If you're involved in the cell phone biz, or looking to reach the teen market, here are some excerpts from an article in the current issue of Time.
When he needs to figure out what his company should be doing next, Daniel Kranzler often seeks expert advice--from his 18- year-old daughter. Kranzler's company, Mforma, makes games and ringtones for cell phones and, by staying plugged in to teens like Kat, has seen sales double every few months. He's not alone. An explosion is under way in the cell-phone business, as innovative new companies are popping up, feeding not just teen tastes but also, in the process, defining a new future for wireless communications. Kranzler inked a deal in December for Mforma with Marvel for exclusive access to its comic-book characters and is working on a next wave of cell-phone services. "My daughter lets me know what she thinks of the products--with a baseball bat," he says. "Her favorite is, 'Oh, Dad, you so don't get it.'"
Yes, in this vibrant little corner of the wireless industry, market research can be as simple as asking your children what they like. But that doesn't make the potential any less captivating. The cell-phone phenomenon reaches way beyond teenagers. There are 180 million cell-phone subscribers in the U.S. today, and we are no longer simply talking or text messaging or gaming. We are living inside our phones, even decorating them like a home, with images we call wallpaper. Meanwhile, creative companies big and small are scurrying to persuade us to use our tiny screens in ways we haven't even imagined. Fox thinks we will want to watch 24: Conspiracy, a version of its hit TV show developed just for the phone. The NBA hopes basketball fans will use their phones to get game stats, follow their fantasy leagues and watch replays. One ambitious start-up is betting that people will pay to blog via cell phone.
Teenagers right now are "the sweet spot," says Burris of Sprint. An estimated 76% of kids ages 15 to 19 and 90% of people in their early 20s regularly use their cell phones for text messaging, ringtones and games, and that enthusiasm has turned wireless data services into a significant business. Gartner Research estimates that Americans spent $1.2 billion last year on ringtones, wallpaper and other "personalization" services and an additional $1.4 billion on cell-phone games and other entertainment. Fabrice Grinda, CEO of one of the leading ringtone companies, Zingy, says these services tap into young people's impulse to assert their individuality, as they have always done with clothes and hairstyles. And as with clothing, there's money to be made off these urges. While downloading an entire song from iTunes costs just 99¢, Grinda's customers are willing to pay as much as $3 for a 30-sec. ringtone.
To turn wireless data services into a major source of revenue, carriers will eventually have to move beyond what works with young people. They are relying on an army of small companies to create the cutting-edge content. Many of them start-ups, those companies develop the games, ringtones, etc. and take a cut--as much as 80%--of the fees charged by the carrier for each download. Analysts expect that revenue from ringtones and gaming will eventually level off. "There are only so many ringtones and so many games they can offer," says Phillip Redman, an analyst at Gartner. So those companies are madly trying to come up with the next big thing in cell phones.
Intercasting is typical of the new breed of wireless-content companies. Its founders, Shawn Conahan and Derrick Oien, are both veterans of the digital music file-sharing wars, and they envision a world of mobile phones that bears little resemblance to what we have now. "The mobile landscape of six months ago was ringtones," Conahan says. He and his partner are convinced, however, that the possibilities are much broader. Just as peer-to-peer networks like Napster turned digital music into a global phenomenon, they believe that mobile phones have created a similar kind of untapped network. Cell phones, they argue, link each of us to a personal network of friends and family. Intercasting's service, Rabble, allows you to reach those people through mobile blogs--a combination of photos, text and eventually video--all created with a mobile phone. Imagine, for example, narrating your next vacation via cell-phone blog for all the folks back home. Or creating a real-time blog about the people you're meeting at a party--or at a business meeting.
Camera phones, on the other hand, are available on 27 million handsets, and Snapfish Mobile is trying to turn them into a business too. Cell-phone carriers have seen little in the way of revenue from the huge popularity of camera phones. Snapfish Mobile allows users to share and store camera-phone pictures--and encourages them to pay to turn them into wallpaper or order prints.
Of course, the big boys are also jumping into wireless services. Larry Shapiro, who runs Disney's North American mobile business, first realized the potential in cell phones in 2000, in Japan, where high-speed networks allowed cell-phone content to take off long before it did in the U.S. (Disney characters are enormously popular there, particularly with young women in their 20s and 30s--heavy users of cell phones.) In the U.S., Disney's games and wallpaper images of characters like the Incredibles have done well, but the company is still trying to figure out how to translate its movies and television shows to the mobile-phone environment. "Having a wireless strategy will have to be a part of any brand strategy," says Clint Wheelock, an analyst with NPD Group. "What they're all struggling with right now is to figure out what the business model should be." Shapiro admits that finding the right form for wireless keeps him up at night, but Disney is committed to figuring it out. "We think it has the potential to be a significant revenue stream," he says.
