App developers, operators face revenue sharing challenges

Different models apply in developed and developing markets

Mobile service subscription models have emerged as a major factor as mobile operators and developers debate ways to balance revenue sharing models, increase the number of local applications and encourage innovation.

During a roundtable discussion in Barcelona at the Mobile World Congress on how to develop applications for the mass market, the post-paid and pre-paid subscription models were cited as part of the difference in remuneration of developers in developed versus developing countries.

"In most developing countries, 90 percent of the subscribers are on pre-paid service and any money spent on buying an app reduces the ARPU [average revenue per user]; in developed countries, payment plans are fixed and anyone buying an app will have to spend more. That's why there is a difference in revenue share," said Marco Quatorze, head of VAS at America Movil, a leading services provider in Latin America.

When partnering with an operator, the developer will enjoy access to marketing channels and advertising, which Quatorze says should be factored into the revenue sharing agreement.

Nokia has a revenue sharing model of 70 percent to the developer for apps on the Ovi store, but some mobile operators prefer to pay a fixed amount for the app then bundle it together with other services.

"In some cases, Nokia has been absorbing the costs in order to protect the developer. Our engagement with developers at a local level has allowed us to study the markets closely," said Mary McDowell, executive vice president, mobile phones, Nokia.

Apart from differences in spending habits, McDowell said that consumers in India and China prefer to first use the app and then pay for it later, compared to Western markets where users download apps and are immediately billed.

Lack of good billing-information sharing between developers and operators has also left some developers in developing countries feeling shortchanged because they are unable to track the number of downloads.

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