Unfiltered

While the iPhone app store has quickly stamped out 75,000 apps and stolen the lion’s share of attention, is the app store the right approach?

An interesting post over on the Telco 2.0 blog (run by U.K. consultancy STL Partners), which earlier this year made the bold claim that Litmus, the developer program for U.K. mobile operator O2, is “better than the Apple app store.”

Says the consultancy in a follow-up this week taking a closer look at how Litmus has developed:

We based it on the deep integration of Litmus with the range of social and business enablers it provided in addition to the O2 network APIs. As well as a generous revenue share and quick payment, Litmus offered access to O2’s billing system to help cash collection, crowdsourced testing from Mob4Hire, Web-hosting services, and the tantalizing prospect of access to an internal Telefonica venture capital group.

Despite putting those important elements in place, not all is rosy in Litmus-land, Telco 2.0 reports. Only 360 apps have been posted so far and traffic on Litmus email lists and developer message boards is very light. Not a good sign.

The biggest problem is the size of the addressable audience, they contend. O2 UK has 18 million subscribers; Telco 2.0 estimates if 10% are aware of the apps available, that’s an audience of about 1.8 million less-than-rabid subscriber. As a further challenge to the program, O2 is distributing the iPhone in the U.K., so most likely its most app-hungry mobile users are on that platform, and buying out of that app store.

So game over, right? Not quite. O2 execs told Telco 2.0 they see Litmus less as an app store and moer as a way of “crowdsourcing decisions about which applications to promote to the mass market,” rather than relying on the hunches of product managers.

Not exactly the path to mass market success, unfortunately.

Coincidentally, we were speaking with STL/Telco 2.0 analyst Chris Barraclough and he addressed the challenge service provider developer programs face. One of the biggest competitive challenges, he noted, is that despite opening things up to third party developers, Apple has actually created the type of “walled garden” that telcos long benefited from but are no longer able to create.

What Apple (and similarly Google) “have managed to do is create a relatively integrated solution,” Barraclough said. “They’ve opened up to partners in some areas on the supply side, like games or music [but with relatively strict controls], but beyond that it’s closed very much like an operator walled garden.”

Landline service providers and even mobile operators can’t build such universal communities on either the user or developer sides of the equation, he noted, because of practical service-area and regulatory limits.

Instead, telecom operators face the difficult challenge of finding an altogether new way to participate in the digital value chain as both partner to content and service providers and aggregator for their own subscriber base.

“This is not a question of [service providers] inserting themselves between upstream service companies — like advertisers, developers and retailers — and buying stuff from them and reselling it as [their own branded] services,” Barraclough said. “[Rather] it’s about helping those companies connect with their customers more effectively and getting the hell out of the way,” while taking a fair cut of the margin in the value chain.

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