In the second of a two-part series, Susan Kuchinskas reports on making in-car apps pay.
While most auto-branded apps today are distributed via iTunes, Google Play or other mass stores and delivered to phones, this model won't work for apps delivered to embedded systems.
OEM app stores are becoming a popular concept, and they could potentially be lucrative. But running an app store is far from a car maker's core competencies, not only in terms of development but also marketing.
"There's a fine line between enabling apps people are already using and trying to promote emerging or new apps,” says Roger Lanctot of Strategy Analytics. “I think auto makers will be more successful in enabling access to existing apps that are already popular and well understood."
David Quin, head of consumer applications for ALK Technologies, concurs. His opinion is informed by ALK's sales of the CoPilot navigation app, recently acquired by Trimble.
ALK has done it all, providing CoPilot to smartphones for customers including Telefónica and T-Mobile, and then selling directly to consumers via app stores. ALK also produces proprietary products for OEMs, including BMW.
"Auto vendors like to keep control over the customer and the customer experience," Quin notes. "The trade-off for going down proprietary app store route, you limit yourself in audience reach. One of the great attractions of iTunes and Google Play is the potential to reach every user of those devices. Big app stores are the ones people naturally feel comfortable about."
Are app stores the way forward?
Still, OEM-run app stores appear to be winning out, at least for now. Both Renault and QNX have recently launched major automotive app store initiatives. And General Motors is close behind with plans to launch an app store of its own later this year.
What's more, Ford and GM have also stepped up efforts to involve third-party developers through APIs that facilitate the building of apps for the vehicle.
In December 2012, Renault started shipping R-Link with the aim of making it available on its full model line by mid-2013. The system is available as an option costing €590, and car buyers get four pre-installed applications plus access to the R-Link Store for a trial period of six months to a year, depending on the country in which the car is sold. At the end of the trial period, a continuing subscription is €54.90 per year.
But the offerings and even the business model will be tested and adjusted as necessary, according to Emmanuel Bonbon, connectivity and multimedia general manager for Renault.
"We just launched the system, and we don't have enough feedback from our customers yet," he says. "But we monitor customer activity through yield management, and we look for ways to optimize the best applications to customers' needs as is frequently done in the telco industry. The main difficulty, I would say, in the type of business [we are in], and I am sure it’s the same for other OEMs, is that you are buying a product for which some money is going to come later. You have to think about what you put in at the beginning and what you put in later."
QNX enters the fray
Another big step toward a smartphone-type app store for car makers comes from QNX.
In April, QNX and 7digital announced a partnership to add the latter's digital music platform to QNX CAR. 7digitial sells MP3s directly to consumers from its website, and it also offers technology and APIs that let other companies integrate music into their services or develop their own digital music services. It already works with Samsung, BlackBerry and T-Mobile US.
The integration will let OEMs and tier ones build digital music stores into infotainment systems based on QNX. QNX and 7digital think one compelling use case in the car would be the ability to identify a song playing on the radio, whether terrestrial, satellite or streaming, and be able to buy it with the push of a button.
"It's remarkably difficult to buy songs you're hearing on the radio,” says Vickie Nauman, president, North America for 7digital. “The intention of the relationship is to make it much easier for someone hearing something they love."
Most of 7digital's existing business relationships provide a share of music sales revenue to partners, and the company has the systems in place to track and share revenue from sales in the car.
While deals with OEMs are still to be made, 7digital will handle collecting money from consumers and paying music rights holders, and it can also manage giving a piece of the pie to OEMs. "One of the inherent problems with digital music is there's not a lot of revenue share there, but we encourage a revenue share to the car manufacturer," Nauman says.
The QNX CAR application platform already includes an application store client that OEMs can use. The client provides the ability for drivers to browse apps, and download and install them from within the car. This app store client can be attached to any back-end app-store server.
With the CAR platform, "we are trying to either minimize or eliminate the challenges of bringing software designed for mobiles or other industries," says Andy Gryc, senior automotive product marketing manager, QNX Software Systems. "We fully expect OEMs will want complete control over curating their content."
QNX is close to finishing a second part of the app-store puzzle, what Gryc calls a "virtual marketplace" of apps from which OEMS can select compatible apps. He says the platform will make it easier for an OEM to test applications and decide which make sense for the vehicle. "Then, they can work out the business relationship or financial exchange."
(For more on in-car apps, see Telematics: What's next for apps and services, part I, Telematics: What's next for apps and services, part II and Making the most of the app opportunity, part I.)
Show me the money
In the meantime, Nick Pudar, director of developer ecosystems for GM’s Global Connected Consumer group, believes connected infotainment will deliver a better customer experience and end up selling more cars. He also believes that automotive apps may yet turn out to be a profitable proposition for third-party developers, perhaps even more so than building apps for smartphones.
“Yeah, there are millions of new phones built and sold every single day,“ he says. “And yet, if a developer creates an app for the smartphone world, they are competing with nearly a million other apps. How does a customer even know that a new app came into existence? If you look at the number of downloads that occurred last year divided by the 800,000 or so apps that are in existence, it turns out to be about a thousand downloads per app on average.“
According to Pudar, the automotive space offers a much better outlet. “Given the fact that the automotive app environment is going to be very uncluttered, there is a very high likelihood that a developer’s app will get downloaded hundreds of thousands of times, if not millions of times, in the course of the first couple of years,“ he says.
Still, this is a field with a great deal of uncertainty and few clear-cut answers. When asked about the long-term business strategy for his group and the application integration program, BMW's Phil Johnston says, "I wish I had a crystal ball."
Susan Kuchinskas is a regular contributor to TU.
For all the latest telematics trends, check out Content & Apps for Automotive Europe 2013 on June 18-19 in Munich, V2V & V2I for Auto Safety USA 2013 on July 9-10 in Novi, MI, Insurance Telematics USA 2013 on September 4-5 in Chicago, Telematics Russia 2013 in September in Moscow, Telematics LATAM 2013 in September in Sao Paulo, Brazil, Telematics Japan 2013 on October 8-10 in Tokyo and Telematics Munich 2013 on November 11-12.
For exclusive telematics business analysis and insight, check out TU’s reports: Telematics Connectivity Strategies Report 2013, The Automotive HMI Report 2013, Insurance Telematics Report 2013 and Fleet & Asset Management Report 2012.