Cell Phone Software: The Billion-Dollar Sand Trap

We all know the advantages: Everyone owns one. We all know how to use them. Women love them and they fit nicely into a pocket. Did I mention they do wireless?

Cell phones seem like the obvious platform for the next generation of billion-dollar startups. But they're not.

Hundreds of web entrepreneurs have gone into mobile. How many successes can you name?

That's what I thought.

What follows is an explanation of why creating a successful mobile-wireless software startup is not just improbable, but impossible. Specifically, why

• The underlying technology is broken
• The business case is a proven recipe for failure
• The social aspects are more awkward than a middle school dance

The underlying technology is broken

1) There are hundreds of different phone models. Your software needs to run on all of them. How hard is this? Nokia makes a competitor to Loopt called Nokia Sensor. In the last five years, Nokia has only been able to get its software working on ten of its forty-three currently sold phones. And Nokia doesn't even have the challenge of porting its software across the operating systems and architectures of multiple manufacturers.

Modifying the software for each phone's display is a matter of brute-force labor. There's no intellectual way around it. Yahoo! is one of the few companies that's been able to pull this off, but only because they have an army of Ph.D. hackers working for them.

You won't have an army of hackers like Yahoo!, nor will you understand the hardware better than Nokia.

2) The carriers partially disable Bluetooth functionality to prevent customers from downloading their own ringtones. This also means all those good features you came up with in the last brainstorming session aren't going to work.

3) In order to load software, you need to buy the optional cable. No one owns the optional cable. Even if you gave your customers the optional cable for free, it only works with windows. Your early adopters use Macs.

4) You don't know how to install software on your own phone, so why would you expect your customers to know how to do it?

5) Any software that pings the cell tower will quickly drain the battery. Pinging the tower every five minutes completely drains the batter in two hours. So much for making calls.

The business case is a proven recipe for failure

6) Cell phone carriers will never partner with you. At least not on terms that allow you to make a profit.

7) Even if one carrier partners with you, the rest won't.

8) The next generation of WiFi will make your product obsolete in two years anyway.

The social aspects are more awkward than a middle school dance

9) Let's say that against all odds you get a few early adopters. To everyone else it will look like they are just sending text messages. Unlike the iPod, your software is invisible. Invisible software isn't viral.

10) You also can't flaunt what you can't see. So much for your idea of your product being a status symbol.

11) Cell phones don't fit into girl's pants. Remember how the women you asked said they would only use your software if it had a vibrate mode? Oops.

The canonical formula for business success is luck, pluck, and virtue. Success in mobile wireless is mostly luck. Maybe some prayer. It pains me to see some of the smartest people I know falling for the mobile trap. I've observed dozens of entrepreneurs go into mobile wireless. All have failed.

That's not to say there will never be a day when it's feasible for startups to venture into mobile. How will you know when the time is right? Ask yourself this question: Could I make money as a distributor of mobile software? If the answer is no (because there is no software to distribute) then find something else to do and check back again in a year. Mobile is still the future and it isn't going anywhere. But in the meantime, better to let others get stuck in the billion-dollar sand trap.

Comments

[stelt]

> 1) There are hundreds of different phone models

Which have things in common: http://svg.org/special/svg_phones

btw, Opera rules

[Superborsuk]

I read your blog on my archaic phone, Nokia 3100 in Google RSS reader for mobiles. GPRS network is full accessible in Poland, the poorest country of EU. My company is using mobile devices with GPRS and GPS for telemetry in fleet of more than 10 000 cars in East Europe and we are developing digital maps services for cellphones. The most popular instant messaging application in Poland, GaduGadu was ported for MIDP 2.0 devices and it's advertised on webs of all main GSM carriers. Europe, Japan and Korea are more mobile-friedly than USA and this maybe reason for failure of phone applications business in USA.

[Rob from Las Vegas]

My list of points why this market is successful, and will get better sooner: (not reflective of above numbers)
1.) Developers are already educated on common platform -

Look into Java ME addition. It's designed for mobi app development.

2.) Payment options -

Look REALLY close at Java ME enviornment, you will see "Demo mode", for disabling app at key points or on a timer, "Payment Method", so people can enjoy your app, then BUILT RIGHT INTO SOFTWARE buy app and have it dumped right on their bill!

3.) Market Share -

There are over 400 phones on market right now that support java (just look at the screen when you turn phone on!)

4.) 5-Digit number SMS links -

True, in America these services are utter crap (barrier to entry, price points). Though, you don't have to own the service! You just have to convince one of the companies that your killer app will make them money. Take your pick a) flat fee for selling them licences rights to software b) Per download royalty fee c) mix of a and b

Consider this: 250,000 downloads of your app at .10 USD cents for each download (royalty): USD $25,000 profit! Don't get me started on high download bonuses and selling rights one time payments.

Rob's Final Thoughts: Either a) your methods of getting into this sector suck, and you don't know what your talking about b) you found a lucritive sector and your trying your best at FUD to push other indy developers away or c) Someone in sector screwed you and your wanting to rant to us about it.

[live television]

@The social aspects are more awkward than a middle school dance
That's one of the biggest problems.

[Daniel]

Once Wareen Buffet said that if early investors into aviation would knew what financial disaster it would become, they would put brothers Wright before firing squad. Buffet claimed that two industries, aviation and car making, had never made profit. Still both industries are part of our life. The same goes for mobile.

[Chris Davies]

Wow, I've never heard so much ignorant tripe in all my life.

Lets take it point by point, shall we?

1) Nokia put their software on handsets that it's strategic for them to put it on. Some phones are for business, others are for pleasure. They have no problem writing an app that targets a whole range of phones.

2) By "carriers" what you mean is "US carriers." Just because your part of the world has a warped outlook, try not to tar the rest of the world with a broad brush. My bluetooth works fine, thanks.

3) By "no one" of course you mean "everyone", because it comes in the box. No one uses the cable anyway because their phone has bluetooth.

4) Installing software is easy. You click on it, and it installs.

5) It doesn't "ping the cell tower." The information is broadcast. It costs nothing to gather it passively because the telephony processor is doing it ALL THE TIME. Stop trying to look like you know what you're talking about.

6) And yet they partner with hundreds of companies every year... one wonders how any of them survive.

7) In fact, the exact opposite. Once you've snared one operator, you're hot property.

8) Typical US delusional thinking. OMGZ! WiMax is teh coming. It'll be teh free! Lets handwave over all the problems that GSM solved two decades ago and WiMax doesn't even address. Also, carriers love investing in yet another set of ridiculously expensive infrastructure when they're still paying for the last lot.

9) In Europe, we're proud of our phones. We put them on the table when we eat. We show them off to our friends. The whole world isn't like your little backwater.

10) Ever heard of people recommending software to their friends? Nah, that never happens does it? Ignore skype! Ignore every instant messenger service ever!

11) Wow. Just. Wow.

[al]

Some points are interesting but some are not. Your point about coming up with software that targets all cell phones is available. No big deal for PayCash Mobile.

>Cell phone carriers will never partner with you.
Well that is happening all of the time. Each software vendor that has a special niche is breaking off to find one. Today's announcement: Cellular South, Obopay Launch Mobile Payment Service.
Now whether it's a profit, well that is to be determined.

Note that Obopay heads for the BREW subscriptions.

Drop by and get your self a free account at PayCash Mobile. Kick the tires and let us know what you think.

https://consumers.paycash.us

Regards Al

[Jonathan Zufi]

This is a great discussion.

We sell SDKs/APIs to mobile developers, so we deal with people building applications across all sectors in several countries (both server and client side). There is no doubt that, compared to the world market, the US (which is our strongest market) is the most restricted and backward - 3 different networks with little to no adherence to published standards (with the exception of Cingular and T-Mobile and even then there are customizations that are not found anywhere else in the world). Spend one day in Japan with even their lowest-end cellphone and you'll see exactly how far behind the US is.

I don't think that any developer can truly defend mobile development compared to traditional platforms (web, PC, Mac) - multiple network protocols, multiple protocols which staggered implementation, multiple handsets (read: multiple browsers) - it's a total mess. However there are many great applications available which are easy to purchase, install and use. Verizon, for all it's annoying restrictions and proprietary mechanisms, seems to have it somewhat right with Get It Now.

Dealing with an operator is hard in any country, some more than others but I can tell you for a fact that of the thousands of companies trying to get their application on deck or even approved, a very small percentage make it through to the end.

The underlying technology isn't broken - it's the carriers who are making things harder than they need to be.

[Loki II]

this article makes what JAMDAT, Floodgate and Gameloft, among many others, has accomplished all the more impressive.

[Mediakid]

Very Good Article!

Can I translate it to Chinese and put on my blog?

[Alex Krupp]

@Loki II: Sure, go for it.

[Tim Cinel]

... but mobiles can generally access the web out of the box, so web-software designed for mobiles. That takes care of 1 - 8.

myspace didn't grow because of the "flaunt factor" or the "status symbol", as with many successful startups. That takes care of 9 - 10.

11: Bad joke?

[Vaughn]

In South Africa there is a startup called MXIT http://www.mxit.co.za , which is basically IM on a cellphone. They manage to support most handsets with J2ME, and they're a huge success, mostly because it costs 85c for an SMS and 2c for a longer message on MXIT.

[Mediakid]

Hi~ I make it done.
I translate your great article to Chinese, plz take a reference at

行動軟體市場：一個造價億萬元的陷阱.

http://augmented-reality.blogspot.com/2007/05/blog-post.html

[Joe Smart]

Badly researched dross.

[Jonathan]

Hi Alex.

I agree with some of your points, and I often make similar points when arguing against certain types of mobile development. I know how hard it is to make something that installs on enough devices to be worth making (and I designed the Yahoo apps that you mentioned -- thanks for the props).

However, there is a way to get around nearly all of your points. Develop using the mobile web and SMS through an aggregator. It works on nearly any device in nearly any country, and there is a clear path to $$ through advertising, SMS rev shares, and carrier deals once you have a big user base.

Also, I disagree with points 2, 3, 5, 7, 8, 9, and 10. And I have no idea what 11 means.

[edmond]

better to use

[Max Lee]

I do agree where you said that network operators locked the bluetooth feature in many handsets so that user can not download wallpapers, ringtnes and applications of his taste. But its not true with every operator... I have Nokia N73 from Voda Phone and frequently buys applications from youpark.com, nclubsoft.co and install through bluetooth option... so my handset's bletooth works...

[Jack21]

luck pluck and virtue....well put. I laughed at #11 too

[Loni Devree]

I find this hard to believe. Lets look at the company CellSpin:

Cellspin allows their users to send their mobile audio/text/images/video to many popular websites such as Ebay, Facebook, Myspace, Blogger, MSN LiveSpaces. They support over 300 phones with their free software. It is the easiest and simplest to use mobile blogging software on the market. This amazing mobile blogging solution shows that your points: 1,3,4 are not valid.

Loni
A proud CellSpin user

[Tom Schavo]

Ofcourse there wouldnt be billion dollar mobile corporate for many years now. Countries where infrastructure for telecom is not good, they stand a chance there.