Research Notes

Many people are talking about Apple’s App Store for the iPhone

– but is it really such a large success as the media write, or is it simply one of the many solutions that are being overhyped?

The media are giving App Stores a lot of coverage and most phone manufacturers and mobile operators are in the process of launching their own App Stores with the dream of thereby being able to create a commercial success.

When you read the many articles that are being published about this subject, there is no limit to the optimism and how impressed people are about the many free downloads offered on Apple’s App Store. However in the world that Strand Consult does business in, we do not have many customers that can make a living from giving customers free applications for their mobile phones and we are for example more focused on the 32 billion dollar US market for premium value added services that exists today, than the many app store attempts we run into.

If you examine the historical facts, one of the oldest players on this market is from Seattle, that has focused on delivering applications for smart phones and PDAs across various platforms for eight years.

Back in October 2005, Nokia launched their concept Preminet, which is today called “Download” and has up to now been pre-installed in over 200 million Nokia mobile phones with limited success. If you take a closer look at the idea with Preminet you can see that it is close to Handango’s concept, apart from the fact that it is pre-installed on the mobile phone in the same way as Apple’s App Store.
Basically, Apple has simply copied what others were already doing and created a more beautiful user interface. On the other hand the cash flow generated by Apple’s App Store is probably rather limited compared to the global cash flow from content sales created on top of the business model that derived from the premium SMS market.

If you were to evaluate Apple’s App Store and the cash flow it generates, compared to the global market for premium mobile applications, our analyses show that the value of the premium mobile services market in Norway is larger than the total global value of the premium services being sold via Apple’s App Store. In Norway, the population of 4.3 million people spent 120 million Euro on premium mobile services.

Here at Strand Consult we believe that the path forward for premium value added services is not to build App Stores. What we believe will create a market is a healthy business model combined with massive marketing of mobile services to the end users. The success of this strategy has already been proved by the ring tone and Java game market. In an App Store the primary focus will be on the few services being marketed on the front page and the path to success could be very long for most application developers.

An App Store can be compared to a bookshop. The mobile industry does not lack booksellers, it lacks the people that can educate users and teach them how to use mobile phones for other things than just voice and SMS. We need to educate the many billions of illiterate mobile users, rather than focusing on building bookshops.

If you want to reduce the number of illiterate people you will need to teach them to read and write and experiences from the premium SMS market have shown that for example SMS voting on television has had an extremely positive influence on especially older end-users’ SMS use. Today there are countries where a large part of the over 50 age group of mobile end-users are very active SMS users.
In our new report: SHOW ME THE MONEY – THE FUTURE BUSINESS MODEL FOR MOBILE BROADBAND SERVICES  we have examined how the mobile broadband services market is developing and which business models will help drive this market in the future – both regarding smart phones and ordinary PCs.

We believe that the premium VAS market will explode from the current 32 billion USD as an increasing number of people purchase a mobile broadband connection. We know that many operators will copy their mobile phone strategy, by implementing premium billing on mobile broadband connections. The big question is not whether there will be a market, or whether it will be huge, but rather who will dominate the market? We do not believe it will be App Stores or other similar solutions one reads about in the media.

Find out more about this market, what it currently looks like and how it is developing. Order our report SHOW ME THE MONEY – THE FUTURE BUSINESS MODEL FOR MOBILE BROADBAND SERVICES;  today and receive the knowledge you need tomorrow. The path to success is knowledge and Strand Consult sells the best knowledge available – that is why our customers are successful.

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