For years, cell phones have been off-limits to independent software developers and startups, at least in the United States. But that’s beginning to change, as subscribers gain access to free and paid software and services that let them do more with their phones.
A good example is Q121, a social networking and media-sharing service launched in June by the online marketing firm Traffix of Pearl River, NY. People who register with Q121 can upload their favorite songs, videos, and photos to the site, then send them to the cell phones of other registered users. It’s free, for now – yet Q121 wouldn’t exist if the big cellular carriers weren’t allowing it to sell premium content with the charges for it appearing directly on customers’ cellular bills. “Our interest in doing this really picked up last year, when the carriers opened up their walled gardens,” says Andrew Stollman, president of Traffix.
The paucity of third-party software and services for cell phones to date stems from the unique structure of the wireless industry in the United States. Unlike their European counterparts, U.S. carriers have long dictated which phones customers can use and what software can run on them. Moreover, competing wireless standards, such as CDMA, GSM, and iDEN, and competing phone operating systems, such as Java, Symbian, and Windows Mobile, have created a fragmented technological infrastructure with few economies of scale.
As a result, most of the software and content available to U.S. cellular subscribers has come directly from the carriers, who have determined not only what’s visible to users on their phones’ main menus, or “decks,” but also how consumer will pay for the content they choose, such as TV clips. This “walled garden” concept harkens back to the closed dial-up computer networks of yesteryear, such as AOL, CompuServe, and Prodigy.
Over the last year, though, Verizon, Sprint, Cingular, and other carriers have begun to make their decks – and, perhaps even more important, their billing systems – accessible to outside companies. The result: just as the explosion in online services began with the emergence of the nonproprietary World Wide Web in the mid-1990s, a new generation of startups is giving cellular subscribers more ways to use their phones’ computing capabilities.
And the timing couldn’t be better. The Internet is now overflowing with user-generated content – photos, videos, blogs, wikis, garage-band music. As it becomes easier to transmit this content over cellular networks, the phone – arguably the first social machine – is helping to make the “social computing” revolution mobile.
“There are two trends happening here: on the one hand, we have this explosion of user-generated content, and on the other hand we have the mobile operators deploying and diffusing a payment infrastructure,” says Mark Donovan, senior analyst at M:Metrics, a Seattle firm that monitors mobile commerce. “Big players like Verizon are embracing partners who sell stuff ‘off-deck,’ which means I can now purchase content without having to go through the carrier’s deck.”
That’s opened up niches for services such as Rabble, a mobile blogging service, and New York-based Thumbplay, recently rated by market research firm Hitwise as the most popular U.S. retailer of ringtones, games, wallpaper, and other content for cell phones. Customers who pay $9.99 per month for Thumbplay’s subscription service go to its website to select content, which is then sent to their phones over the cellular network. So far, Thumbplay has won permission from Cingular, T-Mobile, Sprint, Nextel, and Boost to charge customers through their billing systems; in return, the carriers take a cut of Thumbplay’s subscription revenue. Furthermore, many of Thumbplay’s ringtones come from independent musicians, rather than the big record labels.
Q121, too, is counting on amateur and user-generated content to drive use of its network. So far, its 50,000 members, mostly in their teens and early twenties, use it primarily to exchange music files, a large number of which were recorded and mixed by the users themselves. Q121 provides an “express signup” page for artists and bands who’d like others to hear their songs or use clips as ringtones. “It’s a great jumping-off point for artists creating and distributing their own content,” says Stollman. “We encourage that kind of viral marketing activity.”
By opening up their networks and billing systems to outside parties, the cellular carriers are recognizing – and realizing they can profit from – the desire among users to put their phones to new uses, such as media sharing, says M:Metrics’ Donovan. “The areas where we have seen the largest growth [in mobile-phone usage] center around creating, connecting, and sharing – people taking pictures, capturing video, sending those files to the Web, and chatting through instant-messaging,” he says. “Mobile subscribers shouldn’t merely be treated as passive consumers.”