Vodafone announces mobile app store — but will it be enough?

updated
Vodafone has announced its own mobile application store , in an effort to keep up with other competing stores such as the phenomenally successful Apple iPhone App Store.

Vodafone is the world’s largest operator by sales, with 289 million subscribers.

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The biggest news is that it will offer billing so that it can charge its customers directly. This sort of service is surely to be loved by application developers, because until now the main way for billing through carriers has been the clunky “premium SMS”, where users have to pay first and then get what they want to buy.

Carriers are a natural player to handle billing as they already own the necessary customer information. Mobile phone users typically haven’t liked to use credit cards for micro-payments, despite long time efforts from banks, credit card companies and startups like Obopay to facilitate this.

If Vodafone gets this right, then this will likely spur payments in mobile. Down the road this could trigger additional growth in mobile commerce and advertising. On the internet, online advertising really only took off when the checkout process was established.

Vodafone will keep 30 percent of the app sales, which matches what Apple and Google’s Android take for their sales. RIM only takes 20 percent, but apparently does take more later on if an application seeks to conduct transactions after it has been downloaded .

But the question remains, will Vodafone’s strategy be enough to keep the makers of devices (like Apple, RIM, Android phones, etc) from encroaching on its turf? Apple now has a direct relationship with iPhone users, having negotiated with carriers like AT&T (which provide network service to the iPhone) for this right. AT&T may be able to say it offers the sexy iPhone, but it has ceded some valuable control, something that really concerns the carriers. We’ve heard some are in outright panic.

Apple’s success with its App Store is the envy of the entire industry, and carriers like Vodafone want to make sure they maintain a piece of the action as sales of smartphones increase. One theme at MobileBeat 2009 , VentureBeat’s conference for mobile industry leaders coming up in July, will revolve around “the ecosystem battle” for developers and consumers and how it affects every player in the mobile ecosystem — from carriers and handset makers to the application developers and even marketers and advertisers who have to fight their way through this maze . With Vodafone expanding its advertising network (announced yesterday), and saying it’s enjoying strong revenue there, it bumps against ambitions of other major mobile ad companies, such as Google .

With Apple, you need an iTunes account to pay for applications. With RIM, you need a PayPal account . Vodafone will split the revenues from the sales with developers, who will get a 70 percent share. It will go live later this year. Among other carriers, T-Mobile also has an app store , but it uses premium SMS for billing . And AT&T has a store called Media Mall , but it has been called annoying, overpriced, slow and buggy (a criticism that may not be fair, since the Mall really isn’t intended to be full-fledged store, but merely a “deck” on phones where users can go to find things like ringtones).

T-Mobile’s relationship with Android (T-Mobile offers the Android-based HTC phone) is a good test case for the competition between a carriers and their partners. Apparently, T-Mobile loves its relationship with Android and is eager to extend it . However, that relationship still is only now just getting off the ground, app sales are far fewer, and T-Mobile’s app sales offerings are relatively underdeveloped. Still, sources are telling us that Android is in the good graces of both T-Mobile and Vodafone because it offers the operators “more control” than does Apple. For example, Android’s app store states that if carriers want to prohibit a certain app, they’re allowed to. And if a carrier wants to put its app on an Android phone, it can do so. Not so with the iPhone, where Apple dictates everything. We’ve heard similarly that carriers are warmer toward Microsoft’s app store . Among other things, Microsoft promises to ban VoiP applications , which have been a pain for carriers because they allow users to make free phone calls.

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Nokia, the world’s largest device maker, has announced its own “Ovi Store,” which was to have operator billing in place. But earlier this month, Nokia said it would drop this option from its US store, which came as disappointing news. [Update: It turns out that this news, reported by Reuters, is wrong, according to Nokia. Spokeswoman Karen Lachtanski said: Our plans remain unchanged to launch with mobile and credit card billing in our target markets.]

Vodafone’s store has another advantage beyond its billing method: It can pinpoint a user’s location, and in a sign of increased openness, says it will share this network information with application developers and other partners, which would enable developers to create location-based services. The company pledged to release open APIs to ensure the applications work across the network.

Location-based services could help Vodafone — and eventually other carriers — differentiate themselves, since carriers alone have the ability to track their users in real time via GPS technology. This could prove useful in serving targeted advertising, for example.

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