App stores needed for emerging markets

Large opportunity exists for app stores to serve emerging markets, especially in Asia, but approach must differ from those catering to smartphones, says analyst.

COMMUNICASIA, SINGAPORE--Emerging markets in the region provide a potentially large business opportunity for mobile app stores, but a different approach is required for these marketplaces to be successful, according to an analyst.

Speaking at the CommunicAsia 2010 summit here Tuesday, Amrish Kacker, partner and Asia-Pacific head at Analysys Mason, said most mobile operators have identified app stores as an area of growth.

However, at present, the app stores that have proliferated mainly serve a smartphone audience which constitutes just 6 percent of the total number of handsets in Asia in 2009.

"Of course, disproportionately this 6 percent spend a lot more, but there is still a very large base of customers who don't have smartphones and will not have smartphones at least for the next three to four years," Kacker pointed out.

Mobile operators, he said, may find it worthwhile to consider what propositions they can develop for the feature-phone segment in Asia's emerging markets which will constitute nearly half of their total customer base in three years' time.

Within the feature phone market, SMS and ringtone services have been successful but paid games and app downloads make up only about 1 percent across developing markets in the region, he added.

"If you could create an ecosystem and take that needle from 1 percent to 5 percent, 6 percent or 10 percent, there may be a reasonable business opportunity there," he said.

Barriers lie ahead
Despite the potential, however, there are challenges to serving this market segment such as platform fragmentation, said Singapore-based Kacker.

There are potentially a thousand different handsets available today, which is a "very scary development challenge" as app developers typically need to be familiar with information such as the device screen-size, capabilities and the type of Java libraries available.

He pointed to Apple's App Store as an example of a successful model that others have tried to emulate.

With between 10,000 and 20,000 new apps every month, the App Store is a vibrant marketplace that offers substantial variety to consumers, he said.

Paid apps, which make up about 20 percent of the available total, are mostly offered at a "micro-pricing" model that makes users more willing to open their wallets. On the developer end, Apple also made it very easy for developers to submit an app. The prompt availability of apps allows content creators to monetize their offerings as quickly as possible.

While app stores built for Asia's emerging markets can learn from the App Store's success factors, Kacker noted that the definition of an app is likely to be "quite different" in emerging markets.

Unlike smartphone apps which users are typically required to download from a Web store, apps for the emerging market will call for different channels of delivery.

"If we look at emerging Asia, and today if we look at the profile of handsets that are out there in the market, about 60 percent of those handsets can't even [handle] a GPRS session--they are basically voice and SMS-only handsets," he explained. "To have [to go to] an app store to download something doesn't make sense because you can't create an Internet connection to download it."

App store delivery channels - Analysys Mason

According to Kacker, some services for basic and feature phones are already being offered in app stores targeting developed markets, that rely on interactive voice response where a user, for example, can tweet using voice. There are also SMS-based options, where Facebook users can post status updates via text messaging.

"We think app stores [targeting emerging markets] need to take into account the best of all these issues addressing the basic-phone and feature-phone [user] segments," he said.


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