The Future Of Mobile Application Storefronts Wireless Expertise Report 2009

The future of Mobile Application
Storefronts
“The world in your pocket”

Market Report by Anuj Khanna
CEO, Wireless Expertise

© Wireless Expertise Ltd, 2009. All rights reserved. No part of this document may be
reproduced or transmitted in any form or by any means, electronic, mechanical,
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While care has been taken to ensure the accuracy of the information contained in this
report, it is provided on the understanding that no responsibility is attached to
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Readers should independently verify any facts and figures as no liability can be
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© Wireless Expertise Ltd, 2009. Market Report, “The future of mobile application storefronts” 2

Table of Contents Page No

Executive Summary 4

Smartphone sales, growth projections 5

Mobile Applications forecast 6

Market overview 7

Apple’s market disrupting strategy and setting benchmarks 10

The key players 13

Mobile Operator strategies 21

Opportunities vs. Challenges (Discussion) 25

Future of mobile applications (Applications vs. Browsers) 29

Recommended strategy from Wireless Expertise (5 steps) 31

About Wireless Expertise 37

About the Author 38

Contact information 39

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Executive Summary

Wireless Expertise forecasts the number of smartphones sold per annum will
increase from around 165.2 million in 2009, to 422.96 million in 2013, with the total
number of smartphone users approaching 1.6 billion.

Wireless Expertise expects smartphone growth to have a positive impact on the
number of application downloads in the short- to mid-term, with strong revenues
expected to come from low-end mass market smartphones and mid-to high-end
featurephones in the mid- to long-term as operators and handset manufacturers take
app stores to the mass market.

In 2009 Wireless Expertise forecasts that the global mobile app market – including
games – will be worth $4.66 billion rising to $16.60 billion in 2013.

Wireless Expertise believes mobile operators have to adopt a dual app store
strategy, using the now widely-accepted app store model in conjunction with a
browser-based widget store, to provide the greatest potential for a mass-market
proposition. Operators releasing a mobile Internet API would address the issue of
fragmentation, and help create a multichannel app services and content retail
environment coupled with integrated billing and payment mechanisms.

Based on the emergence of operator’s multichannel app store strategies, Wireless
Expertise expects Apple to face increasing competition from global service providers
in the next 18-24 months from alternative app store providers, each vying to become
the global app-store leader

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Smartphone sales, growth projections

The potential of the app store marketplace has encouraged a slew of announcements
from mobile players from around the world. The initial app store opportunity has been
created by the rise of the smartphone over the last 12 months.

In 2008, the number of global smartphone sales was 140 million, and Wireless
Expertise forecasts that by 2013, the number of smartphones sold per year will be
422.96 million, with the total number of smartphone users approaching 1.6 billion.
This figure indicates smartphone penetration will be approaching approximately
28-30% of the total mobile market in 2013.

Source: Wireless Expertise

5


Mobile Applications Forecast

While the increase in smartphone penetration is generating the initial demand for
mobile apps, Wireless Expertise expects this to have a positive impact on the
number of downloads in the short- to mid-term, with strong revenues expected to
come from low-end mass market smartphones and mid-to high-end featurephones in
the mid- to long-term as operators and handset manufacturers take app stores to the
mass market.

In 2009 Wireless Expertise forecasts the global mobile app market – including
games – to be worth $4.66 billion rising to $16.60 billion in 2013.

Mobile Application Sales Revenues (USD $ billions)

18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
2009 2010 2011 2012 2013

Source: Wireless Expertise

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Mobile Applications, Market Overview

With mobile phones outnumbering PCs around the world by 4:1, mobile applications
represent a bigger opportunity for the mobile industry than the fixed-line perceived
the Internet a decade ago. With over 4 billion mobile users around the world
compared to approximately 1 billion PCs, mobile will become the idealistic channel
for businesses to reach their consumers.

The mobile industry has two cash cows: voice and messaging. But with both services
becoming commoditised, usage is increasing while revenues are falling. It is not a
scenario that has appeared unannounced to the mobile industry. It has long been
expected, and explains why the mobile industry has spent the last decade searching
for what will become the next ‘Killer App’.

The popularity of ringtones between 2004 and 2006 provided the mobile industry with
an insight into consumer demand for content on mobile and set the trend for the
subsequent years. But this proved little more than a fad, and the popularity of
ringtones, in developed markets especially, started to decline. And the mobile
industry has been intent on replicating the success of ringtones ever since.

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Video and mobile TV were among some of the services previously hailed as the next
killer app since 2006, but the content and service market has been in a state of
steady decline until the industry was reinvigorated by the arrival of the App Store in
the summer of 2008.

The App Store was simple to navigate – based on the exemplary iPhone user
interface – and presented content in a clear and orderly manner that immediately
highlighted the fundamental flaws and lack of retail understanding previously
demonstrated by operator portals in particular. User reviews and ratings, trials and
the visualisation of available content provides users with the finest purchasing
experience on mobile.

There are now 20 content categories available on the App Store, ranging from
games, entertainment, music and social networking commonly associated with the
mobile space, otherwise deemed as legacy content by Wireless Expertise, but also
more mundane content and services less associated with mobile, like productivity,
reference and lifestyle. The cost of apps ranges from free, with the opportunity for ad-
funded, to a premium in excess of £10.

Above all else, Wireless Expertise believes that the App Store has delivered new
hope to the developer community, providing an opportunity beyond the established
content producers and publishers, and opening the door for ‘garage developers’. This
is spurring new levels of innovation and having a very positive impact on the rest of
the mobile industry.

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It’s not that mobile apps have not always been around, they have. A mobile app is
software, such as a game, designed specifically for a mobile device. One of the
earliest success stories regarding apps was Java. The beauty of Java was its ability
for developers with the freely available Java Developer Kit (JDK) and Java Wireless
Toolkit to create and distribute Java-based mobile applications.

This was followed by BREW, which created a similar platform across multiple devices
using native code based on handset APIs for developers applying the BREW
Software Development Kit. The reason these platforms failed to ignite the passion of
the mobile consumer, is that they both operate in the business-to-business space.
Apple going direct-to-consumer has provided the much-needed stimulus other
players needed to follow suit.

These other players include the likes of Palm, Symbian and Windows Mobile, not to
mention the arrival of Google Android, all of which Wireless Expertise predicts will
play a major role in the development of mobile apps. Each of these companies
control an operating system (OS) providing the platform to launch an app store.

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Apple’s market disrupting strategy & setting benchmarks

Apple have made the last two years in wireless anything but boring. Since the
launch of the iPhone in the summer of 2007, it has shown the mobile industry
how a user interface can stimulate usage among consumers delivering a
simple and enjoyable experience.

While over the last 12 months, Apple has not only invigorated what was rapidly
becoming a stagnant mobile content and services market, its App Store has
paved the way for professional content developers and publishers to stand
side-by-side with the new breed of garage developers introducing innovative,
exciting and also functional apps into the world of mobile applications.

The App Store was launched on 10th July 2008, to coincide with the
introduction of the iPhone 3G, by Apple allowing iPhone and iPod Touch
(iTouch) users with an iPhone OS application to browse and download free and
paid-for applications over-the-air from a mall-like environment – though the
applications can also be downloaded via iTunes. However, it was not until 11th
July 2008 when Apple released its iPhone 2.0 software update allowing iPhone
and iTouch users to download applications from the App Store.
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The applications have been developed using the iPhone software development kit
(SDK) and within days of its launch, there were 500 third-party applications available
on the App Store, of which 125 apps were free.

Within 12 months, there were 65,000 applications and 100,000 developers initiated in
the iPhone Developer Programme (iDP). This suggests that a minimum of 35,000
members of the iDP are yet to release their app onto the marketplace, potentially
swelling the App Store contents well above the 100,000 mark.

Developers are drawn to the iDP because of Apple’s revenue share model, whereby
developers receive 70% of all transactions for paid-for apps, and Apple taking the
remaining 30%.

However, developers are required to pay an annual fee to use the iPhone SDK (US
$99-299) and upload apps to the App Store. All developers have to submit their apps
to Apple, who then review the app, and if it meets the company’s strict rules and
guidelines, will be approved and receive a signed certificate granting permission and
access to the App Store.

In a little over 12 months, iPhone and iTouch users have generated over 1.5 billion
downloads. Following the first weekend when 10 million apps were downloaded, it
took Apple almost six months to generate its first 500 million downloads, just over
three months to take the total passed the 1 billion mark, and a further 81 days to go
passed 1.5 billion.

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While Wireless Expertise believes that Apple has fundamentally changed the
business model within the mobile market, it has been afforded this opportunity by
some of the incumbent handset manufacturers becoming complacent.

Nokia has always been excellent at designing handsets and OS over the years, but
Apple has changed the dynamics of this marketplace. This is not to single out Nokia,
but innovation from the handset industry has been in short supply in recent years
from most vendors.

Apple has shown the mobile industry how it is done. This is in much the same way
that i-mode and BREW proved successful models in Japan and North America,
respectively.

Similarly, Apple has become successful because it is a proprietary solution that
ensures its time-to-market is not obstructed by multiple input points from other
companies. And consequently, the consumers become accustomed to using the OS
and interface and this provides the platform for the content and services to go
mainstream.

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Key players in the mobile applications market

Apple has undoubtedly become the agenda setter in the mobile community. The fact
that the iPhone provides a simple billing mechanism linked to iTunes from the PC
world, makes a simple and compelling user case for consumers.

Nokia

Nokia launched Ovi in May 2009 to a potential audience of 50 million Nokia devices
and expects to have over 300 million users by 2012. Ovi represents Nokia’s third
attempt at direct-to-consumer content strategy, following Club Nokia and Nokia
Entertainment Services. It really will be a case of third-time lucky for Nokia. Ovi offers
a mix of content including games, video, podcasts, productivity tools (like e-mail and
VoIP), web, and location-based services.

There were an estimated 20,000 applications on sale at the launch, and Wireless
Expertise expects this figure to experience exponential growth because it has stated
that will not block any apps that compete with its own. Of these apps, it expects
productivity and location-based services to be the biggest sellers in Ovi, and plans to
make it easy to discover those services by engaging the consumer through a feature
named Social Location.

Nokia’s biggest advantage over Apple is its ability to offer Ovi on a wide range of
handsets, ranging from the high-end to the mainstream. And the fact that Nokia is
pushing its app store to a mass market is very encouraging.

In September, Nokia announced plans to expand its application ecosystem by
making it easier for web publishers and developers to create applications with
integrated services with Ovi APIs and Ovi SDK Beta. On the back of this news, Noka
is confident of introducing a new breed of applications for the web and smartphone
platforms.
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Clearly, Nokia is focusing on the near-term on capitalizing on the increasing demand
for location- and navigational-based services on mobile. The progressive rollout of
web and mobile APIs will start with Ovi Maps Player API and the Ovi Navigation
Player API for location solutions on its smartphones.

To date, Nokia has been working with brands such as Lonely Planet, Deutsche Bahn,
Associated Press, Qype, National Geographic and Deutsche Telekom Medien to
create example applications using the Ovi SDK Beta and Ovi APIs.

Nokia continues to invite developers to join the Ovi for Developers beta program on
the Forum Nokia Developer Community site (www.forum.nokia.com/Ovi), and will
make the Ovi SDK Beta and Ovi APIs available to them. Applications created with
Ovi SDK and Ovi APIs are expected to be distributed through the Ovi Store in 2010.

Nokia is stepping up it’s marketing efforts and will offer tough competition to other
app stores and handset vendors in the mid to long term.

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Research in Motion (RIM)

In a mobile world now obsessing over the eternal quest to find the Killer App, RIM
has it, in email. Email is without doubt Blackberry’s killer app. Nevertheless, it has not
stopped the company launching BlackBerry App World in April 2009 initially in the
UK, US and Canada, and accessed via the handset’s web browser, which means the
content viewed is specific to each device model.

By August, BlackBerry App World 1.1 had been rolled out into 14 countries. A major
boon for RIM is that its service is available to download in five languages (English,
French, Italian, German, and Spanish). As you would expect with RIM, the store
offers a mix of personal and business applications, and like Apple, RIM’s users can
access BlackBerry App World over both Wi-Fi and cellular networks.

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Paid applications can be purchased using the built-in payment process from PayPal.
Customers can also review and recommend apps to friends and manage the apps on
their device using the My World function.

Applications on offer include games, maps/navigation, music and video, news and
weather, finance and banking, e-books, social networking, and sports and recreation.
RIM has mimicked Apple by listing the most downloaded applications, but has added
a ‘recommend’ feature allowing users to let their friends know about particular
applications. All applications bought are stored in a centralised folder, so users can
install and uninstall as required.

Google Android

The Internet search engine company is making its play for the mobile application
store market through the Android platform for handsets. All handset vendors involved
in the Open Handset Alliance (OHA) have committed to launching an Android device,
but so far only HTC has released handsets - the G1 and Magic.

The ODM was the first to launch a touch-screen device after the first generation
iPhone went on sale, and the collaboration with Google suits the vendor well,
because it has helped raise its profile in the global handset market, and allows the
firm to focus on device hardware and design rather than applications development
and distribution. Google appears content with the number of device vendors
committed to Android, and so is now mostly focussed on growing the number of
application developers on its books.

That commitment is highlighted by a Developer Challenge, in which a total of £5
million was offered in prize money. Google’s strategy was to choose to focus on the
applications first, rather than come up with a platform and try to force applications to
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fit that.


Symbian

In July 2009 the Symbian Foundation announced plans to launch its application-
publishing program, Symbian Horizon, in October 2009, claiming a goal of reducing
barriers to success, while increasing the profitability of creating and delivering
Symbian applications. The Foundation claims that Symbian Horizon, will assist
developers in building applications for Symbian devices as well as placing those
applications in the many global stores that reach Symbian customers.

Furthermore, the developers will receive promotional assistance for bringing those
apps to end users. Companies and developers participating in Symbian Horizon will
gain access to a variety of services that support the development, distribution, and
marketing of mobile applications. This will range from application certification and in-
store presence, to language translation services and marketing programs. The
Foundation claims that Symbian Horizon will work with developers to create a single
point of management and distribution to the largest group of mobile consumers
worldwide.

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Microsoft

Microsoft will launch Windows Marketplace for Mobile by the end of 2009, promising
the ability to download applications straight to the phone or via PC, a 70% revenue
share for developers, and operator customisable content. Users will be offered a 24-
hour returns policy that grants them a full refund if they return an paid-for application,
and it will all run on handsets powered by Windows Mobile 6.5 – the latest version of
Microsoft’s mobile phone OS.

What’s more, developers are free to set their own prices for applications, and can
design applications using tools contained in Microsoft’s Windows Mobile 6 SDK,
and .NET Compact Framework v3.5. Other compatible tools include Win32, Active
Template Library and Microsoft Foundation Classes (Visual C++), Visual C#, Visual
Basic .NET, ASP.NET and asynchronous JavaScript and XML (AJAX).

Samsung
The South Korean vendor launched a beta version of the Samsung Applications
Store in January for S60 and Windows Mobile developers, and quickly followed that
by adding Java compatibility in February at a Chinese developer forum in March
2009. When the store opened in the UK it was offering around 1,100 applications
developed by members of Samsung’s Mobile Innovator program, which offers free
access to testing, business development tools, and technical support.

The Samsung Applications Store is part of the company’s broad apps-based
initiative. It has also committed to launching Android handsets in 2009, and continues
to push its own web browser – Dolphin – which has been used to offer access to a
customisable widget screen on the firm’s newest smartphone, the Jet.

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Sony Ericsson

Its mainstream mobile store is the PlayNow arena, an evolution of its original web-
based Arena store that launched in 2004. The key difference between the basic
PlayNow store and PlayNow arena is the content on offer, as well as the latter being
web-based content. Applications are now being added to the store, which already
offers music, ringtones, games, themes, wallpapers, and movies.

An application developer site opened its doors on July 1 2009, and the firm plans to
put applications on sale in 13 countries via 38 compatible handset models.
Developers can use the site for free, and it will initially run Java Mobile Edition (ME)
and Symbian applications, though Sony Ericsson says more platforms will be added
later this year.

Sony Ericsson, believes app stores need to be simple and attractive for developers to
reach consumers, which will be achieved by establishing clear channels to push
content out. Sony Ericsson has collaborated with content aggregator and distributor
GetJar to provide one-click access from PlayNow arena to GetJar’s mobile site.

GetJar

GetJar has been operating since 2005, and has become the world’s largest
independent app store operating in over 200 markets. The company believes that
apps offer the flexibility and functionality to take full advantage of new handset
features, especially as handsets have such a quick development lifecycle.

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There will always be some things that users want to do on their mobile that are not
possible or as attractive via the mobile web; however mobile site shortcuts are also
increasingly popular downloads from our service and demonstrating the
complimentary importance of both technologies.

Over time GetJar expects apps will continue to offer a richer and richer experience for
users, too, especially as the current network infrastructure does not permit reliable,
always-on mobile web connections across the country.

The company believes that users will always opt for the method that most suits them,
and it’s important that apps and the mobile web both continue to exist, much as
software and web applications complement each other on the PC.

It’s inconceivable that mobile apps will be phased out as they are not hindered by the
speed or performance of the network. Users can download an app and run it
regardless of being online or not, while the mobile web will be used for different
scenarios. GetJar is now generating 1 million downloads per day, and stresses that
unlike Apple, it does not include updates within that figure.

Leading app on the site, eBuddy which lets users combine their Yahoo!, MSN,
Facebook Chat, AIM, ICQ and Google Talk friends in one single “buddylist” on their
mobile, allowing users to stay in touch with all their social networking contacts via
one simple app, hit a record 1.2 million downloads per week, by the end of July 2009.

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Mobile Operator Strategy

Wireless Expertise believes that the mobile market has been dominated by the
operators, whom have had a very influential role on the handset manufacturers. But
the emergence of the App Store has upset the applecart to such an extent that the
influence operators have over handset manufacturers is subsiding.

As both operators and OEMs are now looking to capitalise on the app store
opportunity, operators are being forced to pursue a number of channels in order to
compete with Apple and ward off the threat from the handset manufacturers.

Operator app stores are more than just upgraded WAP portals, with numerous app
store announcements to date looking to incorporate web applications and widgets
also as a means to addressing a mass audience, rather than just smartphone users,
as is the case with the majority of app store access presently.

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These stores are the carrier’s front-line defence to consolidate their close relationship
with the end-user from an onslaught of stores from phone makers. Operators are
turning to widgets, multiple OS strategies, and tighter control of handset
specifications in a bid to maintain that control, while addressing the additional
challenge of not excluding the vendor’s shops.

Vodafone, Verizon & Telefonica

Three of the key operators pursuing an app store-based strategy are Verizon
Wireless, Telefonica and Vodafone. It is the latter that has made significant bounds
regarding its customers’ mobile Internet experience, by allowing developers (and its
content partners) to create a range of apps and services using a single set of APIs.

The operator claims that developers will only need to create Internet applications
once in order to reach millions of Vodafone customers on any device and will be able
to charge for it directly through Vodafone’s billing system. Where Vodafone truly
comes to the fore is in its reach, with the promise of 289 million subscribers rising to
over 1 billion mobile users when including operator partners such as China Mobile
and also Verizon Wireless. This is an incredibly strong riposte to the rise of Apple,
and a compelling community for the developer community.

Following the introduction of a management technology-layer based on Service
Oriented Architecture, the APIs will provide a link between the applications and the
Vodafone network capabilities, enabling developers to build capabilities such as
direct billing and location awareness into their services.

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But while Vodafone’s strategy is firmly in place, in the US, the same cannot be said of
Verizon Wireless. In July 2009, Verizon started to provide more insight into its app
store launched expected by end of 2009.

The operator unveiled that it will only preload its own app store on smartphones,
blocking the likes of RIM and Microsoft, as a strategic move designed to attract
developers from rival platforms such as Windows and Android. This seems a
somewhat aggressive move from the operator and could potentially create a walled
garden-like experience that operators are trying to escape.

Interestingly, the operator is looking to integrate its mobile strategy with the fixed line.
Verizon is investing in technology that allows users to access mobile content on their
home phone. The portal upgrade is called the Mobile Web Games and Applications
Store, and aims to simplify the process of finding existing content by offering one-
touch access for any customer with a WAP or HTML-compatible device. Like Apple,
Verizon will share 70% of revenues with developers. Developers using the V CAST
Apps store will also gain access to Verizon’s APIs including user location, the
operator’s billing platform, and also marketing via the web site.

Elsewhere, Telefonica is adopting a different strategy to the likes of Vodafone and
Verizon. The Spain-based operator a multi-platform strategy centred on the iPhone
and Android devices. It became the first carrier in Spain to offer an Android handset
when it launched HTC’s Dream in February 2009, and is now selling the iPhone in 16
countries globally, including Argentina, Brazil, Colombia, Czech Republic and the UK
and Ireland.

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The firm already has close ties with Google, launching Google Maps just under a
year ago. The HTC Dream also includes access to YouTube and Gmail, with e-mails
on the service automatically pushed to users phones. Telefonica’s strategy seems to
centre on fun and frolics. Its users can already access the mobile version of
Facebook, following a new global agreement between the firms signed last year,
though that service is tailored more for Windows Mobile and BlackBerry devices.

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Opportunities vs. challenges

Apple has set the benchmark for the mobile industry. It is Wireless Expertise’s belief
that the mobile industry is most likely to follow the Apple model rather than look to
develop its own concept and accompanying business model. The only real decision
that companies will have to make is whether to follow the App Store model or adopt a
browser-based model. Ideally, companies and operators in particular should adopt a
dual app store and browser-based model.

Presently, app stores are very much a smartphone phenomenon, as we highlight
later in this report. Yet smartphone penetration is low at approximately 8% which
means that these top-end devices remain niche. And for app stores to truly become
mass market, it is imperative that the broadest potential audience can be reached
and that means also utilising a browser-based model. In doing so the provider
overcomes the device fragmentation that continues to blight the mobile industry. It is
then the responsibility of the developer to ensure that their content can be used
across the broadest number of devices possible.

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Dual App & Browser strategy

And that is why Wireless Expertise believes Vodafone’s dual app store strategy
provides the greatest potential for a mass market proposition and is the ideal model
for mobile operators, providing app store-based content, including widgets to all of its
user base. Operators need to have a multichannel app services and content retail
environment. But of equal importance is the need to create a developer’s ecosystem,
with or without the operator involved with the API development.

Wireless Expertise believes operators need to come up with a mobile Internet API,
which would address the issue of fragmentation. The app store market is not a
market that they can give up, just because they are late to enter it and should draw
inspiration from the search engine providers. Search is dominated by Google and
Yahoo, but Google isn’t sharing the revenues with the operators. So letting Google
becoming the gatekeeper has not been good for the mobile operators, and nor will
letting Apple build on its advantage without creating a rival offering.

Like Vodafone, Nokia too has the potential to deliver content to a mass market. At its
launch Ovi could be accessed by over 50 million Nokia users. Wireless Expertise
believes that this direct-to-consumer model requires substantial marketing support
and budget commitment from both vendors and operators. One of the primary reason
operator portals have failed in the past is that they did not receive the marketing
support required to drive traffic to the site.

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While Apple has received global plaudits for the iPhone and the App Store, both have
been supported by ongoing above- and below-the-line marketing campaigns in all
relevant markets. It is Wireless Expertise’s belief that the majority of companies
launching app stores will not have the budget to market their app store. For example,
mobile operators continue to compete on price and device. That means their
marketing is concentrated on communication bundles or prepaid offers or the device.

The lack of consumer-based content and/or service demand limits the need for
mobile operators to market alternative areas. Therefore, Wireless Expertise believes
the lack of marketing budget represents the biggest challenge to the launch of
generic app stores.

A dual-based model is certainly true for developed markets, but for global penetration
in developing markets, Wireless Expertise believes a browser-based model is
required to reflect the range of devices available in these markets. In developing
markets, legacy content like ringtones and games continue to do well in India and
Africa without marketing support.

Wireless Expertise believes that developing markets are more focused on creating an
ecosystem with third parties to sell services and content and this relieves the
pressure on the mobile operator, but also guarantees marketing control of content by
the content provider. Unlike in the developed markets where content providers are
largely reliant on Apple promoting their content on the App Store, for instance, in the
developing market ecosystem multiple marketing strategies combining to promote
content will have a very strong impact on the mobile market.

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Regardless of market penetration, there is still a lot of work required to ensure the
user experience improves. With more apps being added to app stores – regardless of
the platform – the greater choice means discoverability will become increasingly
important. With the App Store already at 65,000 apps and increasing on a daily basis.
Wireless Expertise believes App Stores need to better classify and catalogue
applications making it easy for consumers to discover relevant applications.

Wireless Expertise expects Apple to remain the market leader for the next 18-24
months, but it will face tough competition by service providers and vendors with
global scale.

Apple has effectively told the mobile market that their way of retailing on devices was
fundamentally flawed. And the mobile industry has replied by acknowledging this fact.
The company that will succeed will understand Apple’s approach and implement for
their own strategy based on their market and follow two simple rules:

1. Make content discovery as easy as possible
2. Educate the consumer

Wireless Expertise believes customer education requires a substantial marketing
budget, as already outlined, but to make money, the service provider will have to
integrate the billing with the app store, like PayPal, and become an e-commerce
environment.

It is at this stage of the service that operators can come into their own. Despite an
open mobile Internet model, when mobile users go to pay for an item they will most
likely see Visa or Mastercard. So operators must be involved in the delivery and
payment of the service with their own platforms giving improved revenue shares.
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Future of mobile applications

The future of mobile applications is very much assured. However, the role of app
stores remains very much up in the air. Comparisons can now be made by Apple and
eBay in the company’s ability to simplify the billing mechanism.

Nokia has followed a similar model to Apple, and introduced a billing capability on
Ovi. However, despite the transparent opportunity for operators in the app store
ecosystem, APIs for developers can include a billing mechanism, or an advertising
mechanism, which is not only creating a fragmented strategy for operators, threatens
to disintermediate operators out of the billing altogether.

To overcome this perceived threat, Wireless Expertise believes operators need to
adopt an integrated strategy. In the UK for instance, the mobile operators are pushing
to integrate Payforit providing revenue shares as high as 80% to encourage the
developer community.

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Future of mobile applications

Undoubtedly, there is an opportunity to simplify the business model surrounding app
stores, by providing a mobile commerce capability to the app providers on the mobile
Internet and helping to set up the shop. Wireless Expertise believes this can be
achieved, but will require a phased strategy.

Wireless Expertise predicts that app stores are just a concept on the handset. App
stores will develop on the web, WAP and on the handset. And to overcome the
phenomenal increase in apps from the growing developer community, specialist
stores will emerge, such as mobile gaming specialist store for mobile games. But it
will require a multi-channel store integrated with billing and an advertising platform.
The only problem now, is that the majority of companies don’t know what their mobile
strategy is.

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Five steps to developing a mobile apps retailing strategy

1. Define your market:

It is important to know your customers and have a 360° insight of their requirements
before developing applications. Delivering services via downloadable mobile
applications can be challenging due to the numerous handset operating systems and
standards.

The first step before developing any application is to know whether your target
customers have access to smartphones capable of downloading mobile applications.
There are great geographic disparities in technical capabilities of handsets available
in developed and developing markets. For example, banks can offer mobile banking
services to a large proportion of consumers through downloadable mobile
applications in Europe. However, mobile banking services are delivered via
messaging and browser-based technologies such as SMS, USSD and GPRS in
developing markets of Africa.

Defining your market requires not only demographic and geographic customer
information, but also insight into behavioural consumer data. The rise of the app
store, has also highlighted the consumer demand for business- and utility-based
apps. That means enterprise apps also need to be designed considering handset
capabilities. It is also important to consider compatibility and integration with existing
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IT infrastructure while developing these enterprise apps.



2. Build a differentiated product strategy

It is Wireless Expertise’s belief that the mobile apps market can become congested
with many competing apps offering limited product differentiation. For developers, it is
important to define your product proposition based on consumer requirements for
content and context.

` Applications which may have proved successful online will not necessarily make the
leap onto mobile, where limited screen sizes, battery life and varying content formats
come into play. The most successful apps will be those that are made for mobile.

But they will have to be made for mobile incorporating creativity, innovation and ease
of use. These three characteristics will become the cornerstone of successful mobile
apps. A success founded on an app that has undertaken thorough technical,
compliance and cognitive testing.

Pre-commercial testing will become more critical as apps increasingly incorporate
contextual and interactive components. This will not only help mobile differentiate
from other forms of media, but conversely, also help mobile integrate with the likes of
the PC and TV. Indeed, as apps become more integrated in other media formats,

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Indeed, as apps become more integrated in other media formats, it is important to
take advantage of the interactive capabilities and personal proximity offered by
mobile and its messaging, location, payments and streaming capabilities. The mobile
industry is governed by different regulations and codes of conduct dictated by
regulators and mobile operators. Mobile Applications need to comply with local
regulations and should be easy to customise in different markets.

33



3. Focus on your business model

Most early market handset applications have a limited shelf life due to lack of a viable
and long term business model. There needs to be an opportunity to monetise the
customer relationship and encourage recurring transactions. Businesses can fall into
the trap of offering free apps which are not supplemented by any existing or new
commercial opportunities.

Mobile apps need to be developed with an open architecture that can accommodate
different revenue models including pay-per-use, subscription, renewal, recurring
payments and various price points. Mobile apps should also easily integrate with the
different branded application stores and independent billing/payment systems.

Different app retailers including mobile operators and handset vendors may require
conforming to their payment and pricing guidelines. It is important to follow these
guidelines while using specific distribution channels but you also need to have an
independent pricing, payment and billing strategy enabling you to generate revenues
through different channels.

34



4. Choose your marketing and technical partners

There are specialist mobile application development companies which are focussed
on outsourced application development. However, it is important to involve your
product development and marketing team while defining the development brief for
your applications. Advertising and digital marketing agencies can also be involved in
the process to ensure that there is brand compliance.

There is a general lack of market and technical expertise in the mobile applications
market as it is still in its early days and standards are not clear. It is a good practice
to ask for case studies and also test applications which your prospective partners
have built for other companies. Please feel free to ask for references and detailed
proposals on costs, project time frames, application testing and compliance
processes. It is also important to check if your partners are members of certain
industry forums, developer programs and mobile operator partner frameworks.

35



5. Develop an integrated application marketing and distribution
strategy

Effective marketing and distribution are the final but most important steps if you want
to guarantee success. However, most businesses fail here due to lack of investment
in market planning, consumer education and product distribution. There is a risk of
solely depending on mobile application stores owned by handset vendors and mobile
operators to sell your applications.

You may experience short term success by depending on distributors but will see the
dip once the market is flooded with competing applications. Yes, there is no such
thing as a “Free Lunch”. Businesses need to spend their own marketing dollars and
integrate the mobile channel into their overall marketing plan.

It is important to maximise the number of distribution channels by selling your
applications via mobile store but you also need to invest in other mobile, online, print
and electronic media channels to maximise response.

Mobile Application retailers also need to design their own mobile commerce strategy
integrating with different payments and billing channels including Premium SMS,
Premium WAP, Credit Card, Mobile Wallet, NFC and other payment methods.

36


About Wireless Expertise

CONSULTING RESEARCH DEVELOPMENT

Wireless Expertise focuses on helping Brands and Mobile Operators develop mobile
applications and value added services. Founded with the intention of bridging the
market gap and speeding up the delivery of mobile services, Wireless Expertise
offers international consultancy, service design and development solutions to help
brands overcome barriers and reach out to customers via the mobile channel.

Wireless Expertise is headquartered in the UK and provides consulting services to
global clients. Our clients range from medium-sized mobile application service
providers to global mobile operators and handset vendors. We also focus on helping
mainstream brands adopt the mobile channel including media owners, entertainment
publishers, financial institutions, social networks, ISVs, search engines, advertising
agencies and internet retailers. For more information visit www.wirelessexpertise.com

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About the Author

Anuj Khanna
CEO & Founder,
Wireless Expertise

Anuj is recognised as a mobile marketing expert and is the author of five globally-
published mobile industry books. Anuj founded Wireless Expertise in 2009 with a
focus on the rapid development and delivery of Mobile Value Added Services and
Applications to a wider global market.

Anuj is also the Board Director for the Mobile Data Association representing over 100
mobile services and software companies in the UK, and chairs the Indian
Telecommunications Industry forum which has over 1,000 corporate members. He
has been in the wireless industry since 1996 and has previously worked in senior
roles with leading mobile payment industry brands including Hutchison Telecom,
Netsize and Dialogue Communications.

Anuj holds a MBA in Marketing from The University of Sheffield and a BA in
Economics from The University of Bombay.

For more information about Wireless Expertise or to discuss your company’s
requirements please contact Anuj Khanna on

Email: anuj@wirelessexpertise.com Web : www.wirelessexpertise.com

Mobile: +44 7916 056 916 Tel: +44 208 123 1194

38


Wireless Expertise Ltd
20 Riverine, Grosvenor Drive
Maidenhead, Berkshire SL6 8PF
United Kingdom

Tel: +44 208 123 1194

Email: consult@wirelessexpertise.com

www.wirelessexpertise.com

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The Future Of Mobile Application Storefronts Wireless Expertise Report 2009

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