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Economics behind mobile are changing

By Bill Scott

The mobile Web won't look the same as the desktop Web. GetJar sees many key aspects of the Web going mobile as free mobile applications.

Social networking, messaging, mapping, video, games, VoIP, news, academic reference, open-source utilities -- and many other services that are already free on the Web -- are being turned into free mobile applications.

Some are standalone (downloadable) applications, while some are mobile Web apps, but either way this is the trend. In the first phase of Web-to-mobile conversion, many such services were paid for by the consumer (e.g. messaging, mapping, video, games on carrier decks).

Premium apps in these areas (e.g. premium games; navigation apps that are connected to carriers' location-based services) will also continue to be paid for, even in today's environment.

But the mobile industry is arriving at the same tipping point that we see in the Internet, in print, on TV, in drama, in movies and in any media: some content is free and supported by alternative monetization models, while other content is paid for by subscription or use.

Until recently, mobile applications were skewed toward paid, since they were principally available on carrier decks or commercial off-deck aggregators, who took a skimming strategy to this new market.

As the market has expanded, incorporating millions of users with 'basic' wireless plans, the model has necessarily shifted in favor of free apps.

This means the economics behind mobile are changing.

Previously, the business model for a mobile app was simple.

You contract for some well known license or brand; you pay a lot to build and port the app; you take it to a series of distribution channels that are narrow, exclusive, and difficult to access; you hope for good placement on these distribution channels.

If all of this goes right, you win. If not, you lose.

Today, each of these steps in the mobile economic cycle has changed.

1. You don't need to contract for a well known brand to have a massively popular app. It just has to be good and well promoted.

2. You don't need to pay a lot to build or port, as the tools to build are much more widely known, and development resources in Thailand, Indonesia, Argentina, et cetera can be contracted for low cost. You don't need to pay a lot for porting since free beta-testing resources exist to perfect the application. So, the construction of the typical app is moving to a Wikipedia approach.

3. You don't have to depend on a narrow range of distribution channels, as many new options exist, including Android Market, Apple App Store, BlackBerry Store and many new carrier initiatives that accept apps in a simpler way than was possible in the past.

4. You don't have to depend on placement at the top of one distribution channel for the success or failure of your concept. Many options for ranking and visibility exist within each distribution scheme.

5. If any one of these steps doesn't go right the first time, you can back up and start over. The process is now much more forgiving, which allows small, casual, and lightly funded developers to get some traction. Again, this is the egalitarian dream of the Internet moving to mobile.

The move to free and open will accelerate and it won't always be off-deck.

Just because we have a recession doesn't mean people stop thinking.

Mobile marketers and app developers will not turn off the "creative idea" section of their brains and wait for good times to roll again.

Those who are smart will move, adjust and adapt in several ways. And they will be supported by the rest of the ecosystem, which will also adapt.

Marketers of traditionally paid apps will experiment with massive distribution of demo apps on non-traditional distribution sites in order to get more exposure for premium sales outside of carrier decks and traditional commercial aggregators.

Brand managers will find that inserting advertising is a very valid monetization path for many free applications.

Application developers will turn to free or alternative testing resources to solve fragmentation and compatibility.

Marketers will turn to granular, focused, results-oriented methods for promoting their apps in alternative distribution channels.

They will be less likely to throw large amounts of money at publicity that is designed to build brand equity (e.g. banners on major portals), and instead focus resources on granular models that directly boost user acquisition (e.g. ad network pay per click, Google AdWords).

Marketers will experiment with different platforms (Java, Android, iPhone, Symbian, Windows Mobile, Flash Lite, Palm) in order to find those with the best set of API's, best handset support, best OS integration and best developer support -- in order to maximize the user experience.

The platform operators, knowing that to survive they will need to attract developers to their platform, will make more and more services available for free or little cost, because they know that this will increase their footprint where it matters: on devices in the market.

Mobile operators will realize that if they want to build revenue, they will have to expand beyond traditional, relatively expensive paid/premium apps, to apps that are free and encourage data plan adoption.

Carriers have to move beyond the skimming strategy that has characterized their marketing approach to mobile content, realizing a balance between premium/paid and free/open content.

Carriers will not be able to build a long-term sustainable mobile data business if only 15 percent of their subscribers use mobile data, not just voice.

The only way to do this is to promote various free services that drive data plan adoption, and free apps are one good vehicle. Carriers in Asia and Europe are already embracing this model aggressively. U.S. carriers are considering it.

Mobile device manufacturers will also offer developers more and more free services; the goal being to enhance mobile data experience on their handsets, and subsequently increase their footprint.

How can mobile marketers prepare?

Mobile marketers who are developing mobile applications should be experimenting with a variety of distribution channels, advertising options, testing options and other methods mentioned above, in order to ensure that they have a competitive cost structure.

In this environment, the key is to get more value for less money, or ideally get value for free from the mobile ecosystems that exist.

Mobile marketers must not assume that to get from the idea stage to the full deployment stage necessarily requires a massive investment, but instead look at how, at each step along the way, they can use non-traditional resources to build value.

Bill Scott is vice president of business development at GetJar Systems Ltd. Reach him at .