Mobivox: App Store Downside is Real

App stores offering lots of downloadable software are a good thing, right? Such marketplaces create application richness and boost the attractiveness of the devices they are intended to work on, while stimulating a bit of incremental revenue and stimulating user upgrades to smarter phones and data plans.

 

Well, "sort of," Peter Diedrich (News - Alert), Mobivox CEO, might say. “When I ran a wireless carrier, this was a terrifying thought, absolutely terrifying,” he said.

 

And the problem is the attendant increase in customer support costs, ranging from employee training to help desk operations.

 

"Whether app providers like it or not, when there is a problem the customer looks at the logo on the phone and calls that customer service desk," he notes. That's a challenge enough when most of the volume is generated either by billing-related or device-related issues. Now multiply that challenge by the number of programs sold in the app stores.

 

All of a sudden, a "good" thing can become a "dissatisfaction creator" and then churn driver. The implication for service providers: "value added services should be easy for users to use, easy for carriers to support, and should address as much of a market as possible," says Diedrich.

 

"The frictions of downloads, in my view, eventually lead to application obsolescence," he says. Device independent and hosted applications make more sense, he argues. Larger numbers of devices and potential users can be addressed quickly that way. Think of the difference between text messaging, available to virtually all devices and users, and apps that are run on just one or several smart phone models supported by just one service provider.

 

Such an approach also simplifies a more controlled, centralized and transparent way to support applications that is consistent with current business systems and familiar to channel partners.

 

Also, Mobivox has found that users generally favor subscription packages for just about every kind of service offering Mobivox provides and supports, he says. In its surveys Mobivox likewise found that a very low percentage of high value, power user customers actually do not use free service benefits such as toll-free calling to other members.

 

"They just want to use the service and pay for it. It’s that simple," says Diedrich. Conversely, Mobivox also found that some users only use the free service features. But, these have a finite, real cash cost to us. And our analysis shows their non-purchasing behaviors don’t ever change.

 

The clear implication is that Mobivox has to attract and to retain customers who want to pay for value, rather than gaining undue numbers of users who represent the "free" portion of the "freemium" business model.

 

In some ways, one sees here more than a simple concentration on adding incremental value and revenue. In some ways, there is an inversion of "value." Lots of money is invested to create the basic calling platform, with the typically-expected features. But the use of those features is "low or no" margin.

 

The value and the profit instead is built on the incremental value represented by the software built on top of the basic engine, even when a disproportionate share of the investment is on the basic engine.

 

That's the sort of thing that happens in a market when low development and entry costs lead to many "free or cheap" entry points and the task then is to create a sustainable business model on the "upsell."