Excerpt from:  Tech M&A Talk
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September 24, 2008

Using A Cell Phone To Make Calls? That’s So 20th Century.

Francesca Bartolomey, Updata Advisors

Remember the days when the primary purpose of a phone was to place calls? In the age of the iPhone, such a notion seems almost quaint. Today’s cell phones are jam-packed with so many features, that the landline phone is quickly becoming obsolete. Mobile applications are exploding in popularity thanks largely to Apple’s iPhone. According to TechCrunch, Apple is on track to reach the 1 billion iPhone applications downloaded mark by the end of the first year of the iPhone App Store’s existence. The iTunes Store didn’t reach that milestone until its second year in operation. Of course, the fact that most iPhone apps are free and most iTunes songs are not, might have something to do with the download rate discrepancy – even so, there are more iPod owners than iPhone owners (Apple sold about 10.6 million iPods in Q2 2008 compared with 1.7 million iPhones). Still, its applications give the iPhone one of its prime differentiators in the smart phone market. Consumers are becoming more and more attached to their mobile devices; phones are now more than an accessory – they’re as vital to the completion of an outfit as shoes are and like shoes, young people want to individualize their phones as much as possible.

Mobile device applications run the gamut from the utterly useless to the completely essential – and everywhere in between: the useful, the fun, the ridiculous, the awesome. While by and large iPhone apps serve to entertain iPhone owners with a short attention span, they’re also a big business. At a New York Tech Meetup earlier this month, we saw a live demo of the iRetroPhone app which turns your iPhone into a rotary phone that you can actually use to make calls. This app reportedly took a day to build and sold a whopping 15,000 copies in the App Store at $2.99 apiece (minus Apple’s 30% cut, that’s $30,000 in net revenue).

But Apple isn’t having all the mobile app fun. Yesterday was the official launch of the HTC Dream by T-Mobile, the first mobile device to run on Google’s Android operating system – the phone is set to be released for sale next month. Google launched an Android application development contest called the Android Developer Challenge. A total of $10 million was awarded to the developer teams that created the best apps. Examples of apps that won the top cash prize ($275,000) were cab4me (which will order a cab to the user’s precise location without having to know the numbers for any cab companies), CompareEverywhere (a comparison shopping application which will scan an item’s barcode and show the user pricing from competitors and product reviews), and Wertago (a social app that shows realtime information on local nightlife). Unlike Apple’s App Store, applications submitted for the Android phones will not be subject to approval before they become available at the store.

The line between cell phones and computers is becoming more blurred with each new development in mobile technology and applications are a critical component of that technology. Expect mobile applications to remain a game-changer in the smart phone market.


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