If cell phones could be tailored to the individual, even more of them might sell. Software to the rescue.
By Om Malik, April 18, 2005

Have you walked into a cell-phone store lately? If not, then let me tell you what you’ll find there. Unless you’re willing to spend upwards of $300 on a phone, you will find scores of silvery devices, none bigger or much smaller than two packs of gum, all with the same tinkly ringtones and onscreen menus.

The reason for this mind-numbing uniformity is the rapid commoditization of the handset business. Asian manufacturers stamp out a couple dozen designs. Many phone operators buy these phones wholesale and stick on their own labels instead of selling Nokia (NOK)- or Motorola (MOT)-branded phones. The reason is pretty simple. The carrier wants to promote its own name, not that of the phone maker.

That brand exclusion is forcing leading makers like Nokia to figure out a way to distinguish themselves in a crowded marketplace. And the best way to do so is by offering unique software applications. These tiny applications allow consumers to do more with their phones than just make phone calls or surf predetermined sites. Nokia, for instance, has recently released Lifeblog, a tiny piece of software that allows users to send photos from their camera phones to their weblogs or to special photo websites like Flickr, a Yahoo (YHOO) service. Motorola will soon start including Avvenu’s “place shifting” software on its next-generation handsets. This will allow consumers to access music and photo files that are sitting on their home computers.

I was highly skeptical of these applications. But over the past two weeks, I’ve become addicted to Lifeblog. I’m clicking photos and uploading them to a secret page, where I am building my “life-cache.” Avvenu’s software just went into beta, but chances are I’m going to be using that service as well.

Nokia and the other makers of 3G (third generation) phones are hoping most people are like me. The high-end 3G phones are expensive, and consumers need a reason to buy them. Christian Lindholm, a key architect of Lifeblog and a Nokia executive, believes that such applications give consumers a reason to sign up for high-speed 3G wireless networks. Cell-phone companies have spent billions of dollars on these networks and need consumers to upgrade from plain-vanilla voice plans in order to recoup their investments.

Both Lifeblog and Avvenu do exactly that, since in order to use them, consumers need a ready connection to the Internet, which can cost anywhere from $5 to $25 a month. They bring additional dollars into a cell-phone operator’s pocket for very little effort, thus making Nokia and Motorola phones more attractive than, say, some generic handsets.

But the big winners in this trend could be software coders who can come up with unique software that helps the big guys make money. Any takers?