Phonemakers fight for software developers
As mobile applications turn cell phones into pocket PCs, Apple, Research in Motion and Google are battling for the allegiance of developers.
SAN FRANCISCO (Fortune) -- Phone companies have long battled each other for customers, but now they're also fighting for the loyalty of developers: coders who create bite-sized software applications for mobile devices.
These programs run the gamut from mapping services that show you where your friends are to live traffic information to mobile versions of games like Tetris and Sudoku. And they're now being heralded as the key to transforming cell phones into pocket computers.
To ensure that the best applications are built for their phones, companies like Google (GOOG, Fortune 500), Apple (AAPL, Fortune 500) and BlackBerry maker Research in Motion (RIMM) are trying to woo developers to their camps.
That's why earlier this year Google kicked off a competition that awards cash prizes to companies creating innovative applications for its Android mobile platform. The search giant has earmarked $10 million for the Android Developer Challenge, for which it says it has received more than 1,700 submissions from around the world. The company recently announced 50 finalists in the competition, including Breadcrumbz, a navigation application that uses photos of streets instead of maps, and BioWallet, which has created security software that scans eyeballs in place of passwords.
"The Android Developer Challenge was definitely an important incentive for us," says Jeff Kao, part of the development team behind Ecorio, an application that helps people track their carbon footprint. One of 50 finalists, Ecorio scored $25,000 from Google. "The project would not have left the 'ideas stage' as quickly as it did if the competition hadn't been there to motivate us."
Apple hooked up with Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers to create a developer fund called the (what else?) iFund. The $100 million initiative has already invested in five "innovative" iPhone applications. According to Matt Murphy, a partner at Kleiner and manager of the iFund, the firm has already received 2,400 financing requests from various startups, and plans to make a few more investments by end of the year.
RIM has also been trying to generate excitement for its BlackBerry mobile platform. In May the company unveiled the BlackBerry Partners Fund, which will invest $150 million in venture capital money in mobile applications. The company says its new fund will invest in programs created for all phones, not just the BlackBerry. Just a day after announcing the fund, RIM said it would host its first-ever developer conference in October in Santa Clara, Calif. - the heart of the Silicon Valley and home to many application developers.
"Third-party applications are very important to our strategy, both for corporate users and consumers," says Tyler Lessard, director of RIM's developer relations programs. RIM says thousands of third-party applications are available on its phones. Nearly 4,000 can be found on an online store called Handango.
But despite RIM and Google's best efforts, both have failed to create the kind of buzz Apple has generated with the iPhone.
Many developers say they're taking a "wait and see" approach with Android, which isn't expected to appear in phones until later this year.
"We're looking at Android," says Evan Tana, director of product management and marketing at Loopt, a Silicon Valley mobile developer whose application uses GPS to let people locate their friends. "We're waiting for the phones to launch and then we'll go from there."
As for RIM, even though its BlackBerry is still the most popular smartphone in the United States, many developers say distributing their applications is tricky. Most BlackBerries are used by corporate employees whose IT departments preload applications on their phones. Other programs - like photo-sharing and navigation services - can be downloaded from wireless carriers but are usually hard for people to find.
BlackBerry does offer an "Alliance Program" that helps developers promote their applications.
"RIM has some channels to help you get the word out, but for the most part you have to do it on your own," says Trevor Timbeck, VP of research and development at Itinerant Software, a Canadian startup that has developed a golfing application called GreenFinder for cell phones.
GreenFinder, which calculates the distance from a golfer to the green using maps of golf courses and a phone's built-in GPS, launched on the BlackBerry last March.
But Timbeck says the only way for RIM users to find and download GreenFinder is to first to log on to Itinerant's website. By contrast, the app is readily available on Apple's "App Store" - an easy-to-use application storefront that resides on the iPhone. That visibility, says Timbeck, is why GreenFinder (which costs $35 to download) sells more on the iPhone than the BlackBerry on a daily basis. "It's much easier for people who have an iPhone to buy your application."
Until recently, most people bought a phone and used whatever software the phone companies loaded onto it. But the iPhone and its App Store have unlocked a new world of mobile features, from pocket dictionaries to restaurant guides to built-in pedometers.
iPhone owners can easily search for, preview and download applications by pressing the "App Store" icon on their home screen. On most other devices (including BlackBerries and Windows Mobile smartphones), users must log onto their carrier's mobile web store to purchase applications.
The applications on the iPhone aren't just easier to find, some are more advanced as the device's touchscreen and built-in motion sensor are prompting a slew of new services. "Mobile users haven't seen apps like this before," Gene Munster, an analyst at Piper Jaffray, wrote in a recent report. Munster estimates that as many as 91% of iPhone owners will download applications over the App Store, which he believes could balloon into a $1 billion market by 2009.
Apple says its customers have downloaded 60 million applications since launching the iPhone 3G and App Store in July. Those kind of numbers are attractive to developers, who traditionally have had a tough time getting their applications into people's hands.
A startup called Tapulous, for instance, created an iPhone music game called Tap Tap Revenge. CEO Bart Decrem says the game has been downloaded more than 1 million times. It's currently available for free, but the company plans to make money by charging $9.99 for an upcoming "premium" version of the game, as well as selling ad space on the application.
Developers who create programs for the iPhone get a 70% cut of any revenues. On many other platforms - BlackBerry included - developers often have to negotiate distribution deals with mobile operators, which can take an even bigger piece of the pie than Apple does, as much as 50%.
Apple's mobile platform isn't perfect. For one, the company only allows applications that it approves to sell on the App Store.
Still, many in Silicon Valley say Apple's mobile platform is better than anything that was out there before. And in a world where mobile developers are becoming increasingly valuable, that's got to make other phonemakers - no matter how large - uneasy.
Even Microsoft, which has a competing mobile platform called Windows Mobile, admits that competition for developers is heating up.
"Obviously they're an audience that a lot of platforms are trying to woo," says Scott Rockfeld, group products manager for Microsoft's mobile communications business. "It's a great time to be a mobile developer."