In the App Store MArket, Fortune FAvorS the Bold - Service Provider Success Hinges on Exposing Key Business and Network Enablers to Create ...
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In the App Store Market, Fortune Favors the Bold Service Provider Success Hinges on Exposing Key Business and Network Enablers to Create Rewarding Experiences for both Consumers and Developers WHITE PAPER
CONTENTS THE EVOLUTION OF THE MOBILE APPLICATIONS MARKET ............................... 3 Mobile Applications: A Slumbering Giant Awakens ............................................. 3 On-Portal and Off-Portal Business Models ......................................................... 3 A New Business Model Spells Danger for Service Providers ................................. 3 Understanding the Real Business Opportunity . ................................................... 4 Service Providers have Unique Assets to Build the Killer Application Platform ................... 5 Keys to Success . ............................................................................................. 5 ENABLING THE DEVELOPER EXPERIENCE ........................................................ 6 Community Features . ...................................................................................... 6 Access to Network and Business Enablers .......................................................... 7 Targeting and Personalization .......................................................................... 8 Testing and Certification . ................................................................................ 8 ENABLING THE CONSUMER EXPERIENCE .......................................................... 9 Fostering Innovation with Network Services ....................................................... 9 A Personalized Storefront and Digital Locker . ................................................... 9 Service Provider Billing — A Powerful Business Enabler .................................... 10 ABOUT THE AMDOCS INTERACTIVE APP STORE SOLUTION .............................. 11 SUMMARY .......................................................................................................... 11
THE EVOLUTION OF THE MOBILE APPLICATIONS MARKET Mobile Applications: A Slumbering Giant Awakens On-Portal and Off-Portal Business Models As recently as June 2008, mobile applications were a niche segment The recent history of mobile content sales has been largely driven within the larger mobile content business. Service providers by two business models commonly known as on-portal and off- traditionally paid little attention to this segment, and most were portal, both of which require service provider support. The on-portal perfectly content to let technology suppliers like Qualcomm (with business model requires the service provider to manage all aspects its BREW platform) and device manufacturers, like Symbian of content provisioning, marketing, consumer discovery, content and Nokia, support third party developers with device specific, or delivery and consumer care. It also requires the service provider to operating system specific, application environments. Yet the ecosystem maintain systems and resources to support each of these functions. was far from ideal, and posed significant challenges to developers, The common off-portal business model requires the service provider to including: device platform fragmentation, poor device user experience, support a shortcode messaging service (SMS) and a payments service limitations of the wireless application protocol (WAP) interface, and to businesses that market directly to consumers via media such as the high broadband access costs for end users. All of these challenges web, TV, radio or magazines. The primary value added to the off-portal translated into tough choices and high costs of entry and ongoing business by the service provider is the ability to collect payments from operations for small, and even medium, sized businesses. For those a consumer without extra data entry through the device, a significant who did decide to enter the game, effective distribution often meant benefit when working with mobile devices and impulse sales.To address the need to partner with mobile network operators, a prolonged off-portal business models, service providers either put in place the and overly complicated process for your average, run-of-the-mill necessary systems and work directly with third parties or, more often, start-up operation. service providers work through aggregators (like OpenMarket in the U.S.) who carry most of the operational burden, and offer to third Then along came Apple. In the summer of 2008, Apple introduced parties the extra benefit of consolidating access to multiple service its iPhone 2.0 and App Store business model, injecting a shocking providers within a given market. jolt of energy into the mobile applications market, and to the mobile developer community at large. Suddenly it became possible for third A New Business Model Spells party developers to easily build mobile applications that deliver a great Danger for Service Providers user experience. In Apple’s model, developers can easily on board with With the advent of the Apple App Store model and its emerging a simple, straightforward revenue share contract and can rely on the competitors, a new business model is taking shape: the “non-portal” availability of broadband over WiFi or the cellular network. They can model, where the service provider does not have a front stage role access iPhone application program interfaces (APIs) including an in- in the content or application sales transactions. In this scenario, the application purchasing API. In simple terms, Apple has unlocked the service provider is pushed to the back seat, relegated to the role of revenue potential of the mobile application ecosystem, a move that has network access or broadband provider. This scenario represents a profited almost every link in the mobile value chain. Although mobile clear and present danger for mobile service providers. Although they service providers have benefited from an increase in data usage as a benefit from an increase in mobile data usage, they are witnessing result of mobile application stores such as Apple’s and others, they the control over more and more elements of the mobile purchasing have also experienced firsthand a loss of control over their traditional experience being wrested from their hands in favor of the on-device content and mobile business models. In the App Store Market, Fortune Favors the Bold 3
content and application stores. For example, Apple has been able to its App Store, Apple has realized roughly $110 million in revenue; create an app store that does not even require the service provider 30 percent of direct application sales, and created a $260 million market for payment services. Apple has successfully provisioned credit card for developers.1 accounts independently with their customers, using a very successful PC application, iTunes. However, application sales are not the end game for Apple. While the $110 million revenue from direct application sales is truly impressive, Most existing application stores have also demonstrated the power it represents a mere two percent of Apple’s over $10 billion in revenues of opening the operating system directly to developers. Camera, GPS from iPhone and iPod Touch device sales.2 Clearly in the Apple model, and touch-screen capabilities enhance applications to the extent the app store is not the main revenue driver, but a way to sell more that customers get “locked into” using the device. As the device devices and create loyalty to the iPhone. The same logic applies to manufacturers gain mind-share, service providers lose it. Considering service providers. By opening their own app stores and investing in an the rise of smart devices from 26% to 33% of global demand open platform for developers, service providers will be able to offer the over the past six months (AdMob, March 2009), this threat is even applications their customers want to enrich the user experience and more poignant. create stickiness. A service provider app store is another means to help reclaim ownership over the customer experience and drive long- However, the on-device app store model is not perfect. A modern term customer loyalty. Many service providers have recognized this application store should provide developers with many of the critical opportunity. services of the on-portal model, namely a way to distribute applications through an on-portal like storefront. But most of the device-centric Service providers like O2, Orange and the recently aligned Verizon application stores don’t provide the same level of testing, care or Wireless, Vodafone, Softbank and China Mobile, have come to marketing support for the applications that traditional on-portal recognize they may be better served by opening their network models support. intelligence and back-office software platforms to the application development community. In so doing, they are able to take advantage of While not without fault, the new “non-portal” application store model long tail economics; they empower the developer community to deliver is undoubtedly an attractive bid for both developers and consumers. A tailored applications to all niches within their vast customer base. service provider’s store can certainly be equally attractive. However, Thus, they no longer must depend on one or two killer applications to in order to compete and differentiate in this space, service providers drive revenue, but instead deliver a compelling application platform, must adjust their strategies and take quick action. enabling thousands of high quality applications to be produced, while at the same time, dramatically improving customer satisfaction. This paradigm shift has made service providers realize that what they need Understanding the Real Business Opportunity is not a killer application but a “killer application platform.” 3 Apple’s iPhone/iTunes App Store provides real numbers for app sales and customer base growth. By April 2009, roughly 800 million apps were downloaded from the Apple App Store. Since launching 1 Christian Zibreg, http://www.geek.com/articles/mobile/analysis-app-store-now-1-million-a-day-business-cloud-mobile-apps-the-next-big-thing-20090424/ 2 Philip Elmer-DeWitt, CNN Fortune, http://apple20.blogs.fortune.cnn.com/2009/05/14/how-apple-profits-from-the-app-store/ 3 William Blair & Company, The Rise of Smartphones, Dec. 2008. FIGURE 1 App Stores Launched Prior to and in the Wake of Apple’s App StorE 2000 2008 2009 In the App Store Market, Fortune Favors the Bold 4
EVOLUTION... (Cont’d) Service Providers have Unique Assets Keys to Success to Build the Killer Application Platform As the mobile app store space becomes a major growth area in Table 1 demonstrates the differentiating factors in today’s application 2009, it becomes more evident that no single application store will store competitive arena. Service providers can bring several valuable prevail. To win in this space, mobile application stores must provide assets to create a killer application platform that would be attractive a uniquely differentiated experience for both mobile users as well as to the developer and content partner community: application developers. > Connectivity and Access: Community and social tools, like instant Developer and consumer needs feed off each other. For developers, messaging (IM) and project sharing, allowing developers to the explosion of application stores, and therefore developer interact, would transform a transactional and static environment platforms, is not necessarily a good thing. For one, it increases the into a sticky, dynamic, growing community. The developer-minded already painful market fragmentation. Developers are aware that application store must be a hub of collaborative testing and their initial platform choice may limit and define the future of their development, rather than a mere distribution channel. business. When developers like the platform and are happy with the > Personalization: Using network enablers (location, presence), business enablers, they create innovative software which appeals customer information (purchase history, usage history, etc.), user to consumers. identity support, and behavior analytics. > Purchase Convenience: Through pre-existing billing and payment When consumers can easily discover, purchase and use a variety of enablement, buyer authentication and payment authorization innovative applications, they are likely to buy more. This in turn draws (namely, access to operator billing systems). The ability to complete developer interest. An effective application store serves as a catalyst, a sale with the fewest number of clicks cannot be overstated. expediting app innovation. > Distribution and Reach: Access to a large mobile customer base As will be explored in this paper, service providers have unique assets across multiple devices. On-portal storefront placement, catalog that can be exposed in a controlled way to address both the consumer control, secure delivery and digital content locker support. and developer needs, creating a differentiated app experience. > Multi-platform Support: Remove developers need to make platform decisions by supporting multiple device platforms. > Operational Support: Extending robust operational systems and processes as services to the developer community, e.g., CRM-as-a- service, testing services, etc. TABLE 1 Comparison of Various App Store Models Operating System (OS) Specific or White-Label Application Store (e.g. Service Provider Application Store On-Device Application Store (e.g. Handango) Android, Apple, RIM) Third Party access to OS-specific (e.g. memory, data OS-specific Service provider-specific (e.g. APIs management, media playback, location, presence, CRM data, call address book, GPS, camera) management, address book) Distribution Channels > Web > Web > Web > On-device store > Partner on-device stores > Mobile portals (via on-device > Mobile portals > Partner mobile portals “Download” icon) > Enterprise program > Direct sales Consumer Billing Options Third party (e.g. PayPal, CheckOut, Third party (e.g. PayPal, CheckOut, Service provider billing iTunes, credit card, etc.) iTunes, credit card, etc.) Developer Business Models > Direct application sales Direct application sales Direct application sales Supported > Advertising > In-app content sales Developer Support > Online resources > Business development > Online resources > Conferences and events > Marketing > Conferences and events > Sales > IT Personalization Support In some cases (e.g. Nokia) No No In the App Store Market, Fortune Favors the Bold 5
ENABLING THE DEVELOPER EXPERIENCE As mentioned, no single mobile application platform will dominate. The Community Features most successful platform will offer developers the best combination of The variance in potential partners drives business models and services core capabilities such as device software development kits (SDKs) and needs. Potential partners engaging in application development may network APIs, along with customer reach and monetization options. vary in scale from a single, freelance developer to a large-scale, public Providing such a compelling and consistent developer experience software company. Also, partners’ goals in application development hinges on both business and technology factors. may differ greatly. Some may be directly selling applications as a revenue stream, others may be using applications as a content On the business side, a successful service provider application platform marketing channel (e.g. Kindle). A third breed of developers may want provides: to enable and market a non-digital business via its applications. > A simple on-boarding and submission process, including published Partner collaboration and the exchange of ideas and capabilities is and transparent guidelines an essential success factor for the service provider’s application store. > An incentivized community that provides feedback and testing Community features are required for partners to share problems and assistance solutions, discover, discuss and recommend products. An easy-to- > Robust monetization engines, including marketing features like navigate, easy-to-customize community portal should accommodate user ranking and personalization built into the storefront all variant partner types. > A simple and attractive revenue share model, including incentives to moderate data consumption and support costs Other than the obvious on-boarding and registration that should be > Marketing support made simple and straightforward, the portal should also connect developers to a personal home page or a “personal zone.” The home From a technology standpoint, service provider success in the app page should be accessible to other developers per privileges (like store game depends on their ability to: Facebook pages) and should support: > Expose network services (e.g. location, contacts, call management) > Profile details (mainly name, picture, description, app description/ that can differentiate applications promotion) > Provide powerful yet easy to use development tools > App submission tracking > Make it easy for developers to find, implement and test the APIs > Sales and settlement data and reports they need > Account details > Simplify support for multiple platforms > Alerts and notifications > Enforce policies without compromising the developer experience > Community interaction (invite others, submit/answer questions, > Address privacy, access control and network abuse share ideas via forum and wiki) The following section provides a detailed description of the ideal developer experience regarding some of the key aspects of the killer application development platform. In the App Store Market, Fortune Favors the Bold 6
ENABLING The Developer EXPERIENCE (Cont’d) Access to Network and Business Enablers An integral part of the service provider’s application development Service providers’ assets can be exposed as three types of enablers: ecosystem is a “Service Marketplace,” where developers can subscribe service, business and third party enablers (see Table 2). Each of to the APIs of their choice, fee-of-charge or by paying according to these enablers and their combinations create differentiation over various charging models. The “Service Marketplace” should also and above that which is offered by popular application ecosystems support the following: in the market today. > The discovery of services based on category, type, name, description provider and published date Allowing third party developers to embed service provider network > A view of pricing, service level agreement and other details for and business services into their applications, makes them customer- each service specific and uniquely differentiated (see Figure 2 for example). > A rating system for services which enables top services to be Network and business services exposure also presents new featured opportunities for monetization, as developers will increasingly > Service subscriptions (i.e. a developer can subscribe to a service at be willing to pay for those services, as their added value becomes a certain price level based on mutually agreed upon service level more apparent. agreements) > SDK creation for a specific “language platform” for each service > SDK downloads and the ability to plug into an integrated development environment (IDE) TABLE 2 Service Provider App Store Enablers ENABLER TYPE DESCRIPTION EXAMPLES Service Enablers Capabilities derived from network elements, application SMS, WAP push, call control, location, presence, and servers or billing and support systems, which can be basic customer data exposed as services and used by developers to build new, enhanced applications. Business Enablers Services that allow developers to reduce friction (costs, Testing services, cloud computing, storage, customer time to market, etc.) involved in different aspects of business intelligence (BI), marketing, multi-device application development, distribution, revenue and rendering, and developer tools operational lifecycles. Third Party Enablers Community and third party-driven services that are Social utilities, storefronts, media services and external exposed and managed by the platform similar to the business services business and service enablers. These services vastly increase the functional scope and appeal of the developer opportunity. FIGURE 2 The Service Provider’s Assets in Play: CallManager (A Vodafone Betavine Application) SERVICE PROVIDER’S BUSINESS SERVICES SERVICE PROVIDER’S WEB SERVICES EASY ON-BOARDING CALL MANAGEMENT DEVELOPMENT AND TESTING, DISTRIBUTION, CONTACTS UPDATES, MONITORING, SUPPORT AND MONETIZATION ACCESS TO DEVICE SDKs AND BROWSER WIDGETS MESSAGING CallManager uses the service provider’s contact and call management APIs to set different actions for groups of callers and locations defined by the user. Actions include: • Reject • Send a personalized SMS • Send busy tone • Mute the ringer In the App Store Market, Fortune Favors the Bold 7
ENABLING The Developer EXPERIENCE (Cont’d) Targeting and Personalization Testing and Certification One of the most important factors that will determine the success of Testing and certification is not only about ensuring apps will work any given application environment is the developers’ ability to monetize on any particular handset, but also about screening for viruses, their apps. In other words, developers’ revenue will be a “deal breaker” pornography and copyrighted material. Service providers should aim in the future battle of the app store. to keep the approval process to less than two weeks. The application store game is predominantly about the long tail. Developers should be able to build an application against network Personalization, fed by intelligent subscriber profiles, representing services and easily test them in their integrated development affinities to the various content categories, facilitates discovery environment. Community testing should also be enabled by the and solves the relevancy issue, which is key to effective application ecosystem. The testing functionality of the app store should marketing and monetization. In a fully personalized storefront, allow developers to certify the application running against an discovery is based on users’ preferences, so developers’ access to niche “integration sandbox” environment using real network services. market segments is maximized. Developers should have full visibility into their application certification process. A seamless business flow should exist between an application’s For example, a pedometer application will reach wider audiences if it certification and its push to the storefront, under a “What’s is promoted to all users who have also downloaded a calorie-counter New” section. application or read about weight loss and fitness. In addition, developers should be able to target their apps to specific customer segments by age, gender, behavior, etc. This, in turn, should feed into a powerful personalization engine. The result is an automated marketing tool which is built into the application storefront and exposed to the application developers during the submission process. In the App Store Market, Fortune Favors the Bold 8
ENABLING THE CONSUMER EXPERIENCE According to Informa Telecoms & Media (March, 2009) smartphones Moreover, innovation enabled through network APIs is not limited to will account for just fewer than 20 percent of the global mobile market the mobile screen. Network APIs can enhance the functionality of by the end of 2009. That would leave 80 percent — or 3.2 billion web applications as well as mobile. Exposing network APIs to the mobile users — without access to an app store-like experience. The millions-strong web development community enables the next phase first and perhaps greatest challenge for service providers is therefore, of connectivity. This will position service providers at the center of the to ensure that this experience is accessible to all. new value chain and as purveyors of the connected lifestyle. Platforms designed for widgets and web applications, such as the Joint Users will be able to access and communicate their network-based Innovation Lab (JIL), and Orange widget editor partially address this content and information across any screen. For example, incoming problem. Mobile widgets provide a similar user experience across SMS would display on users’ screens, regardless of whether they are a variety of smartphones as well as mid- and low-cost handsets on playing a game console, using the PC or watching TV. Web applications multiple operating systems. that implement network APIs can also be mash-ups of network and third-party web services. For example, an application can be set to In addition to the quality of the user experience achieved through track certain stock price changes and alert users to changes in real the device, other factors impact the volume of purchases and overall time, via SMS. customer loyalty to a service provider’s application store: > A variety of innovative, functional and personalized apps that A Personalized Storefront and Digital Locker provide real value The storefront experience is key to the success of the application store. > An attractive storefront Apps discoverability is not only an issue for developers but also for consumers. It goes without saying that users should be able to type an > Discoverability of apps (search, personalization, featured apps) app’s name into a search box and find it. > Easy download and sideload (pc-to-device) of apps > Seamless payment through the service provider’s billing Furthermore, app placement should reflect popularity and relevance and be geared entirely toward consumer needs. Customer data and > A digital locker for saving apps accessible from the mobile deck artificial intelligence should be applied to create personalization of the storefront. This would eliminate “click distance” and ensure users are Following are some examples of how the ideal consumer app experience exposed to the applications that are most relevant to them. may be achieved within a service provider app store. A network-based digital locker would ensure that the users’ favorite Fostering Innovation with Network Services apps are saved, even if their device is lost, damaged or stolen. A digital SMS, WAP push, call control, location, presence, and basic customer data locker would also help strengthen the service provider’s relationship can all be used to infuse real user value into applications and create loyalty with the consumer because it would hold content which users view and brand recognition. Applications that enable users to access and interact as their private “assets” and would therefore form an attachment. In with information stored on their calendar, contacts, messaging, photo and addition, at a time of crisis, the service provider would “own” and be profiles, provide more than just entertainment.They become an extension of responsible for effortlessly restoring the positive user experience and the phone’s functionality and an integral part of the user’s digital lifestyle. “saving the day.” This in turn would enhance users’ positive perception Figure 2 above provides an example for such an application. and mind-share. In the App Store Market, Fortune Favors the Bold 9
ENABLING The CONSUMER EXPERIENCE (Cont’d) Service Provider Billing — Done well, service provider billing offers seamless, one-click simplicity. A Powerful Business Enabler However, service providers are still challenged by the need to have As most service providers who have already launched application the right systems in place for allowing micro payments to a myriad stores realize, users’ ability to pay seamlessly, without submitting any of developers and third party affiliates. Premium SMS services and personal information, is a key factor in their readiness to download pre-paid cards offer a roundabout way of tackling the problem; more applications. Consumers simply cannot be expected to make the importantly, they offer reduced usability to the consumer compared to effort to purchase something if it takes more than a few clicks direct billing. to complete. Service providers should invest in the right platform that would Out of the three possible payment mechanisms — credit cards, third empower them to utilize their billing relationship with the customer, party accounts and service provider billing — the latter is the most improve the consumer experience and drive revenues from their user-friendly. While entering credit card account numbers usually poses application store. a trust barrier to some users, most device-centered app stores utilize a third party billing system, which already stores the user’s credit details (e.g., iTunes). However, as research suggests4, it is not always safe to assume that users have a computer and credit card. PC and broadband penetration in some European countries is relatively low. In Japan, young consumers are actually less likely to own a computer and instead rely almost entirely on advanced mobile phones. 4 Deutsche Bank, Digits 14, App Store Mania, April 2009. In the App Store Market, Fortune Favors the Bold 10
ABOUT THE AMDOCS INTERACTIVE APP STORE SOLUTION As a leading player in enabling service providers to create personalized enables service providers to expose and monetize network and business and profitable online digital experiences, Amdocs Interactive resources easily and securely, through partnerships with the developer understands the challenges facing service providers and what it community. With the Amdocs Interactive App Store Solution, service will take for them to succeed in the app store game. To address this providers can create a collaborative developer ecosystem, allowing market need, we have launched the Amdocs Interactive App Store developer partners to easily create, test, target, distribute and monetize Solution. This solution allows developer communities to create and new and mashed-up applications. sell innovative applications that make the most of service providers’ unique assets while providing a more optimal customer experience. It SUMMARY Service providers’ role in the hugely profitable mobile app value chain Putting in place the right infrastructure for the service provider’s is rapidly eroding, as device manufacturers and operating system application store is, indeed, not for the faint-hearted. Careful thought vendors currently dominate this space. Realizing their loss of mind- should be put into accommodating the whole ecosystem to address share and user loyalty, many service providers have already initiated both the consumer and developer needs. Exposing the right business mobile application strategies. At the center of any such strategy is a and network capabilities will ensure a rewarding experience for the development platform, catering to a community of developers who are consumer, and a revenue-generating one for developers and service operating in a largely segmented device market and must carefully providers alike. choose their partner before investing any resources. In the App Store Market, Fortune Favors the Bold 11
ABOUT AMDOCS Interactive Amdocs Interactive App Store solution is part of the Amdocs Interactive set of offerings designed specifically to address the challenges of delivering the optimal online customer experience. Part of the larger Amdocs Customer Experience Systems (CES) portfolio, Amdocs Interactive offerings span commerce, partner collaboration, self-service and personalized portal solutions. To learn more about Amdocs Interactive solutions and services visit us online at www.amdocsinteractive.com. ABOUT AMDOCS Amdocs is the market leader in customer experience systems innovation, enabling world-leading service providers to deliver an integrated, innovative and intentional customer experienceTM at every point of service. Amdocs provides solutions that deliver customer experience excellence, combining the software, services and expertise to help its customers execute their strategies and achieve service, operational and financial excellence. A global company with revenue of $3.16 billion in fiscal 2008, Amdocs serves customers in more than 50 countries around the world. For more information, visit Amdocs at www.amdocs.com. Amdocs has offices, development and support centers worldwide. To see the most current contact information for all Amdocs offices worldwide, please refer to our website at www.amdocs.com/corporate.asp For more information regarding this whitepaper, please contact: Shanie Weissman Product Marketing Manager Shanie.Weissman@amdocs.com T H E A M E R I CA S : A S I A PA C I F I C E U RO P E , M I D D L E E A S T & A F R I CA : BRAZIL AUSTRALIA CYPRUS IRELAND SOUTH AFRICA CANADA CHINA CZECH REPUBLIC ISRAEL SPAIN MEXICO INDIA FRANCE ITALY SWEDEN UNITED STATES JAPAN GERMANY NETHERLANDS TURKEY THAILAND HUNGARY POLAND UNITED KINGDOM RUSSIA Copyright © Amdocs 2009. All Rights Reserved. Reproduction or distribution other than for intended purposes is prohibited, without the prior written consent of Amdocs. Amdocs reserves the right to revise this document and to make changes in the content from time to time without notice. Amdocs may make improvements and/or changes to the product(s) and/or programs described in this document any time. The trademarks and service marks of Amdocs, including the Amdocs mark and logo, Ensemble, Enabler, Clarify, Return on Relationship, Intelecable, Collabrent, Intentional Customer Experience, CES, Cramer, Qpass, SigValue, DST Innovis, JacobsRimell, and ChangingWorlds are the exclusive property of Amdocs, and may not be used without permission. All other marks are the property of their respective owners. AI 2-09.
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