AppStore Wars – The Operator Strikes Back

During the last six months every stakeholder of the mobile value chain has launched or announced the launch of an application store. Apple announced on 27th April that it would reach the 1st billion of application download within days. Vodafone announced its own application store on 12th May with public APIs available and the possibility of invoicing the application through its billing system. Microsoft is positioning its Market Place for a launch along Windows Mobile 6.5 later this fall. Nokia and RIM have already their own appstore.

Why are application stores so important? Let’s look at a simplified value chain chart.

simplified value chain

Applications can be considered  a content amongst others which will generate a huge revenue. Such applications are games, productivity applications, etc. Juniper Research expects mobile applications to generate 25bn $ revenue by 2014.  >> see article

But it will generate revenue only to organizations that will be capable of aggregating and billing the applications to the end user. And here we have many candidates:

  • The handset manufacturer: Apple, RIM, Nokia, Samsung, etc.
  • The OS vendor: Microsoft, Google
  • The mobile operator

The operator knows the customer and how to invoice him for an application download but he needs to aggregate in the same store applications for many different platforms (feature phones, S60, WiMo, Android, RIM, etc).

The handset manufacturer can guarantee to have an on-device-store with applications fully tested and working fine with the device. But he doesn’t have the billing platform and need to use a paypall or a openbit based solution.

OS vendor wants to position himself in between the manufacturer and the operator providing services that the operator will bill and get a share of the revenue.

Here is the most strategic aspect of the application store. Beyond ‘dumb’ applications (non connected), smart applications  (connected) are just a gateway to a service on the “cloud”. A service that can potentially bypass the operator and transform it into a pipe provider getting a small share of the revenue. Application Stores are a danger zone for the mobile operators.

applications value chain

If you consider the application just as a service enabler, a link to a service, you understand that everyone is fighting for it:

  • The operator as he is providing the pipe and the legacy applications like voice, SMS, MMS and doesn’t want to loose the control of the customer;
  • The OS vendor as he wants to grab a piece of the cake of the next generation service;
  • The manufacturer as he is squeezed by the operator to very low margin levels and he wants to put some fat in his diet.

Hence the AppStore Wars are not just wars for content distribution but wars to control the next generation services, to control the end user experience, then to control the entire mobile ecosystem.

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One thought on “AppStore Wars – The Operator Strikes Back

  1. Pingback: AppStore Wars – The clone Wars « Bertrand Issard’s Blog

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