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Vodafone app store closure – the beginning of the end for operator app stores?

If you were a developer who submitted to Vodafone AppSelect store you just recently got a notice that the store is shutting down ahead of schedule.  According to some news sources Vodafone said they are quitting because other stores are coming to Europe, but read between the lines and you will probably think it’s because they just sucked at it. Yes, I said it.  Back in 2005 at my company we did more volume on mobile games with one operator with 4m subscribers in a certain European country than Vodafone did with >50m subscribers, so I can attest to that content has never been Vodafone’s strength.

So does Vodafone’s demise signal the beginning of the end for the carrier app store? Will this inevitably happen to other carrier stores? According to Chetan Sharma, it better not, as operators are in need of transforming themselves to become service innovators – leading rather than following in terms of what users do with their phones. Operators in large part still control or provide two key assets: The ability to customize the home screen of all new phones (thereby including their app store and pre-loading apps) and very simple billing through the operator bill thereby providing true one-click billing experiences.

To succeed as true service providers and content retailers though, operators must succeed in several key things:

1) Attract developers. This means providing solid business models (at least 70% if not more of the share), and minimal friction to become a partner. This last point includes simple sign-up, submission and approval processes, easy of integration for billing (ideally avoid forcing developers to create separate source codes for billing integration – simply create a try-before-you-buy billing wrapper)

2) Understand the consumer. Mobile operators have always been sitting on a goldmine of consumer data. Now it’s time to use that data, to intelligently serve the right services and applications to the right users. Sharing of this data with analytics and data mining companies can also help them value add their offerings by partnering with those companies.

3) Think like a retailer. Running an app store is like running a 7’11 store, only in a lot smaller space. You need to understand what drives purchases, experiment with discounts, bargains, promotions, incentives and more. Embed social recommendations, understand how to drive traffic to your site, make sure users keep their paid for content if they switch operators, etc, etc, etc.  There are plenty of app stores out there that do one or several things well, so establishing a benchmark should not be that hard – getting there of course may be, as it is more of a mindset than anything else.

4) Get creative.  Operators sit on interesting APIs that can enable a whole range of services. The mobile operators led payment solution, Isis, aims to do just that. Payment is one set of APIs, but other things like providing a unified overview of device usage, understanding of network congestion issues (and how to work around it), commuting patterns and more are only one set of APIs that can allow for developers to create cool things.

I do believe there will be operators that will make a comeback as the content providers. But they can no longer hold people hostage, and the bar has been raised very high, and now for any app store you not only have to have a firm grip on content retailing, but also understand how to cater to developers. This will be an interesting space to watch the next few years.

Posted in The Business of Mobile.

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