The battle to dominate the ecosystem
The first thing to recognize is that the mobile ecosystem is neither homogenous nor platform agnostic. Rather it is heavily influenced by a small number of dominating platforms that, if truth be told, wield the power to transform the entire industry and its key value chain components.
Platform markets generally standardize to two or three. In mobile, Apple* and Android™ currently dominate at around 80 percent market share. Yes; Android is the clear winner in terms of unit sales, but Apple is still the number one when it comes to value – either from revenue generated by applications, e-commerce commissions, and web traffic.
These platforms recognized early that success depends on an incentivized developer community, which in turn builds scale and financial investment in the form of more application development. In other words, app stores have become a key ecosystem control point. A platform’s place in the ecosystem therefore is largely based on the prevailing business and revenue sharing models between participants.
Competition drives innovation and choice
We have however also seen multiple competing business models evolving in tandem within the same geography and sector. In Europe alone there are dozens of mobile banking platforms, many of which offer what are essentially identical services.
Consumers want choice and a great user experience: nobody likes to be told that they can only use a certain phone or a certain payment card nor that they are tied to a group of service providers simply because of their platform.
Competing platforms are also advantageous for the sector. Competition drives innovation, ensuring the customer experience as well as value is – most of the time – a priority. It also helps ensure monopoly situations do not arise, focusing ecosystem participants on providing the best services at the lowest cost.
Keeping the field wide open
The interesting part of all this is that few – if any – organizations cater to just one platform. App developers often create different versions for different platforms. The same can be said for retailers and banks which, if tied to just one platform, would be putting themselves at a significant disadvantage and limiting their accessibility.
But participating on multiple platforms brings different problems. Increased cost, multiple service offerings, rising complexity and even competing go-to-market strategies create a management and resource nightmare.
Taking a bigger part of the value chain
While the beauty of a well-calibrated ecosystem is that there may not be one dominating centre of gravity, many organizations are currently focused on enhancing their position within the ecosystem to increase their gravitational pull and command a greater share of future spoils.
For example over the past 18 months almost every major mobile operator has announced some form of hub dedicated to developing, incubating and commercializing new ideas and services for their mobile offerings.
This is partly a defensive move to ensure that they as operators are not relegated to offering a low value utility. It also reflects emerging revenue opportunities such as OTT video and messaging services, data analytics arising from increasingly vast machine-to-machine connections, payments, smart metering and location-based services that would align well with operators’ business models while allowing a shot at earning a greater share of the customer’s wallet.
No single solution
The mobile ecosystem is dynamic, and platforms will continue to drive distinct aspects of the ecosystem. The iOS will, for the time being, address more ‘premium’ segments, and Android will focus more on the mass market and value segments in the developed and developing world. Any organizations playing in the mobile space – whether mobile operators, retailers, banks or technology vendors – will almost certainly want to participate in, and contribute to, a number of key platforms within the ecosystem (for now at least).
By Chris Woodland, Partner, KPMG in the UK
* Apple is a trademark of Apple Inc., registered in the U.S. and other countries.
Android is a trademark of Google Inc.