Opera Mini tops the iTunes chart, but can it make any money?
Good PR doesn't always equal profits
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iPhone users are tuning to the Opera Mini browser, which now tops free apps polls around the world. But giving away a product isn't necessarily the best way to make money.
Cult of Mac noticed that Opera's Mini browser was topping the charts, and promptly checked the 22 iTunes stores to confirm that Opera Mini is the number one free application everywhere. But running those servers costs money, and it's far from clear if Opera Mini users can ever generate enough revenue to cover that ongoing cost.
To the surprise of all and sundry Apple approved Opera's iPhone browser, providing the first alternative to the WebKit rendering engine embedded in the iPhone. Opera Mini offers a faster browsing experience thanks to server-side compression.
Opera's business model involves sharing advertising revenue from searchers and selling Opera Mobile and Mini browsers to manufacturers for pre-installing on their handsets. The pre-installation market was largely dependent on Windows Mobile, which continues to suffer from collapsing sales. This has prompted Opera to change tack and start selling to network operators instead - a far less certain business and one where the company faces considerable competition.
Standard & Poor recently did a detailed evaluation of Opera's position and business model, and the news wasn't good. Revenue per employee is less than half that of Openwave (which is in a similar business) and income from handset manufacturers is expected to be knocking zero by 2012. Once the cost of all that compression is included Opera Mini is described as "at best ... a breakeven product".
Operator-branded versions of Mobile and Mini do make money for Opera - the operator coughs between €1 and €3 per year for the privilege. But the Opera-branded product that iPhone users are getting is only worth around 70 cents a year in search fees, which S&P reckons barely covers the cost of running all the servers it needs.
Besides all this the vast majority of Opera Mini users are in developing markets. 29 per cent are in Russia and 24 per cent are in Indonesia, where advertising margins are tight. The USA only accounts for three per cent of Opera Mini users, but perhaps all those iPhone customers will change that.
On the desktop Opera is being besieged by Chrome and Firefox. In the mobile market Opera Mini's compression technology is a product differentiator, but Skyfire and ThunderHawk both offer similar capabilities, not to mention Novarra, recently acquired by Nokia.
S&P's report applauds Opera's management and technical skills, but reckons the business needs a better model to survive. Topping the iPhone charts makes for great PR, but it won't put food on the table any time soon. ®
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COMMENTS
being besieged by Chrome and Firefox
Not here, I've tried Chrome & Firefox a few times after major point releases, but always return to Opera, which has been my choice of browser since v3, because C & F don't seem to be able to match Opera in the speed, reliability & feature stakes.
It just works.... Tick, VG.
Where's the red "O" icon?
@Craigness
My question is... would you believe anyone who said it is still being used in a month?
Never heard of Symbian in 12 years?!
I didn't take the article very seriously once it became clear the author doesn't think Symbian is worth mentioning and that Opera's mobile browsers revolve around Windows Mobile! Never mind the fact that Opera Mini is a Java app, the point being that the OS is totally irrelevant. There are plenty of NOS and other proprietary or obscure phone OSs that happily run Opera every moment of the day in some corner of the world.
I think Opera are one of the few companies in the 21st century who still think of the bigger picture rather than let the bean counters squeeze every last penny out of every last aspect of the business and then cut out any tiny thing that doesn't make a big profit. Opera being so massively huge on the iPhone is wonderful news for them as it means more people get to hear about them and try their other products. Familiarity also breeds trust.
If you've only ever heard of IE and Firefox and a ballot box pops up on your PC asking whether you want to use IE, Firefox or Balet, which one are you going to instantly ignore?
People have been predicting Opera's imminent end since the 1990s. Analysts also gave us the Dot-Com bubble and the current recession. People also overlook other ways Opera has made money over the years. Opera used to be at the heart of Adobe Photoshop and the other Creative Suite apps because Adobe thought it was the most suitable cross-platform rendering engine for its apps. I gather that they only changed because they wanted to use their own Flash rendering engine as a matter of pride. Perhaps bits of Opera still lurk in there? Who knows. I bet Opera made a nice profit from Adobe over all those years though.
And was it really a surprise that Apple accepted it? Surely anyone could see that it was inevitable, given Opera's super confident attitude and Apple's fear of what the EU might do if it pushed its monopoly too far. People often complained over the IE/EU business that they didn't pick on Apple. Obviously they didn't because Apple are such a tiny player on the desktop. But the roles are reversed in the mobile arena, and it could very easily be Apple that gets a whack whilst MS stand at the sidelines and get ignored.
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