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Over the past few years mobile application stores have been making news for
the way they have been changing the game for the mobile industry. The Apple
Application Store is extremely popular, with nearly 1 bn applications downloaded
within a year of its launch. This is prompting operators like Vodafone to vie
for a piece of the pie by mulling similar ventures. Earlier, operators such as
Orange and O2 had announced their plans to set up mobile application stores.

Analysts feel that service providers will have to come up with really
compelling stuff while creating their own stores in order to beat Apple's store.
In days ahead more wireless carriers are likely to introduce a robust
applications store experience, even if direct revenues are minor.

At present the returns for service providers may not be high, as developers
collect a larger share. In case of the iPhone Application Store 70% of
application revenue goes to developers, while Apple receives 30% plus some minor
application testing fees. At&T delivers the bandwidth required for downloading
applications, but it doesn't get any share of the revenue.

With market scenario changing, China Mobile is seeking a 50% cut of all sales
from its soon to be in place Mobile Market application store.

It has been seen, the more mobile applications that an end user has an access
to, broader is the scope to boost mobile data usage and generate new revenues. A
major challenge here is to design strategies and products that offer compelling
service propositions to the broadest set of end users while also creating a
vibrant ecosystem for application developers.

What gives the mobile operators the confidence to compete is their strength
to differentiate their proposition, building on consumer demand for a broad
choice of applications and a inducing experience. By leveraging all their assets
of brand, pricing, customer service and device range, mobile operators can
provide a great mobile application store experience to their subscribers and
challenge the device OEMs and platform vendors.

Fortune will favor operators as they have an experience of managing customer
lifecycle that includes acquisition of device, acquisition of services, payment,
removal of services and migration to a new device. Mobile operators are also in
the optimum position to deliver excellent personalization PC/Internet-like
mobile experience and recommendation services.

The success graph of application stores from operators will depend on their
resistance to the challenges and their reach. To be able to address a wide
spectrum of the market, an operator-led mobile application ecosystem must work
across multiple application environments and operating systems so that it can
support a large number of device types and different applications. Most critical
factor is that these stores offer seamless, painless, hassle-free, end-user
experience.

Besides, reducing the churn and retaining customers, well-designed
application stores push phone sales, of which operators can get a cut of the
profits, and pull in new customers looking for phones with rich functionality.
Carriers can benefit from a quality storefront because even if they are not
making direct revenue from application stores, the applications can drive
additional service sales that boost monthly ARPU.

Organizations as diverse as Qualcomm, Sun and Carphone Warehouse have
recently announced plans for their own app stores. Sony Ericsson has also
spelled out its intent to launch an application store via its PlayNow content
and services platform.

While some visualize it as an opportunity for operators, others believe the
carriers will only end updraining their profitability while third parties
discover new revenue streams by using the carriers. However, application stores
are rising as the next wave of mobile functionality. Research firm In-Stat
forecasts there will be more than 100 mn application store users by 2014.

Heena Jhingan

heenaj@cybermedia.co.in