. gardens of their network operator to access mobile applications. Consumers can access the device manufacturer’s app store (or, if applicable, The growing popularity of smartphones and the network provider’s app store) via the tablet devices has continued to fuel this web browser on their device, and then shift in the market, and access to third- download and install mobile applications. party applications via a variety of devices is now being dominated by device andHDCG © March 2013 P age |5
  6. 6. MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013- operating system manufacturers (through Mobile applications range in price, from their app stores), free to over USD 999. The Wholesale Applications Community The average cost is under $10, with over 50 (WAC), an alliance of 48 per cent of all mobile applications across all telecommunications providers, device the app stores priced at $2 or less.25 manufacturers and sponsoring businesses Payment for paid mobile applications is (for example, Alcatel Lucent) has launched a made through one-off transactions or wholesale app store. In response to the ongoing subscriptions in the following ways: current success of non-operator app stores, the WAC model allows network operators Credit card; is the most prevalent method. to sell mobile applications to their The interface is established through a subscribers independent of the device being consumer account (for example, an iTunes used via an open platform, and charging account for Apple or a Google account for them via their phone bill. Network Android). operators capture a percentage of the mobile application purchase price as well as Carrier billing; this method is common for the revenue raised from data use. mobile commerce transactions. Payment appears on a consumer’s bill or in the form At present, many network operators are of a call-credit deduction or charge. This is only receiving revenue from data use for similar to current payment arrangements mobile applications or are reliant on for mobile premium services. The revenue partnerships with device manufacturers to split in this situation may incorporate a obtain a share of mobile applications sales percentage to the carrier. For example, revenue. Nokia’s Ovi store provides for a revenue split of between 40 and 50 per cent of the The current contest for market share in the end-user purchase price to the carrier, with application market is now primarily the remainder divided between the between the opposing business models of developer and Nokia on a 70/30 basis. For a operating system and device manufacturer mobile application costing $1.19, this would app stores. result in a distribution of approximately Operating system business models offer an $0.59 to the carrier, $0.42 to the developer open source system, with consumers able and $0.18 to Nokia. to access mobile applications from multiple sources. Device manufacturer models are Voucher redemption; app store-specific closed proprietary environments limiting vouchers are available at multiple distribution of mobile applications to commercial outlets. These may be consumers via a single source their app redeemed for credit via a user account. store. Credit card companies also provide gift vouchers that may be used for the same purpose.HDCG © March 2013 P age |6
  7. 7. MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013- Closed proprietary app store business Leave your questions and comments to: models offer systems integration for herve@delhumeau.com consumers and a seamless user experience. App store business models that use an open source operating system may not be able to offer as efficient systems integration due to the fact that multiple players may be involved in the provision of devices to access the App store. However, the open source operating system business model allows consumers more choice in terms of sourcing mobile applications and greater transferability of information between platforms. Both business models have inherent advantages and disadvantages for consumers, who will ultimately choose which is more significant to them. Meanwhile, network operators are seeking to offset the costs of increasing demands on their networks in terms of speed and resources from mobile applications. The WAC’s commercial app store is one method of doing so, as it allows network operators to once more access the mobile application revenue stream. The success of this business model is dependent on the experience it can provide for the user. The different app store business models highlight the inherent differences in approach to access and control on different platforms. In the longer term, the success of each business model may depend on consumer attitudes to these differences.HDCG © March 2013 P age |7

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