Distilling market noise into market sense

The VisionMobile blog is a space where VisionMobile analysts and industry insiders exchange views on the fast-changing mobile market and the trends that define the future direction of telecoms.

  • 14
    Nov
    2008

    The Mobile Application Store phenomenon

    By Andreas Constantinou - 30,416 views 18 Comments

    [Apple's App Store, Android Market, RIM Application Center.. application stores are the latest fad of the mobile industry. Research Director, Andreas Constantinou, analyses the recipe of the mobile application store phenomenon and the movers and shakers of this virgin market]

    shopping bagsThe success of Apple’s App Store has been well documented; more than 5,000 new applications, $30M revenues in the first 30 days of operation, 200 million downloads in the first 100 days.. the facts point to a rediscovered revenue source that the mobile industry is eager to capture. [Update: John Doerr at O'Reilly has shared some research that shows App Store applications growing by 170% each month between August and October 2008 and then plateau'ing to about 6000 apps in early November].

    Many industry observers will point to the on-device storefront as the reason behind the success of Apple’s App Store. Others will point to Apple’s single OSX platform that allows developers to target more than 10 million devices globally with a single application build. But our research shows that it’s far more than that.

    Mobile Application Stores (MAS) are a new solution market which promises the development of a new revenue stream for operators, handset OEMs and application developers. In the last few months here at VisionMobile we ‘ve analysed the key MAS solutions, namely Qualcomm’s BREW shop, Apple’s App Store and held briefings with Nokia, Handango and GetJar. In this article, we discuss the recipe of the mobile application store phenomenon and the movers and shakers of this virgin market.

    The next figure compares five popular MAS solutions in terms of fundamentals, performance and features.

    Mobile Application Stores

    Mobile Applications Stores have been around long before the iPhone – in fact since 2001 with Qualcomm BREW offering not only an SDK for application developers, but also a complete developer-to-consumer channel for discovering, provisioning, distributing and billing applications on BREW handsets. On one hand Qualcomm’s BREW solution has been criticised for stringent application certification requirements and a cumbersome developer accreditation program. Yet it is by far the most successful MAS solution, with an average of 80 million application downloads per month in 2007 and over $1 billion shared with developers as of early 2007.

    [Updated: The official BREW figures from QIS state "80M+ average monthly transactions during 2007", so that number should include content downloads as well as application downloads. It's also worth mentioning that BREW's download system offers one of the most advanced range of billing models, including subscriptions and prepaid credits that can be used for purchasing  applications or content.]

    Beyond the 10-11% of the sales base of BREW-capable handsets, there have been very few, usually unsuccessful efforts at building an ecosystem for application downloads.

    Nokia Download!
    Nokia’s Download! on-device storefront represents a half-baked MAS solution. Launched in June 2006, Nokia’s Content Discoverer was designed to replace Preminet, the supply-side marketplace for distributing applications. Nokia’s NCD, later renamed to Download!, has been widely deployed on S60 and S40 handsets but failed to get the MAS recipe right due to a number of reasons:
    - an on-device storefront with very few applications, poor catalog management, inconsistent structure and operator-dependent availability.
    - installing an application presents the user with multiple confirmation dialogs, making installation counter-intuitive.
    - the process of submitting an application to be featured on Download! is far from transparent with no central portal and distribution agreements done on a case-by-case basis.
    - billing relies primarily on premium SMS via specific operator deals and takes a large revenue cut away from the developer. To improve the rev share balance, developers have to implement their own credit card charging mechanisms in which case they have to lure the user to their website to make the payment – plus developers have to use their own IMEI-based licensing schemes.

    GetJar
    Despite lacking an on-device storefront, GetJar is a successful Mobile Application Store reporting a respectable 17 million downloads per month. GetJar was started by Ilja Laurs in 2004, is profitable, and has recently received $6 million from Accel Partners.

    GetJar started as a community site, connecting developers with beta testers, where users can download and test applications. It has since evolved into a distribution channel for application developers including brand-name applications like Opera Mini and Google Maps. GetJar reports 26,000 registered developers and 10,000 hosted applications.

    GetJar features mostly free and ad-supported applications. Developers can upload applications to GetJar for free, and get downloads for free. Developers monetise through four revenue models:

    1. Free applications with no advertising
    2. Ad-supported applications, where the developer monetises through GetJar’s in-house ad-injection (CPM) system, or other ad systems (e.g. Greystripe, Smaato) for interstitial ads.
    3. Trial applications, where the activation or upgrade takes place via the developer’s own website.
    4. By the end of 2008 GetJar plans to add a centralised billing facility via credit card to support paid-for applications, according to Bill Scott, GetJar’s SVP.

    GetJar allows developers to promote their apps on GetJar website for a fee of circa $4,000 per month per application. According to Scott, Google Maps downloads jumped from 20,000 downloads/week to 90,000 downloads/week thanks to GetJar promotional banners.

    GetJar is also offering hosted application store solutions for operators. The company allows operators to build own-brand or co-branded mobile application stores in what seems like a no-brainer deal: GetJar offers the hosted solution to the operator for free and is also willing to share part of the ad revenue. GetJar operates custom portals for 11 operators and OEMs, including Three, MAXIS Malaysia and Optimus Portugal.

    One downside of GetJar is that it does not offer an on-device storefront, where we may see the company partner with on-device portal providers.

    Handango
    Handango is one of the first application retailers and bills itself as the largest cross-platform smartphone application distributor with over 140,000 applications (including variants) in its online stores and over 100 million applications downloaded to date.

    Handango offers application developers three channels of distribution:
    - Direct, via handango.com
    - Via channel partners such as Verizon Wireless, AT&T, T-Mobile, Alltel, Nokia, RIM, Sony Ericsson, Samsung and AOL. Handango has recently expanded with distribution through physical retail stores, namely BestBuy and Carphone Warehouse.
    - Via Handango’s commerce engine web-shopping infrastructure used by over 1,000 content providers.

    Handango offers InHand, an on-device storefront which features ratings, recommended and best seller apps. InHand can be freely downloaded from the Handango site and in some cases comes pre-loaded on handsets – in the order of ‘low millions’ of handsets according to Handango’s Alex Bloom, VP Content and International.

    Another provider who has entered the MAS scene is US-based mPortal, best known for having powered Disney Mobile’s on-device portal. The company has now turned to offering a client and server infrastructure for application stores. mPortal offers a white label client-server product that combines an on-device storefront, application provisioning, aggregation of 3rd party application catalogs and integration with operator billing – in other words key elements for helping operators take a Mobile Application Store to market. mPortal already powers the branded application store of a tier-1 operator and reports being deployed on 50 device models (SKUs) as of the end of 2008.

    Naturally, there are a number of other vendors offering partial MAS solutions, namely Cellmania, Motricity, Jamba, Buongiorno and Handmark.

    The recipe behind Mobile Application Stores
    At the end of 2008 we are clearly seeing a turn towards complete Mobile Application store offerings in the footsteps of Apple’s App Store. There’s been plenty of blogoshere coverage on Google’s Android Market, RIM’s Application Center, Microsoft’s SkyMarket and Adobe’s Appzone.

    This new wave of MAS solutions encompass the complete recipe for a developer-to-consumer channel, contrary to the previous half-baked efforts. The next figure lists the five key ingredients of Mobile Application Store solutions; single marketplace, centralised billing, global distribution, provisioning and on-device discovery. The ingredients of the recipe are far from simple to put together – requiring not only the right ingredients, but also the right cook – which is why Apple and Qualcomm are the only two successful, complete Mobile Application Stores as of the end of 2008.

    Mobile Applications Stores - features list

    New market = new opportunities
    We are already seeing a number of software vendors, OEMs and operators planning to offer Mobile Application Stores, many of them still in stealth mode as of the end of 2008.

    We expect the most successful MAS solutions to come from handset OEMs, particularly the top-10. OEMs can manage the distribution, provisioning and on-device discovery elements of the recipe, while partnering with billing and retailing vendors to complete the picture. Operators will find it harder to put together successful MAS propositions, as they control a much smaller percentage of the recipe.

    The few players who have developed vertical ecosystems are also in a very strong position – specifically Google, Microsoft, Adobe, Qualcomm, Nokia, Intel and RIM (see earlier article on the 7 centres of gravity in mobile). It will also be interesting to see if Qualcomm is willing to export its very successful MAS solution outside the narrow realm of BREW-capable handsets.

    We expect handset OEMs and network operators have gone for shopping early this Christmas, as they try to piece together the key ingredients of a MAS solution. Supply of these ingredients is in abundance: billing (Tanla, Bango, Qpass), distribution and retailing (July Systems, Motricity, Jamba, Handmark), on-device storefronts (mPortal, SurfKitchen and the dozen or so ODP vendors) and provisioning (InnoPath, Red Bend as well as many software services outfits).

    Comments welcome as always.

    - Andreas

    Andreas Constantinou

    Andreas Constantinou

    As Managing Director, Andreas oversees the growth and strategy of VisionMobile. He has twelve years experience in mobile, having worked with the top brand names in the mobile industry including Telefonica, AT&T, Telenor, Vodafone, Deutsche Telekom, MTS, Nokia, Sony, RIM, HTC, Qualcomm, Ericsson and Microsoft. Over the last five years, Andreas has grown VisionMobile into the leading, most respected research firm on telco economics and developer economics, with a client base and reputation that out rivals companies many times the size.

martin smith

Andreas, I think the developer gets 70% of sales revenue with Apple's App store (not 30% as stated in the chart).

 
14Nov
Andreas Constantinou

Martin – thanks for spotting the typo, it should have been 30% to Apple. Fixed now.

Andreas

 
14Nov
Roy

Andreas,

As a result of the growing MAS opportunity, several large carriers will continue to build-out their app stores as OEMs & Platforms build theirs (as you state in your report).

Some of these large carriers have very sizable consumers bases (50-100+ million). And they already have most of the ingredients that you list in your table (except for global distribution).

Since these carrier driven app stores app stores are promising to be more open going forward, won’t this MAS category be another "content battleground" between carrier & OEMs?

How do you think “carrier led app stores” will compete or co-exist with “platform led app stores” in the next 12-18 months? . . . How strategic is a MAS for a carrier . . . Who wins over time (Carrier, OEM or Platform) & why?

 
18Nov
Andreas Constantinou

Hi Roy,

I think operators/carriers will struggle to develop their own mobile app stores. The provisioning and on-device discovery elements are the hardest to control across 100-200 or so handset models that tier-1 operators have to cater to. Plus operators most often don't have the know-how for dealing with software developers. Verizon may be an exception here since it has launched its own MAS solution for BREW and non-BREW devices.

Unavoidably, MAS solutions will co-exist across OEMs and MNOs, in the same way that OEM and MNO content offerings compete for the users' attention. My bet for who wins over time would go to the OEMs for a simple reason; the application discoverability (short click distance from the idle screen, catalogue management, etc) are domains which are most familiar to and mostly controlled by OEMs globally (with Japan and US being exceptions). With the exception of operators with major handset customisation investments (notably Vodafone and Verizon), I would expect the most successful MAS plays to be those run by OEMs.

- Andreas

 
19Nov
Gwen

Hi Andreas -

Currious to know what impact you see these MAS having on Smartphone sales. Do you see them directly impacting Smartphone sales in a positive way? Is the consumer situation “Wow I have purchased a smartphone it has so many cool apps I will use/buy” or “I want to do all these cool things with my phone that these apps enable and so I will go out and buy a smartphone.” Is there room for both scenarios? Is one more likely than the other? I'd love to hear your thoughts on the topic.

Best,

Gwen

 
19Nov
Andreas Constantinou

Hi Gwen,

I only have anecdotal evidence on the impact of MAS on smarpthone sales – and that comes purely from personal experience, and so is non-significant statistically. But it may be helpful in extrapolating and drawing some early conclusions that are generalisable.

The diversity of applications on the iPhone, coupled with discoverability, catalogue management, search, etc, makes it easy to find the application that's best suited for each user (i.e. comes very close to 1-2-1 targeting of apps for users). This in turn creates passionate users, as they can find applications they care for. This in turn creates word of mouth marketing, blogging and generally viral marketing. If a campaign can target the opinion leaders (alpha users) then the viral effect is more pronounced.

I have seen this effect apply to the iPhone, from personal experience. That is, the 'I love this application on your phone, how can I get this phone?'.

One thing for sure is that users/people think in terms of use cases, not platforms or technology. The use-case focus is also behind the rise of application-specific phones (e.g. Three's SkypePhone and ING's Facebook phone). So in answer to your question, I would say that users would buy a phone if they find that it is particularly good in a task or use-case, whether that is listening to music, getting the latest gossip on facebook, making them look cool, or being small enough to fit in their pocket. I don't think that the 'average' phone buyer would buy into the potential/technology/platform aspects of a smartphone (and there is no average buyer :)

BTW, the word smartphone should be banned :) – it's is an industry term that doesn't translate in the userland.

Andreas

 
20Nov
Neil Fergus

Hi Andreas, I have been in the mobile apps side placing developers for various firms (OEM's, app developers)

Where do you think the best area to develope a small miche that would serve a specific marketplace. An MAS for a specific service -financial fir example or targeting development for certian types of phones, smart phones for example.

Where can someone lookimg got investor funding in this space (ptentially) find a nuche) for 2009. Whats the latest trend as you see it. I'm looking to pitch an idea of an MAS store offering everything the big guys don't (the best of all worlds and giving more revenue to the developers…

 
24Dec
Andreas Constantinou

Hi Neil,

Good question. I tend to think that niche MAS offerings will not be viable, as the set-up costs are too high. Unless you skip the home-grown solution and related costs and simply brand someone else's white label MAS offering (e.g. Handango, GetJar) and offer a hand-picked set of apps for a vertical segment (e.g. financial).

However, trying to compete with Apple's App Store or anything similar with a home-grown MAS solution is no small feat – which is why I think most network operators/carriers won't succeed in getting app download revenue from home-built MAS solutions – only through white labeling.

One successful recipe in this new MAS market might be to act as the matchmaker and integrator – offering a choice of billing integrators (e.g. Bango, Tanla), app catalogues (e.g. Handango, GetJar), on-device storefronts (e.g. mPortal, Everypoint Nemo), and distribution deals through handset OEMs.

The industry players with the most to make here will be the middlemen who can customise and scale white label MAS solutions.

Andreas

 
06Jan
Dean Barron

Andreas, Have you heard about Nemo? The next generation platform for mobile application dvelopers. I heard it's the hottest thing going on the market and puts all of the others to shame. Including all of the companies you list in your article. Just wondering if it's worth a try. LMK, all the best. Keep upi the good work!

 
11Feb
Andreas Constantinou

Hi Dean,

Everypoint's Nemo brings together an enhanced Java runtime with a vector graphics engine, sync APIs, a on-device-storefront and a marketplace for submitting applications and settling rev shares.

As such Nemo offers some really key technology bricks (much like what In-Fusio was doing 5 years ago) and the important marketplace + on-device storefront infrastructure. However it lacks key billing and distribution deals.

The solution would be perfect if acquired by an OEM or Sun (who's Java ODP solution is too little too late), but on its own Nemo has a long uphill battle to fight against the so many App Store me-toos.

Andreas

 
01Mar
rob

Nokia is now catching up and catching up fast. They have just launched fabulous Ovi store. The revenue sharing scheme seems good and their stimulus to developers to come up with new and innovative applications seems terrific too, what with their Calling all Innovators contests. This year's (2009) will be featured prominently on Ovi Store. Seems like exciting times for mobile developers.

 
03Apr
Andreas Constantinou

H Rob,

Indeed – Nokia has big plans for Ovi Store and seem to be finally catching up.

We need to update this article, as so much has happened since November when it was written. Watch this space :)

Andreas

 
06Apr
Ohad

Hi Andreas,

Very good article, need to update a little bit regarding the Nokia Ovi as you mentioned.

If I'm now exploring the best way to enter the MAS community as a developer, and my specialty is Java, what would be your answer to the following questions?

1. Does java give the most wide solution for a variety of devices?

2. What Java sdk is the most common and recommended since each manufacturer recommends his own extended sdk?

3. Regarding OVI, I see there is a link to the developers website, so how is the billing can be done centrally?

4. Is there a need for centralized billing solution in the market and who is leading it now?

That's for now.

Thanks a lot

Ohad.

 
23Apr
Andreas Constantinou

Hi Ohad,

We do plan to update the research soon after Ovi Store is launched.

Regarding your questions:

1. Yes, if you are talking about developing applications for mass-market devices, which is the route taken by games developers. Think of Java as the lowest common denominator in terms of development environment across mobile devices.

2. I don't think there's a single SDK, as there is no single Java flavour out there.

3. Ovi Store should be launched in May and billing is done centrally via credit card. I 'm not sure if operator billing will also be done centrally 100% of the times

4. There are a few companies offering global billing solutions (e.g. Tanla, Bango, Qpass, etc), but there are no widely deployed app stores on Java yet AFAIK.

Andreas

 
24Apr
Richard

There's a really great guide to mobile app stores here: http://www.mobileappstoreguide.com

 
09Jun

Vision Mobile Blog

Distilling market noise into market sense

A Game of Ecosystems: Measuring ecosystem performance VisionMobile - Game of Ecosystems

[How do ecosystem economics shape the mobile competitive landscape? What are the key performance indicators and how should app ecosystem…

Continue Reading
The Mediatek Phenomenon: the new smartphone disruption The Mediatek Phenomenon

[The next disruption in smartphones comes not from the power struggle between Apple, Google and Amazon, but from silicon. Guest…

Continue Reading
[Infographic] Developer Economics 2013: Dev tools are the foundation of the app economy DE13_preview

We’d like to present our latest infographic, based on the latest Developer Economics report – themed around dev tools. This…

Continue Reading
see all blog posts

Vision Mobile Research

Analytical reports on emerging solution markets

Mobile Megatrends megatrends_cover

Our annual Mobile Megatrends report analyses the major trends in the mobile industry and the future of connected screens –…

The 100 Million Club Preview100Million

The 100 Million Club is a watchlist tracking the shipments of the largest handset manufacturers and mobile platforms. The current…

Developer Economics 2013: The tools report DE13_flagF

This is the fourth in the series of Developer Economics reports, our highly acclaimed developer research series. Besides benchmarking developer mindshare,…

see research reports

Vision Mobile Strategy

Market Sonar MarketSonar_ill

Market Sonar is a customisable reporting service, based on Big Data from all major app stores. We deliver monthly, quarterly…

Report: Telco Innovation Toolbox Telco_web

Telco Innovation Toolbox showcases 10 economic models on how Telcos can manage disruption and reinvent themselves. This report, produced in…

Telco Innovation Toolbox VM029 - SEBroc_V0.5_HR-1 copy

“Telco Innovation Toolbox” is a strategy workshop introducing the new economic thinking necessary for successful innovation by telcos. Aimed at…

see more research reports

Contact Us


address

90 Long Acre, Covent Garden,
London WC2E 9RZ UK

contact

+44 845 003 8742 +44 845 003 8787 hello@visionmobile.com

Join us

private, secure, spam-free

socialize

vision mobile jobs

Data Visualisations Developer

We’re looking for a project-based Visualisation Developer, who will create visual presentations of data and will incorporate them in the… learn more

Privacy Policy

1. Introduction

VisionMobile Limited (referred to as “VisionMobile”, “we, or “our”) is committed to protecting the privacy of visitors to the VisionMobile web site(s) together with all related surveys, discussion forums, directories and databases. This privacy policy explains how we collect and use the information we collect about you.
By accessing and using this web site, you agree to the terms of this privacy policy.
As used in this Privacy Policy, the term “Personal Data” means data such as: your name, mailing address, e-mail address or other personal information that may be supplied by you or collected about you. We hope that this Privacy Policy helps you understand what kind of Personal Data, if any, we collect at this site and how we handle and use any such personal data after collection. Please note that we may provide aggregate statistics about our surveys, sales, traffic patterns, and related site information to reputable third parties, but these statistics will not include personally identifiable information (such as name and email address). VisionMobile is committed to protecting your privacy and does not engage in the practice of selling or trading Personal Data to other companies for promotional purposes.

2. Personal Data Provided by You

To respond to your questions, fulfill your requests or manage our online Surveys, it may be necessary to ask for or obtain Personal Data. If you provide us with any Personal Data, we may use it to respond to your requests or manage our surveys. By providing information to VisionMobile through this Site, you acknowledge and consent to the collection, use and disclosure of personally identifying information of the type and for the limited purposes described in this Privacy Policy.
If you place an order for a product, request a service or submit content to this site, we may need to contact you for additional information required to process or fulfill your order and/or request. Unless compelled by applicable law or administrative or judicial order, we will not provide this information to a third party without your permission, except as necessary to process your order, fulfill your requests, manage interactive customer programs or, if you are a corporate user, enable administration of access and usage of this Site by authorized personnel in your organization.

3. What type of information is collected?

To provide you with our Services and/or Products and to collect your views via our online surveys, we collect certain personal information about you. The information we collect may include, but is not limited to, your name, address, email address and work details.
We do not store credit card or debit card details. If you have given us your credit card or debit card details, we will only use this information to process your order and we will delete this information once your order has been completed.
We do not collect any sensitive personal information such as information on your racial or ethnic origins, political opinions, religious beliefs, trade union affiliations, sexual life, health or criminal history.

4. How is information collected?

We may collect personal information about you from the following sources:
4.1 Personal details registered by yourself in relation to VisionMobile online surveys.
4.2 Personal details registered by yourself in other ways e.g. via our website feedback forum or our Blog
4.3 Information about your visits to our web site(s);

5. How long is the information retained by us?

We only collect information which is necessary for the operation of our web site(s) and for the provision of our Services. We will not keep your personal information for longer than necessary to provide the Services or as required by law.

6. External Web Sites

This privacy policy only applies to our web site(s). Our web site(s) may contain links to external web sites. Please note that we are not responsible for the privacy practices of other web sites. We recommend that you check the privacy policy of any other web sites you may visit through the web sites.

7. Changes to Privacy Policy

We may amend this privacy policy from time to time. If we make any changes we will post them on the web site, so that you will always be aware of the way we use your personal information.
terms of use.
The contents of the VisionMobile Forum are licensed under a Creative Commons Attribution 2.5 License. The contents of the downloadable papers published through this website are licensed under the terms specified within each paper. The remaining contents of this website are licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

8. Cookie Policy

Cookie Name Info URL Info
_vm1 VisionMobile The purpose of this cookie is ensure that a user is authorized to download the report . Vision Mobile does use the data stored in this cookie in any other way.
_prli_click_? Pretty Permaling The purpose of this cookie is to log information from the Pretty Links Lite Plugin in order for the plugin to know that the user has clicked in the pretty link of the (id=?) to go to the VisionMobile website.
mp_2dccbf28670dda1c8b77def198be2f89_mixpanel MixPanel The purpose of this cookie to use mixpanel to identify the mixpanel user to track the flow of the visitors from page to page. No personal or any other private information is captured.
(a)_utma
(b)_utmz
(c)_utmb
(d)_utmc		 Google Analytics (a)This cookie tracks the number of times a visitor has come to www.visionmobile.com including their first and last visits.
(b)This cookie tells VisionMobile from where you, the visitor, were referred to www.visionmobile.com
(c)This cookie is used to determine the length and time of your visit to www.visionmobile.com
(d)This cookie works with _utmb to determine the length of your visiting session to www.visionmobile.com and when that session has ended.
VisionMobile does not use the data stored in these cookies in any other way.
(a)__qca
(b)mc		 Quantserve (a)The _qca cookie may use your computer’s IP address, pixel code, referring HTTP location, current HTTP location, search string, time of the access, browser’s time, any searches made on the applicable website, and other statistics” in order to “analyze Log Data from different websites and combine it with other non Personally Identifiable Information to produce the Reports that are made available on the Quantcast.com Site, to enable web publishers and advertisers to deliver audience segments that are appropriate for their products or services.
(b)The mc cookie set by Quantserve is related to advertising, and may track your behaviour on the VisionMobile website.
PREF Google cookie This cookie remembers users basic search preferences. The Google “PREF cookie” is used to remember our users’ basic preferences, such as the fact that a user wants search results in English, no more than 10 results on a given page etc. Expiry is set to 2038 in order to preserve user preference information. See here for more information.
Please enter your email to receive weekly updates from the VisionMobile blog
I also want to subscribe to the monthly newsletter, with updates on VisionMobile news and research (you will receive a separate email for this list, please subscribe to both to receive the newsletter and blog updates)