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Mobile commerce sees 86pc annual growth: study

Of the seven most common business models that brands, retailers, publishers and developers use to monetize applications, mobile commerce showed the most gains year over year, according to a study by Appcelerator and IDC.

Mobile commerce showed 86 percent year-over-year growth, the biggest jump out of the seven monetization tactics that survey respondents were asked about—a strong vote of confidence in mobile commerce as a viable long-term business model. Appcelerator and IDC also found that PayPal scored the top spot among in-application payment platforms.

Mobile Commerce Daily’s Dan Butcher interviewed Scott Schwarzhoff, vice president of marketing at Appcelerator, Mountain View, CA. Here is what he had to say:

What are some of the key takeaways from the survey related to mobile marketing and advertising?
There is a movement away from “brand affinity” applications that do little more than provide free infotainment content and toward a utility model that rewards repeat engagement and ongoing connection with the brand.

Social, location and cloud-connectivity are driving this shift.

Last year, 64 percent of respondents said they connected their applications to the cloud, while this year that number jumps to 87 percent.

Similarly, 78 percent of respondents say they are now using location in their applications and 75 percent said Facebook will be in their apps this year.

Location sets context to understand when and where cloud-based services should be delivered, and omnipresent social connectivity encourages adoption that would otherwise be lost from discoverability issues in app stores.

As applications become increasingly usage-based, the business models underlying them change as well.

We polled respondents on seven business models in use today, and the three models that showed the most gains were mobile commerce (86 percent year-over-year growth), advertising (59 percent growth), and in-application purchases (56 percent growth).

The slowest-growing business model?  Free “brand loyalty and engagement” applications.

What are the key takeaways related to mobile commerce and payments?
As applications move from an upfront content-based model to an ongoing usage-based model, mobile commerce and payments dramatically increase in their importance.

We found several interesting findings in this area: PayPal (53 percent of respondents) leads Apple iOS (52 percent) as the number-one preferred method of payment in applications.

This is driven by the increase in importance of monetization of Android applications and PayPal’s focus on sophisticated micropayment capabilities such as split payments, chain payments and an overall robust payment SDK.

PayPal and iOS in-application payments lead AdMob and iAd in terms of interest.

We find this to be a strong vote of confidence in mobile commerce as a viable long-term business model.

Appcelerator and IDC also developed a three-tier “Mobile Maturity Model” that separates brands and businesses into three adoption phases: exploration, acceleration and innovation.

The major criteria for the innovation phase is providing transactions in an application.

When asked which phase they were in, innovation jumped from 9 percent to 20 percent of respondents.

To us, this indicates that mobile payments are increasingly being considered as a major source of monetization opportunity for developers and businesses large and small.

Which smartphone/tablet platforms/operating systems have the best prospects for dominating the connected devices OS market?
Increasingly, the question of which platforms dominate the connected device OS market, for example, iOS and Android, is shifting to a more problematic issue of prioritization.

Now, the question we hear repeatedly is, “After iPhone, do I go Android or iPad?”

Appcelerator’s and IDC’s recommendation? For pure market share, go Android. For enhancing the experience, go iPad.

However, this picture is about to become even more unclear as the 85 tablets announced at CES hit the scene in late 2011.

Now, more than ever, businesses and brands need to consider a flexible mobile application strategy that can stand up to the massive amount of innovation that is occurring in devices, capabilities, operating systems and application business models.

What is the outlook for the mobile space in 2011?
Going back to our Mobile Maturity Model, this is the year of acceleration.

In 2010, 66 percent of respondents said they were either just getting started or in the exploration phase of mobile adoption.

A simple application, typically on just the iPhone, lobbed into the App Store for branding purposes is no longer viable.

This year, 75 percent of respondents said they are either in the acceleration or innovation phase—only 25 percent remain in the exploration stage of just getting started.

Advanced phases are defined by multiple applications (the average number of applications is increasing from 2.3 to 6.5 this year), multiple devices (doubling from two to four in 2011) and engagement (social, location and the cloud define the new application experience).

What advice can you give to brands, publishers and merchants/retailers based on the findings of the study?
The need to define a mobile application strategy now is critical. There are simply too many new capabilities, operating systems and devices coming into the market to look at each independently.

Instead, a business needs to assess their strategy from four different perspectives:

No. 1, platforms: “I need my iPhone app” was a common phrase in 2010. No more. Cross-platform is mandatory, as is deploying to multiple form factors, including tablets.

No. 2, customer experience: We are shifting away from simple content-based applications that inform or entertain to more complex and engaging applications that make use of location, social and cloud services to transactional applications such as mobile commerce.

As the customer experience evolves, so do the opportunities to transform the relationship between brands, publishers, merchants/retailers and customers.

No. 3, people: There is an increasing shift from outsourcing to in-house development.

What starts as a tactical out-sourcing of development “to get an application done fast” quickly turns into a more strategic discussion around competitive advantage, control over a sustainable long-term mobile strategy that is well integrated with an online strategy and rapid time-to-market considerations.

No. 4, technology: In order to meet the demand for more applications, new devices, frequent updates and deeper customer engagement, a business needs to drive down costs, time-to-market and complexity by developing and leveraging reusable components.

For example, a media company needs to consider how to plug into its content library, backend analytics, video streaming, social connectivity, location-based notifications and advertising systems in every application it produces.

This enormously challenging exercise becomes exponentially harder and more complex for every new application and platform.

Ultimately, this results in the need for a cross-platform, fully integrated mobile architecture that spans a company’s entire application portfolio.

Appcelerator and IDC believe it is critical to have a long-term yet flexible mobile strategy in place to deal with the explosion of opportunity that mobile offers.

The four perspectives described above provide a foundation upon which a business can begin planning a well-constructed mobile architecture that stands the test of time.

Final Take
Appcelerator execs