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Right time, right price for mobile phone applications

09 апреля 2009

Software developer Philippe Breuss-Schneeweiss, creator of a travel guide for mobile phones, is himself in the right place: at the forefront of the growing market for downloadable applications.

 “I saw the previous internet boom but I was working for big companies and didn’t know how I could do something by myself,” he says. “Then when the Android applications market came, I thought this would be my opportunity to start my own business.”

The Austrian, who has a keen interest in history, had in his spare time been developing Wikitude, an interactive guide with information about landmarks around the world. Putting it on a Google Android phone, which can detect user’s precise location, offered a breakthrough.

Since its launch in November, Wikitude has been downloaded 95,000 times, and the numbers are still rising. Mobilizy, the company Mr Breuss-Schneeweiss set up with good friend Martin Lechner, is thinking of selling each download for about €1.

For software developers, the rapidly growing market for mobile phone “apps” – little computer programmes that run on your cellphone – provides an echo of the late-1990s tech boom. There is a buzz about emerging business opportunities; programmers with bright ideas see a chance to make money.

“It is a sort of gold rush now,” says Sam Shaw, chief executive of Dreamworld Solutions, an Illinois software development company. “The internet has been saturated. It is close to impossible to make money: all the good ideas have been taken. Anything you think of has already been done. But on mobile phone apps stores, you look at an idea and it’s not been done yet.”

Mobile phone applications are not new. But in the early days it was the handset manufacturers and operators who preloaded applications onto a device; consumers had very little choice. Later, it became possible to load your own applications but it was complicated to do so and few bothered.

Now, however, mobile apps have become easy to use and their volume and diversity are taking off. Apple’s iPhone “app store”, opened last summer, offers as many as 25,000 applications; 800m have been downloaded. Analysts at Ovum estimate that the store will generate $500m-$600m in revenue for Apple in its first year.

Google opened the Android Market online store for its Android phones in August and now offers 2,300 applications. Research in Motion (makers of the Blackberry), Nokia, Microsoft, Orange and O2 have all followed suit.

“The stars have become aligned for the first time, as people become more familiar with accessing the internet on mobile phones, there are fixed data [payment] plans and even enterprises are looking at ways to use mobility,” says Kevin Comolly, partner at Accel, the venture capital firm.

Many feel that the really compelling applications have yet to be created. “iPhone applications at the moment are cute but not real businesses,” says Danny Rimer, partner at Index Ventures, another VC firm. “But in the next 18 months we will see a great business come out of that space.”

But already the economics can work out well. Mr Shaw says a simple application can be created for around $500. A more complex one – such as a game with 3D graphics – can cost $12,000. “You can get a simple app made for $500 and make $5,000 from downloads. If you do that 10 times its a bit of a jackpot,” he says.

David Frampton, a New Zealand software developer, reveals in his Majic Jungle Software blog that a top-ranked app in the App Store is likely to be downloaded 10,000 times a day, while one ranked at number 50 is probably getting 500 downloads. His helicopter action game, Chopper, ranked at around 300 and priced at $4.99, earns about $500 a day.

Not everyone will make big money. Many applications are free; the store owners and mobile operations take a cut on sales; and developers increasingly complain that their offerings are lost among the tens of thousands of rivals on Apple’s store.

Still, developers are keen to try their luck. Mr Shaw says around 70 per cent of Dreamworks Solutions’ business is now in developing mobile applications.

“The App Store is the mail order business of my dreams.
Having been in mail order for nearly 20 years I wouldn’t dare complain about a single thing because if you’ve ever tried to get a merchant account, installing real-time credit card processing infrastructure, dealing with charge-backs, piracy, delivering to the end user that would cost you more than the 30 per cent commission you’re paying now,” says Steve Sheraton, creator of the popular iBeer application.

There is a worry, however, that app stores could be dominated by big brands who have more resources to throw at development.

“It is tough for small developers. Big companies can afford to give applications away for free but for us it is not sustainable long-term,” said Konrad Huebner, part of Skycoders, a Munich team which created a taxi-search application called Cab4Me for Android phones.

“There are opportunities for developers but they may be short-term,” agrees Adam Leach, principal analyst at Ovum. “Developers will have to pick a path between big companies like Facebook and MySpace, who can leverage their existing internet presence.”

Venture capital is starting to look at mobile application-related investments, although, cannily, it is not so much backing individual developers as those providing tools and services to them. Amadeus has invested in AePona, a company providing software that helps transform any computer programme into one that works on a mobile phone. Accel, meanwhile, has put money into GetJar, which helps distribute hundreds of mobile phone applications.

“It is a lot like the early days of dotcom,” says Rich Warmsley, head of internet and entertainment at T-Mobile, which launched the first Android phones on its network. “In six months you are going to see the first green shoots of big brands, the ones that may become the future Amazons and eBays.”

Источник: Financial Times

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