Apps club grows in Brazil with carrier support
By Heloisa Magalhães | Rio de Janeiro
A Brazilian idea can give telecommunication carriers the opportunity to make money with application downloads, a business of which they were virtually absent. It is an app club, offered by Bemobi, a startup, and that has conquered the four big Brazilian carriers. Oi, TIM, Vivo and Claro are offering a service in which users pay a fixed amount — no more than R$6 per month — and can download to their phones more than 400 applications among the top rated internationally as many times as they want.
For telcos, the formula could not be timelier. When the user downloads the application through online stores Google Play or the App Store, of Apple, they don’t get paid. The club brings the possibility to benefit from the sale.
Launched last year for smartphones running the Android operating system, the service ended April with 3.2 million monthly paying users in Brazil. It more than doubled in four months, since it had 1.5 million subscribers in December, according to Bemobi, company that created the service, nicknamed “Apps Clube” by some carriers.
Internally, carriers call the platform “Netflix of applications,” since the streaming movies and TV series service offers unlimited access for a monthly subscription fee. Apple’s App Store and Google Play, the two dominant application marketplaces, have free offerings but charge individually for the paid ones. At App Store, prices come in dollars.
People with children know that paying individually for each app may mean a high cost, since it’s difficult to sate kids’ curiosities (or adults’, depending on how they enjoy games and other services). Many have already felt in their wallets the cost of several (or all) applications of Galinha Pintadinha or Turma da Mônica, favorites among Brazilian children.
Oi was the first carrier to bet on the new model. It launched it in March 2014. Then came Vivo in October. TIM and Claro joined in December.
Pedro Ripper, managing partner of Bemobi, says the platform’s big triumph was the creation of a different sales model, benefiting all parties. For users, if they have prepaid cellphone service, the price of using the app club (weekly or monthly) is discounted from their credits. For postpaid or contract clients, the subscription is included in the monthly bill.
On the side of companies, the big difference is for carriers. They get 30% of the subscription fee. The other 70% of the subscription revenue is split between Bemobi and the app developers, which are remunerated according to a percentage relative to the number of times the app is downloaded.
Mr. Ripper says users also like the fact of not needing to pay with credit card, as in the case of Apple’s App Store or Google Play. “Most Brazilian cellphone clients use the prepaid service, and most of them don’t have credit cards or simply don’t like to make online purchases with cards. It is simpler and more predictable to pay the subscription using credits or in the monthly bill,” Mr. Ripper says.
But he doesn’t minimize the strength of the competitors. On the contrary: “Doing what Apple or Google do would be an inglorious battle. What we did was to fill first a space that was empty. And we followed the subscription trend that is maturing with book or music services,” Mr. Ripper says.
The service is being launched this week in Mexico, by carriers of the América Móvil (owner of Claro) and Telefónica (Vivo) groups. And talks with carriers of the two groups are advancing in 11 Latin American countries.
Mr. Ripper has also visited phone companies in other countries. Besides him, Bemobi has Clécio Guaranys and Bruno Mello as partners. The three are computer engineers and were colleagues at the Pontifical Catholic University of Rio de Janeiro (PUC-RJ).
Mr. Ripper stepped down from a vice presidency of Oi in mid-2013 and joined the colleagues. Messrs. Guaranys and Mello decided to be businessmen soon after getting their bachelor degrees, and in 2000 created M4U at the PUC-RJ incubator. The company created mobility tech platforms, among them one for recharge of prepaid cellphones and one for mobile payments. In 2010, Cielo, a payment-processing company, paid R$50 million and took the control of M4U.
The three partners also own now Mobicare, which offers software for large Wi-Fi networks, integrating them to 3G and 4G networks. It is used at more than 1 million hot spots of the three largest Wi-Fi networks of the country, those of Oi, NET and TIM.
Mr. Ripper says he looks after apps to be part of the club on the internet and also visiting developers and distributors in several countries. There are apps created in Norway, Sweden, Japan, Australia, the US, and Brazil, among other countries. The executive expects fast growth for the service, since smartphones still account for only about 45% of the Brazilian market.
Data of International Data Corportation (IDC), published by consultancy Teleco, show that in the first quarter 14.1 million smartphones were sold in Brazil (93.3% of the total), compared to 1 million traditional devices. For the entire 2015, the forecast is for sales of 63.3 million smartphones in Brazil, a 16% growth compared to 2014.