by Windsor Holden on November 9th, 2012
I am going to ask you a question. I already know the answer, but I’m going to ask it anyway, because that’s what I’m like. The question is this: when you downloaded Angry Birds – Star Wars earlier yesterday, did you download it (a) from an OTT storefront, be it Google Play, Apple’s App Store, the Amazon Appstore or whatever or (b) an operator storefront?
The answer, of course, is (a), mainly because hardly any of the operators will be offering it, and even if they were, you’d still be downloading it from Play/App Store/Etc because that’s where you always go to find your apps.
In markets where smartphones are pre-eminent, downloads from operator portals have long been in decline. As I observed in a previous post, the most sagacious of the MNOs have realised this and adapted accordingly: while some have gone for the “shelf-in-store” (thereby preserving a small presence within the OTT shopping centre), others have decided that the game simply isn’t worth the candle and that there are other areas which are a better fit with their assets.
Hence, the news this week that Verizon, historically one of the more successful operators in the storefront space, would be closing down its branded app store from the end of January next year, with the Verizon Apps app remotely removed from all handsets by the end of March.
But is this emblematic of a wholesale MNO retreat from apps? Of app discovery, perhaps, and almost certainly of app discovery in the consumer space, but there are far more ways for operators to monetise apps than simply by sticking them on a portal with a $2.99 price tag attached. Verizon itself is one of a small number of MNOs that have begun to introduce a number of app bundles (including streamed video content) as a means of garnering additional revenues. Provided that the MNO can offer sufficiently compelling content at a price that the consumer deems reasonable, then this is potentially a means of extracting additional revenue from the end user. However (and this is a major caveat), for this strategy to succeed, the MNO must ensure that it has partnerships with several high-profile brands in place. Thus, for example, Verizon offered NFL content as part of its initial app bundle last year.
There is also the small matter of the billing relationship, where partnership with ‘open’ app stores in return for a share of content revenues can be as attractive to the app store as the MNO, as they gain access to a ubiquitous billing mechanism which offers particular opportunities both in markets where credit card ownership is low and amongst younger demographics who do not own credit cards.
Thirdly, billing is by no means the only API that the operators can leverage – witness AT&T’s launch earlier this year of an API platform – offering developers one-stop access to selected APIs. In addition to billing, this included the U-verse API for iOS and Android, which allows mobile applications to access a home U-verse server.
Mobile apps are big business – they are expected to be worth more than $50 billion per annum by 2016 – and while the MNOs are highly unlikely to feature in the front line of sales, they have plenty of opportunity to generate revenues at the back end.