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BLOG: Head, shoulder and tail

Arnaud Delorme | Dec. 5, 2011
Go-to-market strategy for mobile apps business

WHEN Alexander Graham Bell first conceived the telephone over a century ago, there was no way he could have predicted his invention would evolve into the smart devices that would change the lives of millions of people.

Indeed, the growing popularity of the smart devices and mobile apps is leading experts to predict an impending mobile data traffic "tsunami".  Studies by Bell Labs, Alcatel-Lucent's research arm, indicate that global wireless data traffic is expected to surge 30-fold over the next five years. In fact, total mobile apps download now reach into the billions.

Besides being a challenge, this explosive growth also presents an opportunity for telcos to engage in new ecosystems and business models - embracing cloud services and working with over-the-top players.

Today, a large portion of the return for mobile applications comes from the mobile data revenues that they drive (research firm Gartner expects the growth from $314 billion in 2011 to $552 billion by 2015). Given that mobile data revenue is more than a 100-fold the revenues from mobile apps purchases, it is clear that stimulating mobile data consumption is the primary monetisation vehicle for service providers.

With a need to increase mobile data usage - and changing market dynamics - it is clear that telcos have to launch new application services in their markets as soon as possible. In order to shorten time-to-market, however, they need to do things differently - opening up their network assets for internal and third-party app developers so that the innovation demanded by the market can occur in a very flexible way.

Graph go to market

Telcos have start building a new ecosystem for apps, whether it is for their internal developers, their strategic partners or the large crowd of external app developers. As a matter of fact, each of these three groups can be linked to a different zone in the hyperbolic "Value - Volume" graph of long tail apps and content services, in which we distinguish between three apps types: "head", "shoulder" and "tail". Each of these three types of apps demands a different go-to-market strategy.

o        The head of the curve - with a small number of high value apps - represents internally-developed apps and services that either address mass or niche markets. Examples include innovative communications services, mobile commerce services, or multi-screen video solutions that bring TV and video-on-demand to tablets and smartphones. Besides building brand equity, these apps typically help to increase customer loyalty and retention. Monetisation of the "head" can happen in three ways: through the classic bundle of value added services with data access, through subscription services offered on top of the data plan for niche services, or through a co-branded offer (with a partner) for a short term highly targeted promotion.


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