Innovation from the East

Innovation from the East

25 NOV 2014

Talk to most people about Chinese manufacturers or suppliers and at best they will respond with some comments about low production costs. At worst they will refer to copycat manufacturers.

Fairly or otherwise, China has a historic reputation in the rest of the world for copying rather than creating; for producing rather than developing.

But in software and app development that image is fast changing. Take an app like WeChat in China, which has blossomed from a simple messaging service to a full-blown m-commerce platform at a much faster rate and more successfully than its western counterparts.

Real innovation is now emerging from China and I believe it is the western world that will soon become the copycat marketplace. In particular, if operators study what is already happening in China, they will realise that app innovation and integration can open up new revenue streams across the mobile ecosystem.

Here’s the thing about apps as we see them and use them currently: they are standalone islands of information and usage. Yes, they seek permission to use handset and network features – typically access to contact and location information – but they only have a limited knowledge of the customer.

An app like Spotify gets to know the music you like; the travel app gets to know your frequent journeys, the accommodation app knows the types of places you like to stay. But nobody joins up the train booking, with the hotel, with the concert ticket when your favourite band announces a tour. That’s because each of the apps that you use only knows a part of your motivation.

The operator, on the other hand, could see all of those interactions, and with the right innovation, could start to allow some app mash-ups that create compelling offers.

And that’s where the operators in China are innovating and leading the way when compared to their Western counterparts.

Operators in China are creating open API hubs within the network to allow app developers to build and target combined or solo offers based on variables such as usage, location, and audience demographic.

The hub even allows developers to create pricing models or zero-rate data usage – all with operator oversight and agreed revenue share models.

China Telecom is generating about $170 million in revenue each month through its open platform.

Take the music example again. If you have an app like Spotify on your smartphone, and have enabled the location element, the app might well know you are in the area of a music festival. If the headline act at the festival regularly features on your playlist, then it is pretty certain you are there.

But what if you don’t have that music app? There are other ways of knowing you are likely to be at the festival (e.g. the operator knows your location) and if you are at the festival then it’s likely you are a fan of the headline act, so the opportunity exists for a music app to make you an offer – especially if designed using the operator’s open APIs to make it financially attractive.

How about free streaming with no data charges for the first year? What about adding a data-free download to own the headline act’s latest album. If you’re a pay-as-you-go mobile user, then maybe a day pass charged to your pre-paid balance would be a good way to get started?

In China, the open API hub is allowing app developers to work with each other and with the operators to put together exactly those types of offers.

Developers cooperating range from search engines to taxi companies, from ticket companies to sports and betting apps.

In Europe, research from telecoms consultancy Northstream identified that greater collaboration tools for operators and app developers could unlock a market worth in the region of €2.2 billion in gross operator profits over the next three years.

That would seem to me to be a very healthy reason for Europe to start copying China.


Dr Andy Tiller is VP for corporate product marketing at telecoms software provider AsiaInfo.

The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members.