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2010 IBM Corporation
App Ecosystems and their Relevance to CommunicationService Providers (CSPs)
49th FITCE CONGRESS, Santiago de Compostela, September 02, 2010
Bernd Wunderlich
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2010 IBM Corporation2
Poll Question
Who knows about the Wholesale Application Community(WAC)?
Who thinks it will be successful?
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2010 IBM Corporation3
Why CSPs should care - Mobile App Market is going to grow from4.1bn in 2009 to 25 bn in 2014
Overall World Mobile App Market from 2009 to 2014
Market Size:
4.1 bn US$ in 2009 to 25 bn US$ in 2014
Total market size higher as wider revenue opportunities
exists, e.g. upgrade of data plan, reduced churn
Market Growth:
62% CAGR from 2009 to 2012
Market Share:
93% Apple in 2009, 6% Google catching-up
0
10
20
30
2009 2012 2014
App Sales Advertisement
Bn US$
App Sales and Ad Market1
Apple
93%
Android
6%
App Download Market Share 20091
Palm
1%
1Source: Sharma Consulting 2010
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2010 IBM Corporation4
The Market Gap of 93% of the Apps being sold to only 10% ofSmartphones on the market can be filled by CSPs or further DeviceManufacturers
34% Smart
Phone Unit
CAGR
(20082013)
1Source: Gartner, Forecast Global Add-On Functions, April 2009, Forecast Mobile Devices Asia Pacific, 2009, Forecast Mobile Devices Worldwide, 2009
2Source: Frost and Sullivan
0%
20%
40%
60%
80%
100%
2007 2010 2013
% of PhoneShipments
Smartphone Market PenetrationApp1
10% 42%21%
SmartPhones
EnhancedPhones
BasicPhones
Apple10%
Android12%
Symbian42%
RIM
17%
Others19%
Smartphone Market by Share 20142
Smartphone Market Development
The increasing penetration of Smartphones, the two sided business model andMobile Data Rate offerings are enabling the strong growth of the Mobile AppMarket
In 2013 there will be 2.8 bn smartphones versus 1.8 bn desktops
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2010 IBM Corporation5
The over-the-top delivery paradigm has led to unprecendenteddisruptive change in the mobile ecosystem. The Two-SidedBusiness Model and Powerful Devices are key Drivers that enablethis change. CSPs struggle to maintain their level of relationship.
App Insertion/Approval
App HostingApp Sales/
DeliveryDevelopment Consumption
Billing/Charging, Network Enablers, Quality
Broadband Network(DSL, CATV, Edge, UMTS, LTE)
App Store(Device Manufacturer, Operator, Independent)
Source: TM Forum 2010, IBM Analysis
Wholesale Retail
Simplified App Store Ecosystem
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2010 IBM Corporation6
The Apple Phenomenon - Why is Apples App Store so successful?
Source: Morgan Stanley, 148apps.biz, IBM Analysis
More apps drive moreconsumers to
purchase iPhones(26M+) and download
iPhone apps (2B+)
Characteristics
Robust and user-friendly SDK (SoftwareDeveloper Kit) with 800,000 downloads
70%/30% Developer/ Apple Revenue
Split attracts >50,000 Active Publishers
Currently Most attractive CustomerCentric SmartPhone
First centralized Mobile ApplicationStorefront with easy to navigatemarketplace
Easy payment/account management oniTunes (One Click App Purchase)
Rising number ofavailable apps
(>252k)
increasesconsumerchoice
More downloadsleads to higherprofitability for
developers
The Network Effect
Better economicsattract more
developers to the
iPhone platform,creating moreapps
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2010 IBM Corporation7
Industry Problem Definition shows that the Market is dominated by Apples
closed system. The industry fragmentation makes entry more difficult.
Advertiser: Do not have single point of contact from CSPs -> Advertisers therefore prefer
supporting Google (Admob) dominant player (152bn impressions, 100 M$ rev in 2009) andApple.
CSPs: Do not want to become a bit pipe only, but Apples (app store launch in 07/2008)
closed system makes market entry difficult and costly due to device fragmentation.
Device Manufacturers: Problems to enter the market as Apple is the dominant player, need
to take high investments and have difficulty to obtain profitability, but have a lot too loose.
Developer: Devices and technologies are fragmented, developer needs to write apps on
multiple platforms, which results in high development costs while addressing small market sizeper device -> developers therefore prefer iPhone and Android
IT Players: Closed system does not support market entry.
Stakeholder Pain Points
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2010 IBM Corporation8
Fragmentation of Plattforms, Channels, Standards, and Devicesincrease development costs and limit consumer adoption andtherefore a higher market growth for mobile Apps
Device manufacturers,
application providers,
aggregators and CSPs result
in >70 App Stores
Multiple Channels
Fragmentation
Threat
Android, Apple, LiMo,
WebOS, RIM, Symbian,
Windows Mobile
Multiple Plattforms
Device: Cross-platform
WAP, HTML5, JIL, BONDI,
PhoneGap, etc.
Network: GSMA OneAPI
Multiple API Standards
Smartphones vs. Feature
phones
Differing feature sets
Multiple Devices/ Features
1Source: Ovum Eden Zoller, IBM Research
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2010 IBM Corporation9
The Wholesale Applications Community (WAC) is a not-for-profit open
global alliance of currently 24 of the worlds leading CSPs and 3 devicemanufacturers trying to solve the industry fragmentation.
WWWC (W3C) = World Wide Web ConsortiumOMTP = Open Mobile Terminal Platform
CSP Retail
Storefronts
Shared Development Env.
as a Service
App
Certification
andApprov
al
Wholesale
App
Repository
Wholesale
Exposure
Storefront
Network and other Enablers
3rd Party
Storefronts
Service Dev. Toolkit &
Emulator
Developer Community
Support
WAC Overview
WACs objective is to increase theoverall market for mobile applications
WAC will achieve this by enablingdevelopers with a write once, deploy
everywhere, on any device scenario.WAC will use existing standards (JIL,OMTP BONDI, GSMA OneAPI) anddrive a common standard.
WAC will provide a central Developer
Program which will talk to developerswith one voice.
The CSPs are responsible for theApp Storefronts and the Retail part.
Developer
Communities
Developer
Communities
JIL & OMTP
BONDI
Device API2010
JIL & OMTP
BONDI
Device API2010
Common W3C
Device API
Standard
>2011
Common W3C
Device API
Standard
>2011
WAC
Infrastructure
WAC Assets,
Standards
Other
standards
Other
standards
GSMA OneAPIGSMA OneAPI
Source: www.wholesaleappcommunity.com
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2010 IBM Corporation1010
WACs Roadmap to Success WAC to crossing the chasm of gaining
Advertiser, Developer, and End User attraction through supporting an OpenDeviceAPI, introducing a variety of Business Models, and quick moves
WACs/ CSPs Competitive Advantages
Deep Customer Relationships to 3 BillionCustomers Worldwide
Information about the customers usageand behaviour
Charging and Billing Capabilities andTrustful Relationships
Influences on the devices (e.g. throughsubsidization, distribution)
Influences on standards
Financial Resources and NetworkAssets
WACs Critical Success Factors
Time to market (Standards, Platform,Devices, Applications on WAC repository)
CSPs to establish various businessmodels (Freemium, Subsidization, Adfunded,etc.)
Right Skills (Leadership, TechnicalSkills, Marketing/ Partner Management,Advertiser)
Attain Mindshare - Attractiveness toDeveloper Community & Advertisers
Financial Resources and ProductInnovation
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2010 IBM Corporation11
Strategic Options for CSPs demonstrate that the WAC option is theoption with the highest likelihood to succeed
Attract.
to
Developers
Flexible
Business
Model
Influence
on
Devices
Attract.
to
SubscriberStrategic Option
Do Nothing
Partner with 3rd
party Ecosystem
Create own AppEcosystem
Partner with WAC
none little very goodgoodmediumlevels of support:
Implications
Might become a bit pipeproviderLoose revenues to substitutesfor e.g. SMS
Little influence on market
Little chances for future
business
Limited number of Apps
Might not be profitable
Ways to differentiate withthrough own business models
Issues might be the Time toMarket
na na na na
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2010 IBM Corporation12
Conclusions
App stores are a very important component of the future mobile internet
CSPs need to play in this market if they want not simply become a bit pipe provider
Apple owned 93% of the App market in 2009, but only 10% of the Smartphone market.CSPs, Device Manufacturers, and Third Party Application Provider compete for the marketgap.
CSPs need to be able to address the two-sided business model and attract developers andcustomers alike, while gaining support from device manufacturers.
WAC seems to the strategic option with the highest likelihood to be successful
CSPs should not see revenue of App sales as the only revenue source, but need to addressa variety of business models to be successful.