App Insights: VZ Wireless Lures With Ad Dollars

Verizon Wireless has made a lot of promises about its infant app shop, but among the most appealing to developers is a vow to open up two advertising platforms to help bring in some extra cash. (See Verizon Outlines App Store Political Spectrum .)

The carrier is offering V Cast app developers access to its Advertising Development Center through the Verizon Developer Community (VDC) portal. The platform is positioned as a way for developers to monetize their apps through in-app advertising.

At launch, developers can access either a free software development kit for Microsoft Corp. (Nasdaq: MSFT)’s Bing, Verizon’s exclusive mobile ad and search provider; or a free SDK from AdMarvel, a new mobile ad partner that's owned by Opera Software ASA . (See Opera Acquires AdMarvel.)

Bing’s ad prowess is still limited today, but AdMarvel’s software lets developers source, track, and optimize their ads from any network, including rivals like Millennial Media, AdMob Inc. , and Quattro Wireless .

The program could be a powerful differentiator for Verizon, but the potential really hangs in the ad-revenue split. A Verizon spokeswoman said a revenue-share will be involved, but she wouldn’t say what that will be -- just that the goal is to return a high value back to the developer.

The Wholesale Applications Community (WAC) , of which Verizon is a part, hasn't revealed its revenue-split yet either, but Verizon stuck with the Apple Inc. (Nasdaq: AAPL)-set 70/30 share standard for its paid apps. Apple’s recently launched iAd platform takes the split down to 60/40, suggesting that Verizon could likely follow suit here as well. (See Apple Introduces 'iAd' and Apple, Apps, Ads, Antitrust & Adobe.)

Anything Verizon says right now is just a conditional promise, because its VCast App Store is still only available on one device, the BlackBerry Storm II, and offers about 400 apps. Ed Ruth, Verizon’s director of V Cast Apps, says that more apps and devices are coming soon, including more BlackBerry handsets and an Android phone. The Verizon spokeswoman says to expect the next supported smartphone to emerge in "the next couple weeks."

Carriers complement, not compete
The carriers are positioning themselves to be as open and accessible as they can be in their bid for developers, but even promises of more revenue won't woo developers away from competing app stores, according to Soumen Ganguly, principal at Altman Vilandrie & Co., who says that shouldn't be their strategy, anyway.

Given that the carriers have already been usurped in owning the single, all-inclusive app repository, the best strategy for developers is to aim to function in parallel to off-deck store fronts or to be a subset of an existing one, according to Ganguly. The enterprise, in particular, is one place a carrier can be innovative -- and play up the security angle. “There are a number of places where enterprises are not comfortable with their apps running in the app store or open environment,” Ganguly says. For example, an operator could open up a framework for easy app development, much as Nokia Corp. (NYSE: NOK) has done with Ovi. Doing so would ensure a secure environment for enterprises and limit who can download the apps they create. (See Nokia Ovi’s App Wizardry.)

Ganguly suggests that carriers play up their strengths, with security being a big one, but also maintain access to consumer knowledge and APIs for their networks, locations, address books, and other functions, including integrated carrier billing.

They’d also be wise to focus on a subset of apps done in collaboration with the handset maker or developer, but optimized to their devices, he feels. That’s a service they are uniquely positioned to provide. And it's something they're already pursuing with the native apps they offer, including maps, email, and some more innovative examples like T-Mobile US Inc. ’s Sherpa app, developed specifically for the carrier by Geodelic, which also offers a non-customized version of the app in other app stores.

“You’ll end up in a world where you’ll probably have two app stores per phone," Ganguly says, adding that carrier-recommended apps will live in parallel to the native app store, whether it be Android Marketplace or BlackBerry App World. Despite their big talking, this world where carriers are just one of several app suppliers may be alright with them. Their main motivation is in driving incremental revenue, so any time more data is used, they win. That doesn’t require monopolizing the app market as they once did. (See App Insights: DT Wages an App Attack.)

This is something Verizon's Ruth acknowledges, too, noting that Verizon sees its V Cast app store as complementary to existing storefronts, but as always representing the best of the best.

“It’s like a great shoe store,” Ruth says. “It’s high-quality shoes, but not 100,000; maybe just 1,000. That’s our approach. Deliver on a great shopping experience and customers will decide.”

This is Part 3 in a series on the mobile apps market. Read Part 1 here, and Part 2 here.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

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