Application Stores: How Operators Can Create a Winning Case


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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.

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Application Stores: How Operators Can Create a Winning Case

  1. 1. 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. WHITEPAPER
  2. 2. Application Stores: How Operators Can Create a Winning Case Contents Executive Summary 2 The Application Store Sensation 3 The Evolution of VAS 4 The Winning Application Store Strategy 7 Embark on the Application Store Journey Today! 11 References 12 WHITEPAPER
  3. 3. Application Stores: How Operators Can Create a Winning Case 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. WHITEPAPER 2
  4. 4. Application Stores: How Operators Can Create a Winning Case 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. Source: Alott Communications, Global Mobile Broadband Traffic Report, Q2/2009) Quarterly growth in mobile data 40% 35% GLOBAL MEAN 30% 25% 20% 15% 10% 5% APAC 0% EMEA Americas Figure 1: Quarterly Data Growth in Q2 2009 Decline in ARPU While many would hope that the increase in data landscape has now shifted from a local and niche traf c yields similar returns in ARPU, in reality, turf to the global arena, competing with device worldwide ARPU has been on a steady decline. In manufacturers and application store owners. other words, while Operators’ networks are being Operators need to realize that extending used to download and access applications, they are connectivity alone cannot keep them a oat. Instead not bene tting accordingly. If this pattern continues, they require software, device and service strategies Operators may nd that slowly but surely, future that can add value and at the same time differentiate pro tability will be threatened. Their competition them from competition. WHITEPAPER 3
  5. 5. Application Stores: How Operators Can Create a Winning Case 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 Telecom 2 (T-store), T-mobile 3 (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 Mobile 2. Device Manufacturers - Apple, Nokia (Ovi), RIM, Sony, Nintendo, Microsoft Xbox 3. (Independent) Mobile Storefronts - Getjar, Handango 4. Operators - Vodafone (Live), OrangeWorld, O2 Active 1 2 3 WHITEPAPER 4
  6. 6. Application Stores: How Operators Can Create a Winning Case s o nward 2009 8 Application 200 Carrier Warehouses ShopFronts Mobile • As more and more 0 2 00 Stores • Telcos started to join apps stores are built, warehouses for into the Appstore • Qualcomm (Brew), game after the iPhone apps might replace On Device Handango, Nokia showed telcos how traditional app Portals (ODP) Download!, Apple hungry users are for stores 9 8 Appstore, Google pushed apps 19 • Offer a Browser Android Market, • Warehouses: Gets Publisher Experience for Microsoft, RIM • Joint Innocation supplies of users to buy apps application center initiatives between applications from Store to buy apps from developers and Samsung telcos such as with a Operator Portal application store Verizon, Softbank and (suppliers) • Users buy (not successful) (beta) China Mobile has applications begun to surface • Retailers: Operator from publisher • Remember stores or software stores iMode? stores picks up • Eg: Nokia Horizon Figure 2: Evolution of The Application Store Industry 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. WHITEPAPER 5
  7. 7. Application Stores: How Operators Can Create a Winning Case Source: Juniper Mobile Applications & Apps Stores Business Models, Opportunities & Forecasts 2009-2014 Figure 3: Total Market for Mobile Applications and VAS Revenues Outcome of The VAS Evolution The evolution of VAS is contributed by several Subscribers are given equal opportunity to enjoy factors, primarily the change in delivery methods applications as the application store is built to be and the interest shown by other stakeholders in the device and platform independent, while content ecosystem. This has created different business developers reach a wider audience. And the best models in the industry, with varying revenue-share news - Operators bene t from a larger piece of the models. revenue pie, contributed to by application sales and connectivity (user access fee). In the device-dominated model (for example, Apple and RIM) and platform-dominated model (for In short, the application store indeed looks very example, Symbian and Android), bulk of the revenue promising for Operators. The challenge however lies from application sales is reaped by the device in how Operators can ensure that subscribers will manufacturer/platform owner and content purchase applications from them? How does an developers. Operators on the other hand only earn Operator add value compared to its competitors, from user access fee and a margin from device device and platform vendors? 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. WHITEPAPER 6
  8. 8. Application Stores: How Operators Can Create a Winning Case 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. vit y Connecti d Integrate e for ystem Fair Gam Ec o s ers Develop Winning for Strategy ree Multi Op erators Hassle F r Billing En d U s e OS ism Device & Me cha n Support Focal - Location Point of ba se d Ac c e s s Content Figure 4: Key Factors That Determine a Winning Application Store Strategy for Operators Connectivity Simply said, connectivity is the fuel required to Connectivity forms the very foundation, without transport any application to subscribers. Though which any application store, regardless of how cool often over-shadowed by apparently more important or entertaining it is, cannot operate. Operators must aspects within the application store ecosystem, realize that they are in possession of an essential Operators have been playing a very important role in sector of the application store, and this sets them on the ecosystem right from the birth of application the right path to owning an application store. Since stores. Sadly, this role has been marginalized, connectivity belongs to the Operator, why wouldn’t resulting in Operators not gaining any monetary they also own an application store and enjoy bene t from sharing precious bandwidth. signi cant revenue gains? WHITEPAPER 7
  9. 9. Application Stores: How Operators Can Create a Winning Case Integrated Ecosystem (Applications Management, Billing & CRM) A successful application store should place Ready Billing Mechanism emphasis on both the front-end and back-end mechanisms, particularly the applications Another advantage that Operators have is a ready management, billing and CRM. billing system, which includes options for prepaid and postpaid payments as well as exibility in offering interesting rebate packages. This factor CRM Capabilities enables Operators to differentiate from other players such as Apple, which typically have less On the front end, the system serves as a platform to feasible or preferred billing options. push applications to subscribers. It serves as an online shopping mall that hosts various types of The application store system should easily integrate applications and it is the very place subscribers with Operator’s existing billing system, allowing a interface with the Operator’s application store. single point of access to manage billing. 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 Applications Management value-added services are not discovered by the right audience. At the back end, the application store system should be built to support an automated cycle of certifying This is where the Operator has an advantage as they an application. The right ows should be are they only entity within the ecosystem with a implemented to ensure applications submitted by holistic view of subscribers’ lifestyle patterns based content developers are properly scrutinized and on their pro le and purchase history. The Operator’s tested before releasing to subscribers. CRM system provides an abundance of subscriber data which would assist in channeling the right This relieves Operators from the manual process of applications to the right subscribers, at the right managing applications, and at the same time ensure time. all deserving applications are made available to subscribers. It’s important for the application store system to be equipped with arti cial intelligence that integrates In short, deploying an application store is about with the Operator’s CRM system to leverage on the creating a whole ecosystem to support, develop and wealth of subscribers’ behavioural information. provision applications both online and at the device Based on this information, Operators have the level. 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. WHITEPAPER 8
  10. 10. Application Stores: How Operators Can Create a Winning Case Hassle Free Billing System Operators have an established and trusted billing them from shopping online. Application purchases relationship with their subscribers, which presents a can be charged directly to the subscriber’s hassle free billing and payment system for the latter. scheduled (eg. monthly) bill. With prepaid and postpaid payment options, credit cards no longer need to be the settlement medium. Meanwhile, having a direct billing relationship with the Operator puts the subscriber at ease. In the This enables all subscribers to enjoy applications event of issues arising from the purchase of without worrying about security and fraudulent applications, subscribers are able to reach the risks, which is one of the main factors that deter Operator for assistance and settlement. Focal Point of Access Though once upon a time content was regarded as Unfortunately, the issue with the current mechanism king, today it is no longer the anchoring factor. On is the existence of too many distribution channels the contrary, effective content aggregation and (see Figure 5). This leads to a fragmented structure communication sit on the throne. that does not complement each other. Subscribers are faced with a multitude of touch points which Many Operators today offer value-added services to ultimately leads to poor end-user experience and subscribers, which extends beyond connectivity. low purchases. Touch Point Application Call-in buy On-demand Mobile store (purchase through downloads download portal Operator’s (SMS buys) customer hotline) Application /Service Caller Sports Mobile games Wallpapers ringtones updates Figure 5: Fragmented Distribution Channels to Access Applications A successful application store must consolidate all reduced and free previews should be made available value-added services and applications within a single so that subscribers are given an opportunity to platform, hence subscribers bene t from a focal evaluate an application prior to purchase. point of access. Distance to purchase must be WHITEPAPER 9
  11. 11. Application Stores: How Operators Can Create a Winning Case Location-based Content Next, Operators can offer more localization Among the various local content categories, the compared to application stores owned by device number of people accessing online directories has manufacturers or operating system vendors as the seen the greatest increase during the past year, at former understands the local market and subscriber 73%, followed by restaurants at 70%, maps with demands. With this service differentiation, 63%, and movies with 60%. This further strengthens Operator-owned application stores would generate the need for localized contents. more demand for applications and keeps the ecosystem healthy. Usage of applications like coverage maps, traf c updates, and restaurant recommendation not only According to a research conducted by ComScore, enhances a subscriber’s everyday life, but keeps the number of people who sought local information them coming back for more, thus driving demand for on a mobile device grew 51% within just one year the entire application ecosystem. (from March 2008 to March 2009). ComScore de nes local content as "searching for information on maps, movies, business directories or restaurants." Multi End User Device & OS Support Operators are faced with the daunting expectation Synchronization capabilities between multiple to provide applications/services that can be devices further enriches user experience as they are supported by multiple devices, across all platforms not restricted to one device, for example a smart with a consistent user experience. This gives all phone. Instead, they can extend similar experience subscribers an opportunity to indulge in the to other devices such as a laptop of desktop application store regardless of the device or computer. operating system used. For example, Apple’s App Store is only con ned to iPhone users. Do Aside from subscribers, a cross-platform subscribers need to purchase an iPhone to enjoy application store is a stronger incentive for content applications? developers as they are assured that their master pieces reach a wider target audience. Operators can now break this monopoly and offer a similar experience to all subscribers via the Operator-owned application store. Fair Game for Developers It is widely expressed that the visibility of Hence, with thousands of applications out there, an applications residing in Apple’s App Store has been effective application marketing mechanism needs to a great disappointment to content developers. be in place to give all applications a favourable Apple’s practice of ranking applications by price selling ground. Applications should have the drowns premium applications, while cheap and free opportunity to compete in its own space, ranging titles receive a more preferable placement. from popularity, rarity, uniqueness and pricing. This mechanism should give deserving content developers the visibility they deserve. WHITEPAPER 10
  12. 12. Application Stores: How Operators Can Create a Winning Case 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 (kindly quote the reference code, WPIAH09 when you contact us). WHITEPAPER 11
  13. 13. Application Stores: How Operators Can Create a Winning Case References • 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 WHITEPAPER 12
  14. 14. Application Stores: How Operators Can Create a Winning Case About Green Packet Solutions 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 San Francisco · Kuala Lumpur · Singapore · Shanghai · Taipei · Sydney · Manama · Bangkok Copyright © 2001-2009 Green Packet Berhad. All rights reserved. No part of this publication may be reproduced, transmitted, transcribed, stored in a retrieval system, or translated into any language, in any form by any means, without the written permission of Green Packet Berhad. Green Packet Berhad reserves the right to modify or discontinue any product or piece of literature at anytime without prior notice.