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Business case for 'Indian' App store

Though downloadable Mobile applications is 10 year old industry, apart from iPhone applications there isn’t any other proven business model so far.  The iPhone application’s success is derived more from it’s own app store.  The success of app store is due to the fact that it made it easy to develop, market and monetize the apps. Here is my shot at looking into crystal ball and trying to define what would be an ‘Indian App store’.
India, with it’s half a billion subscribers and falling ARPUs is fast becoming a hot market for services and rich experience provided by downloadable applications. But we are still far away from becoming a thriving eco-system for downloadable applications. What the application providers lack is an integrated Development, Marketing , and most importantly Monetization platform provided by app stores to create these compelling services.
The question is what kind of ‘app store’ will work in Indian context?
Can Apple app store replicate such an impact in Indian Market? The answer is NO.
Reason :- Apple app store’s monetization bit depends a lot on credit card based ongoing payment relationship apple already enjoys with iTunes subscribers. Apple or any manufacturer currently does not command such an ongoing relationship in Indian market.
Since Telecom operator has a payment relationship with user , can operator sponsored app store create such an impact? Answer is Maybe.
Reason :- With advent of competitive pricing by operators, dual sim phones, and Number portability , this relationship enjoyed by operators is getting thinner day by day. Giving more services on top of vanilla Call/ SMS may help operators to strengthen their relationship with users, time will tell.
What I think will work is an ‘app/ content store’ created by a relatively independent entity. This “App store” will surely have to leverage on the payment relationship between operators and users but still has to maintain cross operator, cross manufacturer compatibility. I also believe that such an initiative will need some sort of regulatory blessings from TRAI.
Of course it’s easier said than done. Let’s try and do a complete SWOT analysis of such a business case. (comments/ improvements welcome)
Strengths
1. This can scale to be ‘one stop shop’ for all the user’s downloadable content needs including Wallpapers, Screensavers and Ringtones in addition to applications.
2. Positioning as a sales channel for content is a proven method to source quality content.
3. Integrated development, marketing and sales platform for content owner makes it much easier for content owners to publish and monetize their content.
4. Helps operators to improve ARPU.
5. The store can be much more ‘social’ than a handset vendor/ operator sponsored App store.
6. Transparent revenue share model.
Weaknesses
1. Unproven. There is almost no precedence of such an ecosystem barring NTT docomo.
2. No immediate incentive for handset manufacturers ..
3. The app store provider will have to build it’s brand from scratch. It cannot leverage much on operator or manufacturer brand.
4. A new industry player or a startup may find this space very tough to navigate with mindset of existing players.
5. Needs a relatively big capital investment up front to build the relationships and build  the brand.
Opportunities
1. There are already 500 million users hungry for services and the userbase is still growing fast.
2. This can be a marketing platform for all the brands who want to reach mobile users.
3. Potential to reach Rural India and create a completely new market for down-loadable services.
4. Can finally counter content piracy with attractive pricing models enabled by potential reach.
5. Same version can scale to all the emerging markets.
Threats
1. Content owners business models could take a hit since there are more players in rev share agreements (operator+app store+ content owner)
2. Building relationships with all the industry players will be challenging (manufacturers, operators, content owners)
3. iPhone kind of manufacturer->operator alliance may emerge.
4. Multiple Manufacturer, Operator app stores may fracture the market
Conclusion :-
Creating an App store for Indian Mobile users is a huge opportunity which you cannot miss at this point. The company with correct capital backing and focus on building relationships in the ecosystem can exploit it to the hilt.
Full disclosure :- Mobisy has a product for app stores based on our popular platform Mobitop. You can see the details about the app store here.

Comments (7)

  1. That was a great SWOT analysis, Lalit. Content-generation and/or gathering may be a tough task though.
    I think the success of App store also has to do with the fact that most of the iPhone users are tech-savvy and iPhone primary market, North America, is very internet aware. Apple doesn’t have the same degree of success in other parts of the world with their app store (this is also due their DVD-zone type content segregation I think).
    A primary challenge today is that getting a layman to use the mobile internet is quite difficult. I know things are rapidly getting simplified but even now it takes a number of steps to connect to the internet. And this is just over the browser. Also, for some reason, PC based app solutions (including iTunes) seem to be very popular. That’s not going to work in India where mobile penetration is far greater than that of PCs.
    Mobile Apps tightly integrated with an online app store are the way forward. Buy stuff with a click without struggling with the scaling and rendering and scrolling and other browser pain points. This is not a new idea, of course, but somehow has not reached out.
    The operator-manufacturer nexus works *fairly* smoother between the operators and the phone ppl here in India (when compared with, say, North America). E.g., Airtel and Nokia tie up. That said, if a neutral third party app store has any chance of survival – it has to be in the Indian market!

  2. I want to quote your post in my blog. It can?
    And you et an account on Twitter?

  3. Hi Lalit,
    Great summary about Appstore business. I agree with your view that an independent appstore would be successful (not just in India). Let’s call it iAppStore.
    Let’s think of something radical – how about a pre-pay appstore with few extras like a cooling off period of 30days per application and a loyalty programme with points per app downloaded. And, maybe 10% discount to all students.
    The offer –
    For customers – Customer buys a mobile phone contract and gets Rs 1000 voucher to be used on a iAppStore. Each application bought would give some points to the customer which can be refunded as cash, against the phone bill or by buying more apps. Customers can always buy pre-paid vouchers from phone shops or via internet and get delivery to their home.
    Customer could be on any handset and could download any application, i.e. all applications must be compatible with all mainstream mobile OSs. Customer gets 30 days to cancel (or uninstall the app) before the payment is deducted from the voucher.
    Delivery of applications can be done via OTA (over the air) or a free and simple web/ PC/ mac based UI (user interface) that syncs the apps, photos, music.
    For developers – Developers pay for a subscription (let’s say Rs 500) and upload applications validated (tested and rated) by NOT the iAppStore owners, but by other developers (minimum 5). 😉
    Once the approvals are over 90%, the application is launched. The ratings are controlled by views, downloads, ratings, revenue, etc…
    For operators – uhmm.. there’s nothing directly, however, the ARPU would increase.
    For the iAppStore owner – revenue from subscription charge from developers and 30% of the application price.
    Now, I know you’ll think – how will iAppStore pay for the initial Rs 1000 voucher that has been circulated for free. Well, from the subscription charge from developers. Developers (like manufacturers in other industries) effectively pay for cost of acquiring new customers (as they’re not paying for advertising)
    One thing I don’t know is the affordability levels (developers vs customers) and market size (of developers vs customers). Once you know this, you can play with the pricing of subscription and the initial free voucher.
    So, what do you think of this? Would this work in India?

  4. Hi Lalit, We are thinking exactly along these lines. One of the key requirements for an independent app store to succeed is that it needs to have certain sticky apps or services. These sticky apps make the user go back to the online store again and again. Also, the customer needs to trust your brand.
    Would like to know more about your product. ( Tried downloading but page is not opening.)I am reachable at bipinATmobikwik.com

  5. There exists no market in the current Indian Mobile application Content. With more operators & sliding call rates ask for the operator to look for different avenues.
    And surely application market is a good bet. But with already airtel,rcom & aircel into the application market. It’s tough for a startup to get into this market.
    But the opportunities are plenty to explore. But need a lateral business model to exploit.

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