It used to be that to dominate the market, all you needed to do was manufacturer cellphones that everybody wanted. That's what Nokia has done for years.
But with the phones becoming a conduit for everything from GPS functions to games and video, the battle to sell them is shifting, and increasing importance is being placed on the applications that can be installed. The cool phone is necessary but not sufficient: Manufacturers must now also provide the applications everybody is talking about.
"Applications serve three main roles for smartphone vendors," said Neil Mawston, the director of the global wireless practice at Strategy Analytics in Britain. "First, they are loyalty-drivers; killer apps help to lock users in to a particular brand or model. Second, they are revenue-drivers; killer apps can drive new users to a particular handset that they might not otherwise consider purchasing. Third, they are growth-drivers; killer apps controlled by smartphone vendors can open up new revenue streams beyond hardware."
With this in mind, the top three producers of
smartphones - those with advanced functionality - are investing resources to build up the array of applications they can offer clients. Apple has become the standard bearer with its iPhone App Store, which opened in July. It has 8,000 applications made by third parties that have been downloaded more than 200 million times.
Nokia had 39 percent of the smartphone market, or 15.5 million cellphones, in the third quarter, according to Canalys. While that is twice as much as its nearest competitor, it is down from the 51 percent share in the same period last year. Apple surged to a 17 percent share, or 6.9 million phones, from 3.6 percent in last year's third quarter, in part because of its rich offering of applications.
"The App Store has been a game changer for us," said Greg Joswiak, vice president overseeing iPhone and iPod worldwide product marketing.
Nokia, which has long based its business on making phones and cellular networks, entered the fray last year with its ovi.com site, from where free applications can be downloaded. On Tuesday, the company is scheduled to release a new application called viNe that lets users share their photos, videos and music choices with friends and the world at large.
With viNe, which works on several of the new Nokia Nseries phones, including the N96, a GPS tag is attached to the photos and videos taken with the phone and the spot where songs are listened to is also recorded.
With a few clicks, the data is uploaded to a Nokia Web site where it is overlaid onto a map. The application is similar to an Nseries application called Sports Tracker, though viNe adds the music function and is more colorful and interactive. For example, users can watch their avatar walk around the map on their phone.
ViNe's ability to broadcast in real time where you are, what you are doing and what music you are listening to highlights a trend toward the growing popularity of applications that give users the feel of mobile social networking without having to log onto MySpace or Facebook.
Last month, Google introduced the Android Market for cellphones that will use the Android operating system. There is only one cellphone running on Android, though several more will reach the market by the end of the year.
Research In Motion, maker of the BlackBerry, will begin selling applications made by third parties through its own store in March. The company sold six million smartphones in the third quarter, almost twice as many as in the same period last year, to take third place in the ranking.
"Most buyers will continue to prioritize price, brand and hardware design as their primary purchasing factors for the foreseeable future, but high-tier consumers will increasingly look for 'experiences' where their handsets also provide software and services that are entertaining or enhance productivity," said Mawston, of Strategy Analytics. "Examples could include playing arcade games on an Apple
iPhone or navigating around town with a
Nokia N96 GPS phone."