App store frenzy? That’s what comes across when you connect the dots in the raft of recent announcements. Mobile operators ranging from U.S. mobile operator Verizon Wireless (which has borrowed a page from parent company Vodafone to launch a carrier-wide app store based on Java ME that can target more than one device) to China Mobile (which tells TelecomAsia.net that it’s moving full-steam ahead on its Mobile Market app store where it plans to take 50 percent cut of app sales revenues) are jockeying for position and a piece of the action.

Interestingly, much of the operator excitement centers on the new mobile advertising opportunity app stores represent. As Jonathan Kelly, who heads up Vodafone UK Marketing, recently told me in a briefing: “I see some quite interesting opportunities in apps and widgets. A likely scenario could involve a sponsored widget, where the brand actually works with us to create a widget or application that we then prominently place in our app store.”

Beyond that, Jonathan sees other opportunities around actually embedding advertising within a widget. “You could have some sort of utility widget that’s providing weather, and there’s no reason why certain relevant companies may not wish to have some advertising embedded within that.”

At the other end of the spectrum, Apple’s App Store, RIM’s BlackBerry App World and Android’s Marketplace may have been the first to the party, but they have company. The recent JavaOne conference kicked off its annual convention by opening the doors of the Java App Store, a global marketplace for Java apps headed by Sun Microsystems. It comes on the heels of other app store news elsewhere in the industry including Nokia’s launch of the Ovi app store, a storefront offering available in Australia, Singapore, Spain, Italy, Germany, Russia, Ireland and the U.K, offering 20,000 titles (a fraction of which are apps) to an estimated 50 million Nokia devices globally.

Not to be outdone, Sony Ericsson takes the wraps off its new PlayNow Arena, the only player that opts to outsource much of the work to GetJar. The Lithuania-based company is billed as the world’s largest independent app store, with over 450 million mobile application downloads to date in more than 200 countries, will take on the mammoth task of managing and stocking the app store’s virtual shelves. The takeaway: make way for more companies and models.

An interesting newcomer that merits a closer look is WeFi.

This community-based WiFi network provider that has a new twist on the app storefront strategy that covers the bases to place it (and companies like it) firmly in the emerging app store ecosystem. Its blog outlines the quiet but clever launch of a combination “Wi-Fi powered launch-pad” and applications portal called WeFiApps, an app store offering a range of apps (communication services, entertainment, and information) in partnership with companies/providers including Fring, joiku, Nimbuzz, IM+ from Shape Services, VuFone from NewAct and Hollywood Star from HOVR. These apps (a combination of free and paid) are currently accessible on any WiFi-enabled Symbian S60 mobile phone.

CHALLENGES & OPPORTUNITIES

Is the flurry of excitement and activity around app stores a sign that we are entering into a new era of innovation and market opportunity?

Or should we worry that it’s the walled garden scenario all over again? This well-written opinion piece from Knowledge @ Wharton suggests the tight integration between mobile networks, device manufacturers and operating systems vendors limits our choices. It asks us to think through a case in which the new Palm Pre has a must-have app. In this scenario iPhone users in the U.S. who want it would have to switch devices (from iPhone to Pre) and mobile operators (from AT&T, Apple’s only provider to Palm’s partner Sprint).

The role of the operator amid this fragmentation and confusion remains unclear. However, it is clear that the majority of mobile operators want to stake their turf in this new services creation environment, a position they will cement by offering an app store-like offering or simply by opening up their APIs to enrich or enhance services offered by third-party developers.

How big could the market be? The jury is out on that one, but a recent survey from Airwide Solutions, a provider of mobile messaging and wireless Internet infrastructure, applications and solutions, found mobile operators expect significant growth in apps downloads within the next two years. The methodology was a bit fuzzy and percentages were diverse, but on average, operators said they expected 18.3 percent of the customers to be downloading apps within an average timeframe of 2.9 years. Overall some 43 percent of operators expect 20 percent of their customer base to download apps by 2011.

USER EXPERIENCE & SERIOUS SHORTCOMINGS

App stores schemes from handset manufacturers and mobile operators alike increase our demand for centralized solutions, one-stop-shops where we can find and buy the apps we want.

But how do these virtual shops really stack up? Alfred DeRose, Co-founder & Managing Director of Tego Interactive, a Web and mobile product and services company providing development and integrated solutions for the needs of major brands, content publishers and mobile network operators, recently conducted an informal road test of Ovi and documented his experience in his blog.

The process users follow to purchase an app from Ovi (excerpted from Alfred’s blog):

1. Select the item you want to purchase.
2. Select Buy .
3. Enter your Nokia account user name and password. If you do not have an account, select Create a Nokia account, and enter the required information.
4. Select to pay using your credit card or through your phone bill. If you already have your credit card information stored in your Nokia account, and you want to use another credit card, select Edit payment settings, and enter the required information. To save your credit card information to your Nokia account, select the Save this card to my Nokia account check box.
5. Select the e-mail address to which you want to receive a receipt of your purchase.
6. Select Purchase

While Nokia made a wise choice not to duplicate the one-click payment model from Apple that has effectively disintermediated operators from the app value chain, the process is tedious and complicated, hardly the user experience that encourages the all-important impulse buy. As Alfred puts it: “The best content will sit on the virtual shelves unless the buying process is clean and simple.”

Another prerequisite he highlights is the critical need for quality content discovery tools.

With an abundance of mobile apps at their finger tips, people certainly can’t claim they offer a lack of choice. But they can complain about the tedious navigation process and confusing hierarchical menus they must endure to find and buy content they like. If operators, providers, developers and handset makers want to sell more mobile content, then they are going to have to harness technologies and techniques to help users discover the content they want.

Put another way, it’s Retail 101 all over again, and the advance of app store schemes turns up the pressure on the emerging business ecosystem to remove the pain from the content discovery process and provide users with what they want – and perhaps even before those users know they need it in the first place.

The takeaway: Amid the activity and excitement that marks the emergence of a plethora of app store offers and schemes, many companies have lost the plot. It’s not about how many there are or who operates them. It’s about making finding and buying apps a no-brainer. The players in a position to give people the apps they want (allowing developers to rise above the noise and make money in the process) will be among the leaders not the also-rans.

(NOTE: I am proud to announce that Alfred DeRose has joined our roster of authors and influencers contributing news, analysis and thought leadership to MSG. He will focus on issues and solutions related to design, usability, mobile advertising and content discovery. You can reach him at alfred.derose@tegointeractive.com .)

Disclaimer: Tego Interactive is an MSG supporter.

To fully understand the significance of Scanbuy’s decision, it’s important to review the events and announcements that have effectively dealt companies up and down the mobile barcode business ecosystem (Scanbuy included) a new hand of cards.

First came the decision in February by the United States Patent and Trademark Office to re-examine the patent claims filed by NeoMedia Technologies, a provider of barcode scanning solutions. The move prompted NeoMedia to push forward in March on a patent licensing program and tie up with other vendors (3GVision, Mobile Discovery, Mobile Tag, and NeuStar) in a pilot program based on open standards in a bid to show interoperability between the technologies out there and – more importantly – position NeuStar, a short code registry, as a central clearinghouse in the middle. More about this model and Jonathan’s own take in the podcast.

I appreciate that the barcode space is a tough one to navigate, which is why I also recommend this simple primer from Tim Green over at Mobile Entertainment.  Unfortunately, he wrote it before this flurry of activity.

So, what moved Scanbuy to open up the specs to the code that Jonathan stresses has been “labelled” proprietary (thus repeating the discussion around semantics that we began in this earlier interview on MSG)? At one level, it is a giant step toward building a viable ecosystem. But we can also read it as reaction to the pilot program (supported by players 3GVision, Mobile Discovery, Mobile Tag, NeoMedia, and NeuStar).

In response to my comment that NeuStar is clearly positioning itself to play the honest broker in a kind of hybrid model, Jonathan reminds me that Scanbuy can now also play the role of a trusted third party. “We don’t have a proprietary code or reader any more.” (Before Scanbuy’s wise decision to go open, other barcode companies could make a case that it was a closed shop with Scanbuy the only company that could both issue EZcode barcodes and decode them.) The argument from other vendors was that they didn’t have a choice because Scanbuy was the only company that could provide the technology, Jonathan explained. “But that now is off the table.”

NUTS & BOLTS: Scanbuy has committed to publishing the specifications for reading EZcodes, giving companies/developers the ability to create EZcodes. “So, a software company could create software for handsets which enables handsets to read those codes, and they could also create server side software which allows them to create the codes.” Plug-ins? They appear to be work in progress. “We’re looking at that; we made the announcement first. [As to] how we implement it, we’re looking at a lot of different tactics on how to release it and what the best way is.” De-coding? “Anybody who currently creates handset software to de-code barcodes could integrate these specifications into their current decoders.  So, 3GVision, for instance, who have software which de-codes QR and data matrix, could build in the functionality to also de-code EZcodes.

PROCEDURE & SUPPORT: For now, it’s all through Scanbuy. “Over the coming weeks they’ll be able to look at the specifications and create a platform which meets the specifications to create the codes on their own, if they want.” Meanwhile, Scanbuy is thinking through the details of offering support. “Support will probably not be free, however. So we’ll make the specifications free, support is probably going to cost.  What it’s going to cost, I’m not sure.”

OPEN STANDARD: Open is the direction the industry needs to go. While the pilot program, led by NeuStar, may be on the mark, Jonathan wonders whether it might not be too much, too soon. “Too many players, too early, can create too much competition and confusion in the market and it’s not necessarily a good thing.” As he puts it: “To have multiple players, you have to have multiple revenue opportunities for those players to be able to operate and compete, and it’s not clear right now what everybody’s revenue model is in that scenario.”

NEUSTAR: “We’ll see what happens over the next few months.  Obviously we are playing the most active role in the U.S. today as the only authorized code and the only authorized platform provider, so, we’re a major player in the space in the U.S. and we believe we’ll continue to be going forward.” (NeuStar has a strong focus on the U.S. market, thus Jonathan’s comments are limited to that geography.) Not satisfied, I put the question to him straight: What is Scanbuy’s position and will it participate in the pilot? “They [NeuStar] are positioning themselves as the clearing house which everything goes through. It’s not clear to us that they will play that role, so for us participating in the pilot at this point, we don’t know that it’s in our best interest to do that at this point [time].  We believe that if that is the final structure that the carriers decide is the best for the U.S. market, there will be a role for us to play. But it’s not clear. By no means is this the de facto structure for the U.S. market.”

DRIVERS: What is going to move barcode solutions out into mainstream mobile marketing and advertising campaigns? “This market will happen if readers are built into phones by the carriers, not by pushing downloads to consumers.” (By way of background, Scanbuy’s ScanLife handset application has already been pre-loaded on handsets from LG, Nokia, Samsung and Sony Ericsson, and been made compatible for mobile phones running on Google Android as well as BlackBerry, iPhone, Java, Symbian, and Windows Mobile.) “The carriers need to decide, OK, are we bundling readers on our phones or not? Sprint in the U.S. is about to start pre-loading our software on their phones, which is great news for the industry and for us.  But we need the others to get on board, and this has to become standard in every phone just as your Internet browser is that you use on your mobile device.”

EUROPE: Spain and Italy lead the pack – mainly because operators in these countries have chosen to pre-load readers on all their handsets. “What you’re starting to see [in Spain] is widespread code use. Marketers can go to several different campaign managers and get their codes, and they [the codes] will work across multiple operator platforms and handsets in the market.  If that’s the ecosystem that evolves, codes will be everywhere and they will be completely integrated into all marketing materials at all levels for marketers and media.”

DIRECT/INDIRECT MODELS: Which models are popular where? Japan has embraced a direct model (routing the user who scans the barcode directly to a site/destination). The trend in Western Europe, Latin America, and the U.S. is toward an indirect model, where scanning the barcode takes the user to a third-party server (where the site/action linked to a specific advertising campaign can be stored but also changed on the fly to freshen the sales pitch or simply point the user to a different site). “What you’re seeing in countries like Australia …is this hybrid approach where the campaign managers create a direct code that has a URL embedded in it, but that URL goes to their platform and the platform then tells it what URL to link to. So it’s a direct code but it goes through a campaign manager’s platform, not to the person who is putting the code out.” Could the U.S. adopt a similar model to make barcodes work? It could, provided that “code readers are ubiquitous on all phones; they read direct codes but the codes go to authorized campaign manager platforms.”

OUTLOOK: Is huge (!), but not all countries are moving at the same pace. “The markets where carriers and handset manufacturers are embracing it and getting phones into the market with software on them will take off the fastest.” In 2-3 years “codes will be everywhere in Spain and Italy.” In the U.S., the timeframe is “probably 3 to 4 years, and Latin America is probably 3 years.” Are we heading for a shake-in or shake-out? “From a competitive standpoint, I think you’re going to have major players in different geographies and the players in each geography will get stronger; there won’t be a lot of competition in each geography.” There may be a couple of players, but there are not going to be ten, for example. And this goes double for clearinghouses. “There aren’t going to be ten clearing houses in Spain or Italy or the U.S.

HOT TOPICS: In the U.S., it’s about “patent-related questions” and figuring out the right structure and ecosystem to take barcodes to the next level. In Europe it’s about growth – because the market is growing – and identifying the catalysts for even stronger growth. What’s next for Scanbuy? The excitement builds as the company nears the launch of two carriers in Spain, laying the groundwork for the first cross-carrier launch in Europe. “Spain will be the first country to actually launch and be operational with an interoperable system, and therefore our other markets around the globe, Latin America, US, Denmark, will be interoperable with those platforms so we’ll have a multi-country, 5 to 7 country interoperable system up and running in the next six weeks.”

My take: As I wrote earlier, the focus on open standards changes all the rules. The Scanbuy announcement signals a new chapter in the barcode industry (and a long overdue rethink on the part of Scanbuy). It also jumpstarts an equally overdue discussion around openness. But – as we know from similar discussions elsewhere in the telecoms and IT industries – there are different degrees and definitions of openness. How open is open and which open is best? The jury is out on that one.

In the meantime, there’s no overlooking the overlap between Scanbuy’s new push toward open standards and the progress of a pilot program (in which Scanbuy currently has little interest) aimed (likewise) at establishing open standards and a viable ecosystem. From my vantage point, the laundry list of fragmentation and intellectual property issues has yet to be satisfactorily resolved. But that’s not an excuse for not moving the market forward. Scanbuy’s decision marks real progress toward openness – and there is no turning back for anyone. Now all parties will have to walk the talk (and abandon the rhetoric we read across the blogosphere) if they want mobile advertisers to embed barcodes in their marketing strategies and not just dabble with one-off experiments.

Speaking of walk the talk, today Scanbuy’s EZ codes features on the cover BrandDigital: Simple Ways Top Brands Succeed in the Digital World, a business book by branding expert Allen Adamson. The 2D barcode on the back cover connects directly to the title’s page on Amazon’s mobile website, making this the first book to be sold in North America that includes an EZcode to sell the title via the mobile device. As Jonathan put in a statement: “This is a perfect example of how a 2D code placed on any physical media can send an interested shopper directly to a purchase opportunity. The mobile commerce experience has improved substantially over the past twelve to eighteen months, and we expect to see more of these applications in the future being initiated through our technology.”

This scenario also figures prominently in the Netsize Guide 2009, a 250-page mobile industry overview I wrote and offer for free download via a link on the homepage (sidebar).

Barcodes or visual search? Which technology approach will best link our virtual and physical worlds to support commerce? What do YOU think?

(I should mention at this juncture that the MSG global mobile industry research project and publication will feature a section on barcode companies and showcase successful mobile advertising campaigns. If you are a company in this space, or would like MSG to consider a mobile advertising campaign case study for inclusion in this work, then please contact me directly (peggy@msearchgroove.com).