Modeling and analysis for mobile application services: The perspective of mobile network operators

- A system dynamics model is developed for mobile application services.
- Conjoint analysis is used to understand preferences of end users and developers.
- The cross-side network effect is not significant for MNOs' application stores.
- Improving app localization and store service quality are required.
- Strategic implications for MNOs are also discussed.

The success of Apple's App Store has motivated many mobile network operators (MNOs) to embrace the application store. However, finding a successful strategy that provides meaningful differentiation in an increasingly competitive mobile application market is a great challenge for MNOs. This research treats the mobile application service as a two-sided market and develops a system dynamics model to understand the diffusion behavior of mobile application services. Choice-based conjoint analysis is used to collect multi-attribute preference data of end-users and developers in order to understand how they select application store service offerings in Taiwan's mobile application market. We found that under the great pressure of application stores offered by mobile platform providers, MNOs have to provide services that directly attract adoption by end-users and developers, because the cross-side network effect is not significant. MNOs need to apply a localization strategy based on their strengths while improving their store service quality by collaborating with third-party IT vendors to persuade developers and end-users to adopt their stores as another “home base”. We conclude that MNOs need to not only fully exploit their resources to sense and seize emerging opportunities, but also reconfigure their resources with respect to market dynamics to rebuild their core competences for sustaining their competitive advantages.