And the Next Killer App is…
This question popped up today on LinkedIn Answers, and we often hear it here and there. It seems there is a lot of confusion about this concept of ‘killer app’, so let’s try to first clarify what is a killer app:
First, what is ‘killer‘:
- something a lot of people use?
- something that makes money to operators? to content providers?
- something that is used often?
- something that serves really well a niche?
Second, what is an ‘app‘:
- something using the mobile network? (i.e. not broadcast? not contactless IC? – hence, not mobile digital TV or mobile wallet)
- something that runs on the mobile? on a server? on the Internet?
Definitions for those two terms are very vague and unfortunately, mobile operators have been very bad at finding them. If the last certified ‘killer apps’ were ringtones and SMS, none of those was really in the strategic plan of operators.
To give a flavor of Year 2000: ‘typing on mobile? only Japanese can – rapidly extended to all Asians – because they have small fingers! Also, they don’t have computers and cars’ – or – ‘nobody would buy such low quality music in the West – Asians like karaoke’. Well…
There are a number of reasons for this:
- only users decide what is a killer app
- an app will be ‘killer’ only if several variables are right: user experience, price, marketing, word-of-mouth
As for ‘universal appeal‘, a good idea is a good idea almost regardless of culture: look at the successful Internet services globally. The thing is that the mobile value chain is way more painful to deal with, and very few operators have the real ‘ecosystem vision’ like Japanese operators have.
Now if number of users is an indication of success, current killer apps in Japan and Korea are:
- music packages (song + ringtone + lyrics) – KDDI, Japan
- music ‘rental’ for mobile and PC – SK Telecom, Korea
- mobile community (ad-sponsored or micro-customization) – Japan, Korea
- mobile auctions – Japan
- mobile search – Japan, Korea
- mobile books/comics – Japan
- pedestrian navigation services – KDDI, Japan
- mobile syndicated advertising – Japan, Korea
- etc.
See for some more ideas our “Mobile 2.0” presentation.
More generally, our understanding is that ‘killer apps’ will not be services requiring the sending of large amount of data, but rather services requiring a large number of small amounts: mobile communities (Cyworld, Mixi, Mobile Game Town), mobile auctions / commerce, mobile user-generated content. The main issue to transform those into ‘killer apps’ is to give a decent return to companies who create them.
This fosters innovation, and grows the market: for operators, better get 50% of a large pie than 70% of a much smaller one!
To give a specific example with music based on a recent research:
KDDI is the second largest mobile operator in Japan, and a pioneer in music services. It sold to date 100 million full songs on mobiles in Japan. This represented roughly 300 million USD in 2006. KDDI takes only 10% as a revenue share (30 million USD – already quite nice). Of course record companies were very happy as they got a large share of the remaining 270 million, making it a much more profitable business than CD retail (no distribution cost, no packaging, no salesforce).
What about KDDI?
They attracted twice as many new subs thanks to it AND it helped them to sell a very large number of data packages. These indirect benefits amounted to OVER 1 BILLION USD in 2006.
So here is the catch 22 idea: a killer app is not only about direct sales of content! It is about indirect benefits, that can amount for tens of times larger revenues.