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A consulting report that defines the entry strategy for client company

A consulting report that defines the entry strategy for client company

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    Mobile Applications Mobile Applications Document Transcript

    • Mobile ApplicationsA consulting report that defines the entry strategy for client company Submitted By: Team: E-Bonds Shweta Jain (09BM8031) Nidhi Bansal (09BM8028) VGSOM, IIT Kharagpur MBA Batch 09-11 1
    • Table of ContentsIntroduction ............................................................................................................................................ 3 Evolution of Mobile Applications ........................................................................................................ 3Market Analysis: Facts and Predictions .................................................................................................. 4Mobile Application Types ....................................................................................................................... 6 Application Usage across Platform ..................................................................................................... 7 Fastest Growing Mobile Apps ............................................................................................................. 8 Top Selling Mobile Applications .......................................................................................................... 8Business Model ....................................................................................................................................... 9Key Players in Mobile Application Market .............................................................................................. 9App Stores ............................................................................................................................................. 10 Revenue Share .................................................................................................................................. 10Top 4 App Store .................................................................................................................................... 11 Apple App Store ................................................................................................................................ 11 Blackberry App world........................................................................................................................ 12 Android Market ................................................................................................................................. 12 Nokia Ovi Store ................................................................................................................................. 12 Business Model ................................................................................................................................. 13Third-Party Platforms ............................................................................................................................ 13Five competitive forces Porter model................................................................................................... 14 Bargaining power of Suppliers .......................................................................................................... 14 Bargaining power of buyers .............................................................................................................. 15 Threat of substitute products ........................................................................................................... 16 Barriers to entry ................................................................................................................................ 17 Rivalry among existing firms ............................................................................................................. 17SWOT Analysis....................................................................................................................................... 20Conclusion ............................................................................................................................................. 22References ............................................................................................................................................ 23 2
    • IntroductionMobile Application market is rapidly growing in global mobile market. They are simple downloadablesoftware program that runs on mobile devices and performs certain task for user of mobile phone.Apple has played a significant role in reenergizing the mobile apps space by bringing moreconsumers and developers into the ecosystem, there is significant activity outside the iPhone orsmartphones space that is often not discussed.Evolution of Mobile ApplicationsHistory of Mobile applications is traced back to the point when smart phones were launched. In2002 Blackberry launched its first Smart phone; at this point mobile applications market startedgrowing. In 2006, Yahoo launched its Go Mobile Application Suite providing mobile user range ofmobile applications. Major breakthrough in Mobile application development was in 2007, whenFacebook launched its Development Platform and Apple came up with its Smart phone iPhone. Withlaunch of Apple Appstore, in 2008 the application world started to blossom in earnest. First, itfundamentally changed the revenue model in favor of the developers which has become the currentdefacto standard (70/30) in the mobile apps business. Second, it brought more developers into theecosystem as it fostered the notion of focusing on just 1-2 platforms rather than the entire deviceecosystem to be relevant. It also reduced time to market for applications. In 2009 Blackberry andNokia launched their application store. Currently we have the mobile application space across allplatforms and on a global basis. 3
    • Fig: Evolution of Mobile ApplicationsMarket Analysis: Facts and PredictionsAs per industry study done by Getjar the total number of apps downloads are expected to grow at92% CAGR to almost 50 billion downloads per year by 2012. This is due to increasing number offeature phone users becoming active application users and increase in the number of appsdownloads/user/month across the board.*Source: Industry Study Commissioned by Getjar 4
    • The corresponding revenue figures for 2009 were over $4.1 billion growing 62% CAGR to $17.5billion by 2012. It is observed that while Asia had the highest percentage of the download share, ithas lowest percentage of revenue share. North America had the highest share of the apps revenueaccounting for over 50% of the total revenue.*Source: Industry Study Commissioned by GetjarFrom the perspective of ondeck vs. offdeck and paid vs. Advertising, ondeck paid had the biggestshare of the revenue followed by offdeck paid. In 2012, advertising based revenue would accountfor about 12% of the overall revenue and is expected to generate 28% of the app revenue. 5
    • Compared to software industry and gaming industry, Mobile applications is still in nascent stage.  Indian S/w Industry 2010 revenue - $60 Bn  Indian Gaming Industry 2011 revenue - $1.265 Bn  Global Gaming Industry 2011 revenue - $120 BnMobile Application TypesMobile applications can be divided into different types as mentioned below depending upon thereusage. 6
    • Application Usage across PlatformAs per Nielsen Quarter4 2009 report iPhone users, followed by Andriod users, have significantlymore applications installed. Games remain the number one application, and mobile shopping, socialnetworking, utilities and productivity tools continue to grow and attract increasing amounts ofmoney.*Source: Nielsen Quarter4 2009 report 7
    • Fastest Growing Mobile AppsAs per survey done fastest growing applications are social networking application followed by news,banking, and information giving applications. The exponential growth in social networkingapplications is accounted due to the rise of facebook mobile. Currently there are more that 150million active facebook mobile users.*Source: Nielsen Quarter4 2009 reportTop Selling Mobile ApplicationsTetris is the best selling mobile app with over 100 million paid downloads. 8
    • Business ModelThe business models for application have evolved over time. Initially, the focus was entirely onthe paid downloads or the subscription based models. Now the most popular business model isadvertisement based. Some mobile players have focused on building loyal and vibrant communitieswhich creates an audience for selling/up-selling/cross-selling virtual, digital, and even physical goodsBusiness Models can be classified into: • Paid – Subscription based – In-app (per application) • Advertising – Impression-based (CPM) – Performance-based – Promotion based • Virtual Goods • Up-selling/cross-selling other goods • HybridKey Players in Mobile Application MarketThere are approximately 100 key app stores. We can divide market into four parts  Device manufactures: Nokia, Samsung, Apple, Andriod, iPhone  Os developer: Google, Symbian, windows, Mac  Mobile Operator: Airtel, Aircel, Vodaphone  Independent (third party/off deck): Getjar, Handmark, Handango 9
    • Fig: Key Market PlayersApp StoresRevenue ShareTop 4 App Stores are Apple , Blackberry App worls, Nokia Ovi Store and Google Android. Apple Appstore has major market share of approx, 83%. Currently market is dominated by Apple, but it ispredicted that in coming years Google Andriod will give Apple strong competition 10
    • • Gartner predicts that in 2013, 21.6 billion apps will be downloaded, generating nearly $30 billion in revenue • The growth between 2010 and 2014 is forecast be over 1,000 percent. • By 2013, according to Gartner’s numbers, the average revenue per app will be $1.36. • By the end of 2014, advertising will be generating a little under a third of the revenue generated by application stores, up from 16 percent in 2010Top 4 App StoreBrief overview of top four App stores and their business modelApple App Store • For app download on Apples app capable Devices (the iPhone, iPod Touch, iPad and Mac) offered by Apple Inc. in 2008 • Allows users to browse and download applications from the iTunes Store • Jan 7, 2011 - Mac App Store Downloads Top One Million in First Day • Jan 22, 2011 - Apple’s App Store Downloads Top 10 Billion • Feb 15, 2011 - Apple Launches Subscriptions on the App Store • App Store revenue estimated to reach $2 billion in 2011 11
    • Blackberry App world • An application distribution service and application by Research In Motion (RIM) in 2009 for a majority of BlackBerry devices • Provides BlackBerry users with an environment to browse, download and update third-party applications • Applications are both free and paid from $0.99-$999.99 in the U.S. developers pay a $200 USD fee (Per every 10 Apps) to participate in the program. • 150,000+ apps available for download • RIM offers Blackberry programmers 80% • On Dec 3, 2010, RIM announced that daily downloads were 2 million apps per dayAndroid Market • An online software store developed by Google for Andriod Devices • Amazon Opens Android App Store to Developers • 98.9% of all applications downloaded are free apps • 300,000+ apps available for download • 8 million Android users downloaded 289 million apps • Developers of software (apps) receive 70% of the application price, with the remaining 30% distributed among carriers and payment processorsNokia Ovi Store • The Ovi Store was launched world wide in May 2009 by Nokia • customers can download mobile games, applications, videos, images, and ringing tones to their Nokia devices • Applications are both free and paid • 350,000+ apps available for download • Downloads reached 4 million in January 2011 12
    • Business ModelBelow is the description of business model followed by top App stores*Source: http://bestmobilephonesoftware.comThird-Party PlatformsThird party platforms for downloading mobile applications are becoming quite popular. Below is thecomparative study of various third party platforms and their business model.*Source: http://bestmobilephonesoftware.com 13
    • Five competitive forces Porter modelWe will analyse the industry attractiveness of mobile application industry using the fives forcesmodel given by Porter.Bargaining power of SuppliersThe suppliers for this industry mainly comprise of platform manufacturers - iPhone, Android,Blackberry, Windows mobile/Windows Phone, Symbian, third party players like GetJar andPocketGear and mobile operators – Airtel, Vodafone, French telecom etc. a) Platform specific applications – The applications developed by these players are mostly platform specific. 14
    • b) High numbers of Suppliers - Currently, there are more than 10 mobile platforms and thousands of application developers in market. For example the number of registered Palm developers has increased from just 3,000 to over 130,000 in the past 22 months. c) Inputs required – The inputs required for this industry i.e. the application developers, software and hardware requirement and the technology required are easily available at competitive price. d) Presence of substitute products - Substitute products i.e. the applications for a particular task are high in numbers. So the consumer has the capability to substitute one application with the other easily and quickly The average selling price of the applications is decreasing (Refer Fig. ) which shows that the developers are now focusing on getting volumes by lowering the prices. This emphasises that the Suppliers bargaining power is high. The Key to be successful in this industry as a Supplier is to continuously Innovative and provide User-friendly product to the consumers.Bargaining power of buyers a. Buyer Volume- From the following graph we can see that the estimated number of downloads in 2010 were around 10.5 bn. If we take that on an average a user downloads 4 applications then the number of users can be estimated to be around 2.625 bn users. This implies that there is huge buyer volume. 15
    • b. Switching Cost- If the buyer is switching between the application providers for the same platform then his switching cost would be low. For switching to different platforms the switching cost would be high c. Buyer Information- Buyers who are involved in this product category are highly informed about the latest applications being launched, their features and cost structure. This information is readily available through numerous application stores online and from the discussion forums. d. Customer loyalty- Customers are only looking for applications which meet their purpose or are entertaining and easy to use. They have low stickiness with a particular application or its developer.Thus, the bargaining power of Buyers for this industry is High.Threat of substitute products a) There has been high increase in the number of application developers for almost all types of platforms i.e. Android, Symbian, iphone etc. This has resulted in High availability of similar applications at very low cost or sometimes even at free of cost. b) Relative price of substitutes is also similar. c) Relative quality of substitute in terms of user-friendliness, security and simplicity is similar. 16
    • Though "45 percent incremental effort" is required to port an application from one platform toanother, still the threat of substitutes in this industry is very high.Barriers to entryBrands like Apple, Nokia, and Google etc have their well –established application stores. Also thethird party application stores like GetJar and pocketgear offer applications in almost all the existingrange of product categories. Thus, there are high entry barriers for Fledgling Developers as they arelow on learning curve and do not have any experience of what a customer likes and desires.Barriers are now reducing to some extent for the upcoming developers. eg. Mobile Roadie a leadingplatform is available in market which can be used by the interested developers to quickly andinexpensively build iPhone Apps. Thus, there is easy Access to required inputs to get started in thisbusiness.Thus, the barriers to entry are moderate and if a new developer can capture the needs of consumerwell and can launch new and improved applications in short span of time, then this industry hashuge potential for him.Rivalry among existing firmsThe entry of Google Android has stirred the positions of the previous market leaders i.e. Iphone andRIM, leading to stiff competition between the leading platform developers. The latest U.S.smartphone market share report from comScore shows the following situation – 17
    • From the above figure we can see that Apple’s market share has remain somewhat constant but theentry of Google has impacted the market share of RIM in US.Also the mobile applications store ranking shows a similar story. There has been 861.5% year-over-year growth in the sale of Android applications over just 131.9% growth of Apple applications. Thisshows that the application market is witnessing heavy competition.The fierce rivalry amongst the big players has resulted in decrease in average selling price of theapplications launched by them. The players are now focussing on getting large volumes by loweringthe price and in some cases giving applications for free. Thus they are following the long tail business 18
    • model to earn revenues. Following graph depicts that the paid applications average selling price hasdecreased from about $ 1.9 to $ 1.1. 19
    • SWOT Analysis WeaknessesStrengths • With the improvement in • There are still some Security technology and competition issues:. For eg. iPhone 3GS Time-to-market for new encryption has been found applications launch has weak and extremely decreased. vulnerable. Also , some of • There is ease of the banking applications are development with launch of not so secure as of now. easier to use platforms. • The applications market is • User-friendly and simple highly fragmented. There are applications are available thousands of application which are an instant hit developers and many more amongst the consumers. are joining this bandwagon • High availability of skilled each day. developers adds strength to • Because of the proliferation this industry. of large number of platforms • Faster and easy access to there is alack of focus on markets available because of single platform. And the online stores, sites and developers have to modify forums. their applications such that it can be used on almost all • Favourable revenue sharing the platforms available. terms exist between the application developer and • Developers need time to re- the platform owner. Thus, its learn as new operating a win-win situation for all system, new user interface, the players. new functionalities and capabilities. As these are being launched at tremendous speed. 20
    • Opportunities Threats • The demand for new • There is Fierce competition in applications is increasing day this market, so it would be by day. Its a growing market difficult for new entrants to with huge potential. command a leading position. • Many of the New Applications (unless they come up with category which can be looked some innovative solution for into by the developers are users) • M- banking • Average selling price is • M-health decreasing, so the players • M-shopping now I have to fight on gaining volumes rather than earning • M-retail from the price of the • Monitoring energy through application. smartphones • in some countries carriers • Business solutions like m- have control over the CRM, m-SCM etc distribution of mobile games. • Sale of virtual goods and This will change as economics redemption of the coupons are shifting , off-deck and promotions through providers arebecoming applications. stronger and to a lesser • Mobile web browser (which extent, ad-supported games will eliminate the need to are emerging. download different applications for different purpose and will offer one stop solution for all the needs of consumers). 21
    • ConclusionBy analysing the mobile application market using the porter’s five forces model we saw that thismarket has low bargaining power of suppliers, high threat of substitute product and fiercecompetition between the existing players. But, still the potential to grow and succeed in this industryis very high. There is still space of players which can offer comprehensive and easy to use solutionsfor the developers as well as for the users. The strengths of this market and the numerousopportunities in this market can be tapped to reap benefits from this booming industry.The opportunities are available at two levels. First, is in the area of developing innovative and highlyuseful applications like m-retail, m-health and monitoring energy. Many of the operators andapplication developers have started focussing on this arena.The second and the upcoming opportunity is in the field of developing a Mobile web browser,which will eliminate the need of downloading number of applications for the different purpose.The browser can form a single stop for documents, audio and video, games, and navigationalservices with APIs leveraging each devices unique capabilities including GPS, accelerometers,cameras and so on. This solution would also help address the fragmentation issue, which only getsworse with each year with new devices, different implementations and operating systems, the costof rolling out an app across multiple devices around the world can increase exponentially. 22
    • References 1. Sizing Up The Global Mobile Apps Market by Chetan Sharma 2. The future of Mobile Application Storefronts by Wireless Expertise 3. Mobile Applications Report by Mobile Marketing Association 4. IHS Screen Digest Feb 2011 5. Nielsen Quarter4 2009 report 6. http://bestmobilephonesoftware.com 7. http://www.mobilebusinessbriefing.com/apps/article/getjar-making-money-from-free-app- distribution 23