Modeling and analysis for mobile application services: The perspective of mobile network operators Juite Wang a, ⁎, Jung-Yu Lai a , Chih-Hsin Chang b a Graduate Institute of Technology Management, National Chung Hsing University, 250 KuoKuang Road, Taichung, 402, Taiwan ROC b Department of Information Management, National United University, 1 Lienda Road, Miaoli 36003, Taiwan ROC abstract article info Article history: Received 8 March 2015 Received in revised form 7 June 2016 Accepted 16 June 2016 Available online xxxx The success of Apple's App Store has motivated many mobile network operators (MNOs) to embrace the appli- cation 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 mo- bile platform providers, MNOs have to provide services that directly attract adoption by end-users and devel- opers, 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 compet- itive advantages. © 2016 Elsevier Inc. All rights reserved. Keyword: Mobile app services Application stores Telecommunication industry System dynamics Two-sided market 1. Introduction The mobile telecommunication industry has transformed from value chains to value networks (Basole and Karla, 2011; Funk, 2009; Peppard and Rylander, 2006). Because of subscriber growth saturation and tight voice tariff competition, many mobile network operators (MNOs) have been experiencing declining average revenue per user (ARPU) (Peppard and Rylander, 2006). They have thus begun pursuing innovation in data transmission and value-added services such as news, games, video, music, and apps for end-users that can drive continued revenue growth (Funk, 2009; Kuo and Yu, 2006). However, due to the complex nature of mobile service ecosystem, MNOs do not have all the capabilities re- quired to deliver value-added services. They face a great challenge in how to integrate a cluster of network actors (e.g., software developers, consumers) for co-creating and delivering values to the end-consumer (Funk, 2009; Kuo and Yu, 2006; Peppard and Rylander, 2006). Initially, MNOs still dominated the market. However, the introduc- tion of Apple's iPhone in 2007 and the launch of Apple's App Store in July of 2008 greatly changed the mobile service ecosystem (Basole and Karla, 2012; Karhu et al., 2014). Similarly, Google launched its Android Market (renamed Google Play in March of 2012) in August of 2008. Later, Amazon and Microsoft followed suit with their own application stores as well. Though MNOs are supporting this trend by providing net- work infrastructure and services and receive stable revenue streams from the fast growing mobile data market, they do not retain the dom- inant positions in the mobile service ecosystem and competitive advan- tages they enjoyed in the mobile phone business (Basole and Karla, 2011; Ghezzi et al., 2015b). Most importantly, MNOs, simply providing data connectivity and bandwidth do not really create unique and long- term values to the mobile service ecosystem and lose valuable revenue opportunities with the customers (Basole and Karla, 2012). Other chal- lenges still remain, such as a constant decline in revenues from voice traffic, increased price competition on data plans, and struggle to take a position in the content industry (Ericsson, Mobile business trend, 2015). Facing great challenges from rapid technological and market changes, MNOs need to fully utilize their assets to promote innovation and find another way to sustain or create additional revenue streams for their revenue growth. Therefore, many MNOs have launched their application stores themselves to enhance their revenue and subscriber bases, such as AT&T in US and Vodafone in Europe (Holzer and Ondrus, 2010). Technological Forecasting & Social Change xxx (2016) xxx–xxx ⁎ Corresponding author. E-mail addresses: rdwang@nchu.edu.tw (J. Wang), jylai@nchu.edu.tw (J.-Y. Lai), jhchang@nuu.edu.tw (C.-H. Chang). TFS-18565; No of Pages 18 http://dx.doi.org/10.1016/j.techfore.2016.06.020 0040-1625/© 2016 Elsevier Inc. All rights reserved. Contents lists available at ScienceDirect Technological Forecasting & Social Change Please cite this article as: Wang, J., et al., Modeling and analysis for mobile application services: The perspective of mobile network operators, Technol. Forecast. Soc. Change (2016), http://dx.doi.org/10.1016/j.techfore.2016.06.020