Cellcos need application stores

Matt Lewis/ArcChart
23 Nov 2009
00:00

AT&T's recent acquisition of the mobile widget platform provider, Plusmo, is a clear validation of the importance which widgets hold for mobile carriers. While several carriers have launched widget services based on third-party solutions, AT&T has dipped into its pockets to bring the technology in-house. This should enable the carrier to quickly rollout a cross platform app store solution to a wide base of both its smartphone and non-smartphone users, ensuring that the first-mover advantage enjoyed by the likes of Apple and Nokia do not eventually lead to AT&T's exclusion from this important opportunity.

While the debate continues to rage over which type of handset application will ultimately prevail - embedded vs native vs widget - the fact is that mobile operators are quickly losing ground to other industry stakeholders in the fight to be gatekeeper to their users' application discovery and download experience. While carriers like Vodafone, Verizon and China Mobile are investing heavily to build and manage their own app store services, offering applications for a range of mobile platforms, these will take time to establish and flourish - and will be largely targeted towards smartphone devices. Smaller carriers, with a large base of non-smartphone customers and without the scale of a Vodafone, will find it difficult to justify the investment into such infrastructure. Widgets are an alternative which represent a lower investment and faster time to market for carriers attempting to secure gatekeeper status in application retail and distribution.

So far, carriers are being outmaneuvered by the OEMs. Nothing underscores this more than the two billion-plus application downloads which Apple's App Store has experienced in such a short space of time. When it comes to the iPhone, Apple controls the app experience, and the carrier sees little upside. But the iPhone's market share is miniscule. Of more concern to mobile operators is the rapid-fire genesis of app stores from virtually all OEMs with a handset market share greater than a couple of percent.

If it isn't already, Nokia's Ovi should be causing carriers many a sleepless night. In the past 12 months, Ovi has been joined by RIM's BlackBerry App World and Google's Android Market, amongst others from Motorola, Samsung and LG.

At the moment, integrating app purchasing within the carrier billing system is seen as important to promoting downloads and driving sales, and much was made of Nokia's inability to get Ovi inside a US carrier in time for its launch (although AT&T has now agreed to offer the service).

True, carriers do receive a small share of app revenue and they may feel that position in the value chain is secure owing to the importance of their customer billing relationship - but this is a false perception. Just as all iPhone app purchases take place outside the carrier owing to the ingenious micropayment system supported by iTunes, the BlackBerry App World supports payment through PayPal and Android Market uses Google Checkout. While Nokia says it prefers to work through carriers, Ovi supports its own credit card payment system.

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