Who Will Win in the WACy Races?
The rationale for WAC from operator speakers seemed clear. Telenor, Deutsche Telekom and others spoke of the need to provide global reach to their partners, via WAC interface exposure and the OneAPI framework. Mobile operators with multiple OpCos clearly want to leverage their scale and provide a homogenous development environment. Of course, this makes perfect sense, but to what end? Where is the value that it creates?
This question remained a thorny topic throughout the day. There was great interest in the potential for browser-based applications, enabled by HTML5, to supplant native applications and to provide a means by which mobile operators can rapidly distribute and support a growing application community. But, it remains to be seen what will happen. Yes, there are assets that can be exposed to developers, but many of these have little value.
Location is now ubiquitous; SMS messaging can be obtained through brokers; there are plenty of web-based voice companies offering APIs; and so on. What can a mobile operator bring to developers that they can’t get elsewhere? The consensus was that payment and trust are the current best bets, but even then payment must include in-application capabilities, otherwise there’s little to differentiate it from existing one-off payment mechanisms to be found in other app stores.
The value of billing and trust seem to rest on an unproven hypothesis. As one operator commented, it needs real interest from developers, and there’s a long way to go before this is apparent. However, the initiative has stimulated a good deal of activity and trials; perhaps commercial models will follow.
But, in perhaps the liveliest debate, the developers in the room noted that they need to see a real return. With a lengthy value chain, the margin left for the application developers diminishes. If they can’t see a worthwhile return, then they won’t be interested. And, if they are not interested, then it’s hard to see how the operators will make money. After all, WAC is clear recognition of what we have known for a long time: operators need third party developers to stimulate innovation.
In the concluding presentation, Caroline Chappell of Heavy Reading noted that revenue passed on to developers from the Apple Application Store had reached a total of $2 billion. A quick calculation from your correspondent suggests that, on the basis of a 70:30 revenue share, Apple has received less than $900 million in revenue, despite the billions and billions of downloads.
We make no claims for our maths, but, let’s face it, most applications are free. They don’t generate significant amounts of money. This leads us to three conclusions.
First, whatever the merits of WAC – and it was agreed that, technically, it doesn’t much matter what the API interfaces are, so long as they have tangible value – the real work needs to be done to find applications that will generate money for all. And, this is unlikely to come from the consumer segment, or at least not in the scale to help arrest mobile operator revenue decline.
Secondly, if WAC is unlikely to generate large returns from consumers, does it have more merit as a defensive strategy, designed to build stickiness into the network? Is it a kind of Hobson’s choice: operators recognise that they need to offer APIs, so they may as well choose a solution that can be deployed in all of their OpCos?
Finally, we think it’s much more likely that operators can make money from enterprise customers, purchasing high-value applications. In the absence of tangible assets that will have developers clamouring for access via whatever API is available, operators need to focus on the enterprise opportunity, not chase a long-tail that offers extremely uncertain returns.
Of course there is room for multiple application stores in the world. But, in the end, with limited budgets, operators need to focus their energies on opportunities where they have the potential for greatest return. WAC is a useful initiative, but if operators get sidetracked into trying to build something that already exists, they may fail to spot a real opportunity.