Bad news for mobile operators: apps don’t generate revenue and don’t attract customers

Consumers still prefer to text and talk as app-athy takes over – a stark warning for mobile operators who should focus instead on rich communication services

Cambridge, UK, 14th October 2010 – Consumers’ appetite for downloading apps appears to be over; normal call and text services remain the most heavily used revenue generating functions on mobile phones, research commissioned by OpenCloud has found. In a survey of 1,000 UK consumers, 45% of all mobile users have the ability to download apps but only 39% of those who can downloads apps, regularly do so.  Significantly, 38% of smartphone users only download free apps, while 50% of smartphone users downloaded no apps in the last month.

By far the most frequently used function on mobile phones is still text messaging, with 83% regularly doing so compared with the other top five features – taking pictures (47%), mobile internet (29%), storing and playing music (28%) and emailing (22%). The mobile phone is certainly more than just a ‘telephone’, however these are local features of the mobile device itself and do not deliver incremental revenue to the operator.

OpenCloud’s My Mobile Lifestyle 2010 survey, conducted by research agency Loudhouse, looked at consumer attitudes to mobile phone usage, beyond just voice calls, in particular apps, and the types of services they desire. These significant findings are a warning to operators who have been tempted by the siren call of the “App Store”.

Consumers care more for the functionality of their mobile phones and the pre-loaded key apps, such as location-based services (maps) and social networking, than downloadable apps themselves. The research also found that the typical user does not make much use of their apps once they’ve downloaded them following the initial “app download honeymoon”. For example, by far the most frequently used function on mobile phones is still text messaging, with 83% regularly texting.

Additionally, the revenue generated from app downloads is perhaps not the nirvana first hoped for as half the respondents only downloaded free apps anyway. The research strongly suggests that Operators should concentrate their app strategy on enhancing their traditional comms services and delivering rich communication services, as this is their core skills area and what the users value in their phone.

While the penetration of social media and 3G applications has certainly seeped into the nation’s consciousness, they are not the key factors for consumers when choosing their mobile phones. 21% of users identified social media services as their main reason for getting a smartphone, while 25% identified map and location based services – these ranked 8th and 7th respectively for key drivers. Compared with the top reason, at 46%, of simply enjoying “having the latest gadgets”, these are only apps that people want, downloaded and regularly use.

It’s clear that apps themselves do not influence mobile users in their decision making process, however consumers increasingly favour social media and “one-to-many” communication services.

What will have mobile operators even more concerned is the apathy of smartphone users towards apps, with the average user only having downloaded 14 apps and a fifth never having downloaded an app at all. Furthermore, 43% of smartphone users are not planning to download any more apps.

“This research indicates that mobile operators need to look at their mobile and smartphone strategies. We know that consumers are increasingly savvy with technology and, in particular, their use and expectations of mobile phones. However, apps are not the reason consumers buy their phones, and they are certainly far from being the ‘cash cow’ operators hoped for,” said Jeff Gordon, CEO at OpenCloud.

“The results echo research we conducted on this area last year, and further strengthen the proposition that the fundamental reason people have phones is to communicate with each other.  Last year, we highlighted the dangers of mobile operators putting all of their eggs in the application market, and these findings have reinforced our stance. Apps are not essential for consumers’ mobile lifestyles and with 85 per cent of operators’ revenue still coming from person-to-person communications, this research indicates that although mobiles contain lots of useful features and functions, few of these deliver incremental revenues for operators and, instead, are part of the competitive handset market. What it does suggest is that operators should concentrate their activities around rich communication services, such as location-based services and improving the quality of voice calls, and look to innovate here.”

To receive the Executive Summary of OpenCloud’s My Mobile Lifestyle 2010 survey, please click here.