Killer Be Killed

The killer app is so 1999. The very suggestion that a single application could appeal to a wide array of consumers and corporate users is as quaint as livin' la vida loca.

Application developers and, to a large extent, carriers themselves are now targeting niches. Some may contain millions of potential customers, but they're niches nonetheless. Instead of dreaming up puffy-cloud, blue-sky applications that will take years to mature (think trading stocks while taking the subway through midtown), developers are looking at the here and now in their latest attempts to generate additional revenue on subscribers' bills.

Overall, the applications presented to carriers are taking on a much more focused tone. Some are enhancements to carriers' existing communications packages that push further into the enterprise network. In other instances, carriers are forging into the risky frontier of wireless mobile commerce applications. And in still other cases, carriers are finding that there comes a time in every subscriber's day when they just want to take aim at an alien and blast its brains out.

Regardless of the application, vendors and application developers are focusing their sales and marketing efforts to offer more than just Internet access and fast connections between corporate offices or to the home. “It has to be more of a bundle of services,” says Cathy Gadecki, vice president of strategy and solutions for Ellacoya Networks, which bases much of its marketing efforts on carriers becoming application providers. “You're not going to address a broad swath of the market with one or two things.”

And while those selling the applications like to point to the need for carriers to deploy more, the bigger challenge is making money from those applications. The answer, according to Gadecki and several others, is the antithesis of the “killer application” attitude.

“AOL is the quintessential provider here because they've figured it out,” she says. “It's all about getting a nickel from every transaction.”

2Roam wasn't built in a day

Gadecki's sentiment, in fact, is behind most wireless application developers' sales pitches. The idea, says at least one developer, is to convince U.S. carriers that they can mimic the success of European and Japanese carriers in selling unique ring tones and short messaging services (SMS) but on an American scale. The challenge, though, is putting enough of a spin on those applications so U.S. carriers don't come off appealing strictly to a teenage and young adult market.

“The applications we see are not just the SMS messages from teenagers,” says Jake Sullivan, vice president of engineering for 2Roam, a builder of wireless application platforms. “It's things like alerts to bring you back into an application.”

Specifically, 2Roam is working with Web site developers to add wireless elements to their pages while also allowing a high level of customization. In one of its most high-profile projects to date, the company worked with the developer of Oscars.com to provide updates on Academy Award winners and other news via wireless devices.

“As long as the carriers keep charging by the minute, any application that keeps people coming back is a big one,” says Sullivan.

While that may work in the U.S., where customers are used to getting bundles of minutes for flat fees, wireless and even wired applications won't really hit their stride until carriers can charge on a per-usage or per-bit basis. That's still some time away, Sullivan insists, further down the road, carriers must upgrade their back-office systems if they want to generate revenue from micro-transactions.

“We've seen in the U.S. that people know how to build apps, but what we should be looking at is things like how to bill for small transactions,” says Sullivan. “In the U.S., there is no way to implement the [NTT] DoCoMo concept of wallets.”

Of course, that isn't stopping carriers from diving headfirst into new applications that don't rely on complex billing models but instead leverage existing systems that allow for subscription-based plans. Extensions of communications models that put the carrier further into the enterprise are perfect examples of services that are comfortable for carriers but ambitious enough to satisfy high-end enterprise users.

Limited availability

Among the most active of communications services has been unified messaging. Despite a recent spate of new services, unified messaging has a history of false starts most early users found the technology too complex, too limited or too expensive. Improvements in the business model and underlying technology, however, are drawing increased interest. Just as important is the ability of users to control their availability in unified messaging platforms through presence management.

“The idea of being able to manage your presence and transmit as little or as much of your information as you want is very important,” says Laura Thompson, vice president of corporate marketing and channels for Sylantro Systems, the developer of an application switch that offers a pre-packaged superset of Class 5 end-office functionality and acts as a service creation platform.

The idea will become especially critical when wireless IP devices are deployed with always-on capability: “You might be at an Internet café in Italy on vacation and have a GSM phone where you could log on to travel Web sites,” says Thompson. “That doesn't necessarily mean you want to be available.”

In fact, adding control to familiar services is key to most carriers' short-term plans. “The communications applications are really what the service providers have their eye on right now,” says Andy Scott, vice president of marketing for TellMe Networks. “Those are being looked at as the second coming of network-based voice mail.”

TellMe, which operates what it calls a “voice application network,” straddles both sides of the fence, offering a number of retail services, including voice-activated dialing, while also actively pursuing partnerships with carriers. At the same time, the company also is working with application developers that want to use its network to create voice-related services to target vertical industries. In one example often cited by TellMe, users could check on flight delays via wireless phone as they are driving to the airport.

“Our experience with users' relative comfort is that users actually prefer an automated service if they get what they're looking for,” says Scott. “Automated services don't have hold times.”

Currently, TellMe is billing for its travel application on a usage basis, but there are multiple options, depending on the service provider's time-to-market needs, Scott adds. “If they have their own existing data centers, we'll build our network within their network.”

Game time

For service providers on the wired side, applications that appeal to the high-level executive hold less allure. Instead, an increasing number are turning to the residential market with gaming and entertainment applications that will ride on top of their broadband access services.

Since late last year, Broadwing has been deploying Media Station's online games as part of its ZoomTown asymmetrical DSL service in the Cincinnati area. “We are working to really enable a next generation Internet experience going beyond just speed,” says Kurt Frehner, director of sales, marketing and product definition for ZoomTown.com. “The participation in gaming in general is three times what it is for things like shopping.”

Such numbers are going to be hard to ignore, adds Jim Maslyn, president and CEO of Media Station. He notes that low-resolution online games and the popularity of Doom servers and the like have whetted the market's appetite. “People do want games. They're being fed a lot of online games that have very low-resolution graphics, and they're still interested.”

In the ZoomTown application, the company is finding it's not only teenage boys swarming to games. In fact, some of the most popular titles fall into the “edutainment” category designed to appeal to families with young children.

“When you look at the demographics of this group, it's different than one might expect,” says Frehner. “We found, from a gender perspective, the split is 45% female and 55% male. There also are certain types of games that each like to play: Trivia games are more interesting to women while adventure, shoot-'em-up-type games are more interesting to men.”

Those numbers are close to results Ellacoya found in researching the appeal of software that could be rented over a broadband connection (see figure). In fact, much of Ellacoya's marketing is based on convincing carriers that they need to evolve into true service providers by emphasizing applications and not just speedy connections.

“There's opportunity on the residential side to bundle in content and applications that aren't very expensive for you to purchase on a wholesale basis,” says Gadecki. In one return-on-investment study, Ellacoya found that carriers could expect to keep about 30% to 40% of each revenue dollar on the newest applications.

Whether carriers decide to move beyond the access mentality is still debatable, however. And like most issues confronting service providers, the decision will come down to the bottom line.

“It's not about getting applications because those are coming out all the time,” says Sullivan. “It's the business model around them.”