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Mobile Applications
1. Mobile Applications
A consulting report that defines the entry
strategy for client company
Submitted By:
Team: E-Bonds
Shweta Jain (09BM8031)
Nidhi Bansal (09BM8028)
VGSOM, IIT Kharagpur
MBA Batch 09-11
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2. Table of Contents
Introduction ............................................................................................................................................ 3
Evolution of Mobile Applications ........................................................................................................ 3
Market Analysis: Facts and Predictions .................................................................................................. 4
Mobile Application Types ....................................................................................................................... 6
Application Usage across Platform ..................................................................................................... 7
Fastest Growing Mobile Apps ............................................................................................................. 8
Top Selling Mobile Applications .......................................................................................................... 8
Business Model ....................................................................................................................................... 9
Key Players in Mobile Application Market .............................................................................................. 9
App Stores ............................................................................................................................................. 10
Revenue Share .................................................................................................................................. 10
Top 4 App Store .................................................................................................................................... 11
Apple App Store ................................................................................................................................ 11
Blackberry App world........................................................................................................................ 12
Android Market ................................................................................................................................. 12
Nokia Ovi Store ................................................................................................................................. 12
Business Model ................................................................................................................................. 13
Third-Party Platforms ............................................................................................................................ 13
Five competitive forces Porter model................................................................................................... 14
Bargaining power of Suppliers .......................................................................................................... 14
Bargaining power of buyers .............................................................................................................. 15
Threat of substitute products ........................................................................................................... 16
Barriers to entry ................................................................................................................................ 17
Rivalry among existing firms ............................................................................................................. 17
SWOT Analysis....................................................................................................................................... 20
Conclusion ............................................................................................................................................. 22
References ............................................................................................................................................ 23
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3. Introduction
Mobile Application market is rapidly growing in global mobile market. They are simple downloadable
software program that runs on mobile devices and performs certain task for user of mobile phone.
Apple has played a significant role in reenergizing the mobile apps space by bringing more
consumers and developers into the ecosystem, there is significant activity outside the iPhone or
smartphones space that is often not discussed.
Evolution of Mobile Applications
History of Mobile applications is traced back to the point when smart phones were launched. In
2002 Blackberry launched its first Smart phone; at this point mobile applications market started
growing. In 2006, Yahoo launched its Go Mobile Application Suite providing mobile user range of
mobile applications. Major breakthrough in Mobile application development was in 2007, when
Facebook launched its Development Platform and Apple came up with its Smart phone iPhone. With
launch of Apple Appstore, in 2008 the application world started to blossom in earnest. First, it
fundamentally changed the revenue model in favor of the developers which has become the current
defacto standard (70/30) in the mobile apps business. Second, it brought more developers into the
ecosystem as it fostered the notion of focusing on just 1-2 platforms rather than the entire device
ecosystem to be relevant. It also reduced time to market for applications. In 2009 Blackberry and
Nokia launched their application store. Currently we have the mobile application space across all
platforms and on a global basis.
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4. Fig: Evolution of Mobile Applications
Market Analysis: Facts and Predictions
As per industry study done by Getjar the total number of apps downloads are expected to grow at
92% CAGR to almost 50 billion downloads per year by 2012. This is due to increasing number of
feature phone users becoming active application users and increase in the number of apps
downloads/user/month across the board.
*Source: Industry Study Commissioned by Getjar
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5. The corresponding revenue figures for 2009 were over $4.1 billion growing 62% CAGR to $17.5
billion by 2012. It is observed that while Asia had the highest percentage of the download share, it
has lowest percentage of revenue share. North America had the highest share of the apps revenue
accounting for over 50% of the total revenue.
*Source: Industry Study Commissioned by Getjar
From the perspective of ondeck vs. offdeck and paid vs. Advertising, ondeck paid had the biggest
share of the revenue followed by offdeck paid. In 2012, advertising based revenue would account
for about 12% of the overall revenue and is expected to generate 28% of the app revenue.
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6. Compared to software industry and gaming industry, Mobile applications is still in nascent stage.
Indian S/w Industry 2010 revenue - $60 Bn
Indian Gaming Industry 2011 revenue - $1.265 Bn
Global Gaming Industry 2011 revenue - $120 Bn
Mobile Application Types
Mobile applications can be divided into different types as mentioned below depending upon there
usage.
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7. Application Usage across Platform
As per Nielsen Quarter4 2009 report iPhone users, followed by Andriod users, have significantly
more applications installed. Games remain the number one application, and mobile shopping, social
networking, utilities and productivity tools continue to grow and attract increasing amounts of
money.
*Source: Nielsen Quarter4 2009 report
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8. Fastest Growing Mobile Apps
As per survey done fastest growing applications are social networking application followed by news,
banking, and information giving applications. The exponential growth in social networking
applications is accounted due to the rise of facebook mobile. Currently there are more that 150
million active facebook mobile users.
*Source: Nielsen Quarter4 2009 report
Top Selling Mobile Applications
Tetris is the best selling mobile app with over 100 million paid downloads.
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9. Business Model
The business models for application have evolved over time. Initially, the focus was entirely on
the paid downloads or the subscription based models. Now the most popular business model is
advertisement based. Some mobile players have focused on building loyal and vibrant communities
which creates an audience for selling/up-selling/cross-selling virtual, digital, and even physical goods
Business Models can be classified into:
• Paid
– Subscription based
– In-app (per application)
• Advertising
– Impression-based (CPM)
– Performance-based
– Promotion based
• Virtual Goods
• Up-selling/cross-selling other goods
• Hybrid
Key Players in Mobile Application Market
There are approximately 100 key app stores. We can divide market into four parts
Device manufactures: Nokia, Samsung, Apple, Andriod, iPhone
Os developer: Google, Symbian, windows, Mac
Mobile Operator: Airtel, Aircel, Vodaphone
Independent (third party/off deck): Getjar, Handmark, Handango
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10. Fig: Key Market Players
App Stores
Revenue Share
Top 4 App Stores are Apple , Blackberry App worls, Nokia Ovi Store and Google Android. Apple App
store has major market share of approx, 83%. Currently market is dominated by Apple, but it is
predicted that in coming years Google Andriod will give Apple strong competition
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11. • Gartner predicts that in 2013, 21.6 billion apps will be downloaded, generating nearly $30
billion in revenue
• The growth between 2010 and 2014 is forecast be over 1,000 percent.
• By 2013, according to Gartner’s numbers, the average revenue per app will be $1.36.
• By the end of 2014, advertising will be generating a little under a third of the revenue
generated by application stores, up from 16 percent in 2010
Top 4 App Store
Brief overview of top four App stores and their business model
Apple App Store
• For app download on Apple's app capable Devices (the iPhone, iPod Touch, iPad and Mac)
offered by Apple Inc. in 2008
• Allows users to browse and download applications from the iTunes Store
• Jan 7, 2011 - Mac App Store Downloads Top One Million in First Day
• Jan 22, 2011 - Apple’s App Store Downloads Top 10 Billion
• Feb 15, 2011 - Apple Launches Subscriptions on the App Store
• App Store revenue estimated to reach $2 billion in 2011
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12. Blackberry App world
• An application distribution service and application by Research In Motion (RIM) in 2009 for a
majority of BlackBerry devices
• Provides BlackBerry users with an environment to browse, download and update third-party
applications
• Applications are both free and paid from $0.99-$999.99 in the U.S. developers pay a $200
USD fee (Per every 10 Apps) to participate in the program.
• 150,000+ apps available for download
• RIM offers Blackberry programmers 80%
• On Dec 3, 2010, RIM announced that daily downloads were 2 million apps per day
Android Market
• An online software store developed by Google for Andriod Devices
• Amazon Opens Android App Store to Developers
• 98.9% of all applications downloaded are free apps
• 300,000+ apps available for download
• 8 million Android users downloaded 289 million apps
• Developers of software (apps) receive 70% of the application price, with the remaining 30%
distributed among carriers and payment processors
Nokia Ovi Store
• The Ovi Store was launched world wide in May 2009 by Nokia
• customers can download mobile games, applications, videos, images, and ringing tones to
their Nokia devices
• Applications are both free and paid
• 350,000+ apps available for download
• Downloads reached 4 million in January 2011
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13. Business Model
Below is the description of business model followed by top App stores
*Source: http://bestmobilephonesoftware.com
Third-Party Platforms
Third party platforms for downloading mobile applications are becoming quite popular. Below is the
comparative study of various third party platforms and their business model.
*Source: http://bestmobilephonesoftware.com
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14. Five competitive forces Porter model
We will analyse the industry attractiveness of mobile application industry using the fives forces
model given by Porter.
Bargaining power of Suppliers
The suppliers for this industry mainly comprise of platform manufacturers - iPhone, Android,
Blackberry, Windows mobile/Windows Phone, Symbian, third party players like GetJar and
PocketGear and mobile operators – Airtel, Vodafone, French telecom etc.
a) Platform specific applications – The applications developed by these players are mostly
platform specific.
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15. b) High numbers of Suppliers - Currently, there are more than 10 mobile platforms and
thousands of application developers in market. For example the number of registered Palm
developers has increased from just 3,000 to over 130,000 in the past 22 months.
c) Inputs required – The inputs required for this industry i.e. the application developers,
software and hardware requirement and the technology required are easily available at
competitive price.
d) Presence of substitute products - Substitute products i.e. the applications for a particular
task are high in numbers. So the consumer has the capability to substitute one application
with the other easily and quickly
The average selling price of the applications is decreasing (Refer Fig. ) which shows that the
developers are now focusing on getting volumes by lowering the prices. This emphasises
that the Suppliers bargaining power is high.
The Key to be successful in this industry as a Supplier is to continuously Innovative and
provide User-friendly product to the consumers.
Bargaining power of buyers
a. Buyer Volume- From the following graph we can see that the estimated number of
downloads in 2010 were around 10.5 bn. If we take that on an average a user downloads 4
applications then the number of users can be estimated to be around 2.625 bn users. This
implies that there is huge buyer volume.
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16. b. Switching Cost- If the buyer is switching between the application providers for the same
platform then his switching cost would be low. For switching to different platforms the
switching cost would be high
c. Buyer Information- Buyers who are involved in this product category are highly informed
about the latest applications being launched, their features and cost structure. This
information is readily available through numerous application stores online and from the
discussion forums.
d. Customer loyalty- Customers are only looking for applications which meet their purpose or
are entertaining and easy to use. They have low stickiness with a particular application or its
developer.
Thus, the bargaining power of Buyers for this industry is High.
Threat of substitute products
a) There has been high increase in the number of application developers for almost all types of
platforms i.e. Android, Symbian, iphone etc. This has resulted in High availability of similar
applications at very low cost or sometimes even at free of cost.
b) Relative price of substitutes is also similar.
c) Relative quality of substitute in terms of user-friendliness, security and simplicity is similar.
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17. Though "45 percent incremental effort" is required to port an application from one platform to
another, still the threat of substitutes in this industry is very high.
Barriers to entry
Brands like Apple, Nokia, and Google etc have their well –established application stores. Also the
third party application stores like GetJar and pocketgear offer applications in almost all the existing
range of product categories. Thus, there are high entry barriers for Fledgling Developers as they are
low on learning curve and do not have any experience of what a customer likes and desires.
Barriers are now reducing to some extent for the upcoming developers. eg. Mobile Roadie a leading
platform is available in market which can be used by the interested developers to quickly and
inexpensively build iPhone Apps. Thus, there is easy Access to required inputs to get started in this
business.
Thus, the barriers to entry are moderate and if a new developer can capture the needs of consumer
well and can launch new and improved applications in short span of time, then this industry has
huge potential for him.
Rivalry among existing firms
The entry of Google Android has stirred the positions of the previous market leaders i.e. Iphone and
RIM, leading to stiff competition between the leading platform developers. The latest U.S.
smartphone market share report from comScore shows the following situation –
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18. From the above figure we can see that Apple’s market share has remain somewhat constant but the
entry of Google has impacted the market share of RIM in US.
Also the mobile applications store ranking shows a similar story. There has been 861.5% year-over-
year growth in the sale of Android applications over just 131.9% growth of Apple applications. This
shows that the application market is witnessing heavy competition.
The fierce rivalry amongst the big players has resulted in decrease in average selling price of the
applications launched by them. The players are now focussing on getting large volumes by lowering
the price and in some cases giving applications for free. Thus they are following the long tail business
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19. model to earn revenues. Following graph depicts that the paid applications average selling price has
decreased from about $ 1.9 to $ 1.1.
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20. SWOT Analysis
Weaknesses
Strengths
• With the improvement in • There are still some Security
technology and competition issues:. For eg. iPhone 3GS
Time-to-market for new encryption has been found
applications launch has weak and extremely
decreased. vulnerable. Also , some of
• There is ease of the banking applications are
development with launch of not so secure as of now.
easier to use platforms. • The applications market is
• User-friendly and simple highly fragmented. There are
applications are available thousands of application
which are an instant hit developers and many more
amongst the consumers. are joining this bandwagon
• High availability of skilled each day.
developers adds strength to • Because of the proliferation
this industry. of large number of platforms
• Faster and easy access to there is alack of focus on
markets available because of single platform. And the
online stores, sites and developers have to modify
forums. their applications such that
it can be used on almost all
• Favourable revenue sharing
the platforms available.
terms exist between the
application developer and • Developers need time to re-
the platform owner. Thus, its learn as new operating
a win-win situation for all system, new user interface,
the players. new functionalities and
capabilities. As these are
being launched at
tremendous speed.
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21. Opportunities
Threats
• The demand for new • There is Fierce competition in
applications is increasing day this market, so it would be
by day. It's a growing market difficult for new entrants to
with huge potential. command a leading position.
• Many of the New Applications (unless they come up with
category which can be looked some innovative solution for
into by the developers are users)
• M- banking • Average selling price is
• M-health decreasing, so the players
• M-shopping now I have to fight on gaining
volumes rather than earning
• M-retail from the price of the
• Monitoring energy through application.
smartphones • in some countries carriers
• Business solutions like m- have control over the
CRM, m-SCM etc distribution of mobile games.
• Sale of virtual goods and This will change as economics
redemption of the coupons are shifting , off-deck
and promotions through providers arebecoming
applications. stronger and to a lesser
• Mobile web browser (which extent, ad-supported games
will eliminate the need to are emerging.
download different
applications for different
purpose and will offer one
stop solution for all the needs
of consumers).
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22. Conclusion
By analysing the mobile application market using the porter’s five forces model we saw that this
market has low bargaining power of suppliers, high threat of substitute product and fierce
competition between the existing players. But, still the potential to grow and succeed in this industry
is very high. There is still space of players which can offer comprehensive and easy to use solutions
for the developers as well as for the users. The strengths of this market and the numerous
opportunities in this market can be tapped to reap benefits from this booming industry.
The opportunities are available at two levels. First, is in the area of developing innovative and highly
useful applications like m-retail, m-health and monitoring energy. Many of the operators and
application developers have started focussing on this arena.
The second and the upcoming opportunity is in the field of developing a Mobile web browser,
which will eliminate the need of downloading number of applications for the different purpose.
The browser can form a single stop for documents, audio and video, games, and navigational
services with APIs leveraging each device's unique capabilities including GPS, accelerometers,
cameras and so on. This solution would also help address the fragmentation issue, which only gets
worse with each year with new devices, different implementations and operating systems, the cost
of rolling out an app across multiple devices around the world can increase exponentially.
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23. References
1. Sizing Up The Global Mobile Apps Market by Chetan Sharma
2. The future of Mobile Application Storefronts by Wireless Expertise
3. Mobile Applications Report by Mobile Marketing Association
4. IHS Screen Digest Feb 2011
5. Nielsen Quarter4 2009 report
6. http://bestmobilephonesoftware.com
7. http://www.mobilebusinessbriefing.com/apps/article/getjar-making-money-from-free-app-
distribution
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