Social Machinery

Apple has changed the game for mobile content by revamping the concept of applications stores. A little bit ironic, Operators who started with the application stores many years back need to embrace this paradigm shift and find ways to successfully redefine their content business in an increasingly competitive app store market.

With Apple as the star of the show, Application store business has experienced a dramatic growth during the past year.  Apple has an impressive 85,000 applications in its store and more than 2.5 billion downloads since launch. Other App Store has been launched by Google, Microsoft, Nokia, BlackBerry, Samsung, Sony Ericsson, Palm, LG and other handsets or OS providers as a way to get a piece of this market. 

Operators have been watching the rise of device vendor application stores with mix feelings; in one hand they see this trend as a clear threat for their content revenues and in the other, they have new hopes for redefining their content business, moreover with the increasingly popularity of this app stores among consumers, which in the past has been a slow growth area besides ringbacktones, wallpaper and few other applications

Can operators compete with handset vendors app stores?

The arrival of device vendor application stores shows that that there is a viable business case for mobile applications, but the question mark is the role that operators can play in this case. The common choice is being just a mere bitpipe or to compete head-to-head launching their own app stores concepts. In view is that there is much more room to play. There are a number of strategic paths operators can take that not necessarily involve launching an Apple Appstore copycat.

 Nevertheless, any of these strategic paths will require certain elements that I believe are essential:

• Remarkable end user experience
• Seamless multichannel discovery and delivery (Web, Wap, TV, Social networks),
• Assets exposure to third parties ( e.g.Location)
• Advertising support
• Social media aggregation
• Ecosystem enablement ( e.g. Applications developers)

Actually a large number of tier one operators have either recently launched application stores or have announced plans to do so, including Orange, Telefonica, Vodafone and China Mobile.

The case I found most interesting from an operator point of view is Vodafone 360, as in this case Vodafone is combining three aspects of the new Digital Marketplace: App store, Social Networking and Advertising.

Vodafone 360 – A new operator’s paradigm shift

For a long time Vodafone has been trying to find ways to add more value in the content business and to leverage on their strengths. Their former consumer service platform, Vodafone Live! was an attempt to bring a better user experience, increase monetization and offer a more interesting number of third parties services. After a while, Vodafone Live! couldn’t compete in an increasingly open internet environment and vendor app stores offering a remarkable user experience. Vodafone Live! Still was a walled garden approach to the content business and narrowly focus on the mobile handset only.

Interestingly, instead of revamping their Vodafone Live! concept, they decided to take a completely different approach by creating a cross-service platform that embraces the Internet, social networking, mobile content as well as advertising. The focus is on services offering in which people are at the centre and in control of services, as their new tagline ‘Power to you’ shows. Vodafone 360 platform combines three aspects Social networking integration (People), Mobile Content (Appstore) and advertising.

“People” – Taking control of the experience

 One of the three cornerstones of Vodafone 360 is ‘People’ service which merges contact books across a wide range of social media sites where people tend to have their social graph information like Facebook, Live Messenger, Google Talk and Twitter among others. ‘People’ also offer a back up service which help users to store their digital life in one place by providing automatic synchronization with user’s PC for easy updating and storage of contact details and photos. Users can also tag, rate and share their favorite locations with friends.

In my view Vodafone deeply understand that a network address book will be the key for making people’s life easy in a more fragmented user social graph. Today, an average user has four separate address books across a number of services, including mobile phones and social networks such as Linkedin or Facebook , but more than 90%  of them struggle to update their address books with contact changes. 

Vodafone ‘People’ client will be downloadable to 100 devices; including those used by non-Vodafone subscribers which I believe is an important part of their agnostic-network strategy as a big difference from Vodafone Live! network based approach. 

App store – An attempt to boost the ecosystem 

Vodafone 360 service includes DRM-free music, mapping, multimedia content such as video, and an app store. The store will launch with 1000 applications (More or less the same number as Telefonica Apps tore), but still is not clear the mix between free and paid applications.

Anyway, the main change in Vodafone 360 is the way that is trying to attract and flourish the ecosystem. First of all, their business model with developers is 70:30 much more aligned with handset appstores and moving away from the 50:50 typical operator’s model. Also, applications are built to the Joint Innovation Lab standards, initiative launched between Vodafone, Verizon, China Mobile, and Softbank last year that will make easier for developer to offer these applications to a larger base of customers. Just these four operators control more than 1.2 billion users or 30% of all mobile market worldwide.

Besides, Vodafone will expose several assets to third parties like user information, location as a way to create more personalized applications and differentiate from handset appstores in local markets. This is for me a crucial element as compared to past experiences.

Is the end user experience baby

If there is one thing we’ve learn from Apple is that even do content is king; end user experience is queen and you need both of them to rule a country. In that sense, 360 services will be supported initially by two Samsung handsets that are tailored to give the best 360 experience and these are based on OMAP and LiMo OS.

But the idea of the 360 service is enable Vodafone to extend a wide range of services across different handsets and OSs, so their roadmap envisages Symbian and even perhaps iPhone and Android support. At launch there are 10 handsets supporting 360 with more to come. 

The key element of 360 experience is to make the rich smartphone environment support the mobile operator’s business model rather than the handset vendor, therefore the multi-platform imperative. Nevertheless, the challenge still is the fragmentation of devices, OS, firmware and capabilities in the marketplace. A typical operator customer base will have in average 1000 to 1500 different handset models, which make excessively difficult to keep a seamless and rich experience across. I think Vodafone bet is that as devices OS intelligence is moving to the browser level (e.g. HTML 5), the fragmentation will be address by moving experience from the OS to the browser itself (e.g.Widgets).

 Open to all model – Changing the way operators compete?

 There is one aspect in Vodafone 360 that intrigues me and might challenge the way inter-carrier competition is conducted. An important part of the service is that it can be accessed by users across any network. This is paradigm shift from operator’s walled garden thinking. From my perspective the main reason explaining  Vodafone move is the increasing number of screens we use and the demand for moving the content seamlessly across them (Laptop, Mobile, TV, etc). In that sense, being network agnostic could be a smart way of addressing this new type of users. 

One use case could be a Telefonica user downloads the phone back up or other services from Vodafone 360. As he starts using the service, Vodafone can get relevant information and offer a compelling Vodafone plan to switch it from Telefonica. As most of the services provided by Vodafone 360 are viral, groups of friends from different networks could start sharing Vodafone’s applications creating a new way of getting into competitor’s user handset.

Another case could be VOIP (Probably part of 360 roadmap). In this case a VOIP client downloaded by anyone could enable Vodafone to replace some of its competitors voice minutes.