Mobile operators and handset vendors frequently pre-install third-party apps on their smartphones, and operators sometimes add more later by bundling them in with over-the-air software updates. App distribution is a tricky game, and preloaded apps offer a great way for developers to get their app in front of a lot of people with a single effort.
Mobile Tag knows a few things about doing deals with operators and vendors, including AT&T and Samsung. We recently spoke with Fernando Saturno, Mobile Tag’s product director and chief marketing officer, about what developers should keep in mind when selling their app into the operator and vendor maket.
For years, most smartphones have shipped with at least a few preloaded apps. Who typically makes those choices: the handset vendor or the mobile operator?
Fernando Saturno: It’s complicated and variable. Handset manufacturers will embed software if they get upfront payments from software developers and/or shares of the revenue generated by the app.
The problem is that handset manufacturers don’t control what ultimately remains on the phone. An operator may decide to wipe the phone clean of everything except those apps that specifically fit their goals (e.g., promote data consumption or appeal to a particular demographic) and are branded according to their exacting standards. The operator can also engage in a negotiation with the software vendor along the same lines: providing placement at different levels of the home page depending on the level of guaranteed annual fees.
A lot depends on business and strategic considerations: whether the software is seen to enhance the position of the operator by providing a quality product which differentiates their offer, whether it aligns with broader strategic goals (e.g., reach a particular target demographic, their pricing bundles, etc.) and whether or not the software provider is willing to provide total or partial exclusivity (e.g., based on geography).
What do mobile operators typically look for when deciding which apps to preload onto their smartphones?
F.S.: They are trying to provide apps which make the phone more attractive, useful, fun and appealing to specific consumer segments, which is very tough given how much choice consumers have.
There are certain categories of apps (e.g., utilities, social networking) that are more or less universally useful and are usually deployed across all handsets. However, we’ve seen that some operators would install some niche apps, particularly data-hungry apps requiring constant connectivity (e.g., streaming radio) only on high-end devices sold in conjunction with all-inclusive data plans.
They know, to a greater or lesser extent, which apps are the most popular and which are required by every phone they market. The challenge for them is to get ahead of this curve with something that may be trending upwards in some area of the market and they believe will become more mainstream over time. It’s a very hard job to predict such trends.
Any advice for how developers can build relationships with operators and increase their chances of getting their app preloaded onto a phone?
F.S.: Offering exclusive rights on an app can certainly influence an operator’s willingness to pre-install your app, as this could potentially allow them to market its benefits to niche audiences (e.g., social or music apps to younger audiences, productivity apps to business power users, etc.). It may also be helpful (and required) to provide a variation of the app as a white label: branded in any way the carrier wants, which may also include some exclusive features, [or] features necessary to comply with legal or country-specific requirements (e.g., privacy considerations or legal framework differences between the U.S. and Europe).
It is important to think of the app as a complete product. So if it needs to integrate with other applications, services, any operator’s backend or billing systems, etc., this should all be thought through to guarantee a user experience that is as seamless as possible. Developers must always balance the demands of any additional development with the benefits of massive-scale adoption.
A good basis for a productive relationship with the operator is to gain their trust as the experts in your space. Be transparent, within reason, and provide them with a roadmap to put future enhancements in context. Start the conversation about how this initial pre-load is just the beginning of a mutually beneficial relationship.
How do operators decide which apps to preload onto which devices? For example, an LTE phone with a 5MP front-facing camera seems like a natural fit for a video calling app. Ditto for a music app on a phone with a built-in subwoofer. But what other factors guide the placement choices?
F.S.: Every operator has a team of people looking at ways to make their phone configurations shine to consumers. These teams are often broken into smaller working groups looking at how a phone or family of phones works best with which applications. Getting to know some of the product people at the operator is a really useful thing to do, and you can meet them at trade shows like CTIA.
The emergence of alternative pricing structures, all-inclusive data plans and a more competitive landscape (e.g., emergence of flat-rate operators) is making applications which enable “always-on” functionality — and the accompanying change in user habits — much more acceptable.
How do the business relationships between developers and mobile operators typically work when it comes to preloaded apps? Does the operator usually pay the developer for each phone that has the app preloaded, or is it sometimes the other way around?
F.S.: The developer may get a fee per pre-load, and the level of fee paid is a big discussion. Usually the developer has a much higher expectation than what the operator has. If you’re lucky, you can get a minimum guarantee fee plus engineering setup costs to adapt the app to each phone family. Finally, it may be possible to get a revenue share if the operator considers what you do to be strategically important for them.
Regardless of the financial arrangement, any misgivings a developer may have must always be balanced with the potential benefits — in terms of reach, user adoption and traction — that having a partnership with a Tier-1 operation makes possible. Even if only a portion of the users buying new phones activate your app (in itself a telling fact), you will have, as a developer, an instant sizable audience to test new features on and who will provide you the most valuable feedback needed to continue improving your app.
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