The mobile content and applications space has been seized by “app store” fever, following the phenomenal success of Apple’s iPhone App Store, which a year after launching had clocked up a staggering 1.5 billion downloads and accumulated 65,000 applications from 100,000 developers. Inevitably, everyone is jumping on the bandwagon and launching copycat stores, hoping to get a slice of the action, including handset and OS vendors such as Google, Microsoft, Nokia, RIM, Samsung and Sony Ericsson and operators such as O2, Orange, Telefonica and Verizon Wireless.
But, although the app store model makes developing and publishing mobile applications far more simpler and profitable for developers and provides previously undreamt of choice for mobile users, it also threatens to further fragment an already extremely fragmented mobile content landscape.
Apple has shown how operators can be completely cut out of the mobile content value chain by firmly tethering the App Store to iTunes, and yet still having operators fall over themselves to launch the iPhone. So has Google with Latitude, a location-based service powered by cellular-positioning information, independently from operators. And, to a certain extent Nokia, with the big content push it unleashed after unveiling Ovi in August 2007.
Brands and service providers looking to target mobile users across networks and borders are more likely to rely on the global services being enabled by the likes of Apple, Google and Nokia than the operators - who are talking about creating common APIs for third parties to hook up to, but are a long way from making that reality.
Operators are all chanting the mantra of “open APIs” and “smart-pipes,” but have they left things too late?
Amidst the hype surrounding app stores, it is important to remember that mobile messaging continues to be the biggest contributor to mobile data revenues. P2P SMS contributes to the majority of messaging revenues but application messaging is also seeing strong growth, driven by the increasing interest and investment in services such as mobile social networking, payments, banking, marketing and advertising.
The lack of fixed Internet and broadband infrastructure in emerging markets is seen as a key opportunity by operators to offer mobile Internet services. In developed markets, operators are keen to provide mobile Internet services to increase data ARPU, reduce churn and substitute and complement fixed broadband. There is also growing interest in telematics and M2M services as consumer markets slow and operators seek new revenue streams to capitalize on their wireless broadband capabilities.
However, the move towards flat-rate data tariffs, with more inclusive megabytes for users, means that the value of data is being fatally undermined. Will operators be able to make good returns on their investments in LTE and high-speed networks if data prices become commoditized?
The uptake of mobile TV services has been disappointing so far, hampered by the lack of agreement on which technology standard to adopt and user unwillingness to pay for the service. The free-to-air model is gaining prevalence in the early stages of deployment to build consumer interest and adoption of services. In the longer term, advertising revenues and consumer willingness to pay for premium content will be crucial for the success of mobile TV, but how can operators and service providers achieve this?
Mobile operators are keen on deploying mobile payments and banking services, especially in emerging markets where banking penetration is low and a very small portion of the population has debit/credit cards. Internet brands like Google, eBay/PayPal and Amazon are also keen to extend their online presence to the mobile environment. How quickly can the industry overcome regulatory hurdles and security concerns affecting the growth of mobile payments and banking?
Due to the global recession, most companies have cut their advertising budgets and it is unlikely that many will invest in mobile advertising this year, especially those who have not invested in the mobile channel before. Next year, these companies will consider mobile advertising again but the overall reduction in advertising budgets means that the spend on mobile will be less than what the mobile industry was expecting and forecasting a year ago. How big will be the impact of the economic slowdown on mobile advertising and investment in other value-added services?
Social networking and location features can drive greater adoption and usage of mobile services and reduce churn. However, at present most mobile social networking and LBS is being offered using the subscription based pricing model. In the coming years, will we see many ad-funded models that will make these services available for free or at subsidised prices to consumers.
Guillermo Escofet, Senior Analyst, guillermo.escofet@informa.com
Shailendra Pandey, Senior Research Analyst, shailendra.pandey@informa.com
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