Mobile

Application
Stores
Project Report for “eCommerce Technology
and Applications”

Submitted by:

eJains
Nihit Jain (06AG3802)
Prateek Kumar Jain (06AG3806)
 Page |1

Table of Contents
Introduction ............................................................................................................................................ 2
Background ............................................................................................................................................. 2
Smart Phones .......................................................................................................................................... 3
Mobile Operating system market ........................................................................................................... 4
Android operating system............................................................................................................... 4
iPhone OS ........................................................................................................................................ 5
Palm ................................................................................................................................................ 5
Blackberry ....................................................................................................................................... 5
Windows Phone 7 series ................................................................................................................. 5
Symbian........................................................................................................................................... 6
Revenue Model of mobile applications .................................................................................................. 7
Mobile Application Stores....................................................................................................................... 8
Revenue model of Application Stores..................................................................................................... 8
Major Application Stores ........................................................................................................................ 9
Android Market ............................................................................................................................... 9
Apple’s App Store.......................................................................................................................... 10
GetJar ............................................................................................................................................ 11
BlackBerry App World ................................................................................................................... 11
Nokia OVI store ............................................................................................................................. 13
PEST Analysis ......................................................................................................................................... 13
Porter’s Five Forces Analysis ................................................................................................................. 14
Industry Rivalry (Moderate) .......................................................................................................... 14
Threat of New Entrants: (Moderate high) .................................................................................... 15
Threat of Substitutes (Low)........................................................................................................... 15
Buyer’s Power (Moderate) ............................................................................................................ 15
Supplier’s Power (Moderate) ........................................................................................................ 15
Conclusion ............................................................................................................................................. 15
References ............................................................................................................................................ 17
List of Figures ........................................................................................................................................ 18
List of Tables ......................................................................................................................................... 18
 Page |2

Introduction

Mobile applications are changing the world faster than we can imagine. They are equivalent
to software for Operating System in our computers. Adding functionality to the mobile, they
are transforming the lives of the people in so many different ways, be it games, business
applications, personal planning, mobile commerce, entertainment, and many more. Mobile
Applications, more famously known as “Apps” have the potential to generate huge revenues,
through taking a price for these apps or by using these apps for advertisement purposes.

These Apps are sold in virtual markets, in general which are known as Application stores. At
present, there are more than 118 application stores according to WIP App Store Catalogue
(the leading resource listing app stores for mobile developers). The growth of this market can
be seen by the growth of the number of application stores which have more than doubled in
the last 12 months and the growth of the revenue which is expected to grow five folds in the
next 3 years.

Before coming to the application stores, it is important to understand the applications’ market
and mobile OS market which are very tightly linked with the application store industry.
Hence, our first part of the report deals with the Mobile OS industry and App industry. The
next sections are an analysis of the app store industry, its profitability, opportunities and
challenges. Using Porter’s five forces analysis and PEST analysis, the attractiveness of the
industry has been analysed.

Background

The developments in mobile handset technology and use of mobile devices by consumers
have made mobile application market consumer-oriented, global in scope and device-
dependent. The rollout of 3G and 4G mobile services vastly increases the data transfer rate
and therefore the variety of services that can be provided on a mobile device. New
technologies permit mobile phones to be used as payment devices not only for virtual but also
real-world shopping. This has caused a lot of changes, with mobile commerce being one of
the major areas of growth. The size of the market is expected to increase exponentially
because of network externalities.

New services, such as mobile digital television, location-based services and integrated
financial services, are being offered by many market players. Due to all these factors,
research companies see mobile commerce developing significantly in the future.

One of the major commerce would be of the application which increases in the functionality
of the mobile phones to those areas which were never thought of before. Now, developers
other than the cell phone provider started working to develop applications to improve the
functionality of the phones. This led to various types of applications being developed, and
uses of mobile phones developed in so many areas which were never thought of before.
 Page |3

Mobile applications categories:

Games Business and
Social Finance Navigation
Networking Lifestyle Utilities
Books Productivity Others
Entertainment Travel

Figure 1: Mobile Application Categories

Smart Phones

It is due to the development of smart phones that the mobile application industry has grown.
Applications can only be installed on a smart phone and cannot be used on a simple phone.
This is the reason why it is called a smart phone, because of its capability to install other
applications which increases the functions which can be performed by a phone to an
unprecedented extent.

Smart phone has a very little penetration (8%) now, but as the prices are decreasing and
functionality increasing, the smart phone sales are expected to grow at a very fast rate. The
predicted sales of smart phones are given in Figure 2.

The increase in use of smart phones is expected to increase the market of mobile applications.
Also, as mobile application use becomes common, mobile application use per user would
also increase, thus increasing the mobile app market to a greater extent.
 Page |4

Figure 2: Smart phone shipments from 2008-2010 and predictions for 2011-2013

The applications are developed for a mobile operating system. There are many different
mobile operating system available, and it is usually the mobile handset provider who decides
which mobile operating system to use. Many of the mobile device manufacturers developed
their own operating system, or acquired companies which sold mobile operating systems. But
there have been some operating systems which are open and anyone mobile handset
manufacturer can use them. This has given flexibility of new mobile handset manufacturers
as their cost to buy the mobile platform reduces.

Mobile Operating system market

While the size, features, and price determines what mobile device or smartphone users opt
for, the operating system (the piece of software that controls everything from what you see on
display to the communications) remains a very important factor that the mobile device user
must consider before making a purchase. There are numerous types of mobile operating
systems. The top ones are Palm, Google Android, Blackberry, Symbian, Windows Phone 7
series, and the iPhone OS (which is a mobile version of Mac OSX).

Android operating system

Android is the second most popular smartphone platform. This operating system runs on
 Page |5

several smartphones, particularly the Google Nexus One Smartphone which became available
in January 2010 and is being manufactured by the Taiwanese company, HTC. With the Robot
logo, android was originally manufactured by a company called Android Corporation which
Google bought in July 2005. In November 2007, the Open Handset Alliance, which is made
up of over 50 software and hardware manufacturers, was inaugurated with the aim of
developing a better open standard for mobile devices. The Open Handset Alliance is made up
of Sony Ericsson, Samsung, LG, Vodafone Group, Nvidia, Motorola, Intel, Google, Toshiba,
HTC, and many more.

Google Android is powered by the Linux Kernel. Android has since undergone a lot of
changes to fix bugs and add new features. Android OS looks great to the eye. Also, features
such as multi-touch and the ability to support a far greater number of media formats than any
other Mobile OS makes it irresistible for consumers and hardware manufacturers alike.

iPhone OS

iPhone OS, manufactured by Apple Inc., is the mobile phone version of Mac OSX. One
unique feature that makes iPhone OS stand out is that all the interaction with the phone can
be conducted through the touch screen. iPhone OS comes with several applications, both
third party and included applications. One setback of iPhone OS is in the area of Multi Media
Messaging (MMS) : one can only view MMS messages on a web application.

Palm

The palm OS is a mobile operating system that was designed by Palm, Inc., in 1996. It was
initially designed for PDAs, however, later versions have been designed for smartphones and
other mobile devices. It offers a unique touchscreen that is easy to use.

Blackberry

Blackberry is no doubt the most popular smartphone of the corporate world. Like some other
mobile OS's, it has popular features that include a built-in keyboard and a thumbwheel
control that is easy to use. It can synchronize well with your PC. With Blackberry OS, email
messages automatically appear on the screen as you receive them instead of having to open
them manually. There are thousands of third-party applications available for Blackberry. One
bad side is that it limits one to viewing MS Office documents only.

Windows Phone 7 series

Microsoft is wrestling to remain relevant in the world of mobile operating systems which is
why they had to abandon Windows Mobile for a completely New Windows Operating system
for PDAs and Smartphones. Windows Mobile is dead but WP7 would only be widely
 Page |6

available before the end of 2010. It has almost everything you can ever ask for in a
smartphone. However, no current Windows Mobile software can run on WP7.

Symbian

Symbian is a mobile OS that is very
operating system for smartphones and
acquired Symbian Software Limited in
open source software. Devices running
smartphone sales worldwide
popular outside the United States. Symbian is an
mobile devices designed by Symbian Ltd. Nokia
2008. Symbian OS was made available in 2010 as
on Symbian OS make up the largest percentage of

Figure 3: Market share of major OS from 2007 – 2010

The trend of the market can be seen from figure 3. The Symbian OS, which was once the
market leader in Mobile OS market by a huge margin, is getting a very tough competition
from other companies. Apple’s iOS, which comes with iPhone, is also holding a major share
in the market and has already surpassed RIM. Google’s Android is the fastest growing mobile
platform. Started in 2008, it is already eating away the market share of Symbian and other
mobile OS, and is the second largest OS provider. The speed with which it is growing, it is
expected to become the market leader. Also, as of March 2011, Nokia has announced to leave
its Symbian OS and use Microsoft’s Mobile OS version of Windows 7.

All the mobile platforms / Mobile OS do not provide the same capability for a developer to
develop applications. This is the reason why one application will not work in another
operating system. So a developer has to develop an application for a particular OS. It
 Page |7

becomes a tendency for the developers to develop applications for only those OS which are
much more widespread in the industry.

A summary of the supported platforms and development environment of the mobile OS is

given below.

Figure 4: Supported environment in major Operating Systems

Revenue Model of mobile applications

The developers of mobile application use one or more of the following three revenue models:

1. Free Apps
2. Paid Apps
3. Ad-supported Apps

Free Apps are generally very simple. The developers do not feel that they would be sold if a
price is charged for it. This is usually done for publicity of other apps or products which the
same developer has developed.

Paid Apps are the ones which are sold for a price to the customers. This is a revenue source
for the developers. Another revenue source is the advertisement revenue. This model or
 Page |8

revenue works by placing an advertisement in the app, so whenever a user clicks on the add,
the app developer would earn some revenue.

Mobile Application Stores

These are the online portals on which applications can be searched, downloaded for free or
bought. The application stores are generally categorized into two types:

1. Native or on deck - operators, mobile device manufacturers, and Operating System

(OS) developers managed. These app stores have applications only for the particular
operating system they promote.
2. Third party or off deck- independent or third-party managed. These app stores have
all types of applications and are open for all app developer to put their application for
sale. The benefits of these app stores are that they are neutral to the operating system
used or the developer.

The app store provides some services to the app developer which he / she cannot
independently develop easily.

 The application store gives the developers a platform for publishing their application.
 The store provides a billing service, which is safe and secure, so that the developers
have to concentrate only on developing the app.
 Rating and review system of app from the users creates a good platform to compare
different apps, also promoting those apps which are better than the others.
 People would go to a store which has more number of apps to buy or search an app
rather than going to the website of a particular developer.

Revenue model of Application Stores

The revenue for the app stores comes from two sources, a cut of each paid app sold and a
fixed fee for putting up the app on that store. The usual cut for the paid app is 70:30 (70%
goes to the developer, 30% is kept with the app store). The fixed fee which the app store
takes from the developer varies a lot from app store to app store.

Table 1 is a list of major native app stores and their characteristics. Table 2 is a list of Third
part app stores.
 Page |9

Available Device Developer's Developer

Name Established Owner
apps platform cut per sale fees

300,000
Android October 22,
Google (Mar Android 70% US$25
Market 2008
2011)

6,405
App June 6,
Palm/HP (Mar webOS 70% Free
Catalog 2009
2011)

July 10, 350,000

App Store Apple iOS 70% US$99/year
2008 (Jan 2011)

16,121 US$200/10
April 1,
App World RIM (Dec BlackBerry OS 70% application
2009
2010) submissions

1€
Multiple (plus
May 26, 43,535
Ovi Store Nokia (Symbian, Java, 70% possible
2009 (Oct 2010)
Maemo) certification
costs)

Windows 12,023 US$99/100

October 21, Windows
Phone Microsoft (Mar 29 70% application
2010 Phone 7
Marketplace 2011) submissions

Table 1: Major Native / On-deck Application Stores

Major Application Stores

Android Market

Android Market is an online software store developed by Google for Android devices. An
application program called "Market" is preinstalled on most Android devices and allows
users to browse and download apps published by third-party developers, hosted on Android
Market. Users can also search for and read detailed information about apps from the Android
Market website. The Android Market only has apps which can be used on Android phones.
 P a g e | 10

Figure 5: Growth of Revenue of Android Market

Android Market was started on 22nd October, 2008. Since its inception, it has grown at a very
high speed. Today, there are about 300,000 apps on Android market which is second only to
Apple’s App Store. The growth rate of revenue of Android market has been the highest
among all the app stores. Apart from taking a share of 30% of the revenue of developers
through selling of Apps, google charges its developers a onetime fees of $25 to start
publishing apps.

Apple’s App Store

The Apple App Store is preinstalled on Apple's iOS (carried on the iPhone, iPod Touch, iPad
and Mac), which allows users to browse and download applications from the iTunes Store
that were developed with the iOS SDK or Mac SDK and published through Apple.
Depending on the application, they are available either for free or at a cost. The applications
can be downloaded directly to a target device, or downloaded onto a PC or Mac via iTunes.
30% of revenue from the store go to Apple, and 70% go to the producer of the app. The App
Store opened on July 10, 2008 via an update to iTunes. On July 11, the iPhone 3G was
launched and came pre-loaded with iOS 2.0.1 with App Store support; new iOS 2.0.1
firmware for iPhone and iPod Touch was also made available via iTunes. As of October 20,
2010, there are at least 300,000 third-party apps officially available on the App Store. As of
January 18, 2011, the App Store had over 9.9 billion downloads, which was announced via
the company's "10 Billion App Countdown". At 10:26 AM GMT on Saturday, January 22,
2011, the 10 billionth app was downloaded from Apple App Store. The median revenue per
application is estimated to be $8,700, although data is not publicly available.
 P a g e | 11

The App Store is accessible from the iPhone, iPod Touch and iPad via an iOS application by
the same name. It is also the only way to directly download native applications onto an iOS
device without voiding the warranty. Web applications can be installed on these devices,
bypassing the App Store entirely, but they tend to have less functionality. The store is also
accessible through iTunes, and then on any operating system for which iTunes is provided.

GetJar

GetJar is an independent mobile phone application store founded in 2004. The company
provides more than 75,000 mobile applications across major handset platforms including Java
ME, BlackBerry, Symbian, Windows Mobile and Android, reaching more than 15 million
consumers. GetJar allows software developers to upload their applications for free through a
developer portal. About 300,000 software developers have used this service resulting in over
1.05 billion downloads. The rate is currently at 3 million downloads per day.

Getjar gets its revenue not only from a share of the paid apps, but also from the promotion of
application by the developers. GetJar generates it’s major share of revenue from a 'pay-per-
download' system, where developers bid for ad slots on the store in order to get premium
visibility, paying GetJar when downloads are made. The developers can promote their apps
on the Getjar website, which will show the apps in a featured section. This way, the
developers can hope to sell more app and earn more profit.

The major difference between the working of Getjar and Android market or Apple’s App
store is that Getjar has applications which could be run on all platforms. Getjar is the biggest
independent mobile phone application store. The company is backed by venture capital fund
Accel Partners, and closed its US$11 million Series B funding round in June 2010 – at this
time, it was said that the company had “maintained its profitability despite a challenging
economic environment.”

BlackBerry App World

BlackBerry App World is an application distribution service and application by Research In

Motion (RIM) for a majority of BlackBerry devices. The service provides BlackBerry users
with an environment to browse, download, and update third-party applications. The service
went live on April 1, 2009. As of September 9, 2010 - BlackBerry App World is available in
70 countries and accepts payment in all 70 using a combination of PayPal, credit card, and
carrier billing. Applications are both free and paid from $0.99-$999.99 USD in the U.S.
Developers pay a $200 USD fee (Per every 10 Apps, see Section 10 d of the FAQ) to
participate in the program.
 P a g e | 12

Developer'
Organization Available Developer
Name Established Device platform s cut per
s apps fees
sale

3,800
Amazon Amazon.co US$99/yea
March 2011 (March Android 70%
Appstore m r
2011)

445
August AppsLib,
AppsLib (October Android 70% Free
2009 Archos
20, 09)

Kalador 55,000 Multiple

MobileRated 2006 Entertainme (Decembe Android, BlackBer N/A Free
nt r 2010) ry OS, Java

Multiple
Android, BlackBer
Handango 2000 PocketGear 190,000 ry OS, Java, Palm ≈42% Free
OS,PSP, Symbian,
Windows Mobile

Multiple
Android, BlackBer
ryOS, iOS, Java, P
explorePDA 2004 explorePDA 1,500 75% Free
alm OS, Symbian,
webOS, Windows
Mobile

Blackberry, Palm,
5,000
MobiHand, Symbian, Windows
MobiHand 2004 (June 3, 60-80% Free
Inc. Mobile
2009)
and Android

Multiple
140,000 Android, BlackBer
PocketGear 1999 PocketGear (June ry OS, Java, Palm ≈55% Free
2010) OS, Symbian,
Windows Mobile

1,860
SlideME April 2008 SlideME (July 21, Android ≈95% Free
2010)

Table 2: Major Off Deck Application Stores

 P a g e | 13

Nokia OVI store

Ovi by Nokia is the brand for Nokia's Internet services. The Ovi services can be used from a
mobile device, computer (through Nokia Ovi Suite) or via the web (Ovi.com). Nokia focuses
on five key service areas: Games, Maps, Media, Messaging and Music. Nokia's aim with Ovi
is to include third party developers, such as operators and third-party services like Yahoo's
Flickr photo site. With the announcement of Ovi Maps Player API, Nokia has started to
evolve their services into a platform, enabling third-parties to make use of Nokia's Ovi
services. It has some significance in that Nokia is moving deeper into the world of Internet
services, where head-on competition with Microsoft, Google and Apple is inevitable. Ovi is
the Finnish word for "door". As of April 2011 there were exactly 5.0 million downloads
every day, also 158 developers reached over 1 million downloads for their Applications.

Many big companies have also decided to open app stores. Amazon is one such example who
has recently open its own app store.

Table 3: Global Mobile Applications Store Ranking in 2010 and 2009

PEST Analysis

The Application industry and Application store industry, both are at a nascent stage.
Everything in this industry is on the web, or mobile phones. Unless and until, the app
breaches any privacy, there are not many political factors affecting this industry.

The industry has grown at a very fast rate over the past year. It is estimated that the growth
would even increase for the coming few years due to various reasons such as increase in the
selling of smart phones and more use of apps. Also the demand is consolidating in the
industry. The total earnings in the application Industry in 2010 was about $ 4 billion, which is
expected to grow to $27 billion.

The social environment is also changing, which is promoting the use of apps. There is a huge
shift to mobile based gaming, shopping and banking. Other than this, mobile is becoming a
 P a g e | 14

more functional and useful tool in our life than any other device. The functionality of mobiles
is increased by apps, due to which the app market is expected to benefit.

Figure 6: PEST Analysis

There are various technological reasons which are promoting the use of mobile and apps. The
better technology for communication in the form of 3G and 4G is facilitating a much greater
wireless internet speed. This makes the use of mobile commerce much easier and affordable.
Also, with the introduction of sophisticated hardware like tablet-PCs, the sales of apps are
expected to increase even further.

But some technological changes are also happening which might change the way the industry
is working. Presently, the apps are OS dependent. This creates a major problem for the
developers to develop apps for all platforms as it increases their effort. There are attempts
being made to develop a platform such as a browser which can run the same app for any OS.
If such a thing is developed, then the difference between the Operating Systems for mobile
would decrease to a large extent.

Porter’s Five Forces Analysis

Industry Rivalry (Moderate)

The same apps are available at various stores. The industry is at a growing stage right now,
and not many companies have entered the market. But there are a big few companies which
are very aggressive in their marketing strategy. Hence, we have right now considered the
industry rivalry to be moderate but it is increasing day by day.
 P a g e | 15

Threat of New Entrants: (Moderate high)

The entry barrier for the new industry giants is only due to the size of the existing companies.
Otherwise, the industry is quite open as it does not require a lot of investment in the form of
money to be put in to open a app store.

Because of the attractiveness of the industry due to its growth potential, a lot of companies
has already have announced entry into the market. Hence, we have considered the threat of
new entrants to be moderately high.

Threat of Substitutes (Low)

App Stores are in the business of providing a platform to sell apps. As there are no effective
substitutes to sell apps other than app store, the threat of substitutes is considered as low.

Buyer’s Power (Moderate)

Similar kind of applications is available at a lot of app store. This increases the Buyer’s
power. But the on-deck app stores usually are closed for other platforms and they also have
the power to not to allow the consumers to buy apps from other app stores, which causes the
buyers power to decrease. Hence we have considered it to be moderate.

Supplier’s Power (Moderate)

There are many app stores for developers to sell their apps. So they do not have to dependent
on any particular app store to sell their product. But the limited number of big app store and
the business model of the native app stores is decreasing the suppliers bargaining power.
Hence, we have considered the Supplier’s power to be moderate.

Conclusion

The industry is in a growing stage. It is expected to grow at a very fast rate and is expected to
undergo a lot of change before reaching a stable position. The benefit of the industry is that it
is under very little or no regulation from the governments. Through the Porter’s five forces
analysis, we see that industry is quite attractive.

Presently the industry is dominated by on-dock app stores. But this becomes a disadvantage
for the consumers, as the app stores are biased towards their own operating system or
network. The market share of Off-dock app store is less now, but is expected to dominate the
market within a few years, as they give the benefit of being neutral towards operating systems
and might be better for the user.
 P a g e | 16

One of the major threats for the industry is challenges of the industry is the revenue system.
There is a trend in the industry to shift towards ad-based revenue model. This will decrease
the share of paid apps being sold and is a potential loss for app store owners. Big companies
like Google and Apple have already entered into the business of generating ad-revenue from
these apps, so as to be neutral to these potential losses or change in revenue stream.

The application store industry is very closely associated with the app industry and operating
system industry. The growth of the off-deck stores will decrease the dependence on the
operating system manufacturer’s app store and increase competition. But if a company wants
to survive, it cannot afford to look into the app store business alone, and has to enter into the
cloud of businesses such as application to increase its power over its suppliers, buyers and
competitors.

We would like to conclude by saying that the industry is very attractive now, and if a
company would like to enter the market, it is better to do is as fast as possible to avail the
benefit of growth of the industry. But, the existing players in the market are very strategic in
their action, who have already gone into the related business so as to capture the whole cloud
that surrounds this industry. Competing against these industry giants would be a challenge
especially in the face of the change that is awaiting the industry.
 P a g e | 17

References

“App Store Report – April 2011”. 2011. Wireless Industry Partnership.

http://www.wipconnector.com/

“Figuring Apple’s App Store’s Gross Profit”. 2010. http://news.cnet.com/8301-13579_3-

20008540-37.html

“Future of m-Commerce”. 2009. http://www.binarymantrasystems.com/ retrieved on 15th

March, 2010.

“Mobile Applications”. 2008. Mobile Marketing Association.

http://www.mmaglobal.com/mobileapplications.pdf

“Mobile Commerce”, 2007. Organization for Economic Co-operation and Development.

http://www.oecd-ilibrary.org/mobile-
commerce_5kz84nzc93g0.pdf;jsessionid=kew1wh9ima2j.delta?contentType=/ns/WorkingPa
per&itemId=/content/workingpaper/231111848550&containerItemId=/content/workingpaper
series/20716826&accessItemIds=&mimeType=application/pdf

“Our Easy Smartphone Guide”. 2010. http://www.e2save.com/ retrieved on 16th March, 2010

“The Rise of Mobile Application Stores: Gateways to the World of Apps”. 2010. Booz & Company.
http://www.booz.com/media/uploads/The_Rise_of_Mobile_Application_Stores.pdf

Android Market. https://market.android.com/apps . Retrieved on 14th March. 2010.

Apple App Store. http://store.apple.com/ . Retrieved on 14th March, 2010.

BlackBerry App World. http://appworld.blackberry.com/webstore/ . Retrieved on 14th March, 2010.

Getjar. http://www.getjar.com/ . Retrieved on 14th March, 2010.

Khanna, Anuj. 2010. “The Future of Mobile Application Storefronts”. Wireless Expertise.

Milanesi, Carolina. 2010. “Creating a Successful Mobile Application Store”. http://www.gartner.com/

 P a g e | 18

List of Figures

Figure 1: Mobile Application Categories………………………………………………...……3

Figure 2: Smart phone shipments from 2008-2010 and predictions for 2011-2013…………..4

Figure 3: Market share of major OS from 2007 – 2010……………………………………….6

Figure 4: Supported environment in major Operating Systems………………………….……7

Figure 5: Growth of Revenue of Android Market……………………………………………10

Figure 6: PEST Analysis……………………………………………………………………..14

List of Tables

Table 1: Major Native / On-deck Application Stores………………………………………….9

Table 2: Major Off Deck Application Stores………………………………………………...12

Table 3: Global Mobile Applications Store Ranking in 2010 and 2009………………….….13