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Stay Small, Stay Focused...Make It Big

Stay Small, Stay Focused...Make It Big

It's hard to quantify just how many developers are building new wireless applications today...but their numbers are sure to swell as new color handsets and robust operating systems hit the market.

At the close of 2002, NTT DoCoMo tallied more than 3,300 menu sites on its network, representing the breadth of mobile content available to its Japanese subscribers. More accurately stated, these 3,300+ offerings comprised the sum total of the officially registered sites within DoCoMo portals. By the company's own estimates, there is a universe of more than 60,000 "voluntary" Web sites that operate independently and without the status accompanying the registered DoCoMo applications.

In North America, the status of many mobile application developers is much the same as it was 12 months ago. They are all (still) poised for greatness. Their potential has yet to be realized. Their aims remain true. And there are more joining their ranks each day. With thousands of companies and individuals across the U.S. and Canada scanning the wireless horizon, 2003 is bound to be a period in which mobile data and application developers begin to hit pay dirt.

Some already have. You just aren't likely to read about them in the pages of the Wall Street Journal. They are bubbling just beneath the surface of notoriety. They are operating without millions of dollars of venture capital funding. In fact, they probably started out with their own money and don't even want to engage VCs. They exist on their own terms. They may be companies of only five or six employees. You may have used their software. You may have played their games. You may have used an application that was built using one of their applications. You may be one of them.

Lee Wright, director of global developer marketing at Nokia, calls this class of company an "innovation engine." His group is responsible for a number of programs that support the developer: Forum Nokia, the Nokia Content Syndication Program, the Nokia Knowledge Network, and the online TradePoint marketplace, to name a few. All of these initiatives are designed to support, inspire, and otherwise connect developers to opportunities (and revenue).

Nearly every major mobile device manufacturer, platform vendor, and mobile operator has an outreach strategy today, including developer forum events and seemingly massive support teams. It's nothing short of a crusade for the hearts and minds of a burgeoning mobile developer community. Organizations on the scale of Disney, Sega, Sony, and AOL Time Warner didn't dive headlong into the mobile app market, although they will undoubtedly move closer to center stage in 2003 by mobilizing their well-branded content and creating new phone-based software. But they will be following the lead of tiny microcompanies that are doing the lion's share of trailblazing in the marketplace and grabbing their own share of the early revenues.

"The profit margin for wireless software is currently very high," says Dr. Ronjon Nag, CEO and cofounder of Cellmania, "typically 50-80% of revenue. This compares with desktop software, where a publisher might give 5-15%. So if software developers can keep their costs low, and find a nice niche, wireless software can be quite profitable as the market grows."

As a key participant in the market for enabling technology that allows developers to be compensated for their applications, and for operators to provision them, Cellmania's products provide access to tens of thousands of apps - from large companies, and from some of the smallest.

"They help all of us in the industry," Nokia's Wright says of the small developers, "by determining which applications are right for businesses and consumers. They have a keen understanding of what works today."

So who are they? Where did they come from? Where do they work? An old television drama once claimed that there were 8 million stories in the naked city. There are plenty of interesting stories in the mobile sector as well. You'll find their best work being distributed through numerous online channels and partner portals, and with the aid of companies like Nokia and Cellmania.

Reqwireless
Reqwireless was formed in September 2001 with the goal of producing a toolkit that would allow developers to seek out HTML content and render it for other applications. What they found instead was a fairly strong demand for a mobile HTML browser.

Today the Waterloo, ON-based company of six produces the increasingly popular WebViewer product for the mobile phone market. Version 2.0 was released in early 2003 and optimized for the Sony Ericsson P800, Nokia 7650, Nokia 9290 Communicator, Nokia 7210, Samsung A500, Sanyo 5300, and other new color handsets. WebViewer 2.0 brings actual HTML browsing to the mobile phone, and even offers users the ability to read attachments, such as Adobe PDF files and Microsoft Word documents.

CEO Roger Skubowius started the company after moving back to his native Canada following California stints at ProxiNet and Puma Technologies. ProxiNet, a Palm microbrowser startup whose assets were acquired by Puma Technologies in 1999, provided Skubowius with early mobile browser development experience. But the merger and the subsequent wild ride of the Internet bubble era left a lasting impression on him in a business sense. Puma will be remembered not so much for its mobile synchronization software, but for its skyrocketing stock spike of over 3,700% in 1999 and subsequent decline the following year.

Reqwireless is as conservative and button-downed in its operations as bubble-era companies were flamboyant. They just moved into their first office space (1,200 square feet) this past September, after more than a year in business. They are not only generating revenue, but aiming for profitability before the close of 2003.

The Reqwireless crew matches the intensity of its leader, who sold off some of his Puma stock to get Reqwireless off the ground yet thought it important enough to bring in a group of Ontario-based angel investors to validate the business model. He calls the company's early success "a testament to a very focused team" and vows to see that employees are duly rewarded for their efforts.

After isolating where they want to be in the fast-moving wireless sector, the company has adopted a "get the product to market" philosophy.

"We release aggressively," says Skubowius. "In the first year, we had 18 versions of our browser out. Some companies like to work in a very closed environment. If we get requests for smaller fonts, there's no reason for us to hold it back," he adds.

They distribute through many of the popular J2ME sites such as Midletcentral.com, Handango, and Midlet.org. Their browser has been a particular draw on the my-symbian.info site, where it has been downloaded more than 1,000 times on peak days.

Centerscore
Centerscore was started by four friends from Stanford University who reconnected after working in various Java-related businesses. In fact, they all lived on the same floor of a Stanford dorm during their years there and now work from their headquarters in Palo Alto, CA, just a few miles from campus.

The market for mobile entertainment wasn't large enough for venture funding at the time the company was founded, although they have since received inquiries from VCs. In concert with many bootstrapping entrepreneurs in the software development field, CEO Oliver Miao sold off some of his personal stock holdings in previous employer Marimba in order to get the company started.

Publishers are important to Centerscore. They handle marketing, billing, and digital rights management (DRM) in most cases, leaving more time for the small company to devote to its compelling content. Centerscore has worked with publishers like Tira Wireless and Versaly Games in addition to self-publishing some of its own titles. In its earliest days, the company was able to get through to mobile operators with a phone call or a chance meeting. Miao says now that "the doors are already closing" for small companies without a market presence.

In the future, developers in the mobile entertainment space will rely more heavily on publishers and handset partners to get their applications in front of the major operators who simply will not have the capacity to evaluate all of the individual games and applications.

The company still produces Java- and Shockwave-based games for general Internet audiences. But their growth should march in lockstep with J2ME titles like CS Soccer, Mobile GT, Billy Bob's Logjam, and Hampster Race. They have successfully branched off into the BREW space with Elimimatch as well.

Centerscore will usually work toward exclusive agreements with publishers. "We don't want any problems with the channel crossing over," says Miao. By maintaining a lean operation, the company has produced more than two dozen titles and has been able to develop games both independently and at the specific request of publishers.

As one of the first companies to launch interactive, color games on the AT&T Wireless and Verizon Wireless networks, Centerscore has established a track record in the nascent mobile gaming market that would seem to make them an appealing partner to both large game publishers and other mobile operators.

Open Path Products
Wireless consulting work produced the revenue that underwrote the initial development efforts and startup activities for Open Path Products. CEO Johanna Wilson and chief technologist Richard Smith both worked on SMS applications at previous companies before the founding of Open Path in March 2001.

With headquarters in Annapolis, MD, and a staff of six, Open Path Products found early success by working directly with mobile operators. Content aggregators like Handango and WirelessDeveloper.com also play an increasingly important role in getting the company's apps in front of potential buyers today.

One early product line, the DataBow Wireless Application Authoring Tool and Execution Platform, was "born out of necessity," says Wilson. In seeking out an SMS test suite for their own development projects, they found few suitable options and realized that there was a clear market for such a product. By creating their own test suite and incorporating the feedback that they receive from developers on a regular basis, they are able to fine tune the product to serve the evolving needs of mobile developers.

DataBow was designed with a unique user interface that allows users to quickly develop wireless applications without mastering every wireless protocol. Applications can be developed once and used with multiple devices, including WAP and two-way SMS phones, two-way pagers, and wireless PDAs.

In addition, the company has their own line of games and entertainment applications that were developed using DataBow. Java action games like Cargo Hunters, wireless chess (which features alerts after each player's move), and the Rude Bard peer-to-peer game have all shown promise in the mobile gaming sector. They have also begun to establish themselves as a leader in what might be called "mobile e nlightenment." Perhaps influenced by CEO Wilson's time at St. John's College in Annapolis, which is known for its liberal arts focus on the "great books" of history, Open Path Products has produced an Enlightenment suite that features a collection of psalms, poetry, proverbs, and Shakespeare's sonnets that can reside in a J2ME phone's local memory.

Conclusion
Many of these small development shops have adopted the old-school business strategies that were trampled and pushed by the wayside on the road to dot-com riches in recent years. It is refreshing to find the penny-pinching drive to profitability as a common trait. Another similarity is their reliance on handset partners and cost-effective online channels for the marketing and promotion of their products. Nokia's Wright says this allows them to "stay small, stay focused, and generate revenue."

More Stories By Tim Bresien

Tim Bresien is WBT's VC editor, the principal consultant with infraStar, Inc., and a freelance writer covering investments in the wireless communications sector. He is a former research analyst with the telecommunications consulting firm of Bond & Pecaro, Inc., Washington, DC, and a cofounder of the Telecom Investor Forum, held annually at SUPERCOMM.

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