Summary

Verizon’s new ads imply an app business by pitching “app-friendly” and emphasizing “exclusively”.  But the prerequisite might be to have WiFi-capable smartphones and to offer free WiFi hotspots until the 4G LTE build out.

Analysis

Verizon suggests an app proposition with the latest ads for being “app-friendly.  But the offer is LG handsets, with the theme of “all exclusively from Verizon Wireless.”  Verizon wants to seize the app demand and differentiate its handset portfolio by advertising “the app-friendly LG enV lineup.  The ads follow the weekend of AT&T sharing in the sales of one million 3G S iPhones sold.  And Verizon has to act on the device manufacturers launching off-deck apps.  LG announced their app store for South Korea, and does not want to immediately interfere with carrier relationships.  Yet LG’s President and CEO made the strong statement of “The key thing to success for smartphones depends on content”.  The questions become what Verizon is doing in apps and can it withhold WiFi-capability on handsets until building out the 4G LTE network.   

If Verizon wants data growth for 2009, it needs app business for the next two quarters and cannot wait for a dual mode CDMA/LTE iPhone from Apple or a Pre model from Palm.  Verizon’s growth in data ARPU has been flattening with the last quarter at $14.16 compared to $13.99, $13.30, $12.58 and !0.79 for the previous four quarters.  Verizon’s App Zone has been low traction since opening to developers when the RIM Storm was launched.  Then Verizon announced an app store called Mobile Web Games & Apps Store that required Get It Now-capable phones.  The apps tended to be mundane with messaging, ringtones and wall papers.

The other question is how Verizon will make WiFi accessible to smartphone app users.  Boingo at Apple’s WWDC reported that 23% of all devices accessing Wi-Fi for May 2009 were iPhone and iPod Touches.  Boingo also pointed out that unique visitors increased 380% with 292 average minutes per month.  Previously in April, Verizon was rumored to offer Boingo WiFi free to DSL and FiOS customers but lacks WiFi-capable handsets to extend the offer to mobile phone subscribers. And Verizon’s other WiFi announcements like the Novatel’s MiFi 2200 was for a 3G connection across netbooks, cameras and media devices.  Verizon seemed unfocused in the Hub for home VoIP without wireless connectivity.  Earlier this year, Verizon introduced the Network Extender as a home mini-cell site that was the same as Sprint’s offer of the Samsung Ubicell.  The mini-cell site was priced at $249.99 and only did basic service without EV-DO mobile data.  Verizon did quickly replace the Hub in its retail stores with the H-P Mini 1151NR netbook.  Let’s watch if Verizon shows urgency for WiFi-capability to build an app business.       

Analyses are solely the work of the authors and have not been edited or endorsed by GLG.