The new battleground for app stores

Luc Grimond and Guillaume Sachet/Accenture
11 Aug 2011

App stores have been around since the turn of the century. Yet, they have only started to garner broader interest since June 2008 and the launch of the most successful app store to date. Since then, operators, operating system (OS) vendors, and device manufacturers have launched their own application stores.

An app store offers operators an alternative distribution channel for mobile content and an opportunity to boost data revenues. Yet, the success of operators' app stores has been mixed and operators are now re-thinking their approach to building and launching app stores, with an increased focus on the eco-system.

Operators in Asia Pacific (most notably in Southeast Asia) have a unique opportunity to engage and grow their subscriber base by leveraging their knowledge of local market specificities given the lack of established OS or device manufacturer app stores with a local footprint. This is further supported by the emergence of cross-platform and multi-device standards as defined by Wholesale Application Community. Asia Pacific is therefore becoming a new battleground for app stores.

Why have so many failed?

Only a handful of operators have seen their app stores generate significant growth since their launch, with some of the largest and most well established operators failing to capture sufficient interest from both the developer community and consumers, despite multiple launch attempts. Five key factors have contributed to this lack of success:

  1. The dominant market share of the largest device manufacturers and OS vendors in the mature North American and European markets have made these app stores the channel of choice for consumers to download mobile content.
  2. Burdened by the capital expenditures required to upgrade existing network infrastructure, operators cannot afford to invest as much in app store technology as OS vendors or device manufacturers that are able to source funds from their healthy and sustainable OS or device sales revenue streams.
  3. Telco's organizational structure is not aligned to a dynamic internet business that requires a much leaner operating model to respond to constantly changing customer and partner needs.
  4. The "walled garden" approach maintained by some operators can hinder app store success unless an operator has attained sufficient scale or dominance in its market.
  5. The lack of innovative pricing strategies and attractive business models for partners.

Despite these challenges, operators continue to launch app stores, hoping to build attractive eco-systems for the developer community, advertisers and content providers, as well as for their own subscribers.

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