Mobile Fix: Can operators make money from Apps?

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November 26, 2010

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4 minutes

Simon Andrews Addictive is the full service mobile agency Simon has just launched, in partnership with digital media specialists Agenda21. addictive is the fifth agency Simon has launched. His first digital creative agency, in 1995, was a dismal failure – few marketers understood the internet then and even fewer cared. The next three were more successful – Simon was one of three partners who launched what became Modem Media in Europe – growing a business from six people in one room in Soho to two hundred and fifty people in London, Paris and Munich. He then joined DLKW in 1999 at the time of their management buyout and built DLKW Dialogue into one of Londons most respected digital agencies before launching Big Picture in 2005 which focused on emerging media such as mobile, social networks and newTV. He joined Mindshare in November 2006 where global chief digital strategy officer – focused on ensuring that key clients receive the best digital thinking – and doing. Simon was also highly involved in developing the talent, product and processes necessary to deliver this thinking and doing. This led to a key role in architecting the recent restructure that saw Mindshare embrace digital across all disciplines. He left Mindshare in the summer to work on the addictive launch. Before going digital Simon was media planning director of Young & Rubicam and Zenith Media, and then account planning director of Ogilvy Direct. Outside of work Simon tries to have his two sons Ethan and Isaac share his enthusiasm for obscure soul and jazz records and the increasingly obscure Leeds United.

In the latest Mobile Fix, Simon Andrews, founder of the full service mobile agency addictive!, wonders whether mobile operators will really make a go of app-stores…

It’s interesting to see how peripheral operators are too much of the action in mobile. Whilst we constantly cover new moves by the usual suspects (Amazon, Apple, Facebook and Google) we haven’t found too much from the operators to get excited about.

At the Mobile 2.0 conference in Berlin this week a recurring theme was how operators were developing app-stores and planning to use their data on their customers to make recommendations.

And whilst the app-store idea sounds interesting, we wonder whether they can really make a go of it. To be useful, their recommendations need to based on what apps have been downloaded and used by their customers. But the operators have little or no visibility of this – it all happens on the iTunes store or in GetJar etc. They can see which mobile web content is consumed but when we talked to operators few have actually looked at this data in any depth and even fewer have tools to enable them to do this in a useful way. And in some markets – such as Germany – there is a question over whether they are allowed to even use the data in this way.

But it’s clear that operators want to get involved in apps and there are some interesting examples – Orange have produced a couple of dozen and see a real opportunity.

Through an interesting presentation from mobile start-up TouchNote we see why they have to get more involved in mobile content and applications (MCA)

USD27 billion (EUR21 billion) in annual voice, SMS and data revenue will ‘follow’ subscribers that are likely to switch between mobile operators on the basis of an overall MCA proposition

Churn is the big problem operators have and they are beginning to recognise that it will be MCA that keeps people with them – so they need to start developing addictive content and services – stuff you just can’t live without. (Yes – that’s where our name comes from)

Some time ago it was reported that Vodafone were losing 18% of their contract customers each year and that it cost them £350 to replace each one. Now that amount of money would buy a lot of content and applications.

At the time we speculated that Vodafone could afford to take over Big Brother (C4 used to pay £60 million a year for it) and make it available exclusively to their customers across their mobile and web channels. As long as the churn reduced by 3 or 4 points, it would pay for itself.

Now that sounds radical but why can’t the operators use their money and reach to deliver exclusive content and services?

Why can’t Telefonica buy FourSquare and take location and check-in mass market? With a full service exclusively for Telefonica customers and a reduced version that they can invite their friends on other networks to join? If you knew that this type of service enabled you to find your friends on a night out in Hoxton, Henley or Heckmondwike it would be a powerful differentiator. And a real barrier to exit.

Why can’t an operator produce the next Kate Modern and allow their customers to see it first – with a YouTube airing a day later? Ad funding is feasible and its another reason to choose who you contract with. (We tried to sell this mobile soap format to UK operators in 2005 but couldn’t get anyone interested – and we’re about to try again with a new concept..)

With powerful players in both the software and hardware space building ever deeper mobile connections with people, the operators need to build a real dialogue with their customers. They have the data to make that an informed and useful dialogue, but they need content and services to be the topic of the conversation. They also need the right attitude.

My contract with O2 is now due for an upgrade and I’ve heard nothing from them. They know I queued up for the iPhone 3GS on launch day, so they know I’m a sucker for a cool new phone. And they know I spend a lot of money on data and roaming so they know I’m a valuable customer.

So why haven’t they contacted me to try and sell me an iPhone 4 or a new Android? Do they not have the systems and processes in place? Or are they worried that once they remind me I’m free to leave, I’ll go off to Carphone and see who has the best deal?

Either way they need a new plan if they want to retain their customers…

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