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Where are the Partners? The Life, Death and Potential Future of the Long Tail.

This hypothesis rested on the assumption that the many small applications that can be developed would attract revenue and emerged from highly popular research that coincided with the early days of the application store model. There are thousands of applications in the application store, the argument went, and although most only sell for a few cents, there are so many it must be big money, so let’s recreate this in telco land!

A few years ago, our friend Mac Taylor from Moriana researched this and was able to comprehensively debunk this theory. He showed that the majority of applications are free; few developers made much money and, although the overall volumes are high, the host of the application store (beginning with “A” in this case) actually did not make much money per se (or at least relative to overall revenues) due to the revenue share model adopted. Instead, the store was really a tool for increasing hardware, not software sales, and user dependency on shiny new phones. Therefore, while app stores have their merits, they weren’t something that would ever generate significant revenue for operators. At the same time, a number of comprehensive critiques of the “long-tail’ theory emerged.

Yet still the idea remained. It’s interesting and useful as a construct, even if it doesn’t necessarily offer any reliable predictions, but even so it has been a little frustrating seeing how much attention – particularly among analysts who should have known better – has been paid to the idea.

Happily, however, at this year’s SDP Global Summit, it was heartening to discover that no-one was really talking about the long tail any more.

This is excellent news and means that, instead of fantasising about the hidden masses of entrepreneurial developers, operators can focus on building an ecosystem of strategic partners who consume their APIs, and deliver tight integration with resources, systems and capabilities. The rewards of such an approach may be tangible, delivering revenue, or intangible, helping build relationships and reducing the potential for churn.

We made similar points in presentations we delivered last year at the Broadband World Forum. As the SDP GS, we heard a number of operators explain that the raison d’être for releasing APIs was to attract and build strategic partnerships. The long tail was far from their thoughts. In fact, we saw that there are essentially two primary audiences for their API initiatives – strategic partners and internal consumers. In other words, they are also eating their own dog food, using APIs to deliver better services or experiences to their customers.

In our opinion, this is absolutely the correct approach and should be fundamental to any API strategy. Focus on what is going to deliver utility or returns, tangible or otherwise. Any dreams of the long tail can safely be placed to one side. But – and this is where unintended consequences can have positive benefits – once APIs have been released, they can also be offered for open access to a wider community. Leading with such an approach is bound to fail. Realising it as a side effect of the primary goals is much more likely to prove interesting – which seems to be what some operators have realised as there are, of course, plenty of initiatives to attract a wider development community, but there don’t seem to be many that are entirely independent of a more strategic programme.

The really interesting question, of course, is who is a strategic partner? We shall address this in future posts, but our thinking is that there are essentially three domains to explore:

  • Key strategic accounts
  • Key systems integration partners
  • New business partners that can benefit from access to operator resources at scales that offer significant returns

This last group, of course, opens up the path for operators to collaborate with OTT providers, forging new partnerships that are mutually beneficial. Exciting times.

The long tail is, if not dead, certainly moribund and largely irrelevant to the future of operators. However, recognising this and switching focus to the right key partnerships may, paradoxically, ensure its survival – which will, we think, be a satisfactory conclusion all round. Just so long as we don’t make it the primary motivation for API exposure, things will be just fine.