Mobile World Congress 2011 Scorecard: Content and applications

Whose profile is rising? In-app subscription models

In-application transactions were already a hot topic coming into Mobile World Congress: App store analytics firm Distimo recently reported that in-app transactions across free and premium apps now account for 49 percent of iPhone developer revenues and 29 percent of iPad developer income. So it's no wonder that Apple's (NASDAQ:AAPL) mobile rivals are following the App Store's lead, introducing in-app transaction mechanisms to their own platforms.

This month alone, Research In Motion (NASDAQ:RIMM) launched its BlackBerry App World 2.1 storefront update, highlighted by the addition of in-application payment options, and days later Google (NASDAQ:GOOG) continued its Android Market overhaul, enabling in-app purchases and extend its retail efforts to the Web.

The next step: In-app subscription billing. In early February, media kingpin News Corp. officially unveiled its digital news journal The Daily, touted by CEO Rupert Murdoch as "the first national news publication for the iPad created from scratch." In association with The Daily's launch, Apple introduced a new subscription billing model giving iPad users the option to pay either a 99-cent weekly option or $39.99 per year. Apple's iTunes digital storefront will push each new issue to the subscriber's iPad during the morning hours, with new content and updates added throughout the day as breaking news warrants.

Rival publishers and digital media appeared poised to seize the subscription billing option as well--but then last week, Apple revealed the terms of its service, demanding 30 percent of subscription revenues as well as ownership of consumer data like names and email addresses. Publishers and developers alike subsequently balked at Apple's proposal, with several startups abandoning their iOS app efforts as a result. Digital music service provider Rhapsody even issued a statement calling Apple's conditions "economically untenable," adding it will huddle with market peers to determine an appropriate legal and business response.

Then, hours after Google (NASDAQ:GOOG) chairman and CEO Eric Schmidt keynoted Day 2 of Mobile World Congress, his company countered Apple's subscription demands by introducing One Pass, a competing digital content subscription platform promising publishers the flexibility to establish their own pricing and conditions. As its name suggests, One Pass offers consumers a single sign-on email and password to purchase digital content across mobile applications and the Web. According to Google, the service helps publishers authenticate existing subscribers so that readers don't have to re-subscribe to access their content across new devices. Google One Pass publisher partners can customize how and when they charge for content, trialing different pricing models including subscriptions, metered access, freemium or a la carte--publishers may also offer discounts to existing subscribers. Google will manage all transactions, employing Google Checkout to process payments; in exchange, it claims 10 percent of the purchase price and will share the customer's name, ZIP code and email address unless the consumer instructs the digital services giant not to. And while publishers selling content within an application running Android must still share 30 percent of revenues per terms of the Android Market storefront, Google One Pass will allow publishers to avoid selling inside the app and instead direct customers to the Web, where the 90/10 split remains in effect--Apple said publishers may no longer provide external links in their iOS applications to allow the customer to purchase content or subscriptions outside of the app.

"This is purely a shot across Apple's bow at a critical point in time," Forrester Research digital media analyst James L. McQuivey told The New York Times. "That's what the industry wants right now, to know there is an alternative to Apple and someone willing to talk about a more reasonable rate."

The conversation is just beginning.

Whose profile is falling? Mobile advertising

The controversy around Apple's in-app subscription demands is a pointed reminder that the computing giant is not immune to criticism and mistakes, despite what its most ardent supporters may suggest. Another case in point: iAd, the mobile advertising network introduced in mid-2010. Insiders say iAd fill rates--i.e., the percentage of ad inventory filled with actual advertisements--have been in steep decline since the year began, buzz corroborated over the course of several interviews conducted at Mobile World Congress by FierceMobileContent.

Reports indicate that iAd fill rates have fallen from 18 percent to 6 percent in recent weeks, with some newer applications running with all their ad slots unfilled. While fill rates and advertising budgets across all media platforms tend to drop in the weeks following the holiday shopping season, marketers also seem increasingly wary about committing to the iAd network. "Apple is in a weaker position than you'd think," one unnamed digital ad agency executive told The Financial Times late last year. Another exec added: "Apple is still figuring out how to sell advertising. You don't just become a sell-side media company overnight. The infrastructure is missing at Apple right now."

Apple's iAd struggles are symptomatic of a larger trend within the mobile segment: Application developers are becoming increasingly reliant on rival monetization strategies to build a business. In late 2010, mobile application analytics provider Flurry reported that in-app purchases, not ads, now generate substantially more income for iOS developers. Based on a sample study comprising leading iPhone social networking apps and social games reaching an estimated 2.2 million daily active users, in-app sales of virtual goods now account for about 80 percent of developers' average monthly revenue per user--as recently as Sept. 2009, micro-transactions represented only about 15 percent of monthly app ARPU.

This is not to suggest that mobile advertising has failed iOS developers, however. In fact, mobile ad network Millennial Media announced last week that while Android continues to lead iOS as the largest smartphone OS across its platform, iOS ad requests increased 47 percent in January 2011 over December 2010, outpacing all rival operating systems.

No less significant, Mobile World Congress yielded several intriguing new mobile marketing announcements. For starters, nationwide apparel retailer Old Navy is partnering with mobile music discovery solutions provider Shazam to launch an interactive, multi-platform advertising campaign spanning in-store promotions, television, the Web and mobile devices. Also announced last week: Hipcricket introduced its HIP 7.0 software-as-a-service platform, promising clients the tools to extend their mobile campaign reach to Facebook. Perhaps most notable, cross-platform application storefront GetJar completed a Series C financing round totaling $25 million; all GetJar apps are free--developers monetize their applications by incorporating advertising or launching demo versions through the site and upselling full-fledged premium iterations across other sales channels.

The developer gold rush is still just beginning.

Mobile World Congress 2011 Scorecard: Content and applications