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App Store setting precedent for mobile industry: Airwide

The iPhone has demonstrated not only the phenomenal consumer demand for mobile applications, but that by reducing industry fragmentation all players in the value chain can make a sustainable business model from this type of mobile content.

With the App Store, Apple has created a substantial and valuable market in a very short space of time -- in a sector of the mobile industry where the pace of change can be frustratingly slow, according to a study by Airwide Solutions.

"The App Store is setting the precedent for the industry," said Jay Seaton, chief marketing officer at Airwide, Burlington, MA. "Aside from igniting mobile consumers' interest and consumption of mobile content and services, the App Store has demonstrated demand for alternative applications and solutions away from the stock mobile entertainment triumvirate of games, music and images commonly associated with operator portals.

"It is the user experience that has driven the consumer to the App Store in the first place, but it is the breadth and appeal of content and services that ensures repeat usage," he said. "Perhaps more importantly this breadth and appeal permeates across all demographics and makes an app store concept an appealing one to all companies operating within the mobile eco-system, none more so than mobile operators themselves."

Traditionally, consumer acceptance of wireless evolution has resulted in a considerable time lag. Take 3G, the mobile Internet, even early forms of mobile content and services.

But with the App Store, the concept is simplistic and the consumers understand it, though only a fraction of the mobile audience can access the App Store.

The success of the App Store has reignited what was a fading opportunity.

Content and services have been reinvigorated by the iPhone and the industry is abuzz with similar app store announcements.

The downside is that the existing hurdle of device and OS fragmentation stands to increase as OEMs release their own proprietary response to Apple.

What's more in a time of uncertain economic conditions, the replacement cycle of consumer mobile devices is lengthening which means the migration to high-end and smartphone devices will also be extended, and therefore potentially prolonging the limited access to app stores and their contents.

This means for mobile operators intent on driving ARPU, deploying an app store-like offering is the ideal solution of delivering content and services targeting the broad mobile demographic.

It is a strategy that guarantees the operator flexibility and the timeliness to respond to changing market and consumer requirements and demands.

A network-based solution using common APIs overcomes the pitfall of device and OS fragmentation and ensures that mobile operators will play a pivotal role in delivering app stores to the mass market to consumers without high-end devices and smartphones.

More importantly, operators will not be disintermediated from the content and services value chain.

"The marketing campaign by Apple, which focuses on how to discover and download applications to the iPhone, has been seen as an example of how good marketing can overcome many of the education issues faced by operators when launching new services," Mr. Seaton said. "But the challenge facing the mobile industry, including the other providers like Google, Microsoft and RIM is providing that experience to the mass market.

The open source software applicable to smartphones is ideal for app store development.

According to Informa Telecoms & Media, smartphones will account for just under 20 percent of the global mobile market by the end of 2009.

That would leave 80 percent -- or 3.2 billion mobile users -- without access to an app store-like experience.

Never before has there been a greater need for the mobile industry to ensure one experience can be accessed by all.

"There remains great consumer demand, so other players and alternatives in the market have a promising future, but none without challenges," Mr. Seaton said. "For RIM, the predominant use by enterprise customers could create a challenge in determining the type of application that will appeal to the typical demographic of a RIM user.

"For Google, it remains to be seen how the ?perpetual beta' applications the company is known for will play out with mobile subscribers," he said.