Mobile app stores for telecom operators: The next battlefield

Published: March 30, 2010

Executive summary

The mobile applications business has grown exponentially in just the past three years. On the back of the hugely popular iPhone, Apple’s App Store has quickly come to dominate the market, but rivals such as Google, Microsoft, Nokia, and Research in Motion Ltd. (RIM) are betting billions that they can catch up. So far, telecom operators have been late to the game. If they want to avoid the fate of becoming mere pipes for the ever more popular app stores, they must devise and implement strategies that take advantage of the very real assets they possess.

Because of their limited customer bases relative to the massive numbers being put up by Apple and other operating system vendors, operators playing alone lack the inherent ability to attract large numbers of application developers to their own stores, and they lack experience in managing open ecosystems of developer communities. What they do have are powerful brands, a strong relationship with their subscribers, and the ability to monetize that relationship. For operators, the key is not to try to reap the direct revenues from app sales, but rather to develop a strong apps offering that can help them increase average revenue per user (ARPU), improve customer acquisition, and reduce churn.

To capture these benefits, operators have three options in building their own app stores: “closed” storefronts offering only apps that they develop or source themselves; “open” storefronts that offer access to third-party apps and app stores, with which they share revenue; and app stores for phones other than smart phones, primarily in developing markets through SIM services. Operators are by no means limited to any of these options; rather, they should pick and choose, depending on the OS and device providers they partner with, and on geography. What is critical is to ensure they play a key role as a retailer of apps by devising strategies — and executing them — now, before it’s too late.

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Conclusion

As the competition to provide consumers with more and better mobile apps heats up, telecom operators run the risk of becoming mere conduits to the successful app stores of others. To avoid that fate, operators must play the game, building storefronts attractive enough to maintain the critical relationship with their subscribers. The real upside for operators, beyond targeting additional revenues from selling apps, is churn reduction, increased ARPU, and improved subscriber acquisition. Succeeding in this arena requires operators to master the business of retailing mobile apps and getting access to a large network of developers or partners, in order to feed their subscribers with large, regularly renewable catalogs of apps.

The mobile apps business is moving and evolving quickly. Operators that act now stand to reap significant advantage.

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Mobile app stores for telecom operators: The next battlefield

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