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Mobile application stores: key success factors

04 февраля 2009

During 2008, in a first for the mobile industry, consumer demand for third-party applications started driving both handset sales and revenues for developers and original equipment manufacturers (OEMs). Apple's success with the App Store has prompted other players to re-evaluate the concept of on-device application stores as a distribution and delivery mechanism for mobile applications.

The keys to Apple's success are its unified software platform for iPhone and iPod Touch, its centralised billing system (iTunes), its ability to leverage the exiting OS X developer community and its straightforward (if not completely transparent) process for developers to publish content. The challenge for other vendors and mobile operators is how to generate revenues from applications with different infrastructure and assets to Apple.

Keep it simple, stupid: complex and costly submission processes inhibit developers Comparing the application distribution strategies of Nokia and Apple is revealing. Nokia was an early adopter of an open application platform for its phones. It has had open phones based on its S60 platform in its portfolio since 2001. Since then Nokia has shipped S60 in over 180 million mobile phones and stimulated approximately 9,000 applications for the platform. By comparison, Apple has had the iPhone open to applications since the middle of 2008 and has generated an approximately equal number of applications.

There are many differences in the approaches taken by Nokia and Apple; however, the most striking difference is in the cost and complexity of submitting and publishing applications for developers.

Nokia maintains multiple channels for developers to get to market, including MOSH, Nokia Software Market and Nokia Download Store. Nokia also supports developers distributing their applications directly over the Web, as well as a B2B marketplace for large ISVs and systems integrators.

By contrast, Apple and Google (for Android) have a single channel for developers to publish content. This has significantly helped both Apple and Google quickly build the number of applications available on their respective mobile stores.

However, Apple's process for submission is not perfect for developers, as it retains the right to block a given application for business as well as technical reasons (for example, if an application competes with an existing Apple service). This lack of transparency inhibits developers as they cannot determine in advance (using the published guidelines) whether Apple will publish the application. Apple's competitors will exploit this weakness.

Monetising applications is key for developers and everyone else
Commercial developers need a clear monetary incentive. Apple has demonstrated that its platform for the iPhone and iPod Touch allows developers to make money.

First, it has a consistent, non-fragmented platform so developers do not have to spend time (money) porting their applications to run on different hardware using the same software. Second, Apple has a clear revenue-sharing agreement with developers (Apple gets 30% and developers get 70% of application sales). Third, Apple has an existing billing relationship with consumers through its iTunes store and therefore consumers can buy with a single click without having to enter payment details for each purchase or trust a third party with these credentials.

By contrast, Nokia has multiple application environments; revenue-sharing agreements are negotiated individually with developers, providing little visibility from the start of a potential application development project on how much they could earn; and Nokia does not own the billing relationship with the customer.

For mobile operators wishing to launch mobile application stores of their own, owning the billing relationship is a key advantage. It also shows that Nokia and other OEMs could partner with mobile operators to provide a comparable customer experience to Apple.

Competition between vendors will intensify during 2009
In 2009 Ovum expects vendors to launch new propositions and to improve current propositions in the market - for example, Android Market will introduce paid applications. RIM has also announced that it will introduce a store for its BlackBerry range of devices. In addition, we expect Nokia will streamline its distribution process and focus on marketing the Nokia Download Store as the main channel for developers.

Tier-one handset vendors will also introduce mobile application stores. We anticipate stores from the remaining tier-one manufacturers, such as Samsung, LG and Sony Ericsson, as well as from other platform vendors, which could include Microsoft and LiMo.

We also expect mobile operators to introduce stores for their device portfolios. The challenge for mobile operators will be to incentivise developers, keep the process simple for developers and consumers, and support application stores that provide the broadest reach across their device portfolio.

By Adam Leach

Источник: Ovum

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