A few months back one of analyst friends asked me whether it is possible for the mobile service provider to create their own App Stores and be successful. My opinion to him was they can do it or rather they should do it, else they have not even joined the battle for customer loyalty. The talk turned to Singtel which is one of the largest operator based out of Singapore and it has a global presence due to its joint ventures and acquisitions in many countries. I remember telling him that it should be one of the large operators who will have the reason to do it.
Now Vodafone has done it. Vodafone 360 is a mobile web service that provides music downloads, integration with Facebook and Twitter, and supports several handsets. In a way it is competing with Apple’s App Store, Nokia’s Ovi and other App Stores created by the mobile phone vendors.
Now Vodafone’s Telco 2.0 model (called efficient pipes) is nothing new. A lot of mobile service providers thought about that but shied away from taking the plunge. Now Vodaphone which has over 300 million consumers in over 30 countries has taken the challenge.
As Apple and Nokia increase their emphasis on the App Store and have made a success of it (Apple’s App Store’s success is chronicled here), the mobile service providers can’t afford to be silent spectators.
But whether the service providers with their current competencies would have the ability to build an App store and an application eco-system is a big question.
I was taken aback when I saw the RIM’s stock suddenly drop 17% last week. By all accounts, it had a strong Q2 results: Q2 revenue was up 37% y-o-y and 2% q-o-q to $3.53 billion on shipment of 8.3 million units. Net income was $475.6 million or $0.83 per share versus $495.5 million, or $0.86 per share last year and $643.0 million, or $1.12 per share in the prior quarter. Gross margin improved to 44.1% from 43.6% last quarter due to reductions in raw material costs and shifts in the product mix. The company ended the quarter with $2.5 billion in cash, up by $78.5 million over last quarter.
It gave a conservative forecast for the quarter ahead. I think the analysts were expecting bigger revenue growth. And this explains why the stock got beaten.
Looking beyond the immediate quarters, RIM faces several strategic challenges and threats — iPhone getting entrenched within the corporate enterprise which was RIM’s sweet spot, imminent price wars with Apple and Palm and the emerging Android phones likely to hit the market anytime.
Unlike Apple, RIM hasn’t made much strides with the App Store. Apple’s success is highlighted here. RIM’s App Store was launched only in April and has seen about 20 million downloads compared to Apple’s 2 billion downloads. It needs some serious work here and may be a cutting edge application. It also needs to pay serious attention to building an application eco system for business applications.
I think their deal with Verizon will be watched with interest as Verizon already has deals with Palm and Motorola’s Android. RIM is apparently coming up with several new models, but the competition is hotting up.
I think the next 2 quarters would be key for RIM to regain the momentum it seems to have lost. The opportunity is now.
Here are the impressive statistics on the Apple’s App Store based on Apple’s recent announcement:
Number of applications available: 85,000
Number of countries from where App Store is accessible : 77
Number of participants on the App Store : 125,000
Number of downloads : 2 billion.
“App Store has reinvented what you can do with a mobile handheld device, and our users are clearly loving it.” says Steve Jobs.
I talked about the game changing nature of the iPhone and the App Store here.
What is incredible is the rate of growth. From just 500 applications in July 2008, it surged to 15,000 apps downloaded half a million times in 6 months. 3 months later it had its billionth download and 35,000 apps. A further 5 months later both the downloads and the apps have doubled.
Well, I wonder what would be the growth trajectory of the App Store once iPhone is launched in China?
Now that every cell phone vendor has his own App Store the mobile operator is just left to be a dumb pipe.