Cellular nokia phone ringtone

Byline: Jason Ankeny

To understand the future of wireless data, look no further than data about wireless. According to research firm Frost & Sullivan, the U.S. mobile applications market will generate $2.3 billion by 2006, and with 96% of all handsets sold in the U.S. now data-capable, the momentum is clearly building. Figures presented by Cellular Telecommunications & Internet Association President and CEO Steve Largent during the organization's Wireless I.T. and Entertainment conference in October show that during an average week, wireless users now download twice as many mobile games, ringtones and related apps as they did in any given month during 2003.

What best positions next-gen apps to enjoy an even bigger year in 2005 is a development announced in late 2004: According to the CTIA, the nation's wireless operators have agreed on standards to enable multimedia services interoperability across carrier networks. Short messaging services took off with U.S. consumers only after operators agreed to text messaging interoperability, and conventional wisdom suggests that multimedia messaging service will enjoy the same bounce once subscribers can exchange photos and media content without regard to network boundaries.

Most of all, multimedia interoperability represents a major step forward in establishing the consumer confidence imperative to widespread application adoption and use.

"What drives the majority of revenues for the telephone companies and the mobile operators is making phone calls and sending text messages because they work - everyone can do it, and you're 99.999% assured that the call's going to connect," said Mark Willingham, vice president of marketing with mobile messaging solutions developer HeyAnita. "You can't say that for a lot of other technologies. I have a picture phone, but I never use it. Why? I don't have any idea who I can send a picture message to because I don't know what kind of handset they have or what mobile operator they use."

The burgeoning popularity of photo messaging also speaks directly to what many in and around the wireless industry argue separates successful applications from flops, an element not often associated with technology: emotion. They say users have developed intimate relationships with their mobile devices that transcend man and machine, customizing and personalizing their phones with ringtones and wallpapers that explicitly reflect their individual identities.

For Trip Hawkins, founder of mobile software developer Digital Chocolate, the wireless phone is now a "social computer" designed to create and foster a sense of virtual community.

"There's an emotional connection," Hawkins said. "People take for granted making a phone call, but applications represent new ways to reach out and touch someone. People are feeling the need for emotional intimacy, and wireless phones are the way they stay in touch and start new conversations."

Multiplayer games - which foster not only community but also competitiveness, perhaps an even bigger revenue driver - are set for a huge year, buoyed by improved graphics (including 3-D visuals). The other hot gaming trend is fantasy sports, which are moving from the PC to the wireless handset to deliver gamers up-to-the-minute statistics and injury reports on their rotisserie teams, enabling roster updates and other mission-critical fantasy coaching decisions from the stadium or from the sofa.

Regardless of what else is in the pipeline, for now ringtones continue to generate the lion's share of applications revenue in the U.S. - $146 million in 2004, according to research firm In-Stat/MDR - although most observers agree their popularity will be superseded by games and informational content during the next two years. But given that ringtones are a significant source of income for both wireless operators and the music business (according to CTIA, they now account for 10% of the record industry's overall revenue), don't expect them to vanish overnight.

Ringbacks - ringtones-in reverse that replace the traditional ring-ring heard by callers with audio clips - have proved hugely lucrative in Asian markets and are poised for imminent launch in the U.S (see Spectrum, page 8). Also, anticipate more interactive ringtone applications - for example, the controversial Xingtone offers users software to burn their own ringtones from audio files on their PC's hard drive, a solution ideal for personalization but a direct challenge to content aggregators who license and create ringtones through more traditional means.

"The current ringtone model is not sustainable forever," said Jonathan Schreiber, Xingtone CEO. "The reality is that companies like us affect the wireless industry in positive ways because we give consumers what they want."

Mobile video is also positioned for a great leap forward. In early November, Qualcomm announced plans to build an $800 million nationwide mobile media network that will comprise some 50 to 100 distinct national and local channels, including up to 15 live streaming channels. The chip developer plans to broadcast optimized content from major television providers as well as unique mobile content.

But the question of just what kind of content users want to watch on their wireless handsets - and even if they will watch, for that matter - remains a point of contention. According to Graeme Ferguson, Vodafone's executive head of content development, sports have so far proven to be the only content genre powerful enough to convince subscribers to change carriers. Accordingly, in early November the NBA partnered with Nokia to launch "NBA Unwired," which boasts wireless video highlights from every NBA game as well as more traditional fare like ringtones and games.

Content developers and aggregators will additionally rely less on adapting existing media content to fit the wireless model and instead build portfolios highlighted by exclusive titles. In mid-November, Twentieth Century Fox studios announced it would produce a series of unique 1-minute "mobisodes" based on the hit Fox television thriller "24," for the Vodafone Live! Service. This is believed to mark the first time a Hollywood studio has produced a TV series expressly for distribution on mobile handsets. Likewise, entrants such as Def Jam Mobile are recruiting musicians, rappers and DJs to develop new ringtones and remixes expressly for distribution over wireless channels (Wireless Review, October 2004, page 36).

But with so much emphasis on consumer applications, advanced enterprise apps still lag behind. Mobile e-mail remains the killer app in the enterprise. According to AMR Research, 83% of companies roll out e-mail and calendar solutions prior to any other wireless application, followed by sales force automation (40%), marketing and knowledge management (both 37%) and time/expense management (33%). While verticals like health care, shipping and retail continue to embrace wireless solutions, other sectors have yet to fully explore how mobility can improve or even reinvent the way they do business.

"On the consumer side, a lot of the easy stuff has been done," said Scott Silk, CEO of mobile applications experience software developer Action Engine. "On the enterprise side, wouldn't it be nice to have a very intuitive version of Siebel or SAP or PeopleSoft - a lot of the transactional applications? Those are the things that are going to be driving this next wave of mobile applications."

With so many applications developers and content aggregators entering an already-crowded marketplace and begging for facetime with carriers, consolidation seems inevitable. The food chain is already buzzing with activity. At CTIA, consumer applications developer Vindigo announced its acquisition of wireless content and commerce developer waymobile.com - a deal that followed about three months on the heels of Vindigo's own acquisition by Japanese mobile content provider For-side.com.

"This [waymobile.com] deal speaks clearly to the consolidation trend," said Vindigo CEO Jason Devitt. "waymobile is a company with some very interesting applications but with very little chance of building the momentum to establish carrier relationships."

Perhaps most important of all, 2005 is the year that next-gen apps must shake off the remaining vestiges of novelty status and find their footing as a truly essential component of users' personal and professional lives.

"We need to segment the market and find out what are the needs culturally and what are the needs from a business perspective," said HeyAnita's Willingham. "We have to look at what we can do to help the operators to deploy solutions that will drive sustainable revenues for them - 'sustainable' meaning they're not going to peak in three months."

CUTTING EDGE