Attack of the Software Stores

It seems one of the biggest unknowns for 2009 is who won’t launch a mobile software store.

I’ve been rooting around the new mobile version of the not-so-new Palm Software Store, powered in this case by PocketGear. For users, the Software Store is straightforward enough, with a solid variety of free and paid programs across most categories. For developers and content providers, it’s a reminder that Palm intends to compete with the like of Nokia, Google, Apple and RIM for their attention.

But this post isn’t just about Palm. It’s about mobile software stores… lots of them from all quarters. Service providers such as T-Mobile USA (web2go), O2 (Litmus) and Orange (an integrated cross-platform initiative) are also creating software store initiatives that will allow developers direct access to their subscribers.

Irrespective of these platforms’ merits and strategic objectives, you have to question the efficiency of a mobile market with tens of stores from numerous diverse participants. Will the market support a store on every corner, figuratively speaking? I think the answer’s a qualified yes.

Vodafone’s announcement last week of support for Android (covered by Geoff here) is tantamount to an endorsement of the Android Market store. Similarly, Nokia has won significant support for its Ovi services suite from Vodafone, TIM, T-Mobile, Orange and other influential network operators. Apple’s story is well reported, and there is every reason to believe a RIM offering will gain similar acceptance.

While terms of these agreements are closely guarded, it’s clear that service providers can command a share of revenue generated by the platforms. In this way, the network’s a “landlord” and the store a way to unite access to the short and long tail of third-party goods. The store assumes greater risk in terms of research and development, marketing, platform costs, aggregation costs and service introduction. The best of these will push up average revenue per user, and help carriers attract and retain high value subscribers. The worst will fail, with little impact on the network provider.

Conversely, initiatives such as Ovi, Android Market and the App Store establish control points for their owners’ strategies of reaching out directly to consumers. These initiatives are already creating vast new sources of information that will be applied to value-generating activities that are independent of the network provider. The offerings from T-Mobile USA, O2, and Orange don’t exclude third-party initiatives, but if successful they would go some way toward cutting out the middleman, be it Nokia, Google or Apple.

Assuming numerous me-too offerings in 2009, store owners run the risk that their offering will be indistinguishable from its competitors, unless, as Apple has shown, they retain tight control over the four P’s — product, pricing, promotion and placement. Most won’t have this luxury.

The rash of software store launches and announcements in 2008 (Google, Nokia, RIM, Palm, most operators) and the likelihood of more (Samsung, Microsoft, Access) are creating a new level of distribution complexity for developers and content providers. We’ll cover platform prioritization criteria for content providers in a future research piece.

I can state categorically that CCS Insight will not launch a mobile software store in the next 12 months. It seems, though, that we’ll be an exception.