I work with a ton of mobile startups and entrepreneurs and one of the questions that we address is invariably the carrier strategy. How do you decide which carriers to pursue and if you go for smaller operators or go for the big ones?

There are two missions that a startup needs to have – traction and revenue. You need to have both. One can argue that one implies the other but the question is how much traction and how much revenue. If you look at the global mobile services revenue breakup, over 50% of the revenue comes from just 10 operators, that is staggering. Out of thousands of operators worldwide, only 10 players control more than 51% of the revenue base. If you add another 10 carriers, the share jumps to 62%. (we will have more details in our upcoming Global Mobile Market update for 2008)

So, clearly, by focusing on one or more of the top 10 or top 20 can pay off big because the reach offered is tremendous (of course, not every product requires direct carrier involvement and approval). If the product is good, unique, IP protected, there is a good chance you might one of the big ones to endorse and off you go.

But, then one needs to wonder, what if, after all the focus and energy, the contract doesn’t pan out for whatever reason, will the company have the resources to outlast the approval process? Many companies have gone under, CEOs have lost their hair and some sanity waiting for the approval. It is tough on the other side too as the carriers are inundated with thousands of requests and only 1-2 persons to manage it. Appstore 2.0 is going to change that a bit but the issues are still there (more on this in an another post).

However, there is another strategy that can work quite well before you got to the big guys and that is to pick and choose smaller carriers and work with them to get the kinks out from the s/w. Smaller carriers are nimble and hungry for new stuff and they can decide quickly. Companies such as Ontela and Mobile Posse have pursued this strategy to great effect. Both these startups worked closely with some of the smaller regional and local carriers to trial and then launch. Once the momentum was built, they got traction with the big boys more quickly. Since, the market had already tested the products, the big players didn’t have to invest time and effort in sizing the opportunity or the technology and worked out to be a win-win for all.

Finally, there is a market question. Sometimes a given market is not ready for a technology so you have to look elsewhere, whether it is trailblazing markets like Japan and Korea or developing markets like India and China.

So, the answer to the carrier strategy isn’t black and white, it depends on the product, resources you have at your disposal, and the strategy you can pursue to gain traction AND revenues. Getting only trials might make you feel good but won’t get you the necessary revenues and working only with smaller players might get you some early revenues but not the hockey stick growth that your spreadsheets show. It might take a mixture of strategies to figure out what works best for a given startup or for a given technology and where.