aggregated survey of sustainable business models for agile mobile

Journal of Service Science Research (2012) 4:97-121

DOI 10.1007/s12927-012-0004-3

Alexander Becker, Andreas Mladenow ( ), Christine Strauss Department of e-Business, School of Business, Economics and Statistics, University of Vienna e-mail:{alexander.becker, andreas.mladenow, christine.strauss}@univie.ac.at Natalia Kryvinska Secure Business Austria-Security Research e-mail: [email protected]

Aggregated Survey of Sustainable Business Models for Agile Mobile Service Delivery Platforms

Alexander Becker, Andreas Mladenow, Natalia Kryvinska, Christine Strauss

Received: 21 February 2012 / Accepted: 31 May 2012 / Published: 30 June 2012

© The Society of Service Science and Springer 2012

ABSTRACT Mobile technology has undergone a drastical evolution within the past few years. Cell phones

with small monochrome displays-designed solely for phone calls and text messaging-have

turned into miniaturized computers with dual-core processors. Combined with 3G standards

such as UMTS, mobile devices nowadays offer almost the same freedom in exploring the

Internet as desktop PCs do. Apple’s iPhone, Google’s Android, and the availability of mobile

broadband Internet have changed the mobile landscape, and-as a consequence-the way in

which mobile services are delivered to their users. Thus, we focus in this paper on the theory

and implementation of four distinct platform models for mobile service delivery. Further-

more, we perform a classification of platform agility features-business and technology

oriented-along with a comparative analysis of their effectiveness.

KEYWORDS

Mobile Service Delivery, Platform Models, Classification, Comparative Analysis, Business Models.

98 Alexander Becker, Andreas Mladenow, Natalia Kryvinska, Christine Strauss

© The Society of Service Science and Springer

1. INTRODUCTION

The mobile landscape has evolved from devices purely built for telephone calls and text

messaging to sophisticated pocket computers called smartphones, while mobile Internet

connections have shifted from slow and costly GSM connections towards 3G broadband

access. At the same time, new ways in which consumers use mobile Internet, and in which

mobile service applications have emerged, breaking the traditional dominance of mobile

network carriers over service delivery (Gerum et al. 2004), and leading to a more modular

market environment with competing platform models (Ballon et al. 2008). With mobile

devices getting more widespread and technically advanced, potential business models have to

be developed or existing models need to be adapted. The aim of this paper is to analyze and

illustrate the ways in which current and emerging mobile service platforms cope with the

characteristics of platform competition, using strategies centered on platform leadership.

Using Ballon & Walraven (2008) as a starting point, we will provide a basis for further

exploration of the topic. Besides, our article reflects recent developments in the mobile

sector. After all, the past two years brought along the mass market entrance of tablet PCs,

Android’s inception and rise to market leadership for mobile operating systems, Symbian’s

fall, a new alliance between Nokia and Microsoft, and an on-going battle between open and

closed systems (i.e., Google vs. Apple).

As the majority of scientific key literature, taking into account the latest trends of mobile

business, has yet to be released, considering that most of the developments mentioned before

have occurred in the past months. Scientific journal articles, on the other hand, often take at

least a year to be published, starting from an initial call for papers, going through review and

revision processes, until finally being released. Therefore, while the theoretical framework of

this paper (e.g., the classification of the four platform models) is based on scientific journals,

some of the most recent developments must inevitably be backed up by newspaper articles

and various Internet sources.

Before analyzing various competing platform models for mobile service delivery, basic

terms used in this paper, need to be explained.

• As regards “mobile business” and “mobile service delivery”, a definition of what

constitutes a mobile device must be given first. For the purpose of this paper, devices

Aggregated Survey of Sustainable Business Models for Agile Mobile Service Delivery Platforms 99


which are covered by the term intelligent mobile terminal or IMT (Isckia & Gueguen

2011) will be the object of discussion. This includes PDAs, smartphones and the most

recent trend of tablet PCs such as Apple’s iPad. Laptop PCs do offer a certain degree of

mobility, but usually run the same operating systems (e.g., Windows 7) and applications

as desktop PCs; hence there are no distinct ways of service delivery as far as the subject

of this paper is concerned.

• The term “mobile service delivery” implies that mobile devices are able to offer more

services than just simple phone calls and text messaging. Nowadays, they are also used

for web browsing (e.g., news, shopping), entertainment (e.g., music games), receiving

broadcasts (radio and television streaming), payments (e.g., “Paybox” or the upcoming

Near Field Communication) and other services such as email, GPS or even social

network (Funk 2009). These services are usually delivered through applications.

• Several definitions of the term “platform” (from a mobile viewpoint) exist. While

technically it can be described as “a shared, stable set of hardware, software, and

networking technologies on which users build and run computer applications” (Bres-

nahan, 1998), its function is commonly defined as mediating between two or more

groups of stakeholders, usually a demand and a supply side, to extract revenues from

both sides, implying that the platform must generate some kind of added value for all

parties involved (Ballon et al. 2008, Gonçalves & Ballon 2011, Holzer & Ondrus 2011,

Zoric 2011). To emphasize their mediating role, mobile platforms are also known as so-

called “mobile middleware” (Ballon et al. 2011).

• The two main categories of models for mobile service delivery are portal-based and

device-centric models; the telco-centric platform model and the aggregator-centric

platform model defined by Ballon & Walravens (2008) are instances of the portal-based

model, whereas device-centric models distinguish between closed and open technology

approaches (Holzer & Ondruz 2011). Examples of the aforementioned models are

Vodafone Live!, Facebook Mobile, Apple’s iPhone and Google´s mobile operating

system Android (Isckia & Gueguen 2011, Funk 2009).

After introducing basic terms, concepts and models, in Section 2 four platform models for



mobile service delivery will be described in depth: for each of the four models the theoretical

foundations the current market conditions and a detailed discussion will be provided.

2. FOUR PLATFORM MODELS FOR MOBILE SERVICE DELIVERY

2.1 The Portal-Based Model I: Telco-Centric Model

2.1.1 Theoretical Model

The telco-centric model by Ballon & Walravens (2008) is the eldest and most basic model

for mobile service delivery. As the name suggests, the network carrier (or the telco provider)

is the major and controlling stakeholder of this platform approach. Within its role as a

platform operator, the network operator mediates between mobile customers and mobile

service providers (cf. Figure 1).

In the center of this platform’s service provision is a portal site only accessible by the

mobile network’s customers, and containing an aggregated selection of content by third party

service providers or exclusive partners of the network operator. To generate revenues, the

portal provider charges its customers fees, and pays the service providers according to

individually agreed upon revenue sharing plans (Ballon et al. 2008). Due to its operator-

controlled selection of content, which cannot be influenced by the end user, this platform

model is often referred to as a so-called “walled garden” approach (Gonçalves & Ballon

2011, Holzer & Ondruz 2011, Ballon et al. 2008). The most common services provided were

news, ringtone and picture downloads shopping sites, weather forecasts, stock prices, or chat

applications.

Figure 1. Players and Their Functions in Telco-Centric Platforms

2.1.2 Current Market Conditions

The telco-centric model stems from an era of mobile handsets with small, monochrome,

Mobile Customer Owns devices and pays

mobile subscription

Mobile Service ProviderDevelops services

and provides content

Mobile Network Operator Operates the mobile network and

provides the control portal



low-resolution displays and slow GSM/GPRS connections. To navigate websites, the Wire-

less Application Protocol (WAP), a simplified version of wired standards like HTTP, was

employed. These websites had to be specifically tailored to mobile browsers; lacking any

interoperability, WAP browsers required websites to be written in Wireless Markup Language

(WML) instead of HTML (West & Mace 2010). Back then, providing mobile services was

mainly controlled by the mobile network operators, phone manufacturers, and selected

application and content providers (Holzer & Ondruz 2011). Considering that WAP bro-wsers

could not freely browse the Worldwide Web, as we know it today, the necessity for a portal

containing links and content appears to be a logical result. Today, most telco providers still

offer their own mobile portal sites, but their importance in mobile service delivery has

decreased significantly. Gonçalves & Ballon (2011) have come to the conclusion that these

walled garden portals “have failed or are experiencing slow take-off”. As a result, the world’s

largest mobile network operator Vodafone (2010) reacted in 2009 with a re-launch of its

Vodafone Live! portal as Vodafone 360 by incorporating social networks, personalization

options, and new application stores to compete with the platform models of Apple and

Google (O’Brien 2008, Green 2008, Dredge 2009), which are going to be discussed in this

paper later.

2.1.3 Discussion

Modern smartphones and tablet PCs are running Google’s Android, Apple’s iOS, or even

Windows 7, thus being able to browse HTML websites and the WWW in an unaltered form.

Meanwhile, WIFI and 3G broadband Internet access are rapidly becoming the industry’s de-

facto standard, allowing mobile users similar freedom in exploring the Internet as PC users.

Hence, there is no longer the need to pay a subscription fee for portal access to spoon-fed

content such as news, weather, or sports results. This model lends itself more as a free

service; as an additional benefit and an incentive for customer retention. Also, it might be

beneficial to elderly users, who do not have the ability to search and install desired appli-

cations but rather use a portal with their mostly needed services.

Lastly, it is still viable for offering “premium” services, which are not available in the

Internet for free. Application stores, mobile television, or live-streaming of sports events



come to mind as suitable content. The latter being the topic of recent discussions (Protalinski

2011) as it offers potentially attractive revenues, but also comes with high entry barriers for

mobile network operators.

2.2 The Portal-Based Model II: Aggregator-Centric Model


The aggregator-centric model by Ballon et al. (2008) does show similarities to the telco-

centric model, as it also revolves around a portal site (or service aggregation platform) with

aggregated content. However, this model offers interoperability, as the portal site is no longer

controlled by the network operator but by an independent third party, resulting in a portal,

which can be accessed by anyone from any device. Two of the most relevant examples to

date would be Facebook (mobile) and iGoogle.

The main actors and their relations are almost identical to those mentioned in Figure 1,

with the prime exception that the portal is being provided by a third party, thus “degrading”

the network provider to its original role of merely granting mobile network access. Up-and

downstream cash flows to and from the portal provider also differ, as the portal site is freely

available (Ballon et al. 2008). Consequently, no subscription fees have to be paid for using

the portal, while service providers develop their own applications via an openly available API

(Application Programming Interface), which can be published with no regulation or just

slight regulation from the providers (cf. iGoogle Developer FAQ and Facebook Developers

Documentation). Revenues are generated either indirectly (e.g., via advertising) or, in the

case of real Platform-as-a-Service (PaaS) models, by charging developers for development

space, hosting costs, and computing resources (Gonçalves & Ballon 2011). However, the

latter will not be covered by the following two examples, as it refers rather to the subject of

cloud computing (Mladenow et al. 2012) which in turn goes beyond the scope of this paper.

2.2.2 Current market conditions

As mentioned, two of the most relevant examples for mobile service aggregation platforms

are the mobile versions of iGoogle and Facebook respectively. Thus, the remainder of this

subchapter will now focus on these two examples.



The mobile version of Facebook has almost reached the immense popularity of its original

version; as of May 2012, it is being used by about 500 million users per month (Constine

2012), which is twice the amount of the prior year (Protalinski 2011) and already equates to

more than half of Facebook’s total user base In addition to the core features of this social

network platform (such as a blogging-system, chat function, picture and video sharing),

Facebook also facilitates the integration of self-made applications into the platform. For this

purpose, Service Development Kits (SDK) supporting JavaScript, PHP, iOS, and Android are

being freely provided. The actual application is still located and hosted by the developer, who

rather benefits from access and integration to Facebook’s huge user base (Anson 2012). Both,

Facebook and the application providers generate direct and indirect revenues. Advertisements

are placed in Facebook as well as directly within the applications, the first generating re-

venues for Facebook and the latter for the application provider. Direct revenues are generated

by micro-transactions within these applications, most notoriously in Facebook games, where

players can buy virtual goods for real money (Bodle 2011). A business model which should

not be underestimated, as Zynga-host of the most popular Facebook games CityVille and

FarmVille-alone generated $400 million in profits and $850 million in revenues in 2010,

valuing the company between $7 and $9 billion (Wingfield et al. 2011). Formerly, the

application provider could choose to handle payments either on their own, or by using

Facebook’s virtual currency called Facebook Credits for a 30% commission. This system was

introduced in July 2011, securing Facebook a 30% share on all micro transaction revenues by

game developers like Zynga (Osbourne 2012). This coincides exactly with the revenue

sharing quota for applications imposed by Apple and Google (Van Buskirk 2010) delivering

further proof that we are indeed looking at directly competing platform models for mobile

service delivery.

iGoogle, a second major player among aggregator-centric models, acts as a personalized

portal screen for the Google search page, which can be customized by users with widgets

called gadgets. These gadgets can be compared to Facebook’s applications and range from

newsfeeds, weather forecasts, or integration with Google’s email service GMAIL to self-

made gadgets by independent third party developers (Udell 2009), often aiming at integrating

a plethora of most-used websites to aggregate their content into a single portal which can be



accessed from any device (Deinert & Magedanz 2010).

2.2.3 Discussion

Facebook’s move towards forcing application providers to use Facebook Credits for their

micro- transactions, and hence to pay a global 30% commission, is an impressive display of

exploiting platform leadership. The fact that subordinated platform actors like Zynga could

not offer their services without Facebook and its user base, enabled platform leader Facebook

to impose such a regulation and directly tap into their revenue streams. It should be

mentioned, however, that this is not per se an issue of mobile business alone. And unlike

assumed by Ballon & Walravens (2008), Facebook applications still do not run on all modern

mobile devices. A lot of smartphones can only use the core features through the official

mobile version, but technological advances and tablet PCs should bring the full range of

Facebook applications to the majority of mobile users soon. Also, the fact that already 50%

of all Facebook visitors access the site from a mobile device can and must not be neglected.

iGoogle, on the other hand, seems to be less focused on generating direct revenues. Instead,

it appears to be yet another additional service to collect user data and strengthen customer

retention. An Internet user, who is deeply integrated into the Google network, with a

personalized iGoogle portal set as home page, is certainly less likely to use other search

engines. Just like Facebook Mobile, iGoogle is, of course, not solely a mobile platform, but

rather concerns mobile and stationary devices alike.

2.3 The Device-Centric Model I: Closed Technology Approach

We have now described two portal-based approaches to mobile service delivery in

Subsection 2.1 and 2.2. The first one is the telco-centric model, with a portal controlled by

the mobile network operator and only accessible by its subscribers. The second one is the

aggregator- centric model, delivering a similar portal-controlled by an independent platform

provider with likewise independent application providers-which can be accessed by any

device and thus offers interoperability. The device-centric model, on the other hand, follows

an approach, which is based on a device or, more specifically, a combination of a device and

its operating system. It does, however, share the walled garden approach with the telco-



centric model; for several reasons, which are discussed in the following.


The closed technology approach to a device-centric model according to Ballon et al. (2008)

emerged with the release of Apple’s iPhone in 2007, and is based on the smartphone techno-

logy. Smartphones, unlike their predecessors, are characterized by large touch-screens, html-

browsers, and real multi-tasking-capable operating systems which run complex third party

applications, whereas traditional cell phones were only able to use limited applications

written in BREW or the Java-based J2ME (Singh et al. 2008). Unlike the aggregator-centric

model, the device-centric model leads to more drastic changes in the traditional, telco-centric

mobile value chain presented in Subsection 2.1. Mobile network operators lost control on

devices and service provision, while the integration of service providers into the platform is

now more informal.

The device as a platform uses application portals (like Apple’s AppStore) to mediate

between application developers and consumers as depicted in Figure 2, usually charging the

application provider a brokerage fee of 30% per application and transaction (Apple 2011,

Van Buskirk 2010) To create their content, application developers have access to SDK

provided by the device manufacturer. These toolkits include libraries, debuggers, handset

emulators, and other tools to create new applications (Holzer & Ondruz 2011).

Figure 2. Mobile Application Distribution Process (Holzer & Ondruz 2011)

Represented by RIM’s Blackberry, Microsoft’s Windows Phone 7 (formerly Windows

Mobile), and Apple’s iPhone, the device-centric model constitutes a closed technology



approach (or cathedral model) using proprietary software as a basis (Holzer & Ondruz 2011).

Aside from other structural and theoretic traits, the main noticeable difference for consumers

and developers-in comparison to the open (source) systems which will be discussed later – is

that these devices only allow the use of their own native applications or applications acquired

from the official portal (e.g., AppStore) respectively. So whenever a consumer wants to use a

developer’s application, the intermediary (i.e. the application portal and its 30% brokerage

fee) cannot be bypassed. In the case of iPhone, developers have to be registered and their

applications to be approved by Apple, following strict guidelines and approval processes

which have been criticized for their lack of transparency (West/Mace 2010).

As seen in every platform approach other than the telco-centric model, the mobile network

operator is, again, reduced to the role of a network provider without impact on platform,

portal, and mobile services provided (Ballon et al. 2008). However, with the ability to browse

full HTML websites combined with the smartphone’s integration into an environment of

Internet services and applications (such as weather forecast widgets on the phone’s desktop

or instant push email reception), the device essentially requires a 3G connection with monthly

data volumes of at least 1 GB per month. Obviously, this fact creates new business oppor-

tunities for the telco companies, namely by providing data packages which were widely

unsuccessful during the WAP era (Gartner 2011, Kane 2011, cf. Subsection 2.1).


The market for smartphone platforms is currently split up among four main players:

Google’s Android, Apple’s iOS, Nokia’s Symbian, RIM’s Blackberry (Gartner 2012). The

marketshare of WP7 by Microsoft, Bada and others is less than 5% (Gartner 2011, 2012). As

mentioned, RIM, Apple, and Microsoft follow the walled garden approach of a device-centric

model, with Apple’s iOS-driven iPhone being the most successful closed technology platform.

Furthermore, the smartphone market is very dynamic. In the beginning of 2011 Apple has

overtaken Nokia as the world’s largest smartphone manufacturer, generating wholesale

revenues of $11.9 billion in the first quarter of 2011 (Kane 2011). However by the 3rd quarter

of 2011 Samsung became the nr. 1 smartphone manufacturer as sales to end users tripled year

over year to reach 24 million (Gardner 2012). Nokia, on the other hand-currently using the



open source OS Symbian-is facing heavy losses in market shares; traditionally being known

for its follower strategy, analysts see Nokia initially having missed the smartphone trend as

the reason for failure. In order to gain back weight on the smartphone market, Nokia and

Microsoft-with its similarly ailing Windows Phone 7 platform-formed a strategic alliance to

build Nokia smartphones with proprietary Microsoft OS software. Supposedly Microsoft paid

Nokia around $1 billion for its choice, as the open technology platform android (to be

described in Subsection 2.4) was also interested in Nokia´s partnership (dpa 2011, 2011a). As

a result of this alliance, Symbian can be expected to completely vanish from the market,

leaving Android as the only open technology approach to mobile service delivery; an

approach however with a projected short- and long-term market share of approximately 50%

(Gartner 2012, 2011).

Figure 3. Apple’s Revenue Extraction from All Platform Actors

With its iPhone, Apple is particularly effective at capitalizing its position as platform

leader by extracting revenues from all kind of stakeholders along the platform. As illustrated

in Figure 3 (revenue streams flowing from bottom to top), open devices without contract

obligations are sold directly to consumers, the product being positioned as a high- end device

(and arguably even a fashion statement) in the topmost price segment. The AppStore men-

tioned in a) taps into the revenue streams of application developers and consumers alike,

granting Apple a share of 30% on every mobile application sold. Lastly, Apple also extracts

revenues from mobile network operators, who traditionally have to sign exclusive contracts

in order to market the iPhone. These agreements also work on the basis of revenue sharing

Apple

Application Delevopers

Network Operators

Consumers Consumers Consumers



plans, and are estimated to earn Apple 5 to 40% of the mobile operators subscriber revenue

from iPhone contracts, depending on the particular provider and contract (West/Mace 2010).

Obviously, the immense popularity of the iPhone, making it a main selling point for

expensive high-end mobile contracts, seems to give Apple enough leverage to demand such

high amounts.

2.3.3 Discussion

While Facebook (shown in the aggregator-centric model) and the iPhone (as the key player

in the device-centric model) are both incredible successful in their own ways, Apple displays

an even more impressive way of platform leadership, being able to extract revenues from

virtually every actor in one platform’s supply chain, whereas Facebook “only” tapped into the

revenues of application providers and their micro-transactions. However, while the suspi-

ciously identical brokerage fees of 30% do imply a certain competition among these platform

models, both approaches do not seem to be mutually exclusive at all. Instead, they almost fit

in as complementary products, since a mobile device is needed to access a service aggregator

portal. Also, the paid services offered, namely virtual goods in social media games versus

standalone applications and mobile network access, do not exactly interfere with each other’s

revenue flows. In 2008, Ballon et al. (2011) still argued that the iPhone as a platform could be

successful, if it was “compelling and differentiating enough to ensure consumer uptake” and

if it was able to “generate considerable interest with telco carriers as well as service deve-

lopers.” Now, in 2012 it seems clear that all of these requirements have been met. As seen in

part b), network carrier are not only interested, but also willing to share substantial revenues

with the device manufacturer, while Apple is now the largest smartphone manufac-turer in

the world. Moreover, while various applications in the AppStore have been downloaded over

10 billion times at the beginning of 2011 (dpa 2011a), the number of downloads will outreach

25 billion by March 2012 (BGR 2012). Hence, reception from both, consumers and

developers, can be described as overwhelming.

2.4 The Device-Centric Model II: Open Technology Approach

We have now covered three of the four platform models for mobile service delivery: A



closed and an open system approach based on portal sites (the telco-centric model and the

aggregator-centric model) as well as a closed system approach based on a mobile device

technology. The last model covered in this paper will be an open system approach based on a

mobile device technology, which in the current market-considering Symbian’s aforemen-

tioned decline and upcoming take-off – is mainly represented by Google’s Android platform,

an open source operating system based on the Linux kernel (Barrera et al. 2010). Hence,

unless explicitly stated otherwise, the theoretical framework for this model implicitly

corresponds to Android.


The second variation of the device-centric model differs from the first one covered in

Subsection 2.3 by being based on an open technology approach. This platform type is based

on an open source operating system, granting its developers full access to the SDK and OS

source code (Holzer & Ondruz 2011). As expected, changing the model to an open platform,

results in further changes to the mobile value chain. Similar to the aggregator- and device-

centric model, mobile network carriers lost control over the platform and its applications, and

are no longer able to restrict either (Lahiri et al. 2011). Since the operating system is built on

open source software, it is freely available to all stakeholders along the platform. Hence,

unlike iOS, which is exclusively used for Apple devices such as the iPhone or the iPad, any

phone manufacturer might use the operating system as its platform and modify the software

as they see it (Murphy 2010). Furthermore, application developers and consumers alike are

not forced to use a central portal (like the AppStore) to buy and sell mobile applications.

Instead, developers may directly provide/sell their applications to consumers either through

their own distribution channels (e.g., own website), third party distribution portals (e.g.,

Amazon AppStore), or the official applications portal (e.g., Android Market) (Barrera et al.

2010). The result is closer to a real ecosystem of manufacturers, developers, and consumers

than to a mere platform (Isckia & Gueguen 2011).

Figure 4 illustrates the interaction between the actors in the open technology approach of

the device-centric model. Both, consumers and developers have access to several distribution

channels for interacting with each other.



Figure 4. Open Technology Approach of the Device-Centric Model: Actors and Interaction


As shown in Subsection 2.3, only two of the four main players in the current smartphone

market follow an open technology approach: Google’s Android and Nokia’s Symbian. Since

Symbian is already experiencing take-off, and the recently forged alliance between Nokia and

Microsoft can be considered as the final nail in Symbian’s coffin, Android is the only

remaining player in the market for open mobile platforms. It is, however, the current market

leader for smartphone operating systems, with a market share of 52.5% in the 3rd quarter of

2011 and predicted to be the market leader in the long run (Gartner 2012, 2011). While main

competitor Apple follows the route of a centralized portal (i.e. the AppStore) with device

uniformity-since iOS is restricted to Apple devices such as the iPhone and iPad series –

Google’s approach is moving towards decentralized portals and device variety, as Android is

currently used by various device manufacturers such as Samsung, HTC, Sony, LG, or

Motorola (Holzer & Ondrus 2011). When it comes to revenue shares, developers who sell

their applications via Google’s official portal called Android Market are charged the same

30% brokerage fee as developers who use the platforms of Facebook or Apple. In contrast to

the closed device model, however, they are free to find their own distribution channels or to

use an alternative third party application portal like the Amazon AppStore. Also, to allow

developers to protect their applications against software piracy, Google allows (Bray 2010)

Developer

Official Portal

Developer Developer

Third Party Portal Own Website

Consumer Consumer Consumer



the optional implementation of Digital Rights Management (DRM).

2.4.3 Discussion

The open technology approach certainly appears to be the more consumer-friendly plat-

form model as opposed to the closed technology approach followed by Apple. The freedom

in application development can be regarded as an innovation driver, as it encourages more

developers to create applications and to try out new ideas (Lahiri et al. 2011). Hobby deve-

lopers can create and freely distribute so-called homebrew software, without having to go

through strict approval processes. Ultimately both, consumers and developers alike, are given

more freedom and choices in the ways they acquire/deliver mobile service applications, than

in any other platform model we have seen so far. Mainly, because it is the only model not

forcing its actors to use a centralized portal.

There are, however, certain drawbacks to the ability to bypass official portals and quality

checks in terms of security. Several threats of malware have already surfaced, one of the most

prominent examples being the trojan rootkit exploit called DroidDream in March 2011,

which enabled hackers to steal data from the over 200,000 users who installed the infected

applications on their phones (Gingrich 2011). However, Google was able to remove the

malware from infected phones via a built-in remote application removal feature, which is

now commonly known as “kill switch” (Cannings 2011). Compared to closed platform leader

Apple, open platform leader Google seems to be less profit- orientated, at least as far as

Android is concerned. While Subsection 2.3 has shown how Apple’s approach is successfully

able to tap into the revenues of all platform actors (consumers, developers, and even mobile

network operators), Google’s open source approach already bars a lot of doors regarding

revenue extraction. Manufacturers can freely use and modify the Android platform, while

developers and consumers are not forced to use Google’s official distribution channel, which

at the same time constitutes its only real source of income on Android devices. Furthermore,

in July 2010 the Android Market had the highest percentage of free applications (57% as

opposed to 28% in Apple’s AppStore), meaning that only 43% of all applications even could

generate any revenues for Google (Wauters 2010), while as of May 2012 the total number of

application downloads jumped over 8.7 Billion (AndroLib Statistics 2012) compared to the



surpassed by far 25 Billion downloads from Apple’s AppStore (BGR 2012). It can be argued,

however, that unlike traditional companies, Google is generally known for building a product

first, and finding the appropriate revenue model afterwards (Bagh 2010). Still, Apple’s

platform model-and the company’s platform leader position within-certainly offers higher

potentials for generating revenues than Google’s open technology approach.

3. AGGREGATED SURVEY AND FUTURE DEVELOPMENTS

After an in-depth analysis of the major platform models that exist for mobile service

delivery we provide a synoptic, aggregated survey and discuss possible further developments

and trends.

• The telco-centric model was the first of its kind, stemming from the era of WAP portals.

The mobile network operator-who acts as a strict platform leader-provides a content

portal (e.g., Vodafone Life!) with a pre-selection of content such as news, sports results,

or weather forecasts from third party service providers, who are contracted partners of

the platform provider. Access to this centralized portal is restricted to the telco carrier’s

paying customers, who usually have to pay a monthly fee for access. As a result of

advances in network and device technology, this walled garden platform model has

become more or less obsolete.

• The aggregator-centric model is also based on a portal site, but provides interoper-

ability, since access is neither limited to a specific group of users (i.e., subscribers) nor

to a specific device; the service aggregation platform can be accessed by anyone from

any device. Also, the selection of available services and applications is not defined by

the platform operator (e.g., Facebook). Instead, independent developers may provide

their applications via an API provided by the platform operator. The example of

Facebook Mobile has shown how the platform leader can exploit its position as an

intermediary to extract revenues caused by micro-transactions between consumers and

service providers.

• The closed technology approach to the device-centric model shares the walled-garden

approach of the telco-centric model, but is based on a device and its operating system,

most prominently the smartphone technology. Apple’s iPhone served as a prime ex-



ample of how to leverage platform leadership to extract revenues from all platform

actors: Consumers, application developers, and even mobile network carriers. A central

service provision platform (in this case the AppStore) acts as a mediator between

consumers and application providers, charging 30% on all transactions between these

two groups. On the other hand, network operators have to sign exclusive contracts with

Apple to market the iPhone; with the device’s enormous popularity, Apple has enough

leverage to get a 5-40% share on all subscription streams from iPhone contracts.

• The open technology approach to the device-centric model is also based on a mobile

operating system. The main difference is that the software code is open source, and thus

freely available to device manufacturers and application developers alike. Application

portals are decentralized, allowing service providers a free choice of distribution

channels aside from the official application portal, which-if employed-also charges a

30% brokerage fee. Despite being the more consumer-friendly model in terms of

freedom and choice, security issues must be considered. Also, the model appears to be

less profitable than the centralized, closed technology approach.

Table 1. Aggregated Survey on Properties of Platform Models

Category Portal-based model Device-centric model Platform Model Telco-centric Aggregator-centric Closed Technology Open Technology

based on portal site portal site device/OS device/OS

access to platform (Type of System)

limited to telco carrier’s paying customers (“walled garden”)

free for anyone with any device (open system)

restricted to paying customers for given device; no open source (“walled garden”)

free access to the software code for device manufacturer and app. developers (open system)

key feature

monthly fee for customer access to pre-selected content from third party services by strict platform leader

independent developers provide apps via an API allocated by the platform operator, who extracts revenues as an intermediary

service provision platform charging on transactions between consumer and application developers

open source software with brokerage fee on transactions between consumer and application developers

example Vodafone Live! Facebook Mobile Apple iPhone Google Android



After observing these platform models and their current market conditions, a further

classification becomes apparent. As shown in Table 1, a distinction can be made between

closed systems (“walled gardens”), where the platform leader dictates the available content,

and open systems, with the platform leader providing the platform, but the content being

developed by independent third parties with a high degree of freedom. Furthermore, there is a

difference between platforms being based on portal sites, and platforms revolving around

(operating systems for) mobile devices.

Hence, mobile business has left the stage of its infancy, being no longer just a niche market

of electronic business. Gartner (2009) predicts that by 2013, “mobile phones will overtake

PCs as the most common Web access device worldwide”. And indeed, the fact that iPhone

was the first mass marketed consumer-level mobile phone to allow “real” web browsing

without altering websites (unlike the WAP portals used before), has been convincingly

argued as the key factor for the device’s (and hence the smartphone technology’s) success,

being even more important than the ability to run complex applications (West & Mace 2010).

Table 2. Comparison of Worldwide Smartphone Sales by Operating System

Operating System Market-Share, 3rd QTR 2011*

Change since 3rd QTR 2010*

Forecast 2011 made in 2010**

Android 52,5% +107,5% +92,9%

Symbian 16,9% -53,4% -99,7%

iOS 15,0% -9,6% 3,6%

RIM 11,0% -28,6% -27,9%

Others (Microsoft etc.) 4,6% -27,0% -47,6%

Total (thousands of units) 115 185,4 +42,0% -

Source: * Gartner 2012, ** Gartner 2010.

The future development of this market is hard to predict, considering that past forecasts

have been vastly inaccurate or simply wrong. According to Gartner’s long-term predictions

for Smartphone OS market shares, predictions for Symbian had to be corrected from



dominant market leader in 2009 to just one competitor for the second position with a prospect

of complete disappearance, while for Android almost the opposite applies (Hamblem 2009,

Gartner 2010, Riley 2010, Gartner 2012). Hence, the market share of Android outperformed

forward-looking statements (Gartner 2010, 2012). The dynamic changes of the market share

within one year are shown in Table 2.

But eventually it seems more than likely that the closed technology approach will remain a

relevant counterpart to the open technology approach in mobile business; regardless of the

winners’ and losers’ names in the end.

The mobile market does seem to be stronger inclined towards domination than the tradi-

tional one (as shown by Google, eBay, Amazon, or Facebook); a tendency which might as

well affect the mobile business. According to Holzer & Ondrus (2011), Metcalfe’s Law

(saying the value of a telecommunications network increases proportionally to the square of

the number of its users) does apply to all platform models. With increasing consumers on a

certain mobile platform/portal, more application developers get attracted. On the other hand,

the larger the amount of available applications for a given platform, the more users will

gravitate to a particular device. Therefore, the condensation of current players on the

smartphone market down to only one or two viable operating systems could be a possibility

in the long run.

We have already seen that mobile network operators have lost most of their initial power in

the aggregator- and device-centric platform structures, but modern technology and open

platforms further threat their influence on mobile service delivery. The most basic services

such as text messaging and phone calls might be replaced (or at least supplemented) by

mobile email delivery or messaging applications, while VOIP (e.g., Skype) becomes increa-

singly viable in the mobile sector, as WIFI and 3G connections are becoming the industry’s

standard in the developed countries (Deinert & Magadanz 2010).

Finally, the question remains whether completely new platform models could emerge, and

what their features would look like. Ballon et al. (2008) envisioned a service-centric platform

model, calling it “a more or less theoretical model for now.” This theoretical model was

based on Google’s Open Social initiative, to unify the APIs of several (social network)

platforms. The goal would have been total data portability across different platforms, so



people could use their data (such as profile information) for other services. However, the

success of such a model would obviously be largely dependent on Facebook’s involvement,

as it is by far the most popular and influential social network worldwide. And even though

Facebook did join the DataPortability Workgroup along with Google in 2008 (Riley 2010), so

far, it remained passive and has shown no real efforts towards developing a service-centric

model (Repeti 2010). By now, the uniform brokerage fee of 30% on application transactions,

imposed by players of the three most relevant approaches (Facebook, iPhone, Android),

indicates that we are indeed looking at competing platform models for mobile service

delivery. Due to the pace of the worldwide mobile market growth the recent past has shown

how difficult a concise forecast of the future market share would be, but mobile phones will

overtake PCs as the most common method to access the internet by 2013 and, while the two

device-centric models are obvious substitutes, it can be argued, whether the aggregator-

centric model is more of a complementarity to any of the device-centric approaches.

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AUTHOR BIOGRAPHIES

Alexander Becker is pursuing his master degree in Business Ad-ministration at the Faculty

of Business, Economics and Statistics, the University of Vienna.

Andreas Mladenow received a master’s degree in Business Admi-nistration at the Faculty of Business, Economics and Statistics, University of Vienna. He is a researcher at the e-Business group at the University of Vienna and a doctoral candidate at the Vienna University of Economics and Business. His research focuses on the field of electronic business and collaboration.

Natalia Kryvinska is a Postdoctoral Fellow at the e-Business rese-arch group, Faculty of Business, Economics and Statistics, University of Vienna. She received her diploma engineer degree in telecommu-nications from National University “Lviv Polytechnics”, Lviv, Ukraine, and a PhD in electrical engineering from the Vienna University of Technology, Vienna, Austria. Her research interests include distribu-ted systems management, service delivery platforms, and e-Services.

Christine Strauss is Associate Professor at the Faculty of Business, Economics and Statistics, University of Vienna. She holds a mas-ter’s degree in business informatics from the University of Vienna and a doctoral degree in economics from the University of Zurich. She is the head of the research group on Electronic Business at the University of Vienna. Her current research focuses on the field of electronic business, with a particular emphasis on e-Services.

aggregated survey of sustainable business models for agile mobile

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