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Telefonica Shows Developers the Money

Michelle Donegan
LR Mobile News Analysis
Michelle Donegan
2/9/2011
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Telecom operators want to entice application developers to create new services for their networks and app stores, but the reaction from developers has resembled the famous Jerry Maguire demand to show them the money.

Now, Telefónica SA (NYSE: TEF) has announced an innovative initiative that introduces a new revenue-share model for app developers.

The operator has launched a new developer community called BlueVia across its international footprint, which not only opens network application programming interfaces (APIs) to Web and mobile app developers but also offers them a revenue share on any transaction that uses those APIs as well as on app sales and subscription revenue.

"The revenue model completely changes for developers," says James Parton, head of developer marketing at Telefónica. Rather than taking a one-time upfront fee of US$5 for their apps, he explains, developers get a recurring revenue stream from each transaction.

Telefónica is offering developers between 10 percent and 50 percent of the revenue generated from API transactions as well as 70 percent of the revenue from application sales or subscriptions.

Here's how the revenue share on API transactions works: Telefónica has exposed an SMS API, which enables developers to integrate SMS into their app or Web page. In one example, a developer has created an app that sits on the dashboard of an Apple Mac computer that lets users send text messages from their computer to a mobile phone. Every time a user sends a text message, the app developer gets a cut of that revenue.

"We're adding more and more APIs that come with this transactional business model," says Parton. "Developers want longer transactional revenue streams."

One of the other APIs that Telefónica has already opened up is for mobile advertising, based on Amobee Inc. 's system, whereby developers would share revenue generated by banner ads or text-based ads inserted into their applications.

In addition, the operator is offering what it calls a "user context" API to developers for free. This provides real-time analytics to developers about who is using their app, what type of customer they are, what device they are using and what kind of network connectivity they have.

And when it comes to distributing the apps developed using Telefónica's network APIs, developers are not tied to the operator's own app stores. They are free to sell their apps through any app store, although Parton says Telefónica would be "delighted" if they sold through its own stores.

At the heart of BlueVia is the service delivery platform (SDP) from Huawei Technologies Co. Ltd. , which Telefónica will deploy globally. Parton describes the function of Huawei's SDP as an "aggregation layer, so we can connect up all the local business around the world but expose [the APIs] globally in the same way across the footprint." (See Telefónica to Go Global With Huawei SDP.)

"Historically, operators have wanted to be very controlling about developing products and services," says Parton. "BlueVia recognizes that's a challenging thing to do successfully. The developer community can innovate far faster then we can. We want to expose and provide those ingredients and allow them to bake the cake for us."

Telefónica's BlueVia initiative is broad: It will take over the operator's regional developer programs, O2 Litmus in the UK, Open MovilForum in Spain, Movistar Developers Platform in Mexico and Plataforma do Desenvolvedores Vivo in Brazil. And it is aimed at Web as well as mobile app developers.

Why this matters
Telefónica is the first operator to make such a concerted effort to coordinate and consolidate its program for application development and service creation. As such, BlueVia will likely get attention from developers as well as other operators. (See Telefónica Looks to Third Parties and Telefonica Delves Into Developers.)

"This is the first really determined effort to get an application ecosystem going [by an operator]," says Graham Finnie, chief analyst at Heavy Reading. "Time will tell if it is successful. There's a lot of evangelizing to do, but it's a good start."

BlueVia is also a compelling example of a way that carriers can avoid becoming a mere bit pipe.

"If they don't do this, they can either develop the services themselves, and operators have a poor record here … all the innovation is happening from third parties," says Finnie. "The other option is to sell connectivity. And that's a difficult business to be in and stay competitive."

For more
Telefónica says that BlueVia is not a program that will supplant the work it is doing in the Wholesale Applications Community (WAC) . For more on operators' efforts to attract developers, please see these stories:

— Michelle Donegan, European Editor, Light Reading Mobile

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