The changing landscape of app discovery

[The explosive growth of app ecosystems is creating serious bottlenecks in app discovery that only popular apps can overcome. Having 700 thousand apps is great for platform vendors, but not so great for developers, whose apps are lost in the heap. Andreas Pappas takes a look at the app discovery problem and considers whether social discovery is a better solution than the alternatives available today]

This article is also published in our newly launched Developer Economics Portal – where you can find more solutions to the app discovery issue.

VisionMobile - The changing landscape of app discovery

One of the greatest marketing challenges facing developers is being discovered, i.e. breaking through app store congestion and in front of user eyeballs. With Google Play and App Store now reporting over 700 thousand listed apps, browsing through these is ineffective, if at all possible. In fact, large app stores and the entire mobile application space are increasingly resembling the web when it comes to discovering content: it’s a jungle out there. Continue reading The changing landscape of app discovery

Discovery kills distribution: why the web needs a new leader

[Apple and Google have locked app discovery and distribution within their app stores. VisionMobile’s Andreas Constantinou explains how Facebook is using the web to disintermediate Apple/Google and why the web needs a new leader].

Discovery kills distribution: The real impact of the web highway

The platform duopoly.

In just the space of 3 years, the mobile platforms landscape has changed from an election race to an oligarchy. The network effects at the heart of the Apple and Google business models have created formidable barriers to entry. The growth in device shipments and apps created seems to continue a relentless climb, showing no signs of developer fatigue or consumer segment saturation as we discussed in our earlier analysis. Beyond the duopolists, competitors have been forced to jump from their burning platform into a chasm of uncertainty or to give up altogether.

The Apple/Google duopolists are now behaving like proper autocrats. Apple is imposing a 30% revenue share on all in-app payments. Google is keeping Android Market and Motorola patents for the exclusive use of its protégées.

The duopolists have been able to run such a tight game by locking together four elements: development, discovery, distribution and monetisation. That is, you can only discover, download and pay for Apple apps through the App Store. Plus development happens through Apple tools only. Google is equally fanatic in controlling development, discovery, distribution and monetization, but is more open to affiliates – for example it allows Sony Ercisson and Vodafone to run their own branded shop within Android Market.

The results are measurable: Over 65% of Apple and Android users discover games via the native app stores, according to Nielsen.

Web discovery kills distribution

With the duopolists amassing so much control, other industry players are getting uneasy. Amazon is creating its own Android tablets and own app store to circumvent Google’s control points. Facebook has shed its Flash dependency and is working on project Spartan – believed to be an app store for HTML-based mobile web apps – that will circumvent Apple/Google app stores.

In the mobile world app distribution is locked to the platform, discovery is still a bottleneck due to the abundance of 100,000s of apps. Developers and media brands alike will pay dearly whoever can put their app in front of the right consumers and help that app get “discovered”. This is similar to the desktop web where distribution is commodity, but discovery is still king due to information abundance, which is what makes search such a lucrative business.

This is where HTML and the web come in.

HTML implies browser-based access and browsers are the only de-facto installed runtime on all handsets that is not bound to any proprietary ecosystem.

HTML and browsers are being used to bypass distribution silos. As such, HTML is being promoted not as a platform (i.e. apps), and neither as a technology (i.e. APIs), as we argued in our recent report. HTML is being promoted as a business model.

Facebook is using the web (in effect browsers) to help users discover Facebook apps and bypass proprietary Apple/Google distribution silos. Facebook is using discovery to kill distribution.

Web purists will argue that the mobile web will always stay open. But we know this is not the case on the web where social networks (Facebook, Twitter) have built silo’d mega-portals which you can only access through carefully crafted, ajar APIs.

Similarly, you can expect Facebook to restrict access to mobile Facebook apps to its own mobile web store, much like how Google can eventually restrict Chrome apps to be only discoverable through the Chrome web store.

And here you have it: web will be the new closed. Back to square one.

Mobile Web as the 4th horse

There are many benefactors or sponsors of the mobile web evolution and they are all in to help drive their core business. Facebook is expected to use the mobile web as a development, discovery and distribution platform. Qualcomm is pushing the web to drive browser sophistication and help sell more smartphone chipsets with web-acceleration smarts. Apple is pushing the web because it wants to have the most “street-compliant” web browser. Google is pushing the boundaries of browser sophistication so that it can auction smarter, more lucrative ad formats across more eyeballs. Facebook and Google are leading web discovery through social discovery and mobile search. Telcos are hoping their own web-based app stores will compel users to switch away from Apple/Google lock-in to a buy-once-use-everywhere app concept.

But there’s a paradox here: the mobile web platform has many benefactors but no leader. Everyone is promoting the mobile web as a business model, i.e. to indirectly drive their core business or benefit from free PR and implicit goodwill. But no one is promoting the web as a platform. The mobile web as a platform has no leader, no general to command the troops, no governor to set the rules. It’s a headless platform.

This presents an unprecedented opportunity for the next challenger to the Apple/Google duopoly. We believe that the next player with complete metal-to-cloud consumer ambitions will use the mobile web as a platform.

Such a choice has many benefits; firstly a mobile web platform offers access to “virgin” segments of web developers who are new to mobile; secondly it comes will many billions of dollars of free developer marketing – already in our measurements of developer mindshare (see our Developer Economics 2011 report), the mobile web comes 3rd after Android, iOS platforms; thirdly, it is a kind of patent haven since web technologies are in the public domain and not behind corporate legal walls; and finally because it allows content providers and brands to get on board from day one with their legacy web content.

The mobile web is waiting for a new leader.

– Andreas
You should follow me on Twitter

Developer Economics 2011 – Why app stores are a one-way street

[Which are the top app distribution channels for developers? Which platforms offer the highest revenue potential? In this part 2 of our 3-part Developer Economics blog series, Marketing Manager Matos Kapetanakis looks at how app stores have effectively re-written the distribution landscape]

Developer Economics - Why app stores are a one-way street

App Store Boulevard

Since the launch of Apple’s App Store in 2008, developers found a market delivery channel that greatly reduced time-to-market and time-to-payment and provided a direct channel to consumers. The result: users started buying more and more smartphones, accessing app stores and downloading billions upon billions of apps.

Today, app stores have become the a one-way street for developers. Over 45% of the respondents in our Developer Economics 2011 report used an app store as their primary route to the market, climbing nearly 30% since last year. At the same time, we found that the use of other distribution channels (own portal/website, 3rd party aggregators, via customers, Telco portals) has greatly decreased since last year’s research.

Developer Economics 2011 - Top app distribution channels

The decline of traditional challenge comes as no big surprise; Telco portals, that once upon a time dominated content distribution in the US and Europe, have now lost their allure. “Downloads through operator portals are still less than one million per month on average per operator. Compare that to one billion per month downloads from the Apple App Store”, noted an executive at a mobile app development house who participated in our research.

But why do developers choose app stores over other distribution channels? Reach is by far the most important reason behind developers’ preference for app stores as a distribution channel. More than 50% of developers distributing through the Apple, Google, Nokia or BlackBerry app stores cite the ability to sell to more users as the primary reason for app store selection. (also, see individual app store ratings in the full report)

However, the use of app stores as a primary distribution platform varies greatly by platform. As we found in our research, the use of app stores is much more pronounced for platforms that have a native app store.

Developer Economics 2011 - top 2 app distribution channels vs platform

As some of you will be quick to point out, Windows Mobile/Phone developers use their own portal/site to an almost equal extent as their platform’s native app store.  We attribute that to three factors: First, as we discussed in the previous post, Microsoft has tapped into two developers segments (Xbox, Silverlight), which are new to mobile. Second, the Windows Phone Marketplace is rapidly growing, but still lagging behind in terms of app volumes. Third, distributing through the Windows Marketplace has only become mandatory with Windows Phone.

The app store duopoly

Despite the many opportunities in this accelerating app economy, not all app stores enjoy the same level of success. Out of the 70+ app stores currently out there, only a handful have managed to emerge as winners. Out of those, the Apple App and Android Market are in a league of their own.

Together, the Apple App Store and Android Market hold over 700 thousand apps, while their cumulative downloads are somewhere in the area of 20 billion. While other app stores have also enjoyed a level of success, this huge gap means we are in effect witnessing an app store duopoly.

Theoretically, the most reasonable approach for developers would be to distribute their apps via multiple app stores. However, in practice, the app store landscape is far more fragmented than one might think; each app store has its own developer sign-up process, app submission process, artwork and paperwork requirements, app certification and approval criteria, revenue model options, payment terms, taxation and settlement terms. This implies that the marginal cost of distributing an application through one more app store is significant, contrary to popular perception.

Plus, there are added entry costs to each platform, in the form of time and money spent. Some platforms have a steep learning curve (see full report for each platform’s learning curve), while others have expensive tools or poor documentation.

Looking at Android, we see that more and more independent app stores, like Andspot, AndAppStore, SlideME and Amazon, are competing with Android Market for user attention and developer app submission. The same also applies to operator and OEM app stores. There is simply too much app store fragmentation.

We believe that the app economy needs a single entry point for application submission (one per platform), along with a million distribution channels:

– one app submission process, i.e., a single website, single contract, single approval process, single billing & settlement and a single mix of business models per platform

– a million distribution channels, i.e., a million different channels through which to retail and sell apps to consumers with a variety of prices, promos, bundles, and regional access that help developers more effectively market their applications.

App revenues and monetisation

The single most important aspect of any business is monetisation. But, in this gold rush of apps, not everyone is making money.

Around 30% of our respondents make less than $1,000 USD per application in total, which means they’re actually losing money, considering it takes months to develop an app and that some platforms have expensive tools.

Which platforms have the largest revenue potential? Monetisation differs from platform to platform, with Symbian having the lowest revenue potential, as our research indicated. Taking Symbian as having a revenue index of 1, we can compare its revenue potential with other platforms. iOS topped the chart, making 3.3 times more money per app than Symbian developers followed by Java ME (2.7x) and BlackBerry (2.4x).

Developer Economics 2011 - Platform revenue index

Another interesting aspect is how the actual revenues compared to the expectations our respondents had. For example, while Java ME offers relatively high revenues per app, Java ME developers did not necessarily respond positively when we asked about their level of satisfaction with revenues (i.e. whether revenues were above or below their expectations).

Developer Economics 2011 - revenue expectations

The previous graph is quite telling. The good news? One in three developers see the level of revenues they expected. The bad news? On average, there are five times more developers who are dissatisfied with their mobile application revenues than there are satisfied developers.

To see the top revenue models, download the full report.

The big picture

What does it all mean? First and foremost, apps have irreversibly changed the way we discover, monetise and distribute content. Second, it’s not Android Market vs. the Apple App Store, but app stores as a whole that have become a one-way street for distributing apps, leaving Telcos, aggregators and OEMs in a diminished role as distribution channels. Third, monetisation may still be a pain point for a significant portion of the developer base, but at the same time 1,000s of companies are after commissioned iPhone or Android work and salaries are on the rise.

One last note: We have yet to see the potential of handsets as app retail outlets, but we believe that OEMs will soon be leveraging on their potential to bundle apps anywhere on the handset real estate and to any region. And, as we know, there’s a higher profit margin in real-estate than in the manufacturing business.

– Matos

For more Developer Economics updates, follow us on Twitter (@visionmobile).

…and for those of you who still haven’t done so, download a free copy of the Developer Economics report.

[Infographic] The Mobile Developer Journey

The Mobile Developer Journey

A few months ago, VisionMobile published Developer Economics 2010 and Beyond, a research report that tracked the entire mobile developer journey, from app design and platform selection to market delivery and monetization. Now, we’re proud to present the entire Mobile Developer Journey on a single infographic.

The Mobile Developer Journey

Developer Economics 2010 and Beyond was created by VisionMobile and sponsored by Telefonica Developer Communities.

Did you miss the chance to participate in our research and have your say on app development? Well, you can express your views in our upcoming developer research, Developer Economics 2011, which is just a few months away. Pre-subscribe here

Feel free to copy the infographic and embed it in your website.

600 pixels wide version

760 pixels wide version

1000 pixels wide version

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The Snowball Effect of Mobile Application Analytics

[It takes time for your eyes to adjust when you’ve been blind-sighted for so long. Especially if you are an entire industry. Research Director Andreas Constantinou dissects the market of Application Analytics and discusses why it’s the most underhyped market sector in mobile]

VisionMobile - The Snowball effect of Mobile App Analytics

Application analytics has been one the surprises in the mobile industry radar. It’s a market sector that emerged almost out of the blue in 2009 and became mainstream in just a year, fuelled by the mobile app phenomenon.

Why are analytics important? from a developer perspective analytics serve a very simple, practical purpose; that of an optimisation tool that helps increase app downloads and sales. From an OEM and carrier perspective, analytics are a double-edged sword; they offer unprecedented insights into consumer app usage, but they can also leak critical insights to third parties (see the Apple-Flurry dispute). Strategically, application analytics present one of the biggest disruptions on the mobile industry radar; the potential to extract more consumer insights and metrics than can be gleaned through TV, credit cards, loyalty cards and any other medium that has come before.

But let’s take things one at a time.

The spectrum of mobile analytics
Application analytics is only one of the three sectors of mobile analytics. Each sector comes with a different set of participating vendors:

– Application Analytics: usage and marketing analytics tools aimed at application developers (e.g. Flurry, Localytics, Motally)

– Campaign analytics: usage and marketing analytics tools for mobile web or WAP sites plus campaign optimization tools aimed at media companies (e.g. Amethon, Coremetrics, Omniture, Bango)

– Service analytics: platforms for mining network or device data to extract service intelligence aimed at network carriers (e.g. CarrierIQ, Neuralitic, Zokem).

The three sectors of mobile analytics differ in terms of probing points, deployment route, sales route, applications and revenue models to name just a few. All in all, mobile analytics is a sector which we expect to see develop over the next 5 years; moreover, it’s probably the most underhyped sector in mobile, as no one can foresee how big analytics is going to get (but certainly many times bigger than TV, billing or other consumer analytics).

Back to application analytics now. When researching the landscape of application analytics vendors we came up with an interesting analysis framework; vendors are positioned differently across the user journey, based on their probing points, therefore the metrics that they can gather, and the types of solutions (or ‘intelligence’) that the can deliver, as shown in the next chart.

Billing/e-commerce analytics intercept the user journey at the discovery and purchasing touch-points (e.g. Bango, AT Internet). App Store analytics extract data directly from the App Stores (e.g. Distimo). Finally in-app analytics extract data during installation and the application runtime (e.g. Flurry, Localytics, Mobixy).

App Analytics landscape

We surveyed the landscape of application analytics vendors in July and August, speaking to Bango, Distimo, Flurry, Localytics, Mobixy and Ubikod. We ‘ve summarised the positioning of these vendors in the matrix below, providing the history, ownership/funding, positioning, products, revenue models and installed base for each vendor. Naturally, there’s lots of vendors that we didn’t have time to cover, namely Motally (now Nokia), Appclix (ex.Mobilytics), Apprupt, webtrends, Adfonic, Google, Medialets, Mobclix, Tapmetrics, Millennial Media, LoopAnalytics, ApSalar, Ivdopia, Mixpanel, appFigures and Eqatec.

The comparative table below offers quite a bit of insight into how analytics products from these vendors differ in their background, positioning and revenue models.

App Analytics Vendors

[click on image for full table]

It’s only the beginning
Despite the hockey-stick growth, the sector of application analytics is still in its infancy. Some key observations are worth highlighting here.

Supply polarisation. There is a very polarized distribution in the installed base with Flurry grabbing more than 95% penetration into iOS and Android apps. At the same time we have negligible penetration for the mass-market of mobile platforms (incl. RIM, Java ME and Symbian).

Solution packaging. App analytics solutions are packaged in two very different forms; firstly pure-play vendors offering analytics as a core product (e.g. Localytics, AT Internet, Motally), where first-party hosting, data ownership and tailored metrics are key issues for customers. Secondly, vendors offering analytics as part of an app recommendations, ad or campaign management solution (e.g. Flurry, Mobclix, Medialets), where targeting efficiency is the key issue for customers.

 

Convergence with web analytics: Mobile analytics are converging with their web counterpart. This is happening on the supply side (web analytics firms coming to mobile), the buy side (brands deploying both web and mobile properties) and the user side (as the web and the mobile user journey have many intersecting points)

 

Customer experience analytics is an untapped vertical for app analytics. Purchase decisions, app usage and device monitoring can be leveraged to add unprecedented, granular insight into traditional solutions.

Disrupting consumer analytics. The app analytics value will explode as mobile apps penetrate more engagement channels. Set-top-boxes, media boxes, augmented reality apps and online payments will more and more leverage the phone as a remote control or as an experience delivery medium. App analytics will catalyse engagement monitoring in all these channels and in the process disrupting Nielsen’s TV audience measurement business.

 

Snowball effect. App analytics is the “snowball” that will pave the way for all other analytics; for many years companies have seen the benefits of deep behavioural analytics, but never before has the route to market been so straight forward. By piggy backing on app analytics, OEMs and carriers can gain access to the richest customer metrics with the shortest distance to customer purchase decisions and the sales funnel. The “Nielsen” of mobile will be a company with application analytics at the core of its business.

In this rapidly evolving market, it is verticals know-how, community-building skills (especially developer communities) and relationships that will determine the real winners and losers. One thing is for certain though; application analytics will bring much-needed transparency and visibility in an industry that has so far been blind-sighted.

– Andreas
you should follow me on twitter: @andreascon

The Mobile App Store Landscape 5 years Ai (After the iPhone)*

[Where is the app store frenzy heading after all?  Guest blogger Francisco Kattan discusses why it’s a winner-take-all game]

2009 was the year of the app store wannabes.  Following the remarkable success of the Apple App Store, OEMs, mobile platform vendors, mobile operators, and traditional aggregators either created new app stores or repositioned their existing offerings as app stores.  There are now between 24 to 32 app stores depending on who is counting (see Distimo’s app store report and the WIP App Store Wiki for reference), and more stores are surely to follow.  However, key questions remain about how the app store landscape will emerge after the current period of hysteria subsides and the dust settles.

– Are we going to see many app stores on each handset?
– Will app malls emerge to host multiple app stores within?
– Will operator stores gain critical mass?

Andreas Constantinou wrote an excellent article that defines the app store building blocks and predicts a “dime-a-dozen” app store future.  I will build on this post, but will offer an alternative view of how the landscape will evolve.

It’s a Winner-Take-All Contest
If we were to extrapolate the current trend, we could expect a future where each handset will host many app stores.   An LG Android device on the Orange network would have the LG App Store, the Android Market, and the Orange App Shop.  The Verizon version would have the V CAST store in place of the Orange App Shop.  On top of this, you could add the Getjar multiplatform store and several specialty stores for say, games, health, and productivity apps to name just a few.  Can you imagine the mess this would create for the user experience?  Which app store do I launch? Which apps do I find on which store? Are apps duplicated on multiple stores?  Are the prices the same across stores or do I need to shop around?  Are the versions of the apps consistent across stores?

Fortunately when the dust settles consolidation will occur and one app store will command nearly all the market share on each device.  Sure there may be a couple “also rans” with a small share, but as history has shown us, these two-sided platform battles tend to result in winner-take-all contests (see definition of two-sided markets here).   We’ve seen similar battles already play out on the web with Amazon winning e-commerce, eBay winning auctions, and Google winning search.

Why winner-take-all markets happen has already been well documented.  Economists Frank and Cook documented this phenomenon with their Winner Take All Society book and Rich Skrenta wrote a nice post on the battle for search supremacy that led to Google’s reign. In two-sided markets there are two sets of users (consumers and developers in the case of app stores) and once both sets of users pick a winner, it is very hard for competitors to gain much share. To cut to the chase, the app store battle in mobile will also result in a winner-take-all contest for the following reasons:

  • Low switching costs.  Given how easy it is for a consumer to switch from one app store to another, any advantage of one store, even if small, will cause more consumers to visit the better store. Why buy at the world’s second best store when the best store is only a click away?  This initial advantage could be in terms of time-to-market, quality or quantity of applications, user experience, or pricing.
  • The word spreads.  Word of mouth, accelerated by social networks, will cause a snowball effect attracting more and more users to the store with the initial advantage.
  • Developers vote.  As more consumers visit the winning store, more and more developers will prioritize that store for their applications offering that store an even greater advantage.
  • Economies of scale.  As one store gets significantly larger, it will enjoy greater economies of scale and therefore a cost advantage over competing stores.

A positive feedback loop cements the ultimate winner.  The more consumers that visit one store, the more developers will create apps for that store, and the greater the economies of scale the winner will enjoy. This battle will play out on a device by device basis with the Apple App Store already the winner on Apple devices (to be accurate, there was no real battle in this case as Apple’s policy does not allow competing stores).  A battle will play out for say RIM devices on the Verizon network (V CAST versus App World), another one for Android devices on the Orange network, etc.  So while we are initially headed for a “dime-a-dozen” app store landscape as Andreas predicted, over time we will see significant consolidation.  And as the number handset platforms themselves consolidate (surely to happen, but this is outside the scope of this post), we’ll have even fewer stores.

The Two Exceptions that Prove the Rule

  • Adult Content.  Niche stores will exist to satisfy needs that, by policy, are not met by the winning store.  Adult content stores such as MiKandi are a clear example.  Another example is Cydia, an app store for jail broken iPhones.
  • Enterprise App Stores.  App stores designed for IT organizations to manage application distribution and provisioning within an enterprise have unique requirements that the consumer stores will not meet.  In addition, the low switching costs described above do not apply to enterprise stores.  Examples of Enterprise stores include Mobile Iron and Ondeego.

Think Department Store, not App Mall
Rather than app malls that host multiple stores, the winning app stores will be like department stores with applications organized by category.  Games, health, productivity, entertainment, etc. will be departments within a big store, not specialty stores within a mall.

For clarification I’m defining a “mall” from the point of view of the customer experience, as in the real world.  Customers walk into a mall and discover multiple branded stores, each with its own checkout process.  An example of an app mall is the now defunct Nokia Download. You may recall that Nokia Download (formerly called Nokia Content Discoverer) touted its “advanced shopping mall experience” when it was announced, hosting multiple stores such as Handango and Jamster (called aggregators at the time).

The mall concept does not work because it hurts the user experience for no extra value:  users end up clicking on unknown store brands adding an extra layer of user interface that gets in the way of the app discovery process.  Moreover, if each store in the mall requires users to enter a form of payment the user experience suffers even more.  Although there are more reasons why Nokia Download failed, the user experience of its mall concept was an important factor and as a result Nokia is now busy copying the more successful department store model with the Ovi Store.

This does not mean that there won’t be aggregators behind the scenes.  In fact, the ingestion process could include a publisher like Symbian Horizon or a syndication service like Getjar’s.  However from a user experience point of view, it’s a department store, not a mall.  Amazon is a good model for the winning app stores.  There may be many sellers behind the scenes, but it looks much more like a department store than a mall.  There is one prominent store brand with many departments, a single shopping cart, and a single checkout process.

Will operator stores gain critical mass?
Once upon a time operators had a virtual monopoly for the distribution of mobile applications (depending on the region). Apple changed all that, of course, and the tables are now turned resulting in a developer exodus away from operators (for more on this see My Number One Wish for Operators).   To regain developer mindshare many operators are launching their own “app store style” stores, implementing many of the lessons learned from Apple, including the 70% rev share, developer set pricing, and click-through agreements.  Verizon announced V CAST, Orange has App Shop, O2 is testing Litmus, AT&T has App Center, Vodafone has 360, etc.  But will these operator stores succeed?  I think it depends on the type of device (feature phone vs. smartphone) and on the size of the operator.

Operators lose the app store battle on smartphones, but win on feature phones
Operators have a natural disadvantage to attract developers compared to the smartphone platforms because they are more fragmented.  There are dozens of operators compared to only a handful of smartphone platforms.  Developers are better off working with the small number of smartphone platforms to get worldwide distribution across all operators instead of targeting each operator separately (each with their own SDK, certification requirements, business terms, and fragmented device line-up).  To compensate for this disadvantage operators would have to add much more value with their own stores.  Carrier billing and access to network APIs are areas where operators can add value, but these capabilities are likely to also become available on the native handset stores.  Operators can also differentiate by tapping into their huge advertising budgets to market their apps, enticing developers whose apps are difficult to discover given the unlimited shelf space in the stores.

Another option for operators is to increase store switching costs for their customers by not preloading competing stores on devices they sell.  This would require customers who want to shop elsewhere to find, download, and install other stores on their own.   Verizon Wireless is a good example of an operator trying this strategy.  Verizon does not preload RIM’s App World in favor of its own (upcoming) V CAST store.  However, as operator influence over smartphone providers continues to erode (a trend surely to be accelerated as devices such as Google’s Nexus One are sold directly to consumers), this option will go away forcing operators to truly differentiate their stores, or else. We’ll see how this plays out, but operators will likely lose the app store battle on smartphones unless they find a way to significantly differentiate and do it fast before the native stores consolidate their advantage.

The battle for app stores on feature phones is quite different for two reasons:

  • This category of devices is much more fragmented and operators can gain an advantage by providing a common platform across them to attract developers. This approach neutralizes the fragmentation advantage that OEMs enjoy in the smartphone category, as discussed above, and is precisely the strategy that AT&T just announced at CES: AT&T will launch Qualcomm’s BREW Mobile Platform across its mid-tier devices to attract developers for its AppCenter store
  • Operators enjoy much more influence over feature phone specs and content than on smartphones.  This will enable many operators to exclusively preload their own stores on these devices essentially blocking alternative stores.

Although the smartphone category is where the growth is, there is still a very large and mostly underserved market at the high end of the feature phone category.  These devices have large displays and often full QWERTY keyboards (touch or physical), representing a large untapped market for mobile applications that operators can serve.

However only tier 1 operators are large enough to attract developers to their own stores.  Even tier 1 operators are better off getting together to form a much larger market to attract developers as we have seen with the JIL alliance or the collaboration between AT&T, Orange and America Móvil (just announced at CES).  Smaller operators will have to rely on third party stores that can aggregate applications and syndicate them across multiple operators.  A good example of an operator pursuing this strategy in North America is Sprint.  Sprint has announced that it will remove its own application offerings from its smartphone line-up and will partner with an external aggregator to launch a white label store for its feature phone line-up.  Other operators will have to follow the same approach.

What are your thoughts?  Do you buy into the winner-take-all argument?  Are we going to see app malls or department stores?  What role do you believe operator stores will play?

– Francisco

[Francisco Kattan has worked in the mobile industry for 10 years and has deep expertise across the entire ecosystem, including devices, operators, developers, and content providers.  Francisco has held leadership roles at Edify, Openwave, Adobe, and currently Alcatel Lucent where he is Senior Director, Developer Ecosystem.  You can follow Francisco via his blog, on Twitter and he can be reached at franciscok [/at/] stanfordalumni.org. This post reflects the author’s personal opinion and not necessarily that of his employer.]

* As an aside, the launch of the iPhone changed the ecosystem so dramatically that we need a new way to measure time in mobile.  Any discussion about how the mobile ecosystem works must specify Ai or Bi (After or Before the iPhone) in the same way historians use BC and AD to date events.