Endless quest for killer apps
Posted March, 26, 2002
By Helen Jimenez
BusinessWorld Online

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It is amazing how the mobile phone, which used to be just an instrument for making voice calls, has evolved into what it is now. But while phone manufacturers have a lot to do with the increased sophistication and functionality of today's mobile phones, the key factor that increases the value of mobile phones to its users is undoubtedly the services and applications now available through these devices. 

As the Philippines' mobile market matures, carriers know that they need to come out with more innovative services to sustain the growth of their subscriber base. Aside from putting huge investments for their network infrastructure, the country's service providers are in constant search for so-called "killer applications" (or killer apps) that would give them better competitive edge. 

What are the factors that make a killer app? And how do players in the local wireless market fare in building an environment that support the creation of more killer apps? 

In the book, "Unleashing the Killer App: Digital Strategies for Market Dominance" (1998) by Larry Downes and Chunka Mui, "killer app" is defined as: 

"...a new good or service that establishes an entirely new category and, by being first, dominates it, returning several hundred percent on the initial investment."
The book cited the personal computer, electronic funds transfer, and the first word processing program as examples of killer apps. 

The definition of a killer app, however, is constantly evolving. The book's authors recognized that there would always be new forces that would tend to disrupt the norm: 

"Killer apps are examples of the Law of Disruption in action, a use of technology whose novelty turns the tables on some previously stable understanding of how things work or work best. 
"In business, killer apps undermine customer relationships, distribution networks, competitor behavior, and economies of size and scale. 
"Killer apps create global competitors where only local players previously mattered. 
"They give customers, suppliers, and new entrants power, upsetting the careful cultivation of competitive advantages that were themselves based on technology, technology that is now suddenly obsolete."
In the wireless space, the quest for killer apps has often brought surprises to service providers themselves. 

The SMS phenomenon in the Philippines is a classic example. Although SMS is essentially a value-added service built-in in digital phones, its massive adoption in the local market compelled service providers and programmers to use it as a base platform for other services and applications. 

Edgardo R. Bautista, head of business and product development of Smart Communications, Inc., said there are certain features that would qualify a service or an application to be called a killer app in the mobile communications space. 

First, he said the service or application must be "habit-forming" to attract repeated usage. "A service may be good but if, after trying it once or twice then that's it already...it could not grow as a killer app. It must have a sustaining usage...it needs to grow," Mr. Bautista said. 

He added that a wireless service or application must be relevant to a broad market, like the youth sector for example, to guarantee wider patronage. 

To develop a killer app, Mr. Bautista also believes that an application must be simple to use. "Of course there may be some complexity but the general factor is that it should be user-friendly without the use of user guides. It should be something that you can learn as you use." 

Mobile applications should also be "fun" to use, said Mr. Bautista because these are normally used during idle time. He also stressed the importance of making the services affordable for the subscribers. SMS has all the factors of a killer app, noted Mr. Bautista, which is why Smart has chosen to maximize this simple yet effective technology to deliver many of its value-added applications that are mostly entertainment-based. Smart now has about 130 applications catering to various segments of the market. 

Innovation is the keyword for killer apps. Both carriers and application developers are aware that they need to be quick in responding to the fast-changing needs of the market and they have to constantly evolve their services so that its users would keep on using them. 

Mobile Arts, Inc., a local wireless application service provider (WASP), believes there is no single application that makes a killer app. It is rather a suite of services that together bring killer apps for the carriers. 

"Telecom companies sort of assembled a lot of things with different partners." said Ramon Duremdes, Jr. of Mobile-Arts. "Ultimately, we think that the killer suite is what the telcos assemble in terms of how they package their services." 

Mobile Arts is one of the young companies in the Philippines that were established to cash in on the growing mobile market in the country. Mobile Arts provides enhanced wireless messaging, personal information, collaboration and entertainment products and services to end-users by partnering with telcos and corporate customers. The company is one of the firms behind Smart's mobile e-mail messaging service. 

While there is no official data, some players in the wireless sector estimate that there are around 20 to 24 WASPs in the Philippines that provide Globe, Smart and the other carriers with wireless applications. These applications include SMS-based games, trivia quizzes, ring tones and phone logos, virtual storage, chat, messaging, among others. 

The Philippines may already find it very difficult to catch up with India in software development, but the local WASPs believe that the Philippines holds bright potentials to become a global hub for wireless applications development. 

The country's active mobile market makes the Philippines an ideal test-bed for new applications, said Arthur Gimenez, president of the Philippine Wireless Applications Users Group (PHILWAPP). PHILWAPP is a non-stock, non-profit organization composed of wireless developers and entrepreneurs in the country. 

Local applications that WASPs would want to offer to international markets are sure to have been stress-tested, added Mobile Arts director Elmar M. Gomez. 

The WASPs have their own niches. Some specialize in logos and ring tones, some are into games, while others are strong in messaging. There may also be developers whose applications were used by telcos only for a short while and then disappeared. 

Except for a few companies with international affiliations like SoneraZED, most of the WASP companies in the Philippines are composed of young developers and entrepreneurs. Usually, local WASPs would have less than 10 people and 30 at the most. 

Fluxion, Inc., a group founded by five young entrepreneurs, is one of the budding players in the wireless sector. An incubatee in the Ayala-owned IdeaFarm, Inc., Fluxion has developed a multimedia messaging service that is now commercially available via Globe Telecom's StorIT service. 

StoreIT is an SMS-based service that offers users a virtual storage solution. It allows users to store text messages, ring tones, logos, and picture messages, virtually, thus creating a solution for phones and SIMs that have limited storage capacity. 

A number of the country's wireless applications and developers are beginning to get international recognition. Smart Communication's SmartMoney, a pre-paid re-loadable electronic cash card linked to the SMART cell phone, has already won two international awards. The first one was 3GSM Award for "Most Innovative GSM Wireless Service for Customers" in Cannes, France in February 2000. It was honored a few months later with the "Best Product Innovation" award at the MasterCard Marketing Awards held in Australia. 

Last February, wireless applications developer Wolfpac Communication, Inc. was nominated in the 3rd GSM World Congress Award for the Best Wireless Application Developer category held in Cannes, France. 

The only Philippine finalist in the GSM Awards, Wolfpac competed with three European companies in the said category. The category considered a company's business benefits, success statistics and best use of available technologies. 

The nomination gave Wolfpac, as well as other WASPs in the country, greater confidence to pursue international markets. The WASPs recognized that its market in the Philippines is practically limited to Globe and Smart and that they have to expand to other markets to grow their business, said Wolfpac official Albert P. Dela Cruz. 

The growth and development of the mobile industry in the Philippines and the wireless applications development sector in particular depends largely on maintaining a healthy "wireless ecosystem", said Mr. Duremdes and Gomez of Mobile Arts. 

A healthy wireless ecosystem is possible when carriers, WASPs, content providers and the subscribers cooperate with each other, said Mr. Duremdes. This means that each one contributes to and benefits from the wireless ecosystem, he stressed. 

WASPs play a unique role in the wireless ecosystem, said Mr. Duremdes, because they can come up with various perspectives telcos would not normally see. WASPs also share the risks with the telcos in terms of investments in new ideas and technologies. 

For local WASPs, maintaining a healthy wireless ecosystem often means sticking it out with one service provider. 

Although telcos may not always require exclusivity with their partners, most WASPs would rather be safe and sure with one telco than risk losing the business by wooing their partner's competitors as well. "Although we are not closing our doors, it is a choice we have to make," said one official of a WASP firm. 

However, another wireless application provider said exclusivity often stunts the growth of the WASPs. 

The developer also lamented the lack of advertising and marketing support that telcos give to WASPs. In a game of hits and misses, WASPs have to live with the reality that most of the applications they develop will get good promotion only at the initial launch. Then, they get run over by newer applications. 

This is why it is a constant challenge for developers to keep coming up with something new and better, said Mr. Dela Cruz of Wolfpac. 

In an earlier report by i.t. matters, WASPs expressed the need to have stronger bargaining power with the telcos, particularly in the revenue-sharing arrangements for value-added applications that they develop and maintain. 

Some wireless applications are paid by telcos on a one-time basis, but most server-based applications that need constant updating and maintenance by the developers are usually put under revenue-sharing schemes. The standard revenue sharing between WASPs and carriers is 80-20 or in some cases even 90-10 in favor of the telcos. 

The revenue-sharing model works well for the telcos and the developers. 

"Day-to-day (developers) have a common goal with the operator to make the service more appealing and useful to attract more subscribers," said Mr. Gomez. 

While he wished that developers would have more share of the pie, Mr. Gomez recognized that the telcos "own the highway" and have the luxury to decide how many players they will allow to pass through that highway and how much they will charge. 

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