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Mobile app stores: a necessary challenge for mobile network operators

25 июня 2009

Following the phenomenal success of Apple’s App Store, a multitude of vendors and MNOs have launched, or are planning to launch, their own stores in an attempt to capitalise on the increasing user demand for mobile applications.

Handset vendors and OS platform owners have been leading the development of application stores, or 'app stores', during the past few months because their close relationships with the developer community, which tends to target particular OSs or application platforms, enable them to launch stores relatively quickly (see Figure 1).

 

Vendor-led app store

Launch date

Payment methods

Vendor revenue share with application developers

Apple's App Store

July 2008

Credit card

30%

Samsung's app store

January 2009

Credit card

20%

Google Android Marketplace

February 2009 (started to accept paid-for applications)

Google Checkout

70% to developers, 30% to operators (Google claims it does not retain revenue)

BlackBerry App World

April 2009

Credit card and PayPal

20%

Nokia Ovi Store

May 2009

Credit card and operator on-phone billing (only in selected markets)

30% (credit card); 50% (operator billing)

Figure 1: Major vendor-led mobile app stores [Source: Analysys Mason, 2009]


As major vendors open their own app stores to sell mobile content directly to end users, MNOs are at increasing risk of being disintermediated from the content value chain. MNOs’ recent initiatives have largely been designed to address this threat. For example, Vodafone unveiled its global initiative in May 2009, when it promised to offer its application developers a single point of access to its 289 million users worldwide.


It will be a challenge for MNOs to succeed in this increasingly crowded market. The key to the popularity of Apple’s App Store is that it offers a compelling user experience, thanks to the iPhone’s features, the wide range of applications available and the large developer community. MNOs will have to aim to match this level of quality in terms of user experience in order to replicate Apple’s success in the mobile applications market.


MNOs are well-placed to enhance some aspects of the user experience by utilising their core network assets. For example, their billing assets offer an intuitive payment experience. MNOs provide premium-rate SMS services and a mobile Internet billing platform, which offer end users an extremely easy-to-use payment process. Several major vendors’ app stores offer credit card and PayPal payment methods, but these tend to be cumbersome in comparison with operators’ on-phone billing mechanisms.


However, MNOs will also need to overcome some major obstacles. Device fragmentation will be a considerable barrier to providing a wide selection of applications to end users and to maintaining quality. Devices differ in terms of their OS (for example, Android, Linux, Microsoft Windows Mobile, Palm and Symbian), application platform (for example, BREW, C++ and Java) and capabilities (for example, screen size and resolution, memory capacity and battery power). This requires content and application providers to develop multiple versions of each of their products to accommodate the diversification in mobile handsets, which results in high development costs and therefore inhibits the proliferation and quality of mobile applications. This issue will be more challenging for MNOs than device vendors, because MNOs will need to operate app store platforms that are suitable for multiple device types, whereas device vendors can focus on one or very few platforms.


Despite these challenges, MNOs should work to incorporate app stores into their service portfolios in order to capitalise on the growing consumer demand for mobile applications, retain control of the end-user relationship and therefore maintain their relevance to the content value chain.


Yanli Suo-Saunders, Senior Analyst

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