The Game between Internet and Smartphone Manufacturers

In the process of revising the pre-installation market for mobile phone applications, the relationship between the two major players in the third-party application distribution channel—Internet vendors and smart phone factories—is becoming more sensitive. Competition is on the increase. On the other hand, the cooperation between the two sides is also moving toward the new normal.


In recent months, mobile phone manufacturers are applying new cooperation policies to application developers. These policies are similar to the bid ranking model proposed by Internet companies, and they hope to fully exploit the position of the existing application store to provide advertising display. These mobile phone manufacturers rely on their authority at the system level.

On November 26th, at a salon for developers, Lu Peng, head of the mobile phone business of mobile phone manufacturer OPPO, disclosed that in 2016 it will fully open the CPD (paid-to-download) advertising bidding cooperation model, and stated that the developer signed After the cooperation framework will enjoy a certain discount.

This charging model has already been adopted by third-party application stores such as Tencent App, Baidu Mobile Assistant and 360 Mobile Assistant. According to Xue Kai, the person in charge of the APP publishing and monitoring platform Cooling Business, Tencent Technology, from the CPA (Pay per Single Activation) to the CPD, the operating models of handset vendors' application stores and Internet companies are becoming more similar.

Most of the interviewed developers indicated to Tencent Technology that there is no obvious difference between the two types of channels, and that mobile phone manufacturers can more accurately locate users, but Internet companies have more extensive coverage of users.

App store has become a source of profit for mobile phone manufacturers

According to Cao Jingsheng, vice president of Coolpad, the App Store serves as the entrance for distribution and is the basis of the Internet business. It is also an essential service provided by the mobile phone itself to the user. Cool began research and development of this business three years ago and it is currently 100 people. The team is responsible.

Li Nan, vice president of Meizu, also indicated to Tencent Technology that the app store is an important part of the ecosystem that is built around its operating system, which helps improve its user experience. The Meizu has also invested a lot in this.

The reason behind this is that in recent years, the competition in the smart phone market has continued to intensify. With several rounds of network upgrades, price competition has become increasingly limited. “Mobile phone manufacturers no longer rely solely on mobile phone hardware to make profits, but also make software applications a new profit growth point. Mobile phone makers’ own application stores are the bridge between the hardware devices and the software services.” Samsung’s responsible person told Tencent Technology .

For application distribution, mobile phone manufacturers have previously mainly two ways, namely the application store and mobile phone pre-installed. A few days ago the media broke out. A domestically-made smart phone selling for around 2,000 yuan, its pre-installed App revenue can even account for 20-30% of gross profit. However, as ordinary users usually cannot uninstall these applications, this government department begins to supervise.

The Ministry of Industry and Information Technology recently released the "Interim Regulations on the Administration and Application of Mobile Intelligent Terminal Application Software (APP)" for public comments. The Opinions stipulate that except for basic applications such as making calls, sending text messages, and application stores, mobile phones can be uninstalled.

Analysts and practitioners believe that the recent crackdown on the policies of the Ministry of Industry and Information Technology in the pre-installation market is also conducive to the normalization of application stores.

Industry will move towards competition

As the differences between the user experience and third parties that handset manufacturers can provide gradually decrease, iResearch analyst Guo Chengjie told Tencent Technology that the advantages of combining mobile phone manufacturers and systems will become more apparent. Xue Kai also stated that from a theoretical point of view, the privilege of mobile phone manufacturers is even lower, and it can be more refined and personalized.

It is precisely because of this that both parties have friction when they compete for the right to speak. A few days ago, Xiaomi users discovered that after downloading an app from a third-party app store on Xiaomi’s mobile phone, Xiaomi’s mobile phone would conduct a so-called “security scan” on the app and remind users to download it through the Xiaomi app store more securely. Some industry sources analyzed that this is Xiaomi’s intention to strengthen the position of self-employed app stores through restrictive measures. From the perspective of market structure, Xiaomi’s application store is a relatively strong camp among mobile phone manufacturers, but it is still lagging behind pure internet distribution channels.

On the whole, Tencent Application Bao, Baidu Mobile Assistant and 360 Mobile Assistant currently account for more than 80% of the market for application distribution. Even if the overall share of mobile phone manufacturers is further increased, the share of the individual manufacturers' market share is still not high. In addition, the market share of mobile phone manufacturers has a direct relationship with their shipments, and the market growth constraints are very obvious.

Some practitioners believe that the current operating strategies of mobile phone manufacturers following third-party application stores will also encounter barriers to development. Whether based on the number of clicks or the number of downloads, the ad placements available in the app store itself have been gradually developed, and third-party app stores have launched new models based on social relationships and in-app search.

In fact, many mobile phone manufacturers in addition to building their own application distribution channels, are also operating app stores with Internet companies. For example, on some models, Huawei’s application store is handed over to its application store. Cool’s application store also has application treasures to participate in customization. Samsung also establishes a partnership with Application Po. Users can use the latter’s plug-ins to download applications and can Clearly identify the source of the application is Samsung's own store, or application treasure. Similar cooperation methods also include Baidu Mobile Assistant and 360 Mobile Assistant.

“Mobile phone manufacturers’ own application stores want to behave well. They also need to be open-minded and actively cooperate with third parties.” Samsung’s responsible person told Tencent Technology.

Of course, competition between the mobile phone manufacturers and third-party channels for the application distribution market is still inevitable, but the share of the application distribution market is unlikely to change much in the short term. For the entire industry, the only variable is when Google Play, Google's official app store, may enter the Chinese mainland market. However, it is widely believed that this influence on the market pattern has not been significant. "There are already many domestic third-party application markets. There is not much more, and it will ultimately be up to the user to decide." Cao Jingsheng, vice president of Coolpad, told Tencent Technology.