There’s a great saying from Benjamin D’Israeli, ‘There’s lies, damned lies and statistics.’ To read the press, you’d think the trillion dollar telecommunications industry has been shaken to its core by Apple, a $33B consumer electronics company. In April 2009 the Apple app store achieved 1B ‘application’ downloads in 9 months, estimates vary on the revenue generated by all these downloads, it is likely a few $100M, as most of the downloaded apps are free. Given the volume of prime-time national TV advertising Apple is running for the App Store, I doubt as a line of business its even profitable. I put quotation marks around the word application as in many cases it’s just a bookmark; on an iPhone for iPod Touch check out iphone.facebook.com in the device’s browser and then the Facebook app – spot the difference? Charging people for bookmarks would definitely be an interesting business model, though its sustainability would be questionable.
But contrast Apple’s App Store revenue to the total telecom content revenues in 2008 of $71B, $30B of which was for mobile. Apple has definitely done well, and there are some important lessons in Apple’s success for operators, but as usual hype and fashionable concepts are causing the industry to knee-jerk react and focus on the less-important part of the problem – service exposure.
Some of the learning points Apple provides to the telecom industry:
- They do not charge for any of their 1k+ APIs; and still operators think they can charge consumers for location. As a proof point, consumer LBS (Location based Services) based on a charged for network location API (which is generally much worse than GPS on a phone) has not been successful.
- A great store experience that encourages people to linger, browse and buy something they did not plan, just like in a mall. The ODP (On Device Portal) was created for just this reason, but unfair revenue share, lack of platform commitment, inept ingestion process and charged for APIs stopped this innovation creating market success.
- You can easily find the application once its downloaded!
- People love free (and that’s free without the sting of an end of month data download charge), and after using the free stuff a few upgrade to the paid for app.
- Simple fair revenue share (70/30), with a clear path to cash, O2 Litmus is the leading light here. A friend of mine sells his apps through Apple’s App Store at $4.99 and another store (which has both the store, pSMS aggregator and operator taking their unfair shares) at $24.99 – he makes more money through Apple!
- Market size in the tens of millions of units (I’ll come back to this as fragmentation continues to stifle the industry and in the limit could kill the operator store.)
- Platform/Device commitment measured in years, not months as is the case with most mobile phones.
- Simple process to publish with direct customer access. Again O2 Litmus leads the industry, but the volume of customer access could be better.
Examining the fragmentation issue in a little more detail. GLU.com had to create 25k versions of its Transformers game. On average developers build about 400-600 versions of any game. There are about 20k phone types on the market today, 750+ operators and depending upon how you count 25-200 different OS, that’s a lot of permutations. And even with this stifling fragmentation the industry has achieved $30B in revenue. Just imagine what could be done by applying all the lessons Apple has shown! Its too late to selectively apply just a few.
If operators really do want to charge for service exposure, then they’re going to have to focus on the enterprise segment; I’ll look at that in a later weblog article. To the answer the question in the title “Is There Any Money in Service Exposure for Consumer Services?” The answer is no if an operator simply wants to charge for APIs. I’ll be covering these concepts and much more in my workshop at the Mobile Operator Smart Pipes and Applications Conference.
Just a quick reminder: On May 19-20th in London will be the Mobile Operator Smart Pipes and Applications Conference. In attendance will be Steve Glagow, head of Orange Partner; Pieter Knook, head of Vodafone Internet Services, Sune Jakobsson, Telenor Open Services; James Parton, head of O2 Litmus; plus many more operators. As well as leaders from Nokia Ovi, Google, Bebo, Fox, Opera Software, Microsoft, OpenAPI, OMTP, etc. The conference will be a nexus of the people trying to move the telco industry from being viewed as “a pipe to the internet” to a “value-adding network of customers and application developers.”
Before the conference, on the Monday 18th, I’ll be running a pre-conference workshop, “Achieving the Economies of Scale Necessary to make the Smart Pipe Strategy Commercially and Operationally Viable,” details show below. Here I’ll be sharing a view of what 2015 will look like if we continue along the current trajectory; where increasingly Google Latitude becomes the default aggregation of people’s context and Google buys Skype from eBay, social networks interoperate which includes messaging and voice inter-working, customers increasingly subscribe to music/video experiences rather than ‘buy’ content, mobile VoIP finally arrives, devices manufacturers have to copy Apple’s experience to stay in business, and customers’ expectations on services continue to change so mobile voice/messaging is considered like fixed telephony is today. What does this mean to the mobile industry? What are we doing, and what must we be doing? The workshop will be a mix of presentation, roundtable discussion, and interactive Q&A. For more background on the workshop see these weblog articles:
- Options on how the Telco industry can work with the App Development Industry
- When everybody wants to be your Friend: What’s an Application Developer to do?
- If you are an Operator who is not selling iPhones, why haven’t you built your iPhone App already?
And finally I would like to extend my thanks to John Holloway, CEO of ZingMagic; and Matt Millar, CEO, Live Talkback for their guidance, help and support at the pre-conference workshop.