Apple may develop digital payments platform
By Caroline Gabriel
The critical debate in mobile internet business models is whether the bulk of usage will move to browser-based applications, held in the cloud, as argued by Google; or stay mainly with downloadable software, as now. The device makers need to position themselves for either, especially if they aim to increase the percentage of their revenue that comes from software. Clearly, downloads are simpler to control and charge for, via device-specific stores like iTunes, but as we have discussed in relation to Apple’s possible rejection of the Spotify cloud music streaming app for iPhone, even powerful vendors cannot assume their preferred model will win out.
So the decision for a company like Apple may not be browser versus download, but software versus hardware as the driver of revenue - optimizing gadgets for effective streaming so that they can be sold at a premium and become highly desirable for users of cloud media; rather than trying to jostle for position in the online content value chain. Apple should be in the best position to stick to the hardware model, given the popularity of its iPhone and iPod Touch for all kinds of web and content activity, and the high margins it commands for its hardware. If its model remains fairly stable, iTunes and App Store will continue to drive adoption of its devices, rather than contributing significantly to revenue and margin in their own right.
New calculations by Berstein Research and Deutsche Bank both point to Apple collecting a disproportionate slice of the handset sector’s profits, given its sub-2% market share. According to Bernstein’s Toni Sacconaghi, iPhone sales accounted for 8% of handset industry revenues in the first half of 2009, though the company had about 1.9% of unit share. These modest figures delivered a huge 32% of the operating profit in the segment though. “Even if we exclude the operating losses generated by Motorola and Sony Ericsson, Apple still accounted for 25% of industry profits,” he wrote in a research note. This is a familiar equation for Apple, whose Mac generates 6% of sales in the PC market, but 25% of the profits.
But Sacconaghi warns that it will be harder for the vendor to maintain this balance in phones than in PCs as first mover advantage and brand impact are more easily lost in this fickle sector, and Apple will have to keep reducing prices in order to remain competitive. In the ongoing debate over whether Apple will, or should, go after the mass voice/text oriented cellphone market, Sacconaghi is on the ‘yes’ side. “We believe Apple will ultimately need to lower price (and margins over time) to expand its addressable market opportunity, including offering a lower cost, non-data plan iPhone,” said the note.
And Apple may be preparing itself for even more extreme outcomes, and possibly a squeeze on its hardware profits and a forced shift to a greater software/services mix. According to Silicon Alley Insider, the firm is working on a digital payment platform for iTunes and App Store, something that most of the web majors are likely to pursue as they seek greater control of the content value chain, and the ability to set the rules. Facebook is a key player, planning its Pay with Facebook system for PCs and mobiles, and introducing increasingly rigid rules (reminiscent of Apple’s own) for advertisers.
The rumored Apple payments platform would enable iTunes, and potentially App Store, account holders to make purchases at participating retailers across the web, not just within iPhone applications - which is as far as the Apple money ecosystem stretches so far, though even this has expanded with the addition of in-app purchasing.
However, broader influence of the payments chain would not necessarily help margins. In the current iTunes system, developers pay 30% per transaction, but clearly the percentage Apple could take would be far lower in a less controlled environment, with many elements - including tough negotiators like Amazon - claiming their cut of any sale.
As for the currently dominant app store model, will there be significant pricing differences between the various shopfronts? RIM has gone for a ‘quality not quantity’ approach with more apps at high price points, reflecting its enterprise credentials, but between the two big names, there is no significant variation in strategy. Prices are currently similar in the Apple App Store and Google Android Market, according to research by Distimo. It finds the only area of real difference is in the ‘reference’ category, where Android is more expensive because its market carries a wide range of dictionary-type apps for $15 to $30. Otherwise, top selling premium downloads in categories including entertainment, navigation and tools are about the same average price across both the stores, though there is a different pricing structure in games. In this category, the most popular Android games typically cost between 99 cents and $5.95, with most selling for $2.99, while most App Store titles sell for 99 cents, with a few offered between $6.99 and $9.99. Games are the best selling group in App Store.
iTunes faces a dilemma over Spotify and cloud music
By Caroline Gabriel
There is much speculation over whether Apple will approve the upcoming iPhone version of the Spotify free streaming music application, for App Store. The software could have problems gaining entry, given Apple’s track record for excluding products that compete with its own business models or those of its favorite carriers (most recently, and controversially, Google Voice).
If Spotify, which is hugely popular on the PC with ad-supported music, does get the green light, it may show Apple getting more willing to compromise, given the heftier competition it will soon face for its handset and store. It may show the iPhone maker bowing to the inevitable trend for free music streaming services, which are developing rapidly alongside more traditional paid-for download stores or subscriptions, like iTunes or Nokia Comes With Music. Or it may just show that Apple makes more money from music-optimized devices than from actual music, and will push anything that encourages users to buy them (a balance Nokia is also struggling to work out, between its musicphones and its content offerings).
Despite Apple’s influence on the mobile music space with iTunes and its associated devices, the company cannot reverse the tide of ‘cloud’ music services, where users stream paid-for or free tracks as they want to listen, rather than downloading and keeping music. The upside for device makers is that the cloud requires highly functional devices and should stimulate the uptake of musicphones as more and more people want to listen to music on the move, encouraged by these free offerings.
iTunes does not benefit Apple primarily for profits, but because it ties its fans into Apple devices (while the iPhone has up to 60% gross margin, the margins on iTunes content are modest). So in the short term, Apple could benefit from cloud music, especially if this increases the total base of mobile music lovers rather than cannibalizing the iTunes constituency. Even if the impact is more negative - if users flock from iTunes to the more modern, social networking-enabled interfaces of the streaming approach - Apple still needs to keep control of the mobile music space.
It can only do this if its devices are the main ones on which services like Spotify are available - or those on which it delivers the best user experience - otherwise music will become device agnostic, with no way to tie in the customers. So far so good - Spotify, like many apps, is coming initially to the iPhone and BlackBerry, but over time we might expect it to appear on other phones. However, this process will only be accelerated if Apple refuses to let it into the App Store at all and the developer, with its loyal user base, is forced to look elsewhere.
Its obvious move, and the real threat to Apple, would be to boost its brand further with branded tie- ins with vendors and/or operators - as Facebook and Skype have done with Nokia, 3 and others. These link-ups boost the marketing efforts of both sides in attracting and retaining lovers of these web services (as long as they deliver a good experience), to the exclusion of other players like Apple.
So perhaps Apple should look to take the lead in streaming music rather than setting its face against it. The operators are certainly on the look-out for opportunities here, and some may well turn to Spotify as a brand partner (and such services will need big name support in future, to help them negotiate sustainable licensing terms with the music industry).
A frontrunner is Orange, which has been expanding its multimedia activities in Europe and even planning a content store that spans phones, PCs and TV set-top boxes. Its latest move, rolling out first in the over-competitive UK market, is a free streaming music package, for subscribers to its new Monkey pay-as-you-go tariff.
The cellco is partnering with Universal Music and UK TV broadcaster Channel 4, and seems to have its eye on the success of free, ad-supported music streaming services like Spotify, which is about to launch a mobile version.
Orange Monkey is aimed at 16-24-year-olds and allows users to create, listen to and share playlists over the internet and on any cellphone, although critics point out that it has a more restricted catalog than Spotify and that it needs to sign up further music majors. Channel 4 will provide editorial content and promote the service on its TV channels and web sites.
In addition to free music, Monkey gives users 300 texts with a £10 top-up, up to 1,000 texts with a £30 option. Voice calls will cost 20 pence per minute. By dialing a special number (247) Orange customers can listen to eight themed playlists which are changed daily. They can also go to the Orange Monkey web site and make their own playlist. The customer can press ‘5′ while listening to any track to receive a free text message with the artist name and track title, which is then saved to their favorites list.
“Unlike some music services which are either restricted to high end more expensive handsets or have download costs, Monkey is for everyone,” said Tom Alexander, CEO of Orange UK, who also says such offerings will help to reduce music piracy.
Nokia and RIM use social networking to lure US cellcos
By Caroline Gabriel
The shift of the social networking craze to cellphones shows no signs of abating, and is a key theme of the US cellcos’ autumn plans, even giving Nokia a boost in its bid to improve its north American performance.
Nokia and RIM, both battling to get visibility under the Apple and Palm spotlights stateside, are heavily focused on tapping the social networking trend. The Finnish giant is launching another handset with AT&T, part of its slow but steady progress in establishing a foothold in the once hostile carrier. The companies have launched the Surge, a “socially supercharged smartphone”.
The handset also represents broader strategies in Nokia - pushing its Symbian Series 60 smartphone platform into midrange, well priced webphones, to appeal to the mass market by making key applications easy to access and use. The Surge, then, majors on homescreen access to instant and multimedia messaging, text and email, plus AT&T Video Share and a new application called JuiceCaster, which allows users to post messages, images and video directly to social networks like Facebook. Other features include Flash support, 2-megapixel camera, AT&T Navigator and AT&T Mobile Music, and the price is $79.99 with two-year contract and after mail-in rebate, from July 19.
Of course, the real prize for Nokia would be to get major carrier support for one of its flagship, higher margin smartphones. Its best chance lies with AT&T, which has already launched the business focused E71x and promised to make Ovi Store available to its customers later this year. Some reports say that AT&T will also launch the N97 superphone in time for the holiday season, though currently this is only available without carrier contracts in the US. Nokia’s north American market share was 7.9% in the first quarter, up from 6.5% a year before.
Over at RIM, the BlackBerry Tour has gone on sale at Verizon Wireless and Sprint Nextel, as the smartphone maker also hopes to lure AT&T for its forthcoming ‘Storm 2′. The company is looking to strengthen its hand by upping its social networking credentials, with reported plans to launch a network specifically for BlackBerry App World. According to reports from TechCrunch, the social site will be called MyBlackBerry and will allow users to create a social profile where they can share mobile tips and tricks, plus recommendations of BlackBerry applications and accessories. The site will also be personalized to connect to owners of similar devices.
Another blog, BoyGeniusReport, indicates that AT&T could launch Storm 2, though the cellco would not confirm this. This would show RIM pursuing a non-exclusive launch strategy, since Verizon Wireless - which had an exclusive in the original Storm’s initial US sales period - has confirmed it will carry Storm 2 from October. The Storm range was co-developed with Verizon co-owner Vodafone and supports both HSPA and CDMA EV-DO. The upgrade is expected to plug a key hole in the first model, Wi-Fi support.
This will be essential for any future RIM launches at Sprint, with the cellco requiring all smartphones to support Wi-Fi from next year. “Sprint is embracing Wi-Fi in all its major devices going forward,” Jeff Clemow, director of business product marketing, told FierceWireless. This may be a nod to surveys that indicate rising demand for Wi-Fi in high end and even midrange devices, or a way to spread the load of data traffic across multiple networks. Sprint even hinted that there could be a Wi-Fi enabled Tour later in the year.
Both Sprint and Verizon are now offering the BlackBerry Tour 9630, effectively a 3G version of the Curve with physical qwerty keyboard, EV-DO Rev A plus quad band GSM and 2.1GHz HSPA for international roaming. Other features include 480 x 360 2.4-inch display, trackball and 3.2-megapixel camera with flash and auto-focus. The Tour 9630 is priced at $199.99 on both carriers, with two-year agreement. The candybar design is being positioned against sub-smartphones like Sprint’s HTC Snap and T-Mobile’s Dash 3G.
However, the Tour is a sign, at least according to analyst Jeff Kagan, that RIM is not being sufficiently innovative in design terms. “The BlackBerry has not been reinvented in years,” he told Wireless Week. “The new devices, like the Bold and the Storm, are better than previous versions with many features, and they have shown strong growth over the last six months; however, during the last month or two, that is slowing. We have not seen anything earth-shaking coming out of RIM in a while.” He thinks RIM risks being confined to its business heartland. “They have too many happy business customers. However, for growth, they have to stay hot and right now they are not.”
Vodafone opens APIs in bid to create giant mobile software store
By Caroline Gabriel
The mobile operators have been busily readying their own application stores and underlying processes, seeking to steal the limelight - and pole position in the mobile value chain - back from Apple, Google and Nokia. Some, like Orange and T-Mobile, have been focusing on cross-platform stores to span all their portfolio of devices, plus PCs and even TVs, but Vodafone has made the most aggressive move yet, opening up its billing platform to third party developers.
This will allow any developer to reach Vodafone’s 289m subscribers from a single point of access, and any of those users will be able to purchase the software via their usual Voda bill. It is not too much of a stretch to think that, in future, Vodafone could also extend the system to non-competitive partner operators, to make it even more attractive to developers - Verizon, China Mobile and Softbank, with which it is creating a common widgets platform, being obvious candidates. The UK-based cellco made a point of noting that its latest move was related to its involvement in this initiative, Joint Innovation Lab (JIL). This will also underpin China Mobile’s planned store, due later this year - which is reported to be branded Mobile Market. The Chinese cellco’s determination to control the branding and business model of its software was said to be a key reason for the breakdown of its talks to carry the iPhone, with its integrated App Store.
Vodafone will publish a set of network APIs to enable the programmers to build capabilities such as direct billing and location awareness into their products and will offer access via JIL. Developers creating widgets using the JIL interfaces will be able to deploy them across all four JIL operators’ networks and stores unchanged. This cuts down on the complexity of making apps suitable for a particular cellular network/store, making the apps instantly suitable for Vodafone’s storefronts, and those of Verizon, Softbank and China Mobile as they upgrade these to support JIL.
Vodafone hopes to gain a far wider choice of software for its stores, vying with Apple’s and Nokia’s grand totals, but also says it should benefit from an increase in revenue via the revenue sharing model with developers (though it refused to specify what this share would be). JIL will release its web site and software developers’ kit later in the summer.
Vodafone’s statement said: “Developers will only need to create internet applications once in order to reach millions of Vodafone customers on any device and will be able to charge for it directly through Vodafone’s billing system.” Users gain the benefits of a wider selection of apps, more payment and micropayment options, a simpler web experience, and consistent quality of service across the Vodafone footprint, it added.
This is more sophisticated than most operators’ attempts to take the reins of running app stores - because not only does Vodafone offer developers a direct channel to market and a billing structure, but a rapidly developing software platform that could potentially reach the one billion-plus customers shared between JIL’s four supporters. But Vodafone’s goals are shared by most of its counterparts in developed markets - to make its own brands and user experience dominant; to ensure that customers are attached to its services and see the carrier as their main point of contact in the mobile web; and to put itself in pole position in the mobile software value and revenue chain.
These goals are hard to pursue when cellcos also want to carry the most eye-catching handsets and applications, which forces them to work with big brands from the device and software fields. Vodafone, partly because of its scale, has been reasonably successful in segmenting its customer bases and its marketing, highlighting partner products like Nokia Musicstore and smartphones for certain categories of consumer, and majoring on its own Vodafone Music for others.
Other carriers have been less decisive, and appear to be trying out various approaches to see what works. For instance, Orange was the most hostile of the European majors when Nokia decided to enter the mobile web services market under its own brand, but its UK arm has now signed with the Finnish giant for a relaunch of Comes With Music (CWM). This unlimited download subscription offering has had a rocky start in its first market, the UK, and this has, in turn, probably taught Nokia a few lessons about the pitfalls of going direct-to-consumer, bypassing its major channel, the mobile operator.
While Nokia may dream of a world where it sells its devices and integrated web services directly to the consumer, in reality, especially in its developed markets, it needs the support of the mobile carriers to thrive. So it is a real breakthrough for Nokia to have signed an exclusive contract with Orange UK to offer the 5800 XpressMusic touchscreen musicphone with a two-year subscription to the CWM unlimited download service (the usual CWM deal from Nokia is just one year). Exclusives, as Apple knows well, have the downside of limiting market reach for a while, but they do bring the operator’s marketing reach and budget with them. Given that CWM saw limited uptake and was generally thought to be poorly communicated to the UK public, a relaunch with a strong new handset and Orange’s full blown support should help matters second time around.
CWM initially launched with Carphone Warehouse but no major cellco, and is reported to have attracted only 20,000 UK users, though subsequent launches in other countries like Singapore are looking more successful.
But while cellcos and handset makers definitely need one another, that does not stop them making every effort to be the dominant players in the app store battle. This battle continues to heat up, and some players will have to be more flexible about operator demands than others, notably Microsoft (see separate item). But despite carrier resentments at Apple’s iron control of its App Store and revenue share, that platform continues to shine with users, and will be the key target for Nokia’s Ovi Store when that opens for business soon.
The Finnish vendor is promising that Ovi Store will go live with about 20,000 items, making it the second largest after Apple’s, which has about twice that number. This would certainly enable Ovi to top Android Market’s launch with just 50, and RIM’s with a few hundred. Key differentiators, says Nokia, will be a heavy focus on entertainment and video; the ability for users to personalize the choices with which they are presented; and extensive use of the store to distribute new Nokia software updates as well as apps.
Nokia aims to unite all its web services under the Ovi store, which is leading to some casualties. The latest is Ovi Share, a media sharing site. The Finnish giant only launched it in February, but said it is now stopping further investment in the product as part of its total overhaul of Ovi’s line-up and branding. It will keep the site operational, but will make no further enhancements to it.
Analysts believe Ovi Share saw poor take-up because of strong competition from established names like Picasa, Flickr and Facebook. Nokia is now likely to work with such firms rather than against them, indicating that it needs to drop its ‘not invented here’ approach to mobile web services. It has already taken a major step in this direction by starting to create a network of partnerships under the Ovi umbrella, saying recently that it would rely more heavily on third parties to expand its offering, in order to reduce cost and time to market, and leverage popular apps in the market.
CTIA: Google wakes up to real world dilemmas of app store game
By Caroline Gabriel
This year’s CTIA Wireless is a very software driven show, and the two themes that are emerging above all are widget-based user interfaces ( see separate item ) and the latest developments in application storefronts. RIM and Microsoft opened their stores, Nokia and Samsung fleshed out details of content for theirs, and Android continued to attract operator support, even as Google found that, in the real world, it has to grapple with many of the same dilemmas for which it has criticized the grandfather of these virtual shops, Apple App Store.
As promised, RIM opened BlackBerry App World, initially offering 1,000 free and paid-for products for download to one of its smartphones. The higher priced structure of this store, compared to those of Google and Apple, suggests it will far best in RIM’s enterprise heartland, though the company says it will also include plenty of consumer items such as games. Features will include keyword searches throughout the store and reviews of apps from other users.
As part of the appeal to consumers, RIM also plans a full episode mobile TV service for the BlackBerry devices, as it looks to put real meat behind its pronouncements about delivering media to the ‘four screens’ (cellphone, PC, TV and landphone), with the BlackBerry at the hub. The company is not commenting on its plans, but NewTeeVee.com’s sources say these consist of a monthly premium subscription plan, with unlimited content included in the fee, and licensed from a range of broadcast and cable networks. Initially, the offering will be for the US only but RIM will seek partnerships in Europe too.
However, the show will be downloaded over Wi-Fi where this is available, to support faster performance and avoid clogging the 3G network - US cellcos like AT&T have suffered much reported glitches in supporting high end smartphones like the BlackBerry Bold on their 3G systems. This would preclude the Verizon Storm from using the TV download service, since it does not include Wi-Fi.
Video is also important to Samsung’s proposition - as we saw last week, the Korean leader is attacking iTunes head-on with a mobile video store boasting full length movies, and it is also announcing a storefront for rich media applications created for its TouchWiz widget interface ( see separate item ). But it seems that the mobile movie store business will remain a head-to-head between Apple and Samsung for some time. Nokia said last week that it would include films in its upcoming Ovi Store, but not a full blown ‘Comes With Video’ offering as was previously rumored. Meanwhile, as Motorola retrenches to its core businesses, it has quietly closed its own movie download platform.
When Nokia introduced its flat rate Comes With Music service last year, it hinted strongly at a movie and video version to follow in 2009, taking on the video side of Apple iTunes. However, it seems less interested in this type of content now, despite Samsung’s launch of an ambitious movie store for Europe, tied to high end handsets like the Tocca Ultra. Although the Finnish giant also has high end phones with OLED screens - though perhaps not quite as video-optimized as Samsung’s flagship - it is currently more interested in stealing Apple users on the basis of games, the most popular section of the iPhone App Store.
Nokia’s head of entertainment business, Tero Ojanpera, said: “Movies will be part of the offering but this kind of a full fledged video store is not in our roadmap.” He was keen to allay confusion over the N-Gage gaming brand, which appears from recent moves to have been sidelined. He said N-Gage will remain a platform for high end games, and its titles will be discoverable in the Ovi Store, but the store will aim to present everything under various personalized channels, but with a single umbrella brand.
Meanwhile, Motorola has closed its movie download service in the UK after just nine months. It was created in conjunction with film studio Paramount and platform provider Saffron Digital and allowed users to download content to a PC for £5.99 to £8.99, and then sideload it to a Motorola phone. However, the offering was hardly marketed and the executives responsible for it both left the firm in January.
Over at Microsoft, the company is determined to make a bigger splash at CTIA than at Mobile World Congress, where it was largely drowned out by the launch of Ovi Store and much Android chatter. It has already talked up its important agreement with LG, which will result in 50 new Windows Mobile products over the next three years, and the Las Vegas event will showcase its mobile web store and applications.
While the Redmond giant cannot launch the delayed Windows Mobile 7 yet, having to rely on the stopgap release 6.5, it can stuff its upcoming Mobile Application Marketplace with eye-catching features, which should include a new Facebook app, and themes created by fashion designer Isaac Mizrahi.
The Facebook app will be an important catch-up on the other smartphone platforms, most of which now boast an optimized client for the popular social networking system. The WinMo implementation will be released in April, and another client for rival MySpace in the summer.
Microsoft has also shipped its Windows Live suite for its mobile OS, consisting of cellphone versions of Hotmail, Messenger, Live Contacts, Spaces and Live Search, for releases 6.0 and higher. Older phones can access Hotmail via the browser, with a new version optimized for the mobile web, said Microsoft.
Other software houses that should be unveiling apps for Microsoft’s store include games makers EA Mobile, Gameloft and Hands-On Mobile, and other recognizable names include AP Mobile, Accuweather and Pandora. However, many reviewers are noting that Windows Mobile Application Marketplace seems to have a less stellar line-up of high profile software than its rivals, such as Ovi Store, are boasting for their imminent opening days.
For Marketplace users, Microsoft will support two methods of purchasing - credit card or via the cellphone bill, and unlike Nokia, there will be no difference in price or developer revenue share terms, with either mechanism. Unlike Apple, RIM and the others, Microsoft will also allow users to return unwanted apps within 24 hours, for a refund.
It has also backed off unpopular plans to charge WinMo developers $99 for submitting even small tweaks to their apps in the store. This was hardly likely to encourage software programmers to focus their efforts on Windows rather than other platforms whose stores provided free entry, or at least free updates. Now all updates, bug fixes or version upgrades for applications that are already in the Marketplace will be accepted free of charge. Developers will still pay $99 a year, plus $99 per app, to submit new products, though in year one, five apps can be submitted free for the initial annual fee. The Marketplace is expected to launch later this year with the release of Windows Mobile 6.5.
Microsoft knows personalization will be important to attract carrier and consumer support for stores, as Nokia has emphasized with its Ovi platform. It has teamed up with the Design Museum London and Council of Fashion Designers of America to offer exclusive color palettes and wallpapers, making the handset into a fashion accessory. A new Theme Generator will enable users to select pictures from their PC to set as background images, and personalize their navigation bar, scroll bar and highlighted text.
With Ovi Store (and Palm’s store for WebOS) yet to open its doors, carrier attention has mainly been caught by Android Market, though some cellcos are ambivalent about the system so far. T-Mobile USA, despite reservations about the lack of personalization in the Android Marketplace store, dropped clear hints last month that Android would be its primary strategic software platform in future; now Orange has joined the chorus. Orange France plans to launch Android handsets almost as fast as they launch this year, promising smartphones from HTC, Sony Ericsson, Motorola, LG and Samsung. Of course, only the HTC model has launched - Orange should follow T-Mobile in offering the Dream, which the German-owned cellco brands G1, in the coming month or two. Samsung should be next off the blocks, around midyear.
French reports say Orange has declared itself happy with the revenue sharing model of Android Marketplace, and plans to promote the store and the cellphones heavily, partly in a bid to compensate for the law-enforced loss of its iPhone exclusive earlier this year. Vodafone is also adding to Android’s snowball effect in Europe, launching the co-developed HTC Magic next month, and planning its biggest campaign for a smartphone since the pre-Christmas program for RIM Storm. And the Magic is also set to come to the US via T-Mobile, in its 1.7GHz AWS band.
Meanwhile, the Android world has been waiting for Flash to become available and this could happen sooner than expected thanks to a port by software house BSquare. Last fall, Google and Adobe executives talked about plans to work together on a version of the streaming technology, which is almost universal on web-enabled phones, though famously excluded from the iPhone. But BSquare is to move more quickly, porting Flash to Android for an
unspecified global tier one carrier.
According to BSquare, Flash technology presently ships on more than 800m devices worldwide and is used by over one million developers to create video and rich media applications. A year ago, BSquare acquired NEC America’s Adobe Flash Technology consulting business and has now worked on about 40 devices.
The operators may want Android to be more personalized, but they seem to feel they have a little more control over it than they do if they partner with Apple on App Store. Despite the strong success of the iPhone and its related store, for exclusive partners like AT&T, there is a rising backlash from carriers in newer markets ( see Wireless Watch March 25 2009 ). This is reported to have led to the breakdown of multiple rounds of talks with two successive Chinese cellcos, China Mobile and now China Unicom. The problems in the latest near-deal seem to have revolved around the Chinese bar on Wi-Fi in phones, and Unicom’s insistence on installing its own software on the handset, including its own store and iTunes-like application. This was the issue that reportedly killed talks with China Mobile, which also wanted to control the software experience and apps revenue share.
The way that the carrier is sidelined in the Apple model has been one issue that Google and Nokia appear to have addressed to some degree, but Apple has also incurred the wrath of developers with its iron control of its store and its habit of barring apps that compete with its own features. Google made much PR hay from this before Android Marketplace was live, promising a fully open store - but has found there is a difficult balance to draw between openness and ensuring a secure and usable experience for consumers.
In January there was a row over an Android ‘rogue application’ that allegedly wiped data on devices. This sounded warning signals, especially among operators, over the open door policy that Google has boasted of, since consumers may be vulnerable to rogue software that causes harm, deliberately or through poor programming, to their precious phones and data.
There are fears now that if more instances of sub-standard applications arise consumers will be put off using the store - and problems are highly likely as more devices emerge and more developers put software into the Marketplace.
However, now Google is on the other horn of the dilemma, coming under fire for reportedly pulling a tethering app from Marketplace to placate T-Mobile USA, its first carrier partner. Google says it will not endorse apps that violate the terms of service of its cellco partners - T-Mobile does not allow tethering (using a cellphone as a modem for the PC), and so the ‘Wi-Fi Tether for Root Users’ product was barred. Google’s apparent refusal of a tethering app is confusing since Android handsets will soon be offered by many operators that do allow the practise, though sometimes in exchange for an extra data plan fee (like AT&T). That might raise the specter of different versions of the store, or at least different skins, for different carriers - surely the opposite of the open access model that Google so loudly proclaims. As on many occasions before, Google is the scourge of the traditional cellcos in public, pushing for an open internet and new service provider models, but in commercial reality, is as keen to please them and use their powerful channels as any other software house.
Apps stores – what’s in the store for the mobile Internet
By Andrew Mitchell
With CTIA Wireless 2009 just a few short days away, the anticipation of the wireless industry, market and media is growing. One area of the wireless industry that is likely to see a lot more focus in this year’s event is the mobile applications market. Commitments and investments in capable 4G networks and some remarkable advances in MID technologies are now enabling applications developers to bring the art of the possible applications to viable products.
For applications developers and vendors, getting viable products to market is now emerging as a critical consideration. For the mobile Internet the question has become, “what are the business models that can create pervasiveness and profit?” What is becoming quickly apparent is that there are a number of different business models being used today. Are they creating pervasiveness and profit? The answer at the moment would seem to be dependent on where in the mobile Internet ecosystem the business model is being applied.
Similar to mobile content, the notion that the more users are attracted to mobile applications the more investment in development will be realized. And with the shakeout of mobile platforms far from over there will continue to be a level of uncertainty for both developers and distributors of applications. There are many models to consider; let’s have a quick look at a few.
A business model that most would view as successful would belong to Apple. Apple’s iTunes store and App Store are well integrated with Apple’s products and are a hit with users. Carriers are seeing benefit as well with a continued demand for the iPhone contributing to additional recurring revenues. But this business model isn’t a hit with everyone. Some developers who’d like to get their iPhone applications to market find the model’s terms too restrictive and have even challenged it. Cydia Store offers users applications for their iPhones that they won’t find at Apple’s App Store. iPhone users will need to have the device unlocked to use Cydia Store and that’s something that Apple isn’t supportive of.
Long established handset manufacturer Nokia has also adopted a consumer direct approach through its on-line store, Ovi. Nokia’s approach essentially removes the carrier from the applications and content value chains. The model has met with mixed reaction from carriers. Some have recognized the model as being beneficial and driving revenue by way of increased data usage and new activations. Others have viewed it as eroding revenue from the carrier’s own portal offerings. Developers will no doubt be watching this model carefully to see whether or not it is successful in driving demand for applications and therefore worthy of continued investment.
Google’s Android Market represents another consumer direct business model but with a twist. The twist here is that open application development is embraced and encouraged by the model. Developers register with Android Market and are then free to publish and distribute applications through the site. While small in comparison to App Store, Android Market seems to have demonstrated that this model works well for users and developers. Early indications also suggest that the model is working well for device manufacturer HTC and carrier T-Mobile as well.
Just this month Microsoft announced its how its Windows Marketplace for Mobile will work. For a developer, the approach looks similar to Apple’s - a 70/30 revenue split. What’s different for the user is that this isn’t likely going to be the only place you’ll be able to find applications for Windows phones. There’s also no direct carrier or device manufacturer role in this business model. Is there sufficient incentive for developers to invest in participating in Windows Marketplace for Mobile? The market based on the number of platforms sold will certainly be there but will that be conducive enough?
The 4G Trends editorial team will be on site at CTIA Wireless 2009 and will be providing updates on mobile applications and more. Be sure to follow their reports from the event at www.4GTrends.com as well as in next week’s edition of 4G Trends.
