Mobile applications are commonly made available through aggregators with online stores. However, due principally to the increased availability of smartphones and faster broadband on 3G mobile telecommunications networks, mobile applications are a major growth sector of the information and communications economy. The mobile service business model has changed dramatically in recent years. In particular, the role of handset and OS providers has become more prominent, and the reliance of third-party developers on network operators for delivery of revenue streams has decreased. Apps Stores revenue-sharing arrangements with developers, has led to other changes. They reshaped the revenue model with its 70/30 revenue split in favor of developers and the exclusion of network operators from revenue-sharing arrangements for mobile applications, attracting large numbers of new independents software developers (ISV).

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MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013-
MOBILE APPLICATIONS:
ACTORS & BUSINESS MODEL REVIEW
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2. MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013-
MOBILE APPS:
1. Developers
ACTORS Developers are creators of mobile
applications programs who do not work
directly for the app store, device
& manufacturer or network service operator.
There are several kinds of third-party
BUSINESS developer:
Hobbyists developing mobile applications in
their spare time for recreation and profit
MODEL REVIEW
Professionals those developing mobile
applications as a main source of income,
either alone or as part of a business
centered on mobile application
Mobile applications are commonly made development
available through aggregators with online
stores. However, due principally to the
Contractors developing mobile applications
increased availability of smartphones and faster
on behalf of another entity or individual.
broadband on 3G mobile telecommunications
networks, mobile applications are a major The number of third-party developers has
growth sector of the information and increased significantly as the improved
communications economy. revenue arrangements and increasing client
base attract more developers to app stores.
The mobile service business model has changed
dramatically in recent years. In particular, the
role of handset and OS providers has become
more prominent, and the reliance of third-party 2. App Stores
developers on network operators for delivery of
revenue streams has decreased. Applications Stores are divided today in the
following families:
Apps Stores revenue-sharing arrangements with
developers, has led to other changes. They Device manufacturers including Apple’s
reshaped the revenue model with its 70/30 App Store, Nokia’s Ovi, and Blackberry’s
revenue split in favor of developers and the App World. These stores can be used only
exclusion of network operators from revenue- by consumers with the appropriate
sharing arrangements for mobile applications, manufacturer’s device and proprietary
attracting large numbers of new independents software.
software developers (ISV).
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3. MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013-
Operating system developer including Extended value chains with multiple
Android Market and Microsoft Windows players mobile applications delivered
Mobile. These stores can be accessed by through various platforms complicate the
consumers with devices from multiple supply chain to the end-user. The
handset manufacturers via the proprietary responsibility for aspects of customer
operating system software (OS). service can consequently fall across several
different organizations or individuals. This
increases the complexity of the relationship
Mobile network operator including Telstra,
between service providers and end-users.
Verizon and Optus. These stores can only be
accessed by consumers with service
Global nature app stores are accessible
contracts with the network operator.
from smartphones and other devices
Consumers can use multiple handset brands
globally, and have a global consumer base,
to access these stores.
although most of the major market players
have managing companies based in North
Independent including app stores operated America (Apple, Google, Blackberry,
as independent commercial concerns, or by Microsoft Windows and Palm). As a result,
developers such as GetJar and Mobango. there are associated cross border and trans-
Access to these stores is not dependent on jurisdictional market implications.
the brand of device used, service provider
or proprietary software. Unpredictable revenue the financial
viability of mobile applications is variable.
The mobile applications market exhibits a The top 10 per cent achieve about 75,000
number of common characteristics across downloads and there are huge successes,
all app stores, including: such as Tap Tap Revenge’s reported
Low barriers to entry: Apple, Android and revenue of $1 million per month. However,
Blackberry all have development 50 per cent of mobile applications achieve
registration schemes with software about 1,000 downloads and, after the app
development kits (SDK) offered free or at store has taken its cut, developers may
low prices with additional support expect to earn up to $2,500 on average.
mechanisms. Mobile applications can be Most people agree that Apple’s opening of
developed with SDK for low fixed costs. iPhone to third-party developers via the
App Store in July 2008 was a key turning
Strong competition: there are a large point in the adoption of smartphones and
number of sellers and mobile applications the use of mobile applications.
available to consumers (more than
300,000). By 2009, combined platform revenues were
$4.2 billion; today, some analysts are
expecting revenues to reach $29.5 billion by
Low barriers to exit with few sunk costs,
the end of 2013.
developers may enter and leave the market
quickly.
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4. MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013-
3. App Stores Developers Programs to have a mobile application placed in the
featured section in the Apple App Store.
The majority of app stores provide
programs and support to encourage third-
party development in their platform. Third-party developers may also operate
across more than one app store. This means
There are a number of components to this that the mobile applications can either be
support: written in the native code of each platform
or written in a higher level software
Distribution of revenue is weighted to
language, which can run on all platforms
favor developers the revenue split in the
the developer is selling on. The choice of
largest app stores is 70 per cent to the
developing language is complicated by
developer and 30 per cent to the store
restrictions proprietary platforms may place
There are no access restrictions or
on using programming tools or controlling
qualifications in place
certain device features and by
fragmentation across device platforms.
Developer support includes access to SDK
in the native code (software language) of
their app store, developer forums, 4. Consumer Access Models
developer guidelines and other support
mechanisms The concept of online stores for consumers
to download software applications is
Start-up costs are low three of the largest continuing to expand. The devices used to
app stores provide developer support access app stores vary, and the numbers
programs for $200 and under21 and types of device used are increasing.
App stores and other platforms can be
Marketing information and user analytics considered access points that allow
are also available consumers to obtain and use mobile
applications, distributed by multiple app
Secure payment mechanisms are provided developers.
Pre-installed mobile applications can
Access is provided to a ready-made
increase the commercial viability of devices.
customer base
Pre-installation of mobile applications from
other commercial entities method for
Advertising of the app stores to consumers device manufacturers to defray production
is provided by device manufacturers and, in cost, and increase the attractiveness of
some instances, network service providers their device to consumers. It is also a useful
method of creating additional revenue
Advertising of individual mobile streams for carriers who preload the device
applications in an app store is also available to consumers.
for example; developers can pay a premium
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5. MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013-
Mobile applications may be downloaded 5. Business Models
and installed by consumers in several ways:
Prior to the introduction of smartphones,
Via the device, consumers can directly telecommunications network operators
access the device manufacturer’s store were the main suppliers of mobile services
through a menu on the device Access may (and fixed-line services). End-users’ choices
be enabled through 3G or Wi were influenced predominantly by network
coverage, pricing, provision of handsets and
Via the internet, consumers can access the value-adding services (such as voicemail,
device applicable, the network provider’s text, email and limited 2G web access via
and then download and install mobile GPRS). Hardware and software component
applications. Access to the internet may be suppliers had only an indirect relationship
enabled through 3G networks or Wi with end-users, and third-party suppliers
applications Smartphones Tablets Multiple provided complementary goods and
access points for the mobile applications services.
market
While not all consumers directly obtained
Mobile applications may be obtained by their handsets through their network
end-users in two main forms as pre- operator, operators still controlled service
installed applications or downloaded subscriptions. Further, with the initial
applications. Pre-installed mobile introduction of web browsing and email
applications are selected by device capabilities, network operators launched
manufacturers and usually include: ‘walled garden’ application platforms to
calendars, alarm clocks, camera/photo maintain their centrality in the value chain.
apps) weather mobile applications, Google
maps, a compass, a music, video, games) for It has also driven the proliferation of non-
example, web browsers, texting and voice network operator app stores as handset
installed mobile applications can increase manufacturers and OS providers seeking to
the commercial viability of devices. capitalize on alternative revenue streams.
The mobile applications from other Today network operators are no longer the
commercial entities on devices are a primary source of revenue for app
method for device manufacturers to defray developers, and consumers of mobile
production cost, and increase the applications are not reliant on the walled
attractiveness of their device to consumers. gardens of their network operator to access
mobile applications.
Consumers can access the device
manufacturer’s app store (or, if applicable, The growing popularity of smartphones and
the network provider’s app store) via the tablet devices has continued to fuel this
web browser on their device, and then shift in the market, and access to third-
download and install mobile applications. party applications via a variety of devices is
now being dominated by device and
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6. MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013-
operating system manufacturers (through Mobile applications range in price, from
their app stores), free to over USD 999.
The Wholesale Applications Community The average cost is under $10, with over 50
(WAC), an alliance of 48 per cent of all mobile applications across all
telecommunications providers, device the app stores priced at $2 or less.25
manufacturers and sponsoring businesses Payment for paid mobile applications is
(for example, Alcatel Lucent) has launched a made through one-off transactions or
wholesale app store. In response to the ongoing subscriptions in the following ways:
current success of non-operator app stores,
the WAC model allows network operators Credit card; is the most prevalent method.
to sell mobile applications to their The interface is established through a
subscribers independent of the device being consumer account (for example, an iTunes
used via an open platform, and charging account for Apple or a Google account for
them via their phone bill. Network Android).
operators capture a percentage of the
mobile application purchase price as well as Carrier billing; this method is common for
the revenue raised from data use. mobile commerce transactions. Payment
appears on a consumer’s bill or in the form
At present, many network operators are of a call-credit deduction or charge. This is
only receiving revenue from data use for similar to current payment arrangements
mobile applications or are reliant on for mobile premium services. The revenue
partnerships with device manufacturers to split in this situation may incorporate a
obtain a share of mobile applications sales percentage to the carrier. For example,
revenue. Nokia’s Ovi store provides for a revenue
split of between 40 and 50 per cent of the
The current contest for market share in the
end-user purchase price to the carrier, with
application market is now primarily
the remainder divided between the
between the opposing business models of
developer and Nokia on a 70/30 basis. For a
operating system and device manufacturer
mobile application costing $1.19, this would
app stores.
result in a distribution of approximately
Operating system business models offer an $0.59 to the carrier, $0.42 to the developer
open source system, with consumers able and $0.18 to Nokia.
to access mobile applications from multiple
sources. Device manufacturer models are Voucher redemption; app store-specific
closed proprietary environments limiting vouchers are available at multiple
distribution of mobile applications to commercial outlets. These may be
consumers via a single source their app redeemed for credit via a user account.
store. Credit card companies also provide gift
vouchers that may be used for the same
purpose.
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7. MOBILE APPLICATIONS: ACTORS & BUSINESS MODEL REVIEW -2013-
Closed proprietary app store business Leave your questions and comments to:
models offer systems integration for herve@delhumeau.com
consumers and a seamless user experience.
App store business models that use an open
source operating system may not be able to
offer as efficient systems integration due to
the fact that multiple players may be
involved in the provision of devices to
access the App store. However, the open
source operating system business model
allows consumers more choice in terms of
sourcing mobile applications and greater
transferability of information between
platforms.
Both business models have inherent
advantages and disadvantages for
consumers, who will ultimately choose
which is more significant to them.
Meanwhile, network operators are seeking
to offset the costs of increasing demands on
their networks in terms of speed and
resources from mobile applications. The
WAC’s commercial app store is one method
of doing so, as it allows network operators
to once more access the mobile application
revenue stream. The success of this
business model is dependent on the
experience it can provide for the user.
The different app store business models
highlight the inherent differences in
approach to access and control on different
platforms.
In the longer term, the success of each
business model may depend on consumer
attitudes to these differences.
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