The relationship between operators and Android Market is getting closer. Not only is carrier billing featuring much more prominently on the application store, but so are operator storefronts.

In July we heard that Vodafone was launching its own content channel within Android Market in the UK, Germany, Italy, the Netherlands and Spain, with Greece, Ireland and Portugal following later. Then in August, Vodafone announced that it would be enabling payments on Android Market across its European footprint, starting with the UK and Germany.

Vodafone is not alone. US carriers Verizon and T-Mobile and South Korean carrier SK Telecom are all offering both payments and their own storefront on Android Market. Others are offering just payments, including the US’ AT&T Mobility and Sprint and Japan’s KDDI and Softbank, and others, such as Australia’s Telstra, just a storefront. Japanese carrier NTT DoCoMo, meanwhile, is offering payments and has its own separate Android apps store.

Open door for carriers

The open-source nature of Google’s Android ecosystem means that operators have always had a greater chance of playing a role than in Apple’s walled-garden iOS ecosystem. Operators have been able to order own-brand, custom-made Android handsets from manufacturers and launch their own Android application offerings. They either launch a separate Android apps store, parallel to Google’s Android Market, the way many Android-handset makers have done (see for example Samsung’s launch this week of its Premium Samsung Apps Store for Android in the UK). Or they launch a storefront within Android Market itself.

The latter is only possible on Android handsets distributed by operators. Usually, the way it works is that the “My Apps” tab that appears on Android Market’s user interface is replaced with the operator’s storefront tab – or “content channel” tab, to use the Android parlance.

Operators believe that their channel adds value by offering a more select set of apps, tested for quality and adapted to local needs – rather than what they would describe as the daunting and hit-and-miss choice available in the main store, which is crammed with hundreds of thousands of apps. In other words, they see themselves as offering quality over quantity.

Compared to Apple’s App Store, Android Market does relatively little to localize content according to which country the store is being accessed from. And it’s seen by many as a bit of a Wild West, with loads of underrate, malfunctioning apps and a growing piracy problem. One might argue, therefore, that there is a need for someone to step in with a more “curated” offering.

User rejection

But judging by comments posted online, users are not that chuffed by the operator-branded tabs that have suddenly appeared on their screen. Many see it as patronizing and dumb of operators to narrow down choice on behalf of users – especially since operators have a terrible track record of delivering what users want on the content and apps front.

The views of these outspoken users might not be representative of the whole. There might be a silent majority of occasional app users who feel less strongly about these things and might welcome some handholding by operators. But there is no getting away from the fact that operators do tend to mess things up when they try to take ownership of what content and apps are offered to end users.

Still, you can’t blame operators for wanting to retain relevance in the content and apps market by exploiting the opportunities that the Android platform offers them to wheel out their own offerings. After all, they have seen the power of their once mighty mobile content portals rapidly dwindle over the past three years with the phenomenal takeoff of over-the-top, native-app stores.

But where the operators are likely to make the greatest difference is with billing.

The carrier billing opportunity

I’ve been harping on for years about the huge asset that billing represents for carriers. In my view, it is the most realistic chance operators have of securing a role in the mobile content and applications value chain. Partly because there are a lot of people out there who could become buyers of digital goods but have no remote means of paying for them, either because they are underage or live in the larger part of the world where credit cards and bank accounts are rare. And partly because keying in one’s credit- or debit-card details on a phone, no matter how “smart” that phone may be and how big its screen may be, is a pain – and in most cases kills the moment of the “impulse buy.” Most users simply don’t bother or give up half way through, and the piece of content or application they were about to buy does not get bought.

This is the problem that has been hampering sales on the Android Market. Very few Android-handset users get round to registering their credit/debit card details with the Android Market’s payments platform, Google Checkout – partly because users are not used to the idea of entering into a billing relationship with Google and partly because registering with Google Checkout is not usually part-and-parcel of the procedure that users have to go through to set up a new Android phone (unlike with the iPhone, whose users are required to register with iTunes when turning the phone on for the first time).

Monetization problem

So, although developers love the greater creative freedom that the Android ecosystem gives them – compared to Apple’s rule-ridden iOS ecosystem – as well as its pole position in smartphone sales, they deplore the small chance it offers them to make money from applications posted on Android Market.

Most other companies that launched application stores in competition to Apple’s pioneering App Store understood early on the need to embrace carrier billing to increase paid-app downloads. The likes of Microsoft, Nokia, RIM and Samsung understood that it was hard to compete with the huge head-start that Apple had in the field of paid downloads – after all iTunes, of which the App Store is an extension, has for years been the world’s leading online store for premium digital media content, especially music. There was already a precedent for people, in their hundreds of millions, of entering into a direct billing relationship with Apple for the purchase of digital goods.

Google has been slower to embrace carrier billing – either because it thought that the strength of its brand would drive enough momentum behind Google Checkout, or because as a company whose business model is fundamentally free ad-funded content it wasn’t too bothered about the issue of paid downloads.

Yet Google had apparently looked into carrier billing quite a few years ago, before the advent of the app stores even. Contacts in the mobile-content aggregation business tell me that around four to five years ago Google was planning to launch some kind of mobile content service linked to its search engine that would be enabled with carrier billing – but it gave up on the idea after it found the task of connecting globally to carrier billing too onerous.

Progress so far

Also, carrier billing has been present in the Android apps ecosystem for some while – even though rather quietly and very much as the exception to the rule. In late 2009 it became available initially among subscribers to T-Mobile USA, the first operator to debut an Android phone; and to Verizon subscribers too, but only for the carrier’s own content channel within Android Market. Over the next two years, the US’ two other national carriers, AT&T and Sprint, joined in. And so did Japan’s three main carriers and South Korea’s top carrier. In Europe, as far as we know, Vodafone’s announcement last month is the first and only carrier billing deal struck by Google for Android Market.

But that still only adds up to five carrier-billing-enabled countries out of a total, at last count, of 52 countries where Android Market has a paid-downloads presence – and most of the five (Germany, South Korea and UK) are only partially enabled.

Contrast that with Nokia’s Ovi Store, which back in April boasted of billing connections with 112 operators in 36 countries. Or with RIM’s BlackBerry App World, which has enabled carrier billing through billing aggregator Bango across the US, Canada and Europe – the latter both in the UK and Euro-zone countries – and also struck a deal with Telefonica to connect to the billing systems of all of the carrier group’s mobile networks, spread around Europe and Latin America.

In its press release for the Android apps store it’s unveiled in the UK this week, Samsung highlights the fact that the store will soon be enabled for carrier billing – saying, almost apologetically, that it will initially offer only credit-card payments as an option.

Carrier billing momentum

Yet, one gets the feeling that Google has other carrier-group billing deals in the pipeline which might come to light shortly (beyond the one announced with Vodafone), and that Google is now fully behind enabling carrier billing throughout its Android Market footprint.

August was a busy time for carrier billing announcements. Beyond Vodafone’s tie-up with Android Market, rival carrier group Telefonica’s BlueVia developer program added API access to the carrier-billing-aggregation service offered by online and in-app mobile payments provider Boku; Boku also struck direct billing deals with French operators Bouygues Telecom and SFR, in addition to its existing deal with Orange France; and rival billing aggregator, PaymentOne, established a direct billing relationship with German operator O2 Telefonica.

Earlier in the summer another carrier-billing aggregator of online and in-app payments fame, Zong, was acquired by e-commerce brand eBay to integrate with online payments platform PayPal. Yet another aggregator, Bango, signed an agreement with mobile-browser maker Opera Software to enable carrier billing on the Opera App Store. Meanwhile, US carrier Verizon teamed up with aggregator Payfone to enable its subscribers to purchase digital goods online via their mobile bill.

There is definite momentum there, and a mutual interest among carriers and iOS ecosystem competitors to keep that momentum going.


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